corruption perception study bosnia and...

CORRUPTION PERCEPTION STUDY

BOSNIA AND HERZEGOVINA

Ovaj dokument je pravljen uz

finansijsku pomoć Evropske Unije.

This document has been produced with the financial assistance of the

European Union.

BOSNIA AND HERZEGOVINA

Transparency International BiH Corruption Perception Study BiH

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Editor – Boris Divjak For the publisher – Transparency International BiH Printing– "Glas Srpski", Banja Luka Printed in 1000 copies Banja Luka / Sarajevo, June 2002. CIP – Каталогизација у публикацији Народна и универзитетска библиотека Републике Српске, Бања Лука 343·352 СТУДИЈА перцепције корупције Studija percepcije korupcije / [urednik i redaktor Boris Divjak]. –Banja Luka ; Sarajevo, 2002 (Banja Luka : Glas Srpski). – 166 стр.: илустр. ; 25 цм Тираж 1 000. – Биљешке уз текст. – Библиографија: стр. 161-165. ISBN 99938-672-0-9 ДИВЈАК, Борис 340, 915 П.О.: КОРУПЦИЈА MFN=000818 Winisis-Библио


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Ovaj dokument je pravljen uz finansijsku pomoć Evropske Unije.

Mišljenja u njemu navedena pripadaju Transparency International

Bosne i Hercegovine i stoga se ni na koji način ne može smatrati da

predstavljaju zvanično mišljenje Evropske Komisije.

Prijevod dokumenta na engleski jezik finansirala je

Misija Svjetske Banke u Bosni i Hercegovini

This document has been produced with the financial assistance of the

European Union. The views expressed herein are those of

Transparency International Bosnia and Herzegovina and can therefore

in no way be taken to reflect the official opinion of the European

Commission.

Translation of this document to English was financed by the

Mission of the World Bank to Bosnia and Herzegovina.


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TABLE OF CONTENTS

PREFACE ................................................................................................................7

INTRODUCTION ..................................................................................................13

Purpose of the research.....................................................................................13

Methodology and sample ..................................................................................13

Federation of BiH ..............................................................................................16

Republika Srpska ..............................................................................................18

CORRUPTION OF THE PRESENT SOCIETY IN BOSNIA AND HERZEGOVINA....................................................................................................20

Introduction .......................................................................................................20

Definition of corruption ....................................................................................21

Position of Bosnia and Herzegovina within the region ..................................23

Perception of corruption...................................................................................26

Corruption as a sociology phenomenon ..........................................................27

Causes of corruption .........................................................................................29

Corruption as (in)direct experience.................................................................31

'Usefulness” of corruption ................................................................................34

Feelings on bribery............................................................................................36

Bribing – who and how much?.........................................................................38

Involvement of the officials in corruption.......................................................45

Future of corruption .........................................................................................49

ADMINISTRATION AND POLITICAL SCENE, TRUST IN THE GOVERNMENT INSTITUTIONS, PARTIES AND INTERNATIONAL ORGANIZATIONS ................................................................................................51

Introduction .......................................................................................................51

Political system in the environment of transition...........................................51

Main reasons of corruption in the system.......................................................53

Corruption in public services (administrative apparatus) ............................58

Corruption and political power .......................................................................61

Political parties ..................................................................................................65


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Further development of institutions in BiH....................................................72

CORRUPTION IN BiH ECONOMY.....................................................................74

Introduction .......................................................................................................74

Current situation in BiH – causes and consequences of corruption.............74

Economic costs of corruption in BiH...............................................................76

Negative influence on investment and growth................................................76

Negative influence on the private sector development...................................77

Increased administrative expenditures ...........................................................77

Effect on the public sector ................................................................................78

Customs administration....................................................................................78

Taxes...................................................................................................................81

Inspection agencies............................................................................................85

Diminishing quality of goods and services ......................................................86

Increasing poverty.............................................................................................87

Organized crime ................................................................................................89

Weakening of the state credibility ...................................................................92

Property transformation...................................................................................95

Resistance to changes ........................................................................................96

Privatization process .........................................................................................97

Public judgment.................................................................................................99

Increasing transparency .................................................................................103

Public procurement.........................................................................................105

Business environment .....................................................................................112

Creating attractive economic space ...............................................................120

JUDICIARY, POLICE AND INSTITUTIONAL GUARANTORS OF ORDER AND SECURITY..................................................................................................123

Introduction .....................................................................................................123

Judiciary...........................................................................................................123

Constitution......................................................................................................124

Current situation of normative regulation of corruption............................124


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Subjects and consequences of corruption in judiciary ................................126

Role of prosecution office ...............................................................................130

Particularities of corruption in Bosnia and Herzegovina judiciary: ..........130

Measures taken so far for suppressing corruption ......................................132

Corruption in the police..................................................................................134

Activities on creation of the rule of law.........................................................138

SOCIAL INSTITUTIONS, EDUCATION, HEALTH AND NON-GOVERNMENTAL ORGANIZATIONS............................................................143

Introduction .....................................................................................................143

Public services in transition............................................................................144

Perception of corruption in health.................................................................145

Perception of corruption in education...........................................................150

Non-governmental sector and international organizations.........................154

Public institutions – equal access for all........................................................158

CONCLUSIONS AND PROPOSED ACTION PLAN........................................164

Summary of the situation in Bosnia and Herzegovina.................................164

Corruption in transition .................................................................................166

National integrity system ................................................................................167

Measueres in the fight against corruption ....................................................170

The role of the Transparency International BiH .........................................173

REFERENCES AND LITERATURE.................................................................175


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PREFACE The corruption perception study in Bosnia and Herzegovina is a comprehensive attempt of the non-governmental sector to establish the basic diagnosis of this acute social problem, and to create an instrument for its continuous monitoring. The goal of the project was to create a data base for the whole country, that would contain detailed information on sectors, level of government, institutions etc., where the citizens would give their judgment of the extent to which the corruption is rooted in the society, and their perception of the ways to confront it most efficiently. Publishing of the results, particularly during the pre-election period 2002., is a part of the strategy employed by the Transparency International BiH (TI BiH), to point to those in power at their failures so far and impose the new agenda for the general elections and the wish of the citizens of BiH for their country to start introducing the rule of law, what had been awaited in vain for seven years now, since the cease of the war activities. The only attempt of this kind made so far was conducted by the World Bank, who had conducted its Diagnostic Study of Corruption in BiH at request of the Governments in BiH in the period January-September 2000; this document is already outdated, but it helps, and it was used by this study to measure possible changes within the two years that have passed since then. However, one should say that the World Bank research had been implemented with the assistance of international experts, and it is not the final domestic product of Bosnia and Herzegovina. This has also caused a need for new diagnostic mechanism. The study that is before you systematically covers the phenomenon of corruption in BiH. It is based on the data base that had been developed professionally from the survey of citizens from the whole country, which had been conducted for the needs of the TI BiH by the Agency for Marketing Consulting – the Partner from Banja Luka in February and March 2002. The data base itself comprises over 900 pages of materials, tables and charts that show an overview of the most important demographic crosses, as well as the regional overviews. The whole study is based on those results, and one part of the material from this broad base is presented and elaborated in this text. A team of nine people participated in writing the analysis. All of them are eminent experts in their segments of society. Mr. Srđan Puhalo has prepared the existing data base. The sociology analysis was conducted by Ms. Olivera Pavlović and Mr. Jasmin Komić, giving the overview of the effect of the corruption on the society


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in general. Ms. Mirjana Nadaždin-Defterdarević gave the institutional overview. Ms. Danijela Vidović and Mr. Boris Divjak have analyzed the harmfulness of corruption from the position of economic analysis, placing a special emphasis to public finance management, privatization and creating a good business environment. An overview of the rule of law and the inferior mechanisms was prepared by Ms. Fatima Hajdarević. A particularly important aspect of the current development of the state was covered by Mr. Vladimir Marić, who has processed the social network institutions, with the emphasis on education, health etc. As a summary of all those papers, the conclusions and anti-corruption action plan were prepared jointly by all the authors. Mr. Emir Đikić was the coordinator of the whole project, and was in charge of administration and organization of its implementation. And finally, the IT BiH office retains the right to edit the texts, harmonize them and finally process, so that all the expressed views would really reflect the positions of this organization. The mentioned authors operated as a team in all respects, and what is encouraging is the facts that they have acted together through TI BiH fighting corruption, using their knowledge and experience as their most powerful weapon. Just the same as the crime and corruption know no borders, the fight against them must be equally well organized. TI BiH has proved through the non-governmental sector that such efforts are possible, by getting together the experts from Mostar, Banja Luka and Sarajevo. Although this publication has technically been written in all three languages of BiH, only one language flows from the joint effort, and that is the belief that the rule of law in BiH is an achievable goal, and that the joined forces of all social pillars, including the non-governmental sector, could provide better future to the citizens of this country. At the same time, this publication represents a participation of the TI BiH in the public debate on the Council of Ministers’ Anti-Corruption Action Plan. TI BiH, being the only association of citizens in BiH having this goal, sees itself as a strategic partner to the government, particularly in the form of mechanism for implementation and monitoring such a plan. In the end, it is important to emphasize selfless assistance provided by the European Commission Delegation to BiH that had provided the financing for the whole project, for what the TI BiH is very grateful. This project is a kind of a synergy between the two development pillars of the society – the donors, i.e. international community, and the non-governmental sector, that had resulted with a very concrete instrument for fighting corruption. Such an evidence should serve as an encouragement for all other segments of the society to join forces in a joint effort with the same goal. This support carries a very specific symbolism, and that is the realization that every success in fighting corruption brings us one step closer


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to the European Union and the family of developed and organized states, having established mechanisms for protection from this social plague. Perhaps this is the right place to emphasize a note of optimism: there are no ethnic or racial differences that implant corruption more or less in some society. All humans are the same and equally disposed to it – throughout the history and on all meridians. The only reason why the corruption is plaguing in some countries, while being a neglectable factor in the others lays in the level of establishment of the rule of law and institutions in the country, i.e. the rule of law. Therefore, the citizens of BiH are not any more inclined to corruption than, for instance, the Finish or Danes, who are, according to the Corruption Perception Index (CPI) of the Transparency International the nations with the least level of corruption in the world1. How harmful the corruption is for the development of the society shows the chart given below, that compares the level of gross domestic product with the CPI mark.

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GNPpercapita(USD)

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Chart 1 –Counter-proportional relation of GDP per capita and CPI2

1 TI 2002 Corruption Perception Index, Annual Report of the TI for 2001, Berlin, page. 13. Finland with 9,9 and Denmark with the grade 9.5 of possible 10 take the first and second place at the list of 91 countries. At the bottom of the table are the Nigeria, with 1,0 and in the last place is Bangladesh, with 0.4. Due to the inexistence of methodologically required minimum of independed international analysis of corruption, Bosnia and Herzegovina has not been included in CPI. 2 Transparency International Moldova: Corruption and Quality of Governance - The Case of Moldova, 2001 Chisinau, p. 55 taken over from S. Gupta, H. Davoodi and R. Alonso-Terme “Does the corruption affect the differences in income and poverty?”, IMF Working Paper


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The above chart also explains the extent to which the corruption is linked to impoverishment of the nation; i.e. that its removal paves the road to economic growth, employment and increased income of the population, what are the main problems the citizens of BiH had identified during this research. The TI BiH wishes to use this basic research to indicate the direction of anti-corruption activities, and that each follow-up research that will be implemented will be the measure of progress and strengthening of the system. A wish above all others is that the disappointing results indicated by this study are the lowest level in combating corruption BiH, and that the only way from it is upwards. We want to thank all our members; associates in this project; project partners in the European Commission, but first of all to Ms. Gordana Šuvalija, the Project Manager within the Delegation; the logistic support provided by the Transparency International Secretariat in Berlin, particularly Ms. Sara Morante, Southeastern Europe Coordinator; the advisory support by the BiH institutions, primarily the Ministry of Foreign Trade and Economic Relations and the Ministry for European Integrations, as well as the entity governments; World Bank Mission in Sarajevo for the information they provided; the Anti-corruption Department of the Office of the High Representative (OHR) for their highly appreciated opinion and methodological consultations; as well as to all other numerous institutions and individuals who had contributed in one way or another to the creation of this study, and who were omitted from this list due to a lapsus memoriae.

Transparency International Bosnia and Herzegovina


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Transparency International Bosnia and Herzegovina is the first and so far the only domestic non-governmental organization the purpose of which is “preventing corruption and promoting democratic values and fair market competition” (from Article 7 of the Statute of the Association). The Association was founded in early 2001, and officially started on February 23, 2001, when it was accepted to the global network of Transparency International as one of 90 branches recognized so far throughout the world. TI BiH has its headquarters in Banja Luka, from where it covers the territory of whole Bosnia and Herzegovina. There are five members of the Board of Directors, one of whom acts as the President of the Association. The five members live in Sarajevo, Banja Luka and Mostar, and are experts in different fields. TI has 20 members from all over BiH, and is proud of the balance it had achieved, both in terms of gender, and in terms of territorial coverage, and first of all, the expert, but also the ethnic composition of the membership. The work of the TI BiH was supported from several project sources: the European Commission, British department for international development – DFID, governments of Swiss and Germany, Organization for Economic Cooperation and Development; and United States Agency for International Development – USAID; and a soon implementation of several projects supported by the Government of Finland etc. are expected. TI BiH remains autonomous from their sources of funding, and the policy of the Association from the very first day was to gain independence of views and positions. TI BiH is a voluntary Association, and for the time being, the only professionally employed staff is the Executive Manager of the Association, who is located in the seat of the Association. TI BiH is preparing a much wider range of activities in the years 2002-2003, what will be communicated to the public in due time through public activities of the Association, and through the Internet Presentation. Transparency International Bosnia and Herzegovina Dragiše Vasića 1a 78000 Banja Luka, RS Bosna i Hercegovina


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Tel/fax: 051 303 783 E-mail: [email protected] Web: www.ti-bih.org Executive Manager – Danijela Vidović President – Boris Divjak Members of the Board of Directors: Emir Đikić Olivera Pavlović Fatima Hajdarević Danilo Vuković International Secretariat of the Transparency International Otto-Suhr-Allee 97/99 D-10585 Berlin Germany Tel: +49 30 3438 200 Faks: +49 30 3470 3912 E-mail: [email protected] Web: www.transparency.org Executive Manager – Hansjoerg Elshorst President – Peter Eigen Executive Directors: Jermyn Brooks Roslzn Hees Gustavo Rayo Margit van Ham Miklos Marschall Miguel Schloss


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INTRODUCTION

This study presents a public opinion resarch conducted on the territory of the whole Bosnia and Herzegovina in the period February-March 2002, for the purpose of examining corruption perception phenomenon and positions of the BiH citizens with regards to that phenomenon. Purpose of the research The purpose of this research was to examine several topics that are currently in the focus of interest in Bosnia and Herzegovina. Te first topic was the identification of the corruption as a problem in BiH. The second topic dwelled on the causes of corruption in BiH. The third topic had to do with individual experiences of the BiH citizens in terms of corruption. The fifth topic is related to the methods used to combat corruption, and who is responsible for waging such combat. The sixth and the last topic was the relationship between the corruption and privatization process. Methodology and sample Methodology Investigation of the phenomenon of corruption in Bosnia and Herzegovina has been conducted on a representative sample of 1200 respondents over 18 years of age, citizens of Bosnia and Herzegovina. The field research was implemented using the method of face-to-face interviews, the method of field survey in the private apartments. A stratified random sample was used, with the number of respondents determined in advance for all local communities and determined start and pace. This procedure makes it possible that the sample is representative for the given population, what means that the data obtained in this way may be generalized for all examined population. When determining the sample, used were the data (estimates) of the Statistical Institute of the Republika Srpska and the Statistical Institute of the Federation of Bosnia and Herzegovina. The parameters that have been taken into account when defining the sample were:

· Population of Bosnia and Herzegovina · Population of each entity · Population in different regions in the entities


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· Ethnic structure of different regions in the entity · Ratio urban/rural population, in different regions in the entities · Sexual structure of population in different regions in the entities

Republika Srpska is divided in six regions: 1. Banja Luka-Prijedor 2. Doboj 3. Bijeljina-Brèko 4. Pale-Višecity 5. Zvornik 6. Trebinje Federation of BiH is divided into six regions: 1. Bihać 2. Tuzla 3. Sarajevo 4. Mostar 5. Kiseljak 6. Čapljina Sample Main demographic characteristics of the sample used in the research: Bosnia and Herzegovina Table 1. Sex number of

interviewees % of

interviewees male 613 51,1 female 578 48,9 total 1200 100

Table 2. Age number of

interviewees % of

interviewees 18-29 313 26,1 30-44 412 34,3 45-59 308 25,7 60 and more 167 13,9 total 1200 100


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Table 3. Education number of

interviewees % of

interviewees four grades 53 4,4 Primary 128 10,5 Secondary 743 62,1 tertiary (higher and high)

276 23

Total 1200 100 Table 4. Profession

number of interviewees

% of interviewees

Agriculturalist 107 8,9 non qualified and semi-qualified worker (NK – PK)

76 6,3

qualified and highly qualified worker (KV-VKV)

455 37,9

Officials 176 14,7 private entrepreneur

72 6

expert 135 11,3 no profession 179 15 Total 1200 100


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Table 5. Work status

Table 6. Total monthly income of a family

Federation of BiH

Table 1. Sex


% of interviewees

Male 400 50 Female 400 50 Total 800 100


% of interviewees

Employed with a state owned company

312 26

Employed with a private company

210 17,5

Company owner 52 4,3 Pensioner 168 14 Unemployed 249 20,8 Housewife 102 8,5 Student 81 6,8 Other 26 2,2 Total 1200 100


% of interviewees

0-149 KM 524 43,7 150-149 KM 91 7,6 250-499 KM 238 19,8 500-699 KM 140 11,7 700 –999 KM 93 7,8 1000-2000 KM 79 6,6 2000 KM and more

35 2,9

Total 1200 100


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Table 2. Age number of

interviewees % of

interviewees 18-29 226 28,2 30-44 271 33,8 45-59 195 24,3 60 and more 108 13,6 Total 800 100

Table 3. Education


% of interviewees

four grades 25 3,1 primary 74 9,2 secondary 488 60,9 tertiary (higher and high)

209 26,1

Total 800 100

Table 4. Type of settlement number of

interviewees % of

interviewees City 492 61,5 village 308 38,5 Total 800 100

Table 5. Region


Bihać 100 Tuzla 100 Sarajevo 200 Kiseljak 100 Mostar 200 Čapljina 100 Total 800


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Republika Srpska

Table 1. Sex number of

interviewees % of

interviewees Male 212 53 female 188 47 Total 400 100

Table 2. Age


% of interviewees

18-29 88 22 30-44 141 35,3 45-59 113 28,3 60 and more 58 14,5 total 400 100

Table 3. Education


% of interviewees

four grades 26 6,8 primary 52 13 secondary 255 63,8 tertiary (higher and high)

64 16,5

total 400 100

Table 4. Type of the settlement number of

interviewees % of

interviewees city 183 45,8 village 217 54,3 total 400 100

Table 5. Region


Banjaluka-Prijedor 185 Doboj 55 Bijeljina-Brčko 55


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Pale-Višecity 35 Zvornik 45 Trebinje 25 total 400


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CORRUPTION IN THE CURRENT SOCIAL FRAME OF BOSNIA AND HERZEGOVINA

Introduction The changes that are taking place in the countries that have been created on the territory of the former SFRY reflect in several spheres of life. The changes in economic, political systems and system of values leave many ambiguities and space for all kinds of manipulations and arbitrary interpretations of laws, regulations and values of democratic political establishment. The politicians who are in power in those countries, as well as the population, are under pressure of changes that need to be implemented in shortest possible time, while the basis for such changes is rather week and instable. The problems that occur as a result of those processes are numerous, the most important among them being unemployment, poverty, poor economic situation and corruption. The problem of corruption is not new in those countries – various levels and forms of corruption had existed in the previous system too. The bureaucratized state, where the property belonged to everyone and no one, left plenty of room for illegal abuse of position and acquisition of individual gain. What needs to be emphasized, as a new thing in connection with this problem, is the extent and intensity of corruption, freedom of speech and writing on this subject, and the attempts of organized combat that is conducted within official institutions of power, but also through active involvement of the non-governmental sector. All this creates the impression that the corruption is a problem that has emerged with the social changes in nineties. This position is confirmed by the data obtained through this research: the time before the war is perceived by the citizens of Bosnia and Herzegovina as a time where the corruption was the least present. The post-war attempts to establish markets leave space for many players in the market game. Undefined legal framework, as well as the slow response of the courts and police, have made it possible for many people in the transition countries to meet their needs violating the law. So it had become common to bribe or do counter-favors during a business cycle, or that the politicians are linked to large chains of semi-legal trade, managing to cash well their current positions of power. Another group of conditions needs to be mentioned: the changes of system of values in the countries like Bosnia and Herzegovina. There is a question in what way the changes that have taken place over the last decade affected the members of the social community, and to what extent the people from the country were ready


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for the comprehensive transformation. One of characteristic features of the transition centuries is a general crisis of values, that is present in personal level, but also passed on to higher instances, and defines the collective behavior. A link may be established between the two mentioned groups of conditions. The political elite that lead the country do not offer a good behavioral model. We are witnessing many newspapers articles bringing forward claims or suppositions on large financial affairs and illegal acquisition of gain. On the other hand, it rarely happens that we are able to read that some politician had been convicted for receiving bribe or corruption, or abuse of official position. The success and motives for political engagement are not seen as a strive to achieve a general good, but as a personal gain. In connection with this, one should mention that most people of Bosnia and Herzegovina fall under the category of those who are following the actions and personalities of those who are occupying public offices. Such a position followed from the fact, that has been proved empirically and in many occasion, is that the largest part of the population tends to respect the authority and accept the leaders as their role models. Therefore, if the President of the Government or a director of a large public company gets charged of corruption, but not punished, this becomes a good encouragement and justification to other members of the society to draw profit by getting involved in corruption, to the extent that is possible for them. Definition of corruption

When talking about corruption and trying to define the corruption, we are faced with two levels to which the corruption may indicate. We can tackle corruption at the level of public administration, made by public officials, and the actions taken by the public official that may be characterized as corruption. This is the so-called ‘grand scale’ corruption. This form of corruption and the perception thereof require a special approach and activities directed to its prevention. In the second case, in addition to the public services, it is interesting to see how the corruption is manifested and spread in some other segments that are much closer to individual members of the society. In this case, we are talking of the so called ‘small scale’ corruption, that most frequently happens at the lower levels of public administration (municipality, inspections, police, etc.) and in public health and education institutions. In addition, it is important to distinguish bribing for provision of legal service and bribing for provision of illegal services. Taking a compensation is illegitimate in both case. In the first case of bribing, one pays for the service that is prescribed by law and bribe is made in order to receive the service quickly or receive it at all. When we talk about bribing in order to receive a service that goes beyond the legal provisions, we talk about double violation of law: law is violated when the


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prescribed action is not conducted in accordance with the legal procedure or law, and it is also violated when the bribe is given or received. An official definition of corruption, according to the Transparency International, is the following: Corruption is an abuse of entrusted power for personal gain. This definition may cover both levels, and does not lead directly to a specific level or new corruption. Anybody who is on some position where he communicates with other people providing some form of service or performing any other action that meets the needs of the others may find himself in a position superior to the others by skillfully increasing the significance of his position and thereby his real power. This situation may facilitate the use of the position of power and dependence for the purpose of acquiring personal gain of one of the side – the side that has the power to make decisions. In addition to this definition, one should consider the definition provided by the World Bank, that is being used in the domain of the non-governmental sector and by the official teams for combating corruption: “Corruption is an abuse of public authority for the purpose of acquiring personal gain”. It is interesting to mention the definition given by Vito Tanci3, according to which the corruption exists if the principle of impartiality in decision making has been violated for the purpose of appropriating some benefit. According to standard legal language, the corruption is legally defined as soliciting and receiving bribe, directly or indirectly, by persons who perform public function, or offering or promising, directly or indirectly, to a public official or person performing public function, any financial value or any other privilege, such as a gift, service, promise or privilege for that official, some other person or somebody third, in exchange for an action or failure to act when carrying out public duty; action or failure to act when performing his duties as a public official or person performing public function for the purpose of acquiring illegal privileges for oneself or a third party; abuse or acceptance of proceeds from an act; participating as an initiator, inciter, accomplice, aider or concealer after the offense, or in any other way, in exchange or in expectance of a payback in form of cooperation or conspiracy to commit an offense.4 In addition to the official definitions used in action plans and theoretical discussions on corruption, it is particularly important to see how the public opinion perceives this problem. The fluidity of this notion as understood by individuals make the combating corruption even more difficult. The question emerges what somebody considers a corruption, as opposed to what somebody else sees as a

3 Begović and Mijatović: Corruption in Serbia, CLDS, Belgrade 2001. p. 10 4 Kregar J.: Corruption, at www.ijf.hr/hr/pojmovnik/corruption.htm, Faculty of Law, Zagreb


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corruption. The easiest answer would be that such dilemma really does not exist, and that the relationships have to be regulated by law, and that anything that formally falls under corruption can not be explained in any other way. Certainly, this would be the case if we were living in the society under rule of law, where the peoples live who are unburdened with tradition. According to a research conducted when starting the TI office in BiH, which was made during 2000 on a sample of 1000 respondents in the Republika Srpska, most respondents do not consider a bottle of spirit or a chocolate candy is a corruption, but only a small token of appreciation5. Similar results followed from the research implemented under the SELDI project, that had measured corruption in seven South Eastern European countries. The authors of this project have attempted to show the practical effects of corruption. According to the results of this project, in all those countries, including Bosnia and Herzegovina, corruption is perceived as an effective tool in overcoming problematic situations. Position of Bosnia and Herzegovina within the region

To show how the corruption issue is treated in BiH as compared to other countries in the region, we’ll use the research conducted in seven countries of the Southeastern Europe (Albania, BiH, Bulgaria, Romania, Macedonia, Croatia, Serbia and Monte Negro)6. In all those countries, the corruption is among the burning problems. Along with unemployment and poverty, corruption was among the most important problems perceived by the people from all those countries. In Romania and Albania, this problem occupies the first place. According to the UNDP data for the period 2001-2002, corruption in BiH is placed on the permanent second place of most serious problems. The problem that is perceived as the number one was unemployment. This trend was confirmed by the TI BiH research, according to which 20,3% interviewees thought the corruption was the most serious problem. We may say that every fifth person in Bosnia and Herzegovina perceives the corruption as the one largest problem our society faces.

Problem BiH (%) RS (%) FBiH (%)

Unemployment 25,8 25,6 25,4 Corruption 20,3 17,0 21,9 Political instability 14,0 12,3 14,9 Poverty, low standard of life 12,6 12,5 12,6

5 Vuković D.: Perception of Corruption, from the brochure "Transparency International Bosna and Hercegovina", Banja Luka, February 2001 6 Regional Project, SELDI , CPA Report (2002)


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Crime 10,9 12,0 10,4 Economic recovery 7,3 11,0 5,5 Poor inter-ethnic relations 3,3 2,3 3,9 Return of refugees 2,3 1,8 2,6 Poor health care 1,7 2,3 1,4 War crime trials 1,2 0,8 1,4 Other 0,4 1,3 0,0 Refuses to answer 0,3 0,5 0,1

Table 1 –The most serious problems, as perceived by the BiH people, split by entities

Identification of the most serious problems is in the direct relation with the level of education of the interviewees. We can observe that in the case of the less educated people that the problems that are most prominent on the individual level are more dominating – poverty and unemployment. In case of better educated people, the corruption perceived as the most serious is the corruption. If we were to set aside the main problem in opinion of the respondents with various levels of education, we would have the following picture:

Problem Primary education (%)

Higher and high education (%)

Poverty 12,7 11,6 Trials to war criminals 0,8 0,4 Poor health care 0,8 1,8 Return of the refugees 3,2 1,5 Unemployment 32,5 21,1 Crime 14,3 10,5 Economic recovery 8,7 10,5 Corruption 14,3 22,5 Poor inter-ethnic relations 4,8 3,6 Political instability 7,1 16,4 Does not know/something else 0,8 0

Table 2 – The most serious problems in BiH – division by education level of the respondents People in the countries where the regional research had been conducted within the SELDI project showed extremely high level of declarative refusal to accept corruption in one’s own society. This is described by the tolerance of corruption7. The index is highest in Albania and Macedonia, at 2.4. It is important to mention that the index of corruption tolerance has decreased in Bosnia and Herzegovina if compared with the year before. The people of Bosnia and Herzegovina have shown

7 Corruption Tolerance Index indicates to what extent the people from the countries where the research had been conducted tolerate the corruption in their own country.


25

that the increased intolerance of corruption, reducing the index from 2.8 to 2. This decrease may be a result of giving higher profile to this problem in the media and statements of the representatives of international community, who have repeatedly emphasized the seriousness and size of this problem, and placed the combat against corruption as one of the priority tasks. In addition to the fact that the corruption is perceived as something bad, the respondents are aware of the extent of how much in certain situations it may help resolve individual problems, and speed up the procedure and simplify the process of problem resolution. In comparison with other countries in the region, Bosnia and Herzegovina is in the group of countries where this way of solving personal problems is seen less and less acceptable. Different from Albania, where the index of effect (practical efficiency of corruption) is 4.5, and from Romania, where the same index is 3.7, this index is in Bosnia and Herzegovina at the same time 2.98. It may seem illogical to see a decrease in the corruption tolerance index and the increase in the corruption effect index. Yet, one has to bear in mind that the citizens are essentially left at mercy of a very complex and complicated bureaucratic procedure. In most cases, they are certain that they would achieve nothing unless they engage in corruption, i.e. bribe the key person who can resolve the problem. Such attitude causes an opposite reaction, and intolerance of corruption. The citizens do not approve of the corruption, however, they are aware of their inability to resolve their problems if not respecting the ‘standardized’ procedure. Another index that may be used as a basis for comparison among those countries is the index that speaks about concrete actions of the respondents – how much the respondents were faced with the demands of the officials to payback for some service illegally. In this case, Bosnia and Herzegovina is behind Albania, where the involvement in bribe is most widespread. One thing that is much more important is the fact that the index increased in comparison with the last year’s research. This means that more citizens of Bosnia and Herzegovina were in the situation when some official directly demanded money, gift or service from them. In terms of the corruption spread index, the values obtained were the highest. The corruption spread index is at its highest in Albania (7), which is followed by Romania (6.9), and Bosnia and Herzegovina is at the fifth place among the countries in the region with the index value 6. In this section, we will present the data showing where BiH is in terms of the time. Namely, the research showed an increasing trend of perception of the extent of corruption. Having analyzed the period from 1992 to date, it is apparent that the

8 Last year (2001.) in Bosnia and Herzegovina, this index was 3,3


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corruption has evolved into a more widespread phenomenon. For the period ending with 1992, one could say that this was the time when the corruption was the least widespread: 49% of respondents think that there was little or no corruption, while the opposite pole is supported by 18.5% interviewees, who think that the corruption was spread very much and much. During the war period, according to 21.3% interviewees, the corruption was little spread, while 47% of the respondents think the corruption was significantly widespread. The period after signing the Dayton Peace Accords, 1996-1998, is perceived by 70.2% of the respondents as the period when the corruption is very widespread. The time of the previous government, i.e. the period 1998-2000, is seed by 85.6% of the respondents as the time when the bribe and corruption were much and very much widespread. The period after 2001 is seen as quite similar: 81.4% respondents think the bribe and corruption are much and very much widespread.

50.3

21.3

5

2.2

2.8

25.4

28.4

22.1

10

10.3

19.2

47

70.2

85.6

84.1

0% 20% 40% 60% 80% 100%

up to 1992

1992-1996

1996-1998

1998-2000

2000+

littlemediummuch

Chart 2 – Extent of bribe and corruption in different periods

One should be very careful when interpreting those data. The simplest way would be to say that the respondents think that the last people in power were the most corrupt. But this needs to be supplemented with other points of view. Everybody knows that it is the easiest to comment on the events that are the most recent, and that the events we are participating in look like one thing now, and very different after some time. The rule is that people are inclined to look at past events more benevolently, except when they are publicly characterized as extremely bad. In this case, the prerequisites to speak of corruption accumulated over time. Since 1998, the combat against corruption becomes one of the main tasks that need to be completed by the local authorities.

Perception of corruption

Understanding the phenomenon of corruption, and the causes of corruption are very important factors for comprehending well this social phenomenon in the country-specific conditions. The public opinion on corruption and its causes


27

definitely affect the formulation and implementation of actions that should lead to decrease of corruption. This will, among other things, show that the respondents are sensitive to corruption that is taking place at the lowest level, that directly affects their everyday life – in the police, municipality, doctor’s office, or at school; that they are more affected by the corruption in the sphere of business and administrative environment, that by definition includes public stakeholders.

Corruption as a sociology phenomenon Over two thirds of the respondents think that the corruption is a harmful social phenomenon, that should be fought against in all ways. Around 20% of respondents think that the corruption has existed at all times, and that it would continue to exist, no matter what we thought about it. There are also some respondents who think of corruption as a necessary evil, something that is not good, but can be useful. The responds show that most respondents are aware of the harmfulness of corruption as a social phenomenon, however, it is important to find out how purely declarative this position is, and to what extent it might be used as a basis for active action against corruption. Certainly, the number of those who think the corruption is something we should come to terms with shows that there is a freedom of speech on this phenomenon, and freedom to express positions that are not socially desirable. This group of respondents shows in this way their disappointment and skepticism in connection with their ability to change things, but it also includes those who think that corruption is a part of our tradition, and it should be accepted as such. Future changes in the numbers of those who reply this way could show as to what extent the people are used to this problem.


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63.9

6.8

23.8

3 2.6

0

10

20

30

40

50

60

70

Harmful social phenomenon that should be fought against in all ways

Necessary evil in any society - not good, but may be useful

There has always been and there will always be corruption, no matter what we thought

Something that is needed in a society in order to ensure more expedient resolution ofproblemsDon't know, refuses to answer

Chart 3 - What is corruption ?

In addition to the general plan, that shows to what extent the corruption is desirable or undesirable, how well accepted or unaccepted it is, one needs to show what is understood as corruption in practice. The respondents were given options to state their agreement with a list of statements and to answer how much the listed forms of behavior are considered corruption. The general position based on the scale created on the basis of the responses is the following: people of Bosnia and Herzegovina to a large extent recognize the manifestations of corruption. The respondents recognize as corruption also the offer of services, interventions, use of connections, abuse of office. One can not say that the opinion that links the corruption to giving money is prevailing. The responses indicate that there is no significant difference between understanding corruption as giving money, and corruption as provision of services. Both are seen as corruption. The statement that giving money to a traffic policeman is a corruption was shared by 84.3% of interviewees, while the statement that disclosing business information to other people for the purpose of obtaining personal gain is supported by 83% interviewees. This situation may be a very good starting point for future actions in combating corruption. The people of BiH have a good understanding of what all corruption


29

includes, and how it is manifested. This leaves a possibility to act in all spheres where different forms of corruption are observed.

Action Yes (%) No (%) Don’t know (%)

Give a present to a doctor 65,4 31,9 2,7 Offer a counter-service 65,8 29,9 4,3 Use connection to free a close person from a military duty

79,8 16,8 3,3

Intervene with a high official to employ your relative

78,1 19,4 2,5

Address the municipal official personally in order to obtain a construction license

62,3 32,6 5,1

Offer a bribe to a traffic policeman in exchange for him not taking your driving license

84,3 14 1,7

Abuse office to the benefit one’s private company

89,7 6.8 3,6

Disclosing business information to other people, in the personal interest

83,7 11,9 4,4

Giving money to a government official 90,8 6 3,2 Giving pre-election contributions 63,3 27,3 9,5 Additional fee to a lawyer for his help 23,9 12,6 63,5

Table 3 – Which of the above actions are considered a corruption? Causes of corruption

Depending on the point one starts from, we can isolate various causes of the corruption: those may be legal, economic, social or moral causes. According to the data obtained through a research of public opinion conducted by Transparency International BiH, in the publication of their work in February 2001, designated as the main causes of corruption were the lawlessness and inexistence of rule of law, and on the second place are the moral and dishonesty, and on the third place is the general poverty9. Clearly, the causes may classified in different groups. One would expect that in a country where most people are at the verge of poverty that the poverty is seen as the main cause of corruption. This would be a kind of justification for all those who participate in corruption, thereby supplementing their

9 Vuković D., ibid.


30

impoverished household budget and feed the family. This different ranking shows that there is far fewer of those who receive than those who give in the process of corruption, and that the respondents saw those involved in the “large scale” corruption first, for whom there are no legal restrictions in form of sanctions (i.e. the laws do not exist, and the delays in court performance is simply transferred to this area). The second cause stated is the lack of moral and honesty. Placing this cause before the general poverty indicates the opinion on social values that has incurred over the last ten or more years. In this context, one should mention that the corruption is not a manifestation of dishonesty, but the actions like corruption, bribing, cheating (in the jargon “snalazenje” or “resourcefulness”) become socially desirable characteristics of individuals.

Cause Yes (%) No (%) General poverty 49 51 Lack of moral and dishonesty 45,3 54,7 Inefficiency of judiciary 27,8 72,3 Heritage of the previous communistic system 7,9 92,1 Poor legislation 22,9 77,1 War 24,5 75,5 Political system 18,6 81,4 Economic system 5,4 94,6 Lack of clear administration 16,5 83,5 Small salaries of the government officials 8,3 91,7 Lawlessness, lack of rule of law 54,7 45,3 Interference of the state with economy 3,2 96,8 Human nature, people are like that all over 10,5 89,5 Something else 0,3 99,7 Does not know/refuses to answer 0,3 99,7

Table 4 – Main causes of corruption10

The responses above were confirmed when the respondents were asked to select the single most important cause of corruption. In this case, the respondents were not saying whether something was the cause of corruption or not, but they had to choose the main cause of corruption from the given list. Every third person in Bosnia and Herzegovina sees lawlessness and lack of rule of law are seen as the most significant causes of corruption. This public opinion may be a result of the massive campaign being conducted throughout Bosnia and Herzegovina, which focuses on changes and introduction of new laws to deal with the problem of corruption, but also an authentic opinion on the causes of corruption.

10 TI BiH Research, 2002.


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Cause %

Lawlessness, lack of rule of law 30,9 Immorality and dishonesty 15,9 General poverty 18,0 Inefficiency of judiciary 7,7 Lack of clear administration 4,5 Legacy of the previous system 1,8 War 5,4 Poor legislation 5,1 Political system 5,0 Small salaries of government officials 1,3 Human nature 1,2 Does not know/refuses to answer 1,2 Economic system 1,1 Interference of the state with economy 1,1

Table 5 – Main causes of corruption

Some of the main demographic parameter determine the conditions on the main causes of corruption. The respondents having lower education (four grades and primary school) perceive the poverty and war as the main causes of corruption, more often than the respondents with higher education. On the other hand, the respondents having higher education offer the inefficiency of judiciary as the main cause of corruption.

Corruption as (in)direct experience People of Bosnia and Herzegovina perceive that the corruption is a big problem that our society faces, and they clearly understand the manifestations of corruption. Unfortunately, they see that the corruption is swinging up, and becoming more and more widespread over the last ten years. What remains is to try to resolve the dilemma to what extent such positions are a result of the permanent media coverage and discussions about this problem, and how much the respondents were confronted with this phenomenon. That is why the TI BiH tried to clarify on the basis of which kind of experience – direct or indirect – the respondents said what they said on the extent of corruption. Do they speak about corruption on the basis of their personal experience, or on the basis of experience of the others, through media or by indirect inference? The answers they received do not help identify with security how did the people of Bosnia and Herzegovina get the information on widespread nesses of corruption. Most people say that they had the experience on the basis of personal experience,


32

but when compared to other answers, there is no a significant statistical difference that would allow emphasizing that factor.

26,2

23,922,8

22,54,3

personal experience

discussions with the relatives

information provided bymedia

the fact that the standard oflife of public officials by farexceeds their salariesother

Chart 4 – Extent of corruption – source of information

A bit clearer picture is obtained after analyzing the sample through the prism of the respondents vocation. In the group of respondents with no vocation, the29.9% assess the level of corruption on the basis of media reports. In the group of expert, most respondents also formulate their opinion on the basis of media reports. In terms of private businessmen, the situation is different: they base their opinion on their personal experience. The group of officials and agriculturalists mostly rely on their friends and relatives. The category of workers makes their opinion on the basis of their personal experience. We can infer from the Chart 4 that the category of private businessmen is the one that most frequently makes judgments on the basis of personal experiences. This may be brought in connection with the nature of the work they do, and the number of contacts they have at their jobs. The information on corruption may be classified in two categories: those who have learned about it from media reports, unrelated to the number of professionalization they reached, or from personal experience, as shown in the Chart below. It is sad to see that from the point of view of the growing private sector that most entrepreneurs felt corruption on their own skin, in the form of bribery – as many as 36.1%. Such results give the least hope for the new BiH society to make foundations in the speedy growth of the small and medium size businesses. This matter will be discussed in more details in the section of this publication on economy.


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25,2

28,9

28,1

25

36,1

23

26,6

31,8

25

24,2

30,1

13,9

20

19,5

16,8

17,1

21,5

21

19,4

34,1

28,9

18,7

21,1

23,3

21

25

19,3

21,9

7,9

5,6

3,1

1,1

2,2

0,4

0,9

2,4

1,7

6,5

1,5

0 20 40 60 80 100

Agriculturalist

NK-PK worker

KN-CVV worker

Clerk

Private businessman

Expert

No vocation

Personal experienceExperience of friends and relativesNewspapers and other media coverageThe living standard of public officials by far exceeds their salariesOtherDoes not know

Chart 5 – Basis for assessment of extent of corruption – split by professions

With all the others, one may ask the following, very logical question in connection with giving bribe: how do you determine the amount of money that you need to give so that certain doing or not doing that you expect would give the desired effect?


34

7,3 6,8

32,6

0,7

46,7

5,9

0

5

10

15

20

25

30

35

40

45

50

I was told in direct discussion, without my askingIn direct discussion, I had to askI knew even without asking, the "number" is knownIn some other wayI have not been in the situation to give bribeDoes not know/ refuses to answer

Chart 6 – Learning about the amount of money to give as bribe

The distribution of the respondents ’ answers, excluding the 46.7% who have not been in position to give bribe, point at the conclusion that the amount is known before the discussion (32.6% of the responses), that the “number” is known. One may indirectly infer that bribing is widespread and very common, because if the “number” is known even before the act itself, that means that there already is a certain market for the services, that there is knowledge, that the habit is already rooted, and that the public accepts it as reality, or even as a part of our mentality. If we look only at those who were involved in corruption, we get the following picture: 15.6% got the answers in direct discussion, and 14.5% learned about the amount in a direct discussion after having openly asked about the amount, while the “going rate” was known in advance to 68.5%. “Usefulness” of corruption In general, the corruption is seen as something that undermines the efficiency of administration (the government) and economy, and threatens the principle of fairness and impartiality that is incorporated in the contemporary democratic systems. This is a phenomenon that needs to be fought against, the intensity and extent of which needs to be diminished. In our everyday lives, we face the situation when it is very important to finish some jobs in time, to get the needed information or certificate in order to resolve the problem to one’s benefit. In such case, there is an option to choose between the two: to regularly seek resolution of the problem


35

and wait for the outcome, or to try to bribe somebody in order to ensure realization of the deal or resolve the problem. The reaction is related to several factors: how important the resolution is (is it the medical treatment or deprivation of liberty etc.), what are the abilities to react in the expected way (first of all, in terms of financing), how much it is morally approvable or not, and how common the phenomenon is considered to be. It seems that the last dimension is also the most important one, because if we think that it is something that is expected from us, something that is common and necessary to do in order to resolve the problem, it is very difficult to resist it and do differently. Of course, there is an additional dilemma: would any relationship with the representatives of public services automatically mean the corruption, because it is a custom to ‘thank” specially for any service provided? Certainly, the situation itself resolves the dilemmas and changes the opinions. It is often believed that ‘the others’ need to deal with the problem of corruption, or that people do not support such behavior with their own actions, because we are not able to act differently because we are ourselves threatened or a person close to us is so. In this case, we think primarily of the corruption in health, where the price list of different operations, bed, childbirth etc. are widely, though unofficially, known. This is additionally confirmed by the data obtained in a public opinion poll on corruption which was conducted among the population of Bosnia and Herzegovina. Almost 60% of the respondents were ready to pay bribe in order to receive better medical service. In comparison with other areas, this is the area where the largest number of respondents would concede to give the bribe. In terms of efficiency of corruption in dealing with problems, a very pessimistic perspective of the relations in the public sphere of the society is depicted: 84.7% of respondents think one should offer money to the official in order to successfully resolve a problem. The respondents gave similar answers when asked about giving presents: 85% of the respondents think that it is probable that a problem would be successfully overcome if a counter-service is provided to the official responsible for resolving the problem.


36

0

10

20

30

40

50

60

money to theofficial

gift to the official counter-service

very likely

likely

little likely

not likely

does not know

Chart 7 – If you wanted to successfully resolve a problem, what do you think is the likeliness of the

people in this society having to do one of the above?

Citizens are aware of the fact that some problems can be resolved by offering the person responsible the bribe, money, gift or a counter-service. It is a common belief that this simplifies the things, and that something needs to be ‘done’ in order to secure the success.

Feelings on bribery

How should one accurately interpret the data that 46.7% of respondents were not in the situation to give bribe? Whether such accurate way exist in the first place depends on the opinion of the person who makes the analysis, like in the known proverb: “half full” or “half empty”. Does the percentage that says that under half of the respondents have not been involved in the process of corruption mean that the state is good, or is it a disappointing piece of information that the society needs to confront?


37

46,7

47,4

5,9

I have not been insituation to givebribeI have bribed

does notknow/refuses toanswer

Chart 8 –Engagement in corruption

The fact that most respondents knew the amount of money that needed to be offered shows that the corruption has become a common practice, and that it becomes a part of the procedure when addressing a public official. The data say that half of the interviewees were in the situation to give the bribe. It is interesting to show how do those who are directly engaged in corruption feel. Those who decide to ‘abide by the rules of game’ and engage in corruption describe their feelings about giving bribe or gifts and the problem resolved in two ways: they either feel bad because of the way how they have done it, or they are indifferent and satisfied. Less than one third – 26.9% of respondents – are angry for having to do it, and 23.6% feel ashamed. On the other hand, every tenth briber does not care, while 26.8% respondents are satisfied.

26.9

10.6

23.626.8

0.4

11.7

0

5

10

15

20

25

30

Agry Indiferent Ashamed Satisfied Something else Don't know/ refuses to answer

Chart 9 – How do those who have given money or a gift feel


38

Bribing – who and how much? Bribing includes the willful or extorted giving (offering) bribe or taking (demanding) the bribe. There are two parties in this activity. One are the people who occupy certain positions in the society (functions, roles) who acquire gains (benefits) by receiving bribe they would not otherwise have. The other party, the briber receives the benefit that may be defined as a difference between the benefit obtained with the bribe, and the benefit that would be obtained without the bribe. Typically, although not equal, the benefits of both sides are the reason for this type of activity, and for the attempts to cover it up. This is the main reason for corruption to persevere, regardless of moral principles and public values. This practice, if it gets well rooted and tolerated in the society, becomes normal behavior, what leads further on to its extent and increase in frequency. Having in mind all those understandings, the concrete cases, their relative frequency and factual social tolerance of such conduct, one gets the impression that the corruption is everywhere, in all fields of public life. Such understanding may be found in the answers of the respondents and their assessment of the presence of corruption in different areas of social life.

Area of social life Very

little Little Mediu

m Much Very

much Don’t know/ refuses

Average

assessment

Health 7,3 12,5 27,0 35,3 15,0 3,0 3,39 Education 8,3 22,5 37,5 19,5 6,5 5,8 2,93 Municipal administration 1,5 3,3 15,5 44,5 31,5 3,8 4,05 Customs 1,0 1,5 7,5 36,0 51,3 2,8 4,39 Judiciary 1,3 3,8 21,0 36,0 32,5 5,5 4,00 Police 2,5 5,3 16,8 36,8 35,5 3,3 4,01 State owned companies 2,0 4,3 13,3 39,8 35,8 5,0 4,08 Private companies 6,0 10,0 17,3 28,8 28,3 9,8 3,70 Cantonal administration - - - - - - - Political parties 1,0 1,8 9,0 33,3 40,8 14,3 4,29 BiH Presidency 1,3 3,8 16,0 30,0 25,8 23,3 3,98 Council of Ministers of BiH

1,3 3,0 15,3 31,5 26,8 22,3 4,02

Government of the Republika Srpska

1,3 2,8 17,0 33,3 28,5 17,3 4,03

National Assembly of the Republika Srpska

1,5 3,3 15,0 34,3 26,5 19,5 4,01

Telekom Republika Srpska

5,0 10,5 20,0 26,8 20,8 17,0 3,58


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Military 15,5 19,3 22,5 15,3 11,5 16,0 2,86 Government of the Brcko District

2,8 6,3 16,5 19,8 14,5 40,3 3,62

Non-governmental organizations / associations of citizens

8,3 15,8 24,0 12,8 14,8 24,5 3,13

Tax Administration Republika Srpska

2,8 2,5 14,0 33,8 37,5 9,5 4,11

International organizations (OHR, UN, OSCE)

5,5 8,5 17,8 23,8 22,8 21,8 3,64

Ministry for refugees and displaced person of RS

3,0 5,0 15,0 30,8 33,3 13,0 3,99

Elektroprivreda Republika Srpska

3,0 7,0 18,0 30,5 28,3 13,3 3,85

Table 6 - Assessment of presence of corruption in different areas of social life, RS

Area of social life Very little

Little Medium

Much Very much

Don’t know/ refuse

s

Average

assessment

Health 7,5 15,5 24,8 28,0 23,4 0,9 3,45 Education 11,6 25,4 37,6 17,9 6,3 1,3 2,82 Municipal administration 1,5 5,8 30,8 36,0 24,0 2,0 3,77 Customs 2,0 4,0 25,8 37,8 25,9 4,6 3,85 Judiciary 1,8 5,3 26,3 34,6 27,8 4,4 3,85 Police 2,6 7,4 26,0 36,4 24,5 3,1 3,75 State owned companies 3.3 6,4 21,6 37,8 28,1 2,9 3,84 Private companies 5,6 9,6 26,1 31,6 23,5 3,5 3,60 Cantonal administration 1,9 5,3 25,1 35,4 26,8 5,6 3,85 Political parties 3,3 5,6 18,5 30,9 36,4 5,4 3,97 Presidency of BiH 7,5 8,1 21,5 26,8 28,8 7,4 3,66 Council of Ministers of BiH 4,9 7,8 20,4 26,9 31,4 8,8 3,79 Government of FBiH 3,3 7,8 21,4 26,0 33,1 8,5 3,85 Parliament of FBiH 2,5 6,9 21,4 26,3 33,6 9,4 3,90 PTT BiH 7,9 17,5 26,1 24,0 18,9 5,6 3,30 Military 11,4 21,1 35,8 15,6 10,8 5,4 2,93 Government of the Brcko District

4,9 9,6 21,9 16,5 18,1 29,0 3,47

Non-governmental organizations / associations of citizens

19,0 22,8 19,5 15,3 9,3 14,3 2,69

Tax administration of FBiH 3,4 9,8 19,8 25,4 34,9 6,9 3,84 International organizations (OHR, UN, OSCE)

17,5 28,0 18,9 11,4 11,0 13,3 2,66

Ministry of Refugees and DPs FBiH

10,4 13,9 18,1 23,0 25,9 8,8 3,44

Elektroprivreda FBiH 4,5 11,0 23,9 25,3 25,1 10,3 3,62 Table 7 – Assessment of presence of corruption in different areas of social life, FBiH


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If the respondents’ answers were qualified as follows: 1 – very little, 2 – little, 3 – medium, 4- much and 5 – very much, the general average assessment in the Republika Srpska is 3.81, and in the Federation BiH it is 3.55. The assessments give the result that may be qualified as something in between much and very much. In addition, the citizens of the Republika Srpska perceive higher level of corruption. This may also be seen from the range of values, because the values go from 2.86 to 4.39 in the Republika Srpska, while the similar value ranges between 2.66 and 3.97 in the Federation BiH, with the dispersion being approximately the same in both entities (standard deviation in the Republika Srpska was 0,402, and in the Federation BiH 0.404). In addition, in the Republika Srpska as many as 10 areas of social life has been assessed very negatively, above 4, while in the Federation of BiH no area has been given the grade over 4. On the other hand, if one looks at the lowest levels, one may decide that there is no a single area in life covered in the survey where the corruption level was graded under 2. This points at the conclusion that the public is of the opinion that there is no area of life where the corruption does not exist or has a minor character. That is why there is no wander that the respondents feel that the second most significant problem of the society is the corruption. This is a reflection of the current reality as seen from the standpoint of personal experiences and understanding of the respondents. It is true that this may be influenced by somebody else’s opinion, collective stereotypes and ideological or political opinion, or less present that they actually are. The list of the top five areas of social life, the areas that had received on existence of corruption in the Republika Srpska is:

Customs 4,39 Political parties 4,29 Tax administration 4,11 State owned companies 4,08 Municipal administration 4,05

In the Federation of BiH this list is as follows: Political parties 3,97 Parliament of the Federation BiH 3,90 Customs 3,85 Government of the Federation BiH 3,85 Judiciary 3,85

It is apparent that the customs and political parties have received a very negative rating in both entities. The difference is that the respondents from the Republika Srpska feel that the economic aspect of corruption is more present in tax administration and state owned companies, while in the Federation the most


41

corruption is perceived in connection with the government agencies (Parliament of Federation of BiH and Government of the Federation BiH) and judiciary. This leads to conclusion that the difference in perception of corruption is a consequence of different problems n the two entities. When analyzing the final results, one should keep in mind the characteristics of the illegal (irregular) actions caused by bribing; kind and size of the bribe; bribing method (willful or coerced bribe); immediate and long term consequences of bribing; and particularly the social power of the persons involved in bribe (those who give and those who receive bribe). How the public perceives the corruption of the state top and the government members bears a special weight because it points at the conclusion that all social processes and the process of transition in general are derogated. When the public shares such opinion in connection with some profession, one should expect a natural connection with the extent of corruption in different professions.

Profession Almost all

engaged in

bribe

Most engage

d in bribe

Only few are engage

d in bribe

Almost nobody

is engage

d in bribe

Don’t know / refuse

to answer

Average

assessment

Directors of state owned companies 46.3 38.8 10.8 0.5 3.8 1.64 Teachers 4.3 14.5 62.0 12.5 6.8 2.89 University professors 11.0 27.0 46.8 4.5 10.8 2.50 Officials in entity ministries 19.3 40.0 19.8 0.8 20.3 2.03 Officials in cantonal ministries - - - - - 1.99 Officials in joint institutions of BiH 19.3 36.8 19.5 1.3 23.3 2.04 Attorneys 22.5 34.5 30.5 2.3 10.3 2.14 Police officers 26.8 41.3 26.3 2.0 3.8 2.04 Customs officers 45.3 36.5 12.3 2.8 3.3 1.72 Judges 26.5 35.8 29.3 2.5 6.0 2.08 Medical doctors 24.3 32.3 36.3 3.0 4.3 2.19 Private entrepreneurs and businessmen

30.5 34.3 23.0 3.3 9.0 1.99

Bankers 19.3 30.0 37.5 3.5 9.8 2.28 Inspections and controlling agencies

41.0 37.8 15.5 1.5 4.3 1.77

Representatives of international community

27.8 25.3 23.8 5.0 18.3 2.07

Political party leaders 42.5 32.3 15.5 1.0 8.8 1.73 Local political activist, party officials

34.0 33.5 21.0 1.5 10.0 1.89

Employees in power distribution company

19.3 31.8 31.8 6.0 11.3 2.28

Employees in Telekom 17.3 27.8 33.8 7.5 13.8 2.37 Journalists 12.5 22.5 36.3 8.8 20.0 2.52

Table 8 - Extent of corruption in different professions, RS


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Profession Almost all

engaged in

bribe

Most engage

d in bribe

Only few are engage

d in bribe

Almost nobody

is engage

d in bribe

I do not know / refuse

to answer

Average

assessment

Directors of state owned companies

32.5 40.8 23.5 1.3 2.0 1.93

Teachers 5.0 18.6 57.3 15.8 3.4 2.87 University professors 14.0 32.1 45.5 5.4 3.0 2.44 Officials in entity ministries 19.3 36.9 34.3 3.0 6.6 2.22 Officials in cantonal ministries 19.1 38.4 33.5 2.9 6.1 2.21 Officials in joint institutions of BiH

18.9 37.6 31.8 4.9 6.9 2.24

Attorneys 19.6 31.5 37.0 6.4 5.5 2.32 Police officers 16.1 36.8 38.4 3.9 4.9 2.32 Customs officers 20.4 36.4 36.5 2.9 3.9 2.23 Judges 19.0 33.8 36.3 5.9 5.1 2.31 Medical doctors 23.8 38.4 30.5 4.6 2.8 2.16 Private entrepreneurs and businessmen

20.8 32.6 34.6 5.1 6.9 2.26

Bankers 14.5 29.3 39.9 7.5 8.9 2.44 Inspections and controlling agencies

28.3 32.3 27.8 6.4 5.4 2.13

Representatives of international community

11.9 22.9 35.9 17.8 11.6 2.67

Political party leaders 26.5 33.4 27.1 5.3 7.8 2.12 Local political activist, party officials

24.1 35.6 27.8 4.8 7.8 2.14

Employees in power distribution company

16.5 29.1 39.8 7.1 7.5 2.41

Employees in PTT 13.6 25.8 43.3 8.8 8.6 2.52 Journalists 5.4 13.9 38.0 20.3 22.5 2.94

Table 9 – Extent of corruption in different professions, Federation BiH

If we qualify the responses as follows: 1 – almost all are engaged, 2 – most are engaged, 3 – only some are engaged, and 4 – there is almost nobody engaged in bribe, the general average mark for the Republika Srpska is 2.10, while it is 2.34 in the Federation. Those marks show that the average opinion of the interviewees is that most listed professionals are engaged in bribe and corruption. Also in case when we look at professions, the results indicate that there is more corruption in the Republika Srpska than in the Federation BiH. The range of values in the Republika Srpska goes between 1.64 and 2.89, and in the Federation BiH between 1.93 and 2.94. The dispersion is a bit higher in the Republika Srpska (0,307) in comparison with the Federation of BiH (0,251). Also, if we look at the engagement of professions in bribe and corruption, the highest marks (2.52 in the Republika


43

Srpska and 2.94 in the Federation BiH) indicate that the respondents do not see any profession (offered in the list) corruption-resistant, according to the marks they assigned to the professions. The list of the five professions that have received the lowest grades, what indicates that most members of those profession are involved in the practice of bribe and corruption in the Republika Srpska is as follows:

Directors of state owned companies 1,64 Customs officers 1,72 Political party leaders 1,73 Inspections and controlling agencies 1,77 Local political activists, party officials 1,89

In the Federation BiH, the ranking list is as follows: Directors of state owned companies 1,93 Political party leaders 2,12 Inspections and controlling agencies 2,13 Local political activists, party officials 2,14 Doctors 2,16

One may note that the results of both surveys are quite similar. In the first place, with the opinion that most are engaged in bribe and corruption, are the directors of state owned companies, followed by political party leaders, inspections and controlling agencies, and local political activists or party officials. In addition, the customs officer are emphasizes in the Republika Srpska, and in the Federation of BiH the doctors. The results indicate that engagement in bribe and corruption in the process of transition is closely linked with the spheres of economy and politics, what directly derogates the attempts to implement the privatization process, create preconditions for foreign investments and investment activity, as well as for opening democratic processes and development of the country. List of the five professions who have got the highest grades (indicating the lowest engagement in bribe and corruption) in the Republika Srpska is as follows:

Teachers 2,89 Journalists 2,52 University professors 2,50 Employees in PTT and Telecom 2,37 Bankers 2,28

while the similar list in the Federation BiH is the following:


44

Journalists 2,94 Teachers 2,87 International community 2,67 Employees in PTT and Telecom 2,44 Bankers 2,66

The top-ranked professions are similar in both entities: as many as four same professions are on both lists. One should repeat that the lowest ranked have the grades indicating their engagement in corruption, but the emphasis in ranking is primarily related to the relative relationships. This is important because that can help define priorities of anti-corruption activities, and the lowest ranked professions are certainly not the priority. The similarity of perception in this area is present in both entities. This perception may be a result of the fact that the mentioned professions, apart from the representatives of international community and journalists, are in position to significantly influence the developments in economy and society by their doing or not doing. In addition, the tasks of those professions are such that the objectivity is essential for successful performance. Giving bribe is a kind of “diplomatic activity” between those who can resolve a problem and those who need such resolution. Both sides are obviously aware of the illegitimacy of the procedure, and for that reasons they are proceeding “in gloves”, what is expected to ensure the discretion of the doing. Satisfaction of both parties is the guarantee that everything will remain under the veil of secrecy, non-transparency for the environment, what would save both parties from exposure to public judgment or criminal proceedings. The Table 10 contains the respondents’ answers to the questions whether anyone of the stated officials has requested a bribe for resolving a problem of the respondents within the last year.

Official Yes No Don’t know

Doctor or medical staff 25,6 71,0 3,4 Teacher 2,0 94,8 3,3 University professor 3,8 92,7 35 Municipal official 14,3 82,5 3,2 Official in public utility company 6,2 90,7 3,2 Judge or a court clerk 5,1 91,9 3,0 Customs officer 10,1 86,3 3,7 Police officer 22,2 74,2 3,7 Member of the Parliament or a party 1,3 95,0 3,8


45

leader Private entrepreneur 4,6 92,0 3,4 Taxation officer or inspector 8,4 87,8 3,8 Cantonal official 2,0 94,0 4,0

Table 10 – Officials who demanded bribe from the interviewees over the last year

Involvement of the officials in corruption

Perception of the involvement of officials in corruption, starting from the state and coming down to the local level, indicates the position of the citizens on the so called “large scale” corruption. Small scale corruption has two levels: first level are the small bribes and gifts to the service provider, and the second level, that most frequently means giving financial compensation for the services, in the small to medium amount. Most commonly, large scale corruption is seen as involving statement, politicians and business people. The medium scale is somewhere in between the large scale and the small scale corruption. The limits between the levels are not clear and sharp.

20,8

49,5

20,8

0,6 0,3

8

0

10

20

30

40

50

Almost all are involved Most are involvedOnly some are involved Almost none are involvedThere is no corruption Does not know / refuses to answer

Chart 10 – Corruption among the officials in joint institutions over the last year


46

19

51.9

20.8

0.5 0.3

7.5

0

10

20

30

40

50


Chart 11 – Corruption among officials in entity administrations

25,2

46,3

22,4

1,1 0,3

4,8

0

10

20

30

40

50


Chart 12 – Corruption among local administration officials

The tables 11 and 12 give the respondents’ answers in connection with involvement in corruption of the officials at different levels – starting from the state and coming to the local level. The largest number of the respondents in the Republika Srpska (43.8 – 50.8%) and in the Federation BiH (45.8 – 52.5%) have similar opinion, according to which most officials in the joint institutions, entity and cantonal administrations, as well as in the local government are involved in corruption. This similarity in positions indicate that the public opinion has a well developed opinion on extent of corruption among officials at all levels of


47

government. All this points at the phenomenon of the “captured state”, where the corruption controls all levels of government.

Involvement in corruption Officials in

joint institutions

Officials in entity

administrations

Officials in cantonal

administrations

Officials in local

administration

Almost all officials are involved

22,3 20,3 18,0 28,3

Most are involved 48,0 50,8 43,8 47,3 Only some are involved 14,8 13,5 11,3 16,5 Almost none are involved 0,0 0,0 0,0 0,0 There is no corruption 0,0 0,0 0,3 0,0 Does not know/refuses to answer

15,0 15,5 26,8 8,0

Total 100,0 100,0 100,0 100,0 Table 11 – Involvement in corruption of the officials at different levels of government,

Republika Srpska

Involvement in corruption Officials in joint

institutions

Officials in entity

administrations

Officials in cantonal

administrations

Officials in local

administration

Almost all officials are involved

20,0 18,4 20,4 23,6

Most are involved 50,3 52,5 50,6 45,8 Only some are involved 23,9 24,5 24,1 25,4 Almost none are involved 0,9 0,8 0,9 1,6 There is no corruption 0,5 0,4 0,1 0,4 Does not know/refuses to answer

4,5 3.5 3,9 3,3

Total 100,0 100,0 100,0 100,0 Table 12 - Involvement in corruption of the officials at different levels of government,

Federation BiH

If we look at this phenomenon from the position of regional distribution, there is a large level of harmonization of views of citizens at the involvement of different levels of government in corruption. However, there are certain differences that catch the eye. The chart below also depicts how much confidence the citizens in different towns or regions have in their local governments – municipalities and cantons.


48

0 20 40 60 80 100

Sarajevo

Mostar

Tuzla

Kiseljak

Čapljina

Bihać

Bana Luka andPrijedor

Eastern RS

Western RS

State (BiH)administrationEntity administration

CantonaladministrationLocal administration

Chart 13 – Involvement in corruption of the officials at different levels of government

The following perception by demographic categories should also be considered. Just about equal number of respondents see the men as more inclined to receiving bribe than women, meaning that there is no gender sensitivity when it comes to the ‘blue envelope’. However, the prejudice exists when it comes to undefined gift, where people probably think of the flowers or chocolate. In this case, 48.6% respondents answered that the women are more inclined to accept such gifts, as opposed to 38.6% who have not supported this statement. Trying to explore deeper the inclination to bribe and corruption, one has arrived to a very encouraging results: younger administrative officials, according to the opinion of 58.3% of respondents, are not more corrupt than the older, while the 23.4% think the opposite.


49

32,7

29,4

24,1

16,7

46,2

48,4

57,5

67,6

21,2

22,2

18,3

15,6

0 10 20 30 40 50 60 70 80 90 100

Four grades

Primary school

Secondary school

Higher and highschool

Yes No Does not know

Chart 14 – Are the younger official more corrupt than the older ones (split by education level) An even more clear picture is depicted at the above given chart, showing that the highly educated layers of population give full support to the young officials, where only 16.7 citizens with tertiary (higher and high) education give advantage to the older officials over the younger.

Future of corruption

It may be freely said that the number of those who think that the corruption may be extinct is neglectable – 7.8% of respondents shares this opinion. On the other hand, two thirds of respondents state very firmly that the corruption is a part of our reality, and that it would remain so. Those data show the readiness of the people of Bosnia and Herzegovina to live with this phenomenon. This is supported by the most frequently given answer – that there will always be corruption here (41.3% respondents) .


50

29,3

41,3

18,33,4

7,8

corruption can not besupressed

there will always becorruption here, althoughit may be madesignificantly lessercorruption can be madesignificantly lesser in oursociety

corruption in BiH can befully extinct

Chart 15 – Opinions on corruption

A bit more optimistic picture on the future of Bosnia and Herzegovina is obtained on the basis of the answer to the question: “Imagine yourself in the shoes of a poorly paid official who is being offered money, gift or counter-service for resolving some problem. What would you do?” Only 18.4% respondents said that they would accept the money, gift or counter-service. One third of the respondents would not accept it, being afraid of the legal sanctions if the resolution of the problem involves violation of law. One third of people would not get involved in the “corruption” against the rules. This certainly does not mean that they would not get engaged in corruption at all, but that they are more inclined to corruption “in accordance with the rules”. And finally, 44.7% respondents said that they have no justification for such things, and that they would not accept money, gift or counter-service for that reason. This less than a half of citizens is the hard core of the individuals who are against all forms of corruption.


51

ADMINISTRATION AND POLITICAL SCENE, TRUST IN THE GOVERNMENT INSTITUTIONS, PARTIES AND INTERNATIONAL

ORGANIZATIONS

Introduction The phenomenon of the political system, due to its complexity does not have a generally adopted definition. It includes all institutions, organizations and associations, which affect the society as the agents of political life, regardless of the motives or the level of their effect. Regardless of the meaning we assign to the political system, it represents a synthesis of political or social institutions, which is always broader than the state. The notion of political system includes, in addition to the state, all different organizations and associations created beyond the sphere of influence of the state, but which, in spite of that, to a significant extent articulate the most varying social positions, making a pressure on making and implementing state decisions. It is important from the aspect of democracy development, which requires a successful implementation of transition, that the purposes of all subjects of political system, regardless of their inner contradiction, make a unity. The purpose of all of them individually is to make political decisions within the state that, being a global organization, has the obligation to make decisions of universal character, which would become mandatory for all members of community, thereby ensuring equality of all subjects. Political system counts on the fact that the state has not become less significant, and that its exclusivity has not been threatened. The state is more comprehensive, massive, and its rules become more and more numerous, creating a dense network of regulations, thereby becoming ever more present both in the life of individuals, and the society as a whole. This is the situation through which the essence of political system is virtually consummated, meaning that the election of representatives of the previous times, which was the only way of individuals participating in government recognized by a constitutional system, there are others, that are not only more numerous, but also more effective. Political system in the environment of transition The BiH society is the society in transition, and in addition to the legacy of the former socialistic political, legal, economic and ideological concept, it also has to cope with traumatic experience of war.


52

A demanding and complex process as transition certainly is, because it assumes desertion of the old concept of state and establishment of the new, in the particular conditions that exist in Bosnia and Herzegovina is made additionally difficult by very slow social changes that are supposed to create conditions for a stabile democratic environment. A condition of successfulness of social transformation is discovering and eliminating the undesirable and harmful phenomena, a precondition for what is the existence of recognizable and reliable criteria for identifying them. The transition has lead to change of government, socialism wend down from the social stage, the new political concept advocated its democratic identification only, but the true temptations were more a testimony of fear of democracy than the desire to adopt and adhere to its principles. The experiences of Eastern European countries had with transition indicate a continual attempts of the new political regimes to maintain the authoritarian model of control over the public and public opinion, and on the other hand, the social change has enabled creation of a new sphere of general public, which had not existed before due to the nature of the government; this new sphere demands a public dialogue to confront opposing arguments, for and against the currently applicable political and legal concept, and conduct a discussion on issues of general interest. The public transforms with transition into an active subject of political system, which demands a respectable status. The transition countries, including Bosnia and Herzegovina, are finding themselves in a contradictory position. On one hand, they want to join the integrative courses in the Western Europe as soon as possible, to accept the values of developed democracies, and on the other hand, they are having hard time adopting the principle of transparency in work of the public authorities. The war has brought about a general crisis of morals, leaving behind the old values, but not replacing them with the new, causing thereby the feeling of insecurity provoked by inexistence of rule of law, lawlessness and poor legislation. The old legal concept of state has been dismissed as used up and inappropriate, while the legislation of the old system has either continued in existence, awaiting to be replaced by new laws that would more better and more appropriately respond to the new social circumstances, or the old regulations ceased, but have not been replaced with the new ones immediately, what had resulted with legal gaps that have jeopardized the credibility of the concept of new democracy, giving raise to the insecurity concerning the real intentions of the public authorities to start a profound and good quality social reform that would ensure a stabile basis for development of a democratic society.


53

The process of transition has brought to the historical and political scene, along with the state that had been the exclusive creator of legislation during the communist era, a complex structure of social forces that are equally trying to participate in state decision making, with the intention of implementing it in accordance with their own interests. This is certainly aided by the fact that the monistic political system of communism has been replaced by political pluralism, which promotes as the main actors at the political scene the political parties. “The political parties are the tool for political activation of the general public and their involvement in political life."11 The work of political parties makes up a dominating part of the political life, in spite of the fact that constitutions do not typically mention them, and or if they do mention, they try not to assign them any importance. The constitutions, because of the actual significance the political parties have in a political life of one side, want to prevent creation of parties that would operate in contravention with the existing constitutional establishment, and in case of those whose operations are permitted, try to inhibit any action that would be harmful for the “public interest”. This is the reason why there are regulations on transparency in the work of parties, the method of their financing, modes of the permitted promotion activities, overseeing party work, etc.12 Main reasons of corruption in the system The old legal and political concept of socialism has never wanted to admit the full capacity of any socially undesirable manifestation; even if it had admitted it, it had done it with the intention of minimizing its social influence and marginalizing it, or, in the worst case, to depict it as a weakness that the “healthy forces will be able to put an end at without many problems.” Certainly, socialism knew the phenomenon of corruption too, but corruption being undesirable and unacceptable for the system, it was not publicly discussed for the reasons mentioned above. There were no reliable data on the size of the phenomenon, so the research of the public opinion that is reactivated with the transition, redirect alarmingly the attention to this problem, defining it as one of the key problems that inhibit, or in the best scenario, slow down the establishment of an operating legal and political framework of the new democracy. The corruption perception study among the citizens of Bosnia and Herzegovina was implemented throughout Bosnia and Herzegovina, with the purpose of

11 Dr Lukić L.: Political parties, Belgrade , 1975. 12 Prof.dr Pobrić N.: Constitutional law, Slovo, Mostar, 2000., p. 203.


54

diagnosing corruption as a problem; determining the reasons the people think are relevant; discover the size of corruption, as well as the individual experiences of citizens with regards to their attitude to corruption; readiness to confront it, accept it, or generate it themselves, motivated by immediate personal gain and the interests, who will be ready for it and who will get engaged in it. The TI research this analysis is based upon suggest, first of all, that the citizens are aware that the corruption exists. It is particularly strong in some areas. Parties, as the most important segment of the political system, were seen as 10.8% of the respondents as the institutions where the corruption is the most present. The institutions where the corruption is the least present are the education and the international organizations, according to the opinion of 24.7% and 15.5% respondents respectively.

7,5

1

5,8

10 ,3

9 ,3

4 ,6

6 ,9

2 ,3

0 ,7

10 ,8

3

1

0

2

4

6

8

10

12

he a lth e d uca tio nm un ic ip a l ad m in is tra tio n cus tom sjud ic ia ry p o licesta te o w n ed co m pa n ies p riva te com p an ie sca n ton a l ad m in is tra tio ns p o litica l p a rtie sB iH P re s id en cy C ou nc il o f M in is te rs o f B iH

Chart 16 – Extent of corruption in different institutions


55

2,5

1,2

2,8

0,9 10,3

8,8

2,3

6,3

3,1 2,8

0

2

4

6

8

10

12

G ov ernm ent of the Federation/RS Parliam ent of the Federation/RSTelekom , PTT Arm y of the Federation/RSG ov ernm ent of the Brcko district Non-gov ernm ental organizationsTax adm inistration of the Federation International organizationsM inistry of refugees and DPs E lektropriv reda of RS/FederationDoes not know

Chart 17 – Extent of corruption in different institutions (second part)

One of the most interesting parts of the research is the study of public opinion and its perception of the causes of corruption and on what influences it extent. The lawlessness and inexistence of rule of law are convincingly ahead of all offered alternatives, because this was the opinion of 54.7% respondents, while additional 45.3% respondents think that the causes are immorality and dishonesty, and 27.8% respondents thinks that the inefficiency of judiciary is the main cause of corruption. 24.5% respondents recognizes the undisputable consequences of war as a cause for corruption, while in the opinion of 22.9% respondents, the cause is poor legislation. For the needs of this analysis, particularly interesting are two pieces of information obtained through this research- the legacy of the old communist system is stated as a cause of corruption only by 7.9% respondents, while 18% recognizes the political system as the main cause.


56

49 5145,3 54,7

27,8 72,37,9 92,1

22,9 77,124,5 75,5

18,6 81,45,4 94,616,5 83,5

8,3 91,754,7 45,3

3,2 96,810,5 89,5

0,3 99,70,3 99,7

0 10 20 30 40 50 60 70 80 90 100

General povertyImmorality and dishonesty

Inefficiency of judiciaryLegacy of the previous system

Poor legislationWar

Political systemEconomic system

Lack of clear administrationSmall salaries of government officials

Lawlessness, inexistence of rule of lawInterference with the courses of state

Human nature, people are like thatSomething else

Does not know, refuses to answer

Yes No

Chart 18 – The main causes for expansion of corruption


57

18,0

15,9

7,7

1,8

5,1 5,4 5,0

1,1

4,5

1,3

30,9

1,1 1,20,3 0,9

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

General poverty Immorality and dishonestyInefficiency of judiciary Legacy of the previous systemPoor legislation WarPolitical system Economic systemLack of clear administration Small salaries of government officialsLawlessness, inexistence of rule of law Interference with the courses of stateHuman nature, people are like that Something elseDoes not know, refuses to answer

Chart 19 – Most important causes for expansion of corruption The respondents state as the most important causes of expansion of corruption the lawlessness, inexistence of rule of law (30.9%), general poverty (18%), immorality and dishonesty (15.9%), and inefficiency of judiciary (7.7%). That the corruption undermines the society and its values is shown on the following chart, that shows the fact that the richer people have much less contact with bribe and corruption (for instance, 8.6% of the respondents whose monthly income exceeds 2000 KM, as opposed to the 31.1% of the respondents with the average income, or 25.2% of people with minimum income). It is of particular importance to mention that, in the light of the existence of standard ‘tariffs’ for different services in administration, the amount of the real bribe paid by the poor is proportionally much higher than the bribe paid by the richer people. In other words, corruption really makes the poor even poorer, and the rich even richer. In addition, the citizens with higher income more frequently have institutional ‘connections’ and they ‘know somebody’, what frees them from paying bribe, while the poor people, almost with no exception, have to pay the bribe and let their funds go to illegal flows, in exchange of a very ordinary service.


58

25.2

22

31.1

30

30.1

24.1

8.6

24.2

33

20.6

22.1

23.7

22.8

28.6

25.2

23.1

21

16.4

19.4

25.3

25.7

21

19.8

24.7

21.5

20

0.4

3.8

2.9

4

2.2

2.1

3.6

2.2

2.5

14.3

25.7

24.80.4

2.1

0 20 40 60 80 100

0-149 KM

150-249

250-499

500-699

700-1000

1000-2000

2000 and more

personal experience

discussions with friends and relatives

information provided by newspapers

fact that the living standard of the public officials is far above their salaries

other

does not know/refuses to answer

Chart 20 – What do you base your knowledge of corruption in the society on? Corruption in public services (administrative apparatus) A famous sociologist, Ralf Derendorf, claimed that six months are needed for establishing the main structures of a rule of law, six years for transformation of economy, and sixty years for building a civil society. Bosnia and Herzegovina society has by far exceeded the time for establishing rule of law, without achieving a satisfactory result, what has caused people loosing confidence in the institutions of the system. In the area of judiciary, 35.1% respondents think there is much of corruption, 29.3% very much, and only 24.5% think there is medium extent of corruption. The aggregate percentage for those three categories, each of which, although in a different extent, say that there is corruption in judiciary, is the alarming 88.9%.


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In case of police, 36.5% respondents see much of corruption, 28.2% see very much, and only 22.9% se medium size corruption, what means that 87.6% respondents see the presence of corruption in the police. Such extremely high percentages showing the presence of corruption in the police and judiciary justifiably confirm the concerns about the ability of putting up efficient and effective fight against corruption, which fight is entrusted to those institutions, in the light of the corruption being so widespread in them. This is also confirmed by the research results: the citizens always relate the notions fair and impartial to the notion of system of justice in only 6.8% cases, 21.7% do that in most cases. 38.1% respondents relates those notions with the system of law only exceptionally, and as many as 25% never. This confirms the previously mentioned concern in terms of credibility of this state function, and its ability to respond to the social task entrusted to it. The respondents relate to the notion of judiciary the assessment “fair and uncorrupt” in most cases, 36.8%, only exceptionally, and as many as alarming 32.8% never do that. 16.8% respondents do that in most cases, and 5.2% always does it. The main principles on which the function of judiciary relies is the principles of impartiality and efficiency that, along with the most important one, the principle of legality, make up the core of the third important government function (behind the constitutional legislation and executive-political function, but before the administrative) are seriously brought into question. The respondents will never related the assessment “effective and efficient” with judiciary in 37.8% cases, 37.3% will do that only exceptionally, while only the modest 3.8% respondents will believe in efficiency of judiciary. 12.9% of respondents will relate this quality to judiciary in most cases. Equally as they doubt the ability of judiciary to be fair and impartial, honest and uncorrupt, effective and efficient, the respondents also doubt the ability of the very same judiciary to implement its own decisions. As many as 41% of respondents think that judiciary is able to do that only exceptionally, 24.4% think that it can never do that. A modest percentage of 26.2% respondents think that the judiciary is able to implement their decisions: 5.8% of them think that the judiciary can always do that, while 20.4% think they can do that in most cases. Such a poor perception of system of justice is additionally worsened by the results obtained on the question how often they relate the notion of independence to judiciary. Only 20.9% respondents relate the independence with judiciary at all: of the total, 4.9% relate it always, and 16% in most cases.


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The function of judiciary relies on the principle of independence, and the principle of legality. That is nothing else but the demand that the judges adjudicate in the legal dispute independently, free from any interference of any other subjects in their decision making on concrete issues. The adherence to this principle “protects, particularly from the politically powerful individuals and the police, the authority and objectivity of the judge, the authority of the legislator whose decisions the judge implements, and the fairness, security, rights and liberties of citizens.”13 The similar question, this time about police, to determine the extent of bribing, was answered in 38.3% cases by saying that most are engaged in this practice, in 19.7% cases that almost all are engaged, while only 3.3% believe that the police are not corrupt. At the same time, almost every fourth respondent was in the situation to give a bribe on request of a police officer. Since the research had been undertaken with the purpose to perceive corruption in Bosnia and Herzegovina, considering the worryingly bad opinion of the respondents on the judiciary, and not encouraging opinion on the police, the assessments of the respondents seem even more interesting:

- considering how widespread were the bribe and corruption in our society in the period from 1992 to date;

- and considering how much efforts did the government in the period 1998/2000 to exterminate the corruption, and how much efforts puts the current government to the same aim.

One more institution has a critical importance for the current moment in the BiH development - the Ministry of Refugees and Displaced Persons. The research viewed them as a separate item because so many people in the country are currently in the stage of realizing their right to their property, or to alternative housing. This ministry is seen as one of the most corrupt institutions, with the assessment that the corruption is widespread very much (28.3%) and much (25.6%), and frequent occurrences of bribe. However, due to the fundamental significance for the individual, the citizens are much more inclined to pay bribe in order to find an alternative housing. The Charts below show the extent of people’s readiness to bribe the officials in order to reposess their property, or keep the temporary housing.

13 Prof. dr Visković N.: State and law, Student Printing of the University, Sarajevo 1996., p.49.


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7,9%

52,1%

40,0%yes

no

does notknow

56,1%

31,8%12,1%yes

no

does notknow

Chart 21 – Would you pay a bribe to:

a) exercise your right to repossess your property; and b) exercise your right to alternative housing Corruption and political power The respondents see the period before 1992, in terms of bribe and corruption in our society, as very little developed (20.8%), little developed (29.5%) and medium develop (25.4%), what is very illustrative, although in the previous regime is now gladly assigned all kinds of vice on top of non-democracy. The research showed that the respondents think that this phenomenon had significantly increased during the period 1992-1996, so 28.4% respondents think it was medium widespread, 28.6% as much widespread, and 18.4% as very much widespread phenomenon. The next observed period, 1996-1998, is seen by 38.8% respondents as a time when bribe and corruption were very much widespread, while additional 31.4% think they were much widespread. For the following two years, 1998-2000, 43.3% respondents think it was much widespread. This continuous growth continues for the period 2001 to date, o the respondents now think in 47.3 percents that it is very much widespread, and 36.8% that it is much widespread. This points at the conclusion that the level of corruption, in comparison with the previous government, has not decreased, but it intensity has marginally grown. In the opinion of the respondents - businessmen, the efforts put by the old government (1998-2000) were too little (27.3%) or none (34.1%), and in their opinion, the current government is not putting this kind of efforts either (61.6%). When such efforts are directed to the high state officials, the respondents are in 40.4% cases of the opinion that it was inexistent, and 25.5% that this effort was very little. The percentage of 26% respondents who think that the previous government from the said period had put a lot of effort in exterminating corruption at this level is encouraging. The respondents think that the current government is also making certain efforts to introduce more transparency in work of high state


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officials, but this percentage went down by approximately 5%, to the level of 21.1%. In terms of the lowest level of government, the local level, the one with which the citizens have most contact, in the opinion of the 33.3% respondents, the previous government has not put any efforts in exterminating corruption, or has done it very little, what is the opinion shared by 27.5% respondents. The current government, in the opinion of 26% respondents, puts serious efforts in exterminating corruption at this level, what is the only area where improvements were made, almost doubling the results Although the diagnostics of corruption is rather discouraging; 18.3% respondents think that the corruption can not be suppressed, 41.3% think that there will always be corruption in Bosnia and Herzegovina society, although it can be a diminished to a certain extent, and only 7.8% think that the corruption may be completely extinct. The existing institutions of the system, in spite of the poor opinion the respondents have about them, particularly the judiciary, the respondents, in their fight against corruption, legitimate the existing institutions, remaining within the framework of the system, what means that the credit the institutions had has not been fully used up. In most cases, the respondents recognize as effective tools the following: consistent implementation of legal sanctions – 29.5%, making the legislation more stringent – 27.8%, and even strengthening the existing institutions – 9.9%. For 15.7% respondents, the solution is in setting up a new anti-corruption team, while 9.6% seeks the way out in giving broader authorities to the international institutions.


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9,9

15,7

9,6

27,8 29,5

0,3 1

6,3

0

5

10

15

20

25

30

strenghtening existing institutionscreating new anti-corruption teamgiving broader authorities to international institutionsmaking the legislation more stringentconsistent implementation of legislative sanctionssomething elserefuses to answerne zna

Chart 22 – What are the best ways to fight corruption In 70/6% cases, the citizens abide by the law only when it suits them, and their attitude towards the corruption as punishable activity is that both giving and receiving bribe should be sanctioned – 49.6%, while 32.7% respondents are of the opinion that only those receiving the bribe should be sanctioned. Regardless of the percentage mentioned before, in some situations the respondents show the readiness to pay the bribe when so demanded by the responsible official:

- 58,5% of respondents would do than to get a better medical service - 57.7% of respondents are ready to do that in order to find employment,

whether for themselves or for somebody else; - 39.9% respondents would be willing to pay bribe in order to avoid paying

import duty at the border; - 38.8% are willing to bribe the police officer to avoid paying the ticket; - 32.1% would bribe to evade tax; - similarly to 32.8%, what is the percentage of respondents who are willing

to bribe in order to secure an utility service; - in 31.4% cases to win a legal dispute; - only 15.9 % respondents are willing to pay bribe for a better grade of their

children in schools, while 79% give negative answer in the similar situation.

The Table below gives an overview of the different levels of government and perception of citizens in terms of the extent of corruption in them.


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Level of government Very

much Much Medium Little Very

little Don’t know / refuses

Municipal administration 26,5 38,8 25,7 4,9 1,5 2,6 Cantonal administration (only for the FBiH)

26,8 35,4 25,1 5,3 1,9 5,6

Entity government 31,6 28,4 19,9 6,1 2,6 11,4 Council of Ministers BiH 29,8 28,0 18,7 6,2 3,7 13,3 BiH Presidency 27,8 27,8 19,7 6,7 5,4 12,7

Table 13 –How present is the corruption at different levels of government? The respondents saw the engagement of officials in bribe as “almost all are engaged”, but in a different percentages:

- among the officials of joint institutions, 19.0% - in the entity administrations, 21.8% - in cantonal administrations, 19.1% interviewees.

In the opinion of the respondents, the following percentages chose the answer that “most are engaged” in corruption in the following institutions:

- in joint institutions 37,3%, - in entity ministries 37,9%, - in cantonal ministries 38,4%.

Public officials are not normally asking for bribe openly. They openly demand bribe in the opinion of 22.9% respondents, and in all cases in the opinion of 7.2% respondents. If they are not asking for money openly, they are showing their expectation to receive money, gift or service, in accordance with the respondents, to a large extent in 37.8% cases, or in all cases in the opinion of 16.7% r5espondents. In addition, 8.3% of the respondents has not demanded bribe openly, but the respondents indicated that this arrangement was possible. 23.8% were on such situation only exceptionally, and high percentage of 38.3% respondents were never in such situation. This represents the “offer” side for the bribe. What is extent of corruption in entity governments the respondents individually said in the table below (the are based only on the responses from the respective entity):

% Government of the Federation BiH

Government of the RS

Very little 3,3 1,3 Little 7,8 2,8 Medium 21,4 17,0 Much 26,0 33,3


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Very much 33,1 28,5 Do not know / refuse 8,5 17,3

Table14 – The extent of corruption in the entity governments A similar picture has been obtained when asking the citizens how do they see the Parliament of each of their respective entities:

% Parliament of the Federation BiH

National Assembly of the Republika Srpska

Very little 2,5 1,5 Little 6,9 3,3 Medium 21,4 15,0 Much 26,3 34,3 Very much 33,6 26,5 Do not know / refuse 9,4 19,5

Table 15 – Extent of corruption in the entity parliaments Political parties The above stated parameters should be interpreted in a close connection with the assessment the respondents provided in connection with the extent of corruption in the political parties. Political parties are a significant stakeholder in any political system, they have the most influence on it, the political system is rather conditioned by political parties. Most respondents, 37.8%, think that the corruption is in the political party present much, 31.7% think it is very much present, and 15.3% think that the corruption is averagely present in the political parties. Since the will of political parties who win the confidence of the citizens in elections affect the whole organization of the state government, the above results are fully understandable. The poor quality such as corruption evidently is, only spreads from the political parties to the structure of the government organization.


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2,54,3

15,3

31,7

37,8

8,3

0

5

10

15

20

25

30

35

40

Very little Little Average Much Very much Not know/refuse

Chart 23 – Extent of corruption in political parties

Although the prevailing opinion of this moment is that the citizen’s role that has been reduced to the participation in elections alone is the least effective method of participating in political processes, it is a necessary condition of existence of any modern, democratic state, and the political system itself. The elections are nothing but a legitimating of power. “In essence of the modern representative democracy is the right and possibility of individual human – or citizen, if viewed from the point of view of the state – to choose his representative, to enable creation of the legislative body that will make laws and take care of its implementation".14 However, confusing, if not concerning, are the above given numbers that do not illustrate high level of confidence in the political parties, and consequently to the government bodies filled by their representatives, on the basis of the number of votes won at the elections.

14 Prof.dr Sadiković Ć.: Political system, 2. revised and amendment edition, Faculty of Law, Sarajevo 2000., p. 37


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3,3

2,9

4,3

8,6

7,9

7,5

2,5

5,7

14,3

19,8

13,6

17,2

29,1

20

30,2

33

30,7

37,9

26,9

36,7

34,3

39,7

36,3

47,9

27,9

35,5

26,6

17,1

9,5

5,5

5,9

10

8,6

5,1

14,3

2,3

1,7

4

2,2

2,9 10,9

0 10 20 30 40 50 60 70 80 90 100

Up to 149 KM

150-249 KM

250-499 KM

500-699 KM

700-1000 KM

1000-2000 KM

2000 KM and more

Very little Little Medium Much Very much Do not know

Chart 24 – The extent of corruption in political parties (division by monthly income of the citizens)

The economically worse off categories particularly indicate at the presence of corruption in political parties: in the category of people with monthly revenues in the range of the BiH average, 30.7% says that the corruption is much present in political parties, and as many as 47.9% respondents from this category say it is very much present. A similar picture is shown by the individuals with the lower income level in the society. It is interesting that the economically best off group of respondents, those with over 2000 monthly income, say that the corruption in this segment of political system is very little – 8.6%, or very much – 17.1%! The given information indicate the higher sensitivity to the phenomenon of corruption of those layers in the society who are worse economically off. Typically, those are the people who are not participating actively in the political life, but they are the most numerous part of the voters, and have the possibility to create and redefine the political system, so one would expect that they will transform their perception on unacceptable and pathological social conducts into a political positions on the performance of which they would insist with the political representatives they elected. On the other side from them, there are economically richer layers, that are very often party activists themselves, and they do not


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welcome any criticism, and even less the self-criticism. This once again reconfirms the difference in perception and damage made by the corruption. The opinion of the respondents that the corruption in political parties is expressed in the said measures justifiably raises concern in terms whose interests the elected political representatives are going to represent, and to what extent the laws they will adopt will be motivated by social, and to what extent their personal interests. The attitude of the respondents towards the political parties, considering the corruption, explains the percentage of responses that relate corruption with all levels of government, who are appointed by the political option in position.

31,833

23,3

3,8

8,1

0

5

10

15

20

25

30

35

almost all are engaged most are engaged

only some are engaged almost none were engaged

do not know/refuses to answer

Chart 25 – To what extent are the leaders of political parties engaged in bribe In 33% cases, the respondents are of the opinion that most political party leaders are involved in corruption. The bribing is also spread among local political activists and party officials - 34.9% of respondents that all of them are engaged in this activity, and 27.4% that almost all are engaged.


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27,4

34,9

25,5

3,7

8,5

0

5

10

15

20

25

30

35

almost all are involved most are involved

only some are involved almost none are involved

does not know / refuses to answer

Chart 26 – To what extent the local activists and party officials are engaged in the practice of bribing

This situation in institutions points at the extra-law synergies, that are implemented through the inter-partisan combinations of centers of power, for the purpose, for instance, of acquiring extra profits through the process of privatization, when it is enough for one party to “deploy” their people in a public company, responsible ministry or privatization agency, to operate in the ideal conditions for themselves and participate in the local government. In this way, a party provides for itself a full control of a process, and through that, provision of benefits for their “privileged” embers. Although the operation of political parties is burdened by a mortgage of corruption, when asked which party is the most corrupt in BiH, as many as 35.9% respondents does not know the answer. This says that the citizens have had enough of political parties not fulfilling their empty election promises to the extent that they not making any more difference between the parities that are being offered to them, but instead, see all of them, without any difference, as equally corrupt, and assess them as such. In other words, 35.9% citizens is completely disappointed with political parties in BiH and fully disinterested in elections. If we add to this additional 9.7% of traditionally disinterested citizens, what has been the usual minimum rate of disinterest and abstinence of people, we have t least half of the population that is very dissatisfied, one could even say disappointed and indignant.


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0,8

8,5

1,3 1,1

3,8 4,2

7,3

1,6

2,1

13,2

10,6 9,7

35,9

0

5

10

15

20

25

30

35

DNS HDZ SNS PDP Party for BiHSDP BiH SDS NHI SNSD RS SDAsome other refuses to answer does not know

Chart 27 – Corruption rating of political parties in BiH

Media The opinions the respondents express on the extent of corruption are based on their personal experience in 26.5% cases, on the discussions with relatives in 23.9% cases, on the direct insight through media – 22.8%. Without doubt, media have a large significance in formulating the public opinion. Their real influence is illustrated by the name they have been called since long time ago – the fourth power. In the political life, the media are the channel through which one of the main human rights is realized – the right to information – of which to a large extent depends the realization of the principle of democratic society. In the processes of realizing the right, it is necessary that a citizen insufficiently “formed and informed” to be able to successfully perform the tasks ahead of him. The politics, particularly in the sphere of creation of legislation, requires a lot of knowledge and information on all aspects of life from which the demands directed to the government come. The main task of the media is to inform the citizens on everything they need in order to get a judgment on the things they are interested in. The assumption of the successful realization of this task is their freedom from influences, of both the public authorities and political parties. Those subjects,


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aware of the role media have in forming public opinion, rarely give up the intention to exercise influence on media, in order to ensure their own political promotion. The influences of this kind drive the media further from their main purpose, and prevent provision of objective and full information. The media in Bosnia and Herzegovina are one segment of society where the war propaganda is the most obvious. The media have emerged from the war seriously burdened with being the instrument of war encouraging politics, whose promoters and pride they were. Media regulations is not sufficiently developed, it is not coherent and it is under strong influence of international community. All this seriously affects the credibility of media, which is, once lost, very difficult to regain. The results of the corruption perception study with regards to the journalists and their readiness to take part in the corruption are encouraging, having in mind all the said above. In 37.4% places, the respondents are of the opinion that only some journalists are inclined to such behavior, while 7.8% think that almost all are involved in it, and 16.4% are of the opinion that almost no one is engaged.

7,8

16,8

37,4

16,4

21,7

0

5

10

15

20

25

30

35

40

almost all are involved most are involvedonly some are involved almost none are involveddo not know/refuses to answer

Chart 28 – To what extent the journalists are involved in bribe


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Further development of institutions in BiH The stakeholders in political life, the total of which in facts make a political system, act with the intention to efficiently represent the interests of those whom they represent, to those who are in position to meet those interests being the public authority agencies. A political system formulated like to be effective must not be burdened with lack of confidence between the citizens and institutions, while the presence of corruption in the extent illustrated by the respondents confirms that such lack of confidence exists. Having doubts that the political parties are corrupt, the citizens have doubts in the whole system, because, as it had been said before, the political parties are the most important element of the political system, and they, as the bearers of political power, cerate the overall political, legal, and ultimately any other environment. Perception of corruption in political system opens a whole row of important questions, starting from how is it possible for the citizens in a democratic society, even if it were in the early stages of adopting democratic rules, accede to the political representatives whose involvement in corruption they suspect, how is it possible to expect efficiency in the combat against corruption if those expected to wage that battle are the same ones who are involved in corruption. If the political reality in Bosnia and Herzegovina is burdened with corruption in political party, corrupt politicians, lack of confidence that follows from that, even if the most important government functions are infected with corruption, one should even more emphasize the trust the citizens show towards the non-governmental sectors and international organizations active in Bosnia and Herzegovina, which act as a sort of replacement for the inefficient or inexistent government agencies. Since the existence and consequences of corruption have been registered in an alarming scope, the question is what are the efficient measures for suppressing it. Certainly, some reforms will be necessary for the purpose of adoption of more efficient and more stringent legislation, it will be necessary to set up specialized teams for combating corruption, and perhaps have a more significant influence on the awareness of the citizens that the corruption is not something people should just accept, on the contrary, once recognized, it should be sanctioned and those involved in it should be punished. According to the picture painted by this newest study, there are two relevant reasons for which one can not expect a more significant progress in treating the observed phenomenon of corruption under the current constellation of social relations; on one hand, we have the inertia of the legislators, and on the other hand,


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lack of readiness on the part of governments to implement a comprehensive and rigorous reform for the purpose of suppressing corruption.


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CORRUPTION IN BiH ECONOMY Introduction The understanding that the corruption is a very significant obstacle for economic development of Bosnia and Herzegovina has lead to an exercise that was implemented by the World Bank (WB) at request of the BiH authorities. This was a public opinion poll in connection with corruption, implemented in 2000. The research of the Transparency International BiH (TI BiH) was conducted with the same goal in February and March 2002. The comparison of the results indicate that, during the time between the two studies, no improvements had been made. Corruption in BiH threatens the reforms that have already been started in the country, new businesses are sucked into the area of gray economy, vital resources are mindlessly exhausted and disappearing, foreign investors turn their heads away because of the high investment risk. High level of corruption makes the transition period additionally difficult by reduced production and speedily growing social gap. One may freely conclude that the main trend that characterizes this period is generally diminishing confidence of the general population in the state institutions, and their ever lesser belief that something can be changed. The purpose of this paper is to identify causes of corruption and the existing practice of corruption in the economic life of BiH, and to point at their influence on the economic development and quality of life in BiH. What this chapter intends to do is to contribute to raising public awareness on harmfulness of corruption and development of practical strategy for fighting against corruption in BiH.

Current situation in BiH – causes and consequences of corruption It has been six years since signing the Dayton peace agreement, a new state establishment was adopted, and to an extent, the western doctrine of economic development was adopted, but no significant changes in the economy have taken place. BiH is still among the transition countries with the lowest GNP per capita, which amount to USD 1.129 in the Federation BiH (FBiH) and USD 823 in the Republika Srpska (RS) in 200015. The causes of such situation in the BiH economy have been partly created because of choosing the transition that suits individuals who have made capital during the war, thereby obtaining the power to affect the government and the decisions it makes. 15 Central Bank of BiH Bulletin No. 3, Sarajevo, January-September 2001, p. 42


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The connections between the state and economy (inherited from the old socialistic establishment) in many areas have not changed significantly, nor clear demarcation line was drown between the private and public interest; this situation has largely contributed to increase of corruption in the highest political and economical institutions in BiH. Simultaneous development of market economy, building new political and social institutions, and redistribution of social funds during the post-war development of Bosnia and Herzegovina (BiH) have made a very fertile soil for corruption.

In BiH, the bureaucratic apparatus still dominates, as a result of the socialistic legacy, which is under control of the officials who have no feeling and flexibility necessary for the new economic endeavors. Also, many laws necessary for development of private companies have either not been adopted yet, or they do not support the private initiative. The right of ownership has not yet been precisely defined, the contracts are often not adhered to, and the work of courts is slow, non-transparent and unforeseeable. The tax burden is over extensive, and not in line with the economic reality of the companies. All those characteristics of the business environment have aided to tax evasion, on the part of a large number of companies. We may say that BiH is in a vicious circle of corruption that reduces the direct public revenues, undermines the trust of the public, weakens the credibility of the government and reduces the belief that the new reforms could make any significant change. The TI BiH research has identified two forms of corruption in BiH that have different effects on economy: corruption at the highest level of government and administrative corruption. (Those forms of corruption receive more attention in the political and sociological analysis in this same publication, while this section will deal with its economic consequences). Corruption in the highest levels of government enables the large companies to adjust the laws and regulations and orders to their own needs, what makes them achieve high turnover rates. Such business environment suffocates the small, perspective firms, while it offers a chance of survival to other firms that have very dubious business abilities. Administrative corruption is a mechanism that enables survival of the poor companies, that in normal conditions of market competition could not survive otherwise, and at the same time increases the operating costs of successful companies, deforming thereby the allocation of available resources.

Is the domestic general public well informed on the above described developments is shown in the data from the TI BiH study on the most important causes of spreading the corruption. The largest number of respondents have indicated the lawlessness and inexistence of the rule of law as the main reasons for corruption


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spreading (30.9%), followed by the general poverty (18%), immorality and dishonesty (15.9%). Economic costs of corruption in BiH

While the basic definition of corruption as an “abuse of official position for the purpose of acquiring personal gain”, it may also be define as disrespect of the principle of the “arm’s length”, which means that neither personal nor family relations may have any part in making economic decisions, regardless of whether the decisions are made by players in the market or state officials.16 Adoption of the decisions of importance for a wider community under the influence of one’s own interest unavoidably produces harm that may be defined as economic costs of corruption.

Economic costs of corruption include:

1. Negative effect on investments and growth; 2. Negative effect on development of private sector; 3. Increased administrative expenditures; 4. Influence on the public sector; 5. Diminishing quality of goods and services; 6. Increased poverty; 7. Organized crime; and 8. Diminished credibility of the state.

Negative influence on investment and growth It is a matter of general knowledge that the instability of the business environment de-stimulates the investment in the country. By increasing the level of insecurity in the country, the corruption influences causes the growth of effective investment costs, what reduces the interest of the foreign investors for the country. Reduced investments imply low economic growth rates, what cumulatively and in long term influence the reduction of the budget revenues, employment rate, living standard and slows down the progress of the society as a whole. One of the major barriers for foreign investment is the corruption of the privatization process. According to the TI BiH study, vast majority of the respondents think that the privatization process is affected by corruption. In the conditions when we have very low GNP per capita, when after the war destruction and general destruction of economic activities, encouraging investments becomes

16Jeremy Pope, TI –Source book 2000 – Confronting Corruption: The Elements of a National Integrity System, Transparency International, Berlin, 2000, p.13.


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and imperative, the combat against corruption has its real meaning. It is not realistic to expect that foreign capital will be attracted to BiH if the whole state apparatus is seen as one of the most corrupt in the Europe. Negative influence on the private sector development Private sector needs to be a bearer of economic development in the transition countries, and this sector is particularly exposed to negative influence of corruption. While the corruption suits the large business systems (it represents their survival mechanism), on the other hand, it suffocates private initiative. Private sector in BiH is faced with a serious difficulties in operation. Those again may cause increased operating expenditures, as well as inefficiency, inflexibility, and reduced capacity for growth and development. In most cases, the corruption is the main cause of all those difficulties. The problems that have the corruption in their roots are:

- complicated administrative procedures, that may be abbreviated only by use of “connections” and bribing the officials;

- unequal treatment of private and state-owned companies (for the reason that the state owned companies are a source of revenues for the political parties) and creating the unfair competition, and thereby the extra profit;

- operation in a corrupt environment deforms the structure of expenditures and prevents any sufficient planning, what makes the companies from BiH non-competitive in comparison with the foreign firms, and makes their exit to the foreign markets more difficult; and

- relying of the management of private companies on corruption as the most important and most reliable problem solving instrument, making them incapable of operating in a normal economic environment.

Increased administrative expenditures

Doing business in a corrupt environment inevitably involves a complicated administrative apparatus. Not only that the company operating costs soar up, but the management efficiency falls down. The assessed average amount of money each individual company has to spend on bribing officials when obtaining various licenses, connection to water supply, sewage or electric network, work with the courts and customs, ranges between 120 and 609 KM. In the structure of the total expenditures of an average costs, the amount of bribe is 18%. On the other hand, managers spend 10.5% of their time on communication with public officials.17

17 World Bank, ibid, p.5-6


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The data above are supported by the results of the TI study, that show that around 80% of the respondents think that in this society, it is necessary to offer money, gift or service to an official in order to successfully resolve a problem (providing a utility service, for winning a court dispute, for employment, etc.) A deeper analysis of those data show that those payments mostly affect private entrepreneurs, particularly those who are in contact with customs officers, tax officials and inspectors (those data are better analyzed under the next title in this chapter). Effect on the public sector Corruption brings about flow of funds from public to private funds. It may be said that there is a negative correlation between the level of corruption and the level of collection of public revenues. In addition to having a negative influence on the quality of health, education, and even infrastructure, the reduction in public revenues increases the readiness of public officials (in the customs administration, control agencies, judiciary etc.) to accept bribe. This opens a new space for operation of the companies that are trying to “catch in muddy waters”. One of the most apparent forms of corruption in BiH is evading the payment of liabilities towards the state. This type of corruption is shown through the following kinds of illegal procedures: evasion of import duty, tax and excise evasion, and inspectors bribing. In this case, the bribe is used to reduce the expenditures of the companies or the individual, and what results is the annual reduction of public revenues by one third.18

A very widespread practice in our country is that individuals or companies who have “strong connections”, and certainly, funds to maintain such strong connection, bribe customs or tax officials, and split the profits obtained by that between the tax payer and the official. On one hand, this is what diminishes the budget revenues, and on the other hand, the tax burden is shifted to the part of population who does not have or does not abuse their public position or connections with the government officials.

Customs administration

Customs and customs procedures in BiH are under the responsibility of the entities. There is the State Border Service at the level of BiH, which is in charge to control border crossings, although it is assumed that there are over 400 illegal border

18 Tomaš, R.: Analysis of Grey Economy in the Republika Srpska , United Nations Department of Economic and Social Affairs, Banja Luka, March 1998, p. 62


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crossings in BiH. Currently, with the assistance of the international community (CAFAO program) a work is being done on defining the cooperation between the entities, for the purpose of creating and implementing harmonized laws at the level that would regulate the work of the customs.19 The TI BiH public opinion study show that the public perceive the customs as one of the most important economic institutions in BiH (Chart 29). Of the total number of respondents, 10.3% thinks that the corruption is most widespread in the customs administration, and right behind the customs administration is the tax administration for which 8.8% respondents think that is the most corrupt institution in BiH.

1 0 ,3

8 ,8

6 ,9

3 ,1 2 ,8 2 ,3

0

2

4

6

8

1 0

1 2

C u s to m s a d m in is t ra t io n R e v e n u e s a d m in is t ra t io n S ta te o w n e d c o m p a n ie s

E le k t ro p r iv re d a R S /F B iH T e le k o m /P T T P r iv a te c o m p a n ie s

Chart 29 – How widespread is corruption in different institutions

Just because it is to an extent purposeless to research the total number of illegal border crossings – it is quite enough to bring the goods to one of the main, larger companies and bribe the customs officers, and if necessary, the SBS officer (the only difference is that now the importer has double expenditure) and finish the “deal”, not risking to cross over a bad and hardly accessible border crossing. The Chart 30 shows the positions of citizens of BiH in relation with the customs. A worrying piece of information is that only 1.7% respondents think that there is very little corruption in the customs, what should normally be general opinion. The perception of this institution significantly varies in accordance with the profession of the respondents. The customs administration is seen as most corrupt by a largest percentage of company owners and those working in private companies, while the same percentage among those working in state owned companies is significantly less. There is also a noticeable difference in perception of corruption in the customs administration between the entities. In the Republika Srpska, a higher 19 CAFAO-Customs and Fiscal Administration Office (of the European Commission)


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percentage of respondents see the customs administration as corrupt than in the Federation BiH. In Republika Srpska, 36$ of the respondents think that the corruption is much present in the customs administration, while the same percentage in the Federation BiH is 37.8%. That the corruption is very much present in the customs administration think 51.3% of respondents in the Republika Srpska, and only 25.9% from the Federation BiH. This difference in perception is confirmed with the evaluation of the work of the employees in the customs administration, where 45.3% respondents from the Republika Srpska thinks that all customs officers are corrupt, while that same percentage is much lower in FBiH, at the level of 20.4%.

19,7

37,2

34,3

4 3,21,7

Very little Little Medium Much Very much Not know / refuse

Chart 30 – Presence of corruption in customs However, the perception of the customs employees is a bit softer than the perception of the customs as institutions. 28.7% respondents think that almost all customs officers are engaged in the practice of corruption, while 36.4% thinks that most customs officers are engaged. There is some deviation from the perception of the customs administration as an institution because 28.4% of respondents think that only some customs officers engaged in corruption.

39.8% respondents are willing to bribe the customs officer avoid paying import duty, while 52.5% respondents said that they would not pay the bribe. There is a very obvious difference when we split the respondents by the amount of their monthly income, and the results indicate beyond any doubt that the respondents with hither income are more ready to pay the bribe, and as the monthly income grows, the readiness so grows the readiness to bribe the customs officer. The result that as many as 50% private company owners was excepted, as well as that this would be done by 46.7% of the private company employees and 36.2% of state owned company employees.


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36,2 55,1 8,7

46,7 47,1 6,2

50 46,2 3,8

31 62,5 6,5

44,2 49,8 6

36,3 54,9 8,8

43,2 44,4 12,3

0 20 40 60 80 100

Employed with a state owned company

Employed in a private company

Company owner - self-employed

Pensioner

Unemployed

Housewife

Student


Chart 31 – Would you pay the bribe, if so requested by the responsible officer, in order to avoid paying the import duty?

One piece of information that makes one think is that only 10.1% of people said they were in the situation over the last year to be requested to pay bribe over the last year, and 86.3% of respondents gave the opposite answer. Is there a specific, defined procedure when paying the import duty, so that the bribe does not need to be asked, or citizens initiate such transaction themselves? When analyzing this information one needs to take in consideration two facts. First of all, not all respondents had the opportunity to work with the customs over the last year. Secondly, the percentages are affected by the fear of sanctions, because the criminal code equally treats those who give and those who receive the bribe. Certainly, most businessmen were in the situation to be asked to pay a bribe over the last year, when importing goods (23.1%), the employees in private companies were in the similar situation a bit less frequently (17.1%), while a lot lesser percentage of those working in the state owned company were in the situation (8.3%) to be requested to pay bribe. Taxes How do the citizens of BiH perceive the work of tax administration is shown at the Chart 29 above, which shows that 8.8% of BiH citizens think that the corruption is mostly widespread in this institution. By comparing the data on corruption of the Revenues Administration (RA) of the FBiH and the RS, one


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comes to the conclusion that the RA is seen less transparent in the Republika Srpska than in the FBiH. Of the total number of respondents from FBiH, 25.4% think that corruption is much widespread in the tax administration, while the same opinion share 33.8% of respondents from the Republika Srpska. 34.9% of respondents from the FBiH and 37.5% of respondents from the Republika Srpska think that the RA is very much corrupt. When analyzing the data on transparency of the RA operations by entities, one needs to keep in mind that this study was conducted in the Republika Srpska at the time of obtaining the single identification numbers of tax payers. Poor organization of this exercise, as well as RA’s coming up to the front stage, has brought about the scrutiny of the RA, and low assessment of its work in the Republika Srpska. However, the public opinion poll in the Republika Srpska from the period after the implementation of the forced tax collection from the private companies, conducted by the RA Republika Srpska, show completely different results. Over 80% of citizens supported this action of the RA, while less than 10% of citizens of this entity were opposed to this action.20

However, what is worrying is the information that 32.1% of citizens of BiH would pay the bribe in order to avoid paying taxes (Chart 32), having in mind that 90% of them think this was a corruption. What we see here is the same trend as in the case of customs evasion, meaning that as higher the monthly income is, the larger is the percentage of those willing to pay the bribe. This percentage goes from 25.3% in case of the group of respondents who have monthly income between 150 and 249 KM, up to 43% in the group of respondents having monthly income between 1000 and 2000 KM. The largest percentage of the private company employees would be ready to pay the bribe (37.8%), 30.8% of company owners would be willing to pay the bribe, while 28.5% employees in state owned companies would adhere to this practice. This also points at the fact that while the state companies have ‘guarantees’ place in the market, the private businessmen are simply forced to provide for themselves their survival and competitiveness in a completely non-market way.

20 Research data of the Agency Partner Marketing from Banja Luka, which had been conducted in the second half of April 2002, on a representative sample of 850 interviewees


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32,1

62

5,9

0

10

20

30

40

50

60

70

yes no do not know

Chart 32 – Would you give bribe in order to pay less taxes?

Only 8% of respondents said that the tax officers requested them to pay bribe over the last year, and as many as 87.8% of respondents gave the opposite answer. In 23.6% of cases, the bribe was demanded from the private entrepreneur, in 9.1% cases from the experts, and in 8.5% cases from the officials. The difference is also great if the respondents are split by their employment status, where we see that the tax officials requested bribe from 25% of company owners, or self-employed person; the percentage of employees in private companies who were in a similar situation was 15.2; and percentage of those employed in a state owned company was 6.1%. The data become even more relevant because not all citizens meet the RA employees directly.

8,4

87,8

3,8

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

do notknow

no

yes

Chart 33 –If you have been asked during the course of the last year to pay the bribe, was the request

made by a tax official or inspector?


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The question is how the authorities cope with tax evasion. In the complex tax system, it is rather an everyday event than an exception. Tax exemptions meant for foreign investment are often abused. Frequently, companies are registered as foreign investment, operate for as long they have the tax exemption, and then liquidated and registered under a new name. This is particularly widespread among the citizens who have dual citizenship in one of the neighboring ex-Yugoslav countries, and now use different legal gaps to earn additional revenues and harm the budget for the equivalent amounts. A concrete measure for overcoming such manipulation would be the introduction of VAT (value added tax), what is planned to be finished in the next three years. Many entrepreneurs perceive tax payment as an additional burden, and they opt for tax evasion, looking for a non-market way to survive. Most of those are smaller businessmen. On the other hand, the entrepreneurs who, under the wing of war and with privileged treatment by the ruling political parties, have acquired enormous wealth, have no right with the survival, so this can not be considered a reason for them not to pay taxes. In the past, the wealth and the way how they got it, gave them power to be above the law, and to avoid paying taxes because the system is not powerful enough to make them do so. Over time, the liabilities accumulated, and those businessmen are now the biggest debtors to the state. This is now the main motive for evading taxes, because the amounts, together with the penalty interest, have reached astronomic figures, and paying those arrears would jeopardize the normal operation of those companies. Most tax evasions is done by smuggling excise goods, like naphtha and naphtha products, tobacco, alcohol, coffee, medicines, gold etc. Because of the dual tax system, the above mentioned goods are shown as destined to the other entity, so that they can not be taxed because of freedom of movement of people and goods among the entities, but in fact do not go over the entity border and are sold in the same entity, and the taxes are never paid. Another weakness of the tax system are the so called “phantom companies” that operate with tax arrears until their bankruptcy that is conducted very slowly, and then disappear to get registered in a name of an inexistent or deceased person. When doing something about the tax evasion, the authorities mostly rely in inspections, but inspections are frequently corrupt themselves, as shown on the Chart No. 34. Until recently, the punishments for the corrupt inspectors were minimal, almost inexistent, or were even tolerated, although this process has started to change in the Republika Srpska in the early 2002, what could be a good starting point for the future changes.


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In addition, regular activities in cutting the illegal trade chains and disable sale of non-taxed goods in streets and markets are conducted. However, such actions in most cases affect the poorest, who are forced to work in the markets or streets to survive. Expectation is that the improvements of the tax system and the system of social protection would gradually legalize this method of trade.

Inspection agencies In addition to import duty and tax evasion, there is one more ‘popular’ way of reducing the operating costs, and that is the non-adherence to all kinds of regulations (failure to register employees, failure to abide by hygiene or technical regulations, etc.), passes overseen because the inspectors are bribed. The difference in corruption perception in this area among the entities is very strong. In the Republika Srpska, 41% of respondents think that almost all officials from those agencies are corrupt, while only 28.3% respondents from FBiH shares their opinion. Also, in the Republika Srpska, the percentage of those who think that most are engaged in corruption is higher (37.8%), while the same percentage in the Federation is 32.3%. Only 1.5% of respondents in the RS think that there is no corruption in those institutions, while the corresponding percentage in FBiH is 6.4%.

32,534,1

23,7

4,8 5

0

5

10

15

20

25

30

35

almost all are engaged most are engagedonly some are engaged almolst none are engageddo not know/refuses to asnwer

Chart 34 – How much are the inspection and the controlling agencies engaged in bribe?


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Diminishing quality of goods and services Although bribe may seem simply as an additional form of ‘taxation’, there is one important difference that one must keep in mind. While the payments of taxes and fees increases the budget, and consequently the quality of services provided by the budget users, the bribe paid ends up in private pockets and leads only to improvement of living standard of the individual who accepts the bribe. In addition, public tolerance of corruption deteriorates the quality of service, and the purpose of work becomes the extortion of bribe, not provision of good quality services.

Corruption (failure to pay import duties and taxes etc.) diminishes the government revenues, and consequently its investment in health, education, etc. Lack of funds in those areas leads to increased tendency to receive bribe or provision of lesser quality services. In this way, the poorer part of the population is not able to afford even the most basic conditions of normal living, for instance, a good quality medical service, fair court procedure, quality education, etc. The TI BiH study shows that the degree of corruption in the institutions providing this type of services is very high. Chart 35 shows the percentages of respondents who think those institutions are the most corrupt.

9,3

7,5

5,8

4,6

1 0,7

0

1

2

3

4

5

6

7

8

9

10

JudiciaryHealthMunicipal AdministrationPoliceEducationCantonal administration

Chart 35 – In which of the above institutions the corruption is the most widespread?21

21 Chart 1 and Chart 7 are a part of a single chart that shows the responses of the respondents who were assessing the spread of corruption in 23 institutions in BiH


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On the other hand, poor imports control (or more precisely, control of origin and quality of products being imported) leads to increased presence of goods of dubious quality in the BiH market. In most cases, the goods are imported without paying the prescribed duties, what makes them cheaper than the local, better quality goods. The consequences are dual. First, low purchase power forces the population to decide mostly on the basis of the price, what makes those products more frequent choice of the consumer. It sounds paradoxical, but the corruption in this case contributes to increased risk for health of population. Secondly, the unrealistically low price of such products pushes the domestic producers away from the market, thus making additional increase at the demand side, which is counteracted by increased imports of non-quality goods. Increasing poverty For most individuals and households, the visible consequence of transition is the diminishing living standard. On one hand, poverty generates corruption because the poor countries have not got enough funds to fight it. On the other hand, corruption aids impoverishment of both the population and the state as a whole.

Although it is possible to identify many factors that contribute to increased inequality, corruption remains one of most important among them. During the early stages of transition, due to lack of regulation of the economic flows, a fertile soil was prepared for growth of corruption (which was inherited from the previous, socialistic system). What has come about was sudden enrichment of one group of people who used the corruption as and instrument to earn wealth. At the same time, the middle class gets poorer, and the gap between the rich and the others widens. The war in BiH has brought about total disappearance of the middle class on one hand, and on the other, a number of “nuveau riches” who had acquired their enormous capital thanks to war profiteering and corruption solidified their positions. Since the corruption has a negative effect on the economic growth rates, the main factor that could pull people out of the poverty weakens. The consequences of corruption are mostly felt by the part of population with the lowest income, because the amounts of bribe, that are more or less standard, take away the biggest percentage of their income, and affect them much more than t he population with higher income. Paying bribe reduces the household budgets, and prevents planning future expenditures. In this way, the possibility of access to public services, like health, education, legal security, etc. is restricted, and many poor families are forced to stop using public services, what in return leads to reduction of already low living standard. This makes life almost unbearable for the poor families, so it


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is not wonder why so many families decides to leave BiH in search for a better and safer life. On the other hand, the corrupt government is making an unjust allocation of the existing budget revenues to meet their own interests, what furthers increases the deficiencies in education, health, judiciary and other public activities, what is leading to a further decrease of the living standard. The best illustration of the situation in BiH are the economic parameters showing the level of living standard of the population. In September 2001, the unemployment rate in the FBiH was 39.9%, in the RS 30.9%. At the same time, the average salary in FBiH was KM 445, and in the Republika Srpska KM 309.22 The corruption perception study, which was implemented by the World Bank in 2000, shows that 60% of respondents think that the main consequence of corruption is that the rich become richer, and the poor even poorer. That the corruption mostly affects the poor is also confirmed by the TI BiH study. If the structure of the population is viewed by the amount of their monthly income, we see a trend of increased willingness to pay bribe as the monthly income grows, in the following situations: to pay lower amount of import duty and taxes, to realize the right to repossession of one’s property, to win a court dispute, to receive better medical service, to provide utility services, and to avoid penalty for traffic offense. Such results are very logical, if we take into consideration that KM 100 bribe is 5% of the income of a person who has over 2000 a month, but for those whose salaries range between KM100 and KM200, this is half or the whole monthly salary. Particularly interesting are the differences in opinion concerning who should be punished, what is shown in the Chart 36. Apparently, the respondents who have monthly income in excess of KM2000 think that the persons offering bribe should not be punished.

22 Central Bank, ibid, p. 54 – 56.


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29,8

20,9

29,8

39,3

40,9

50,6

37,1

5,2

8,8

3,4

4,3

4,3

7,6

51,9

59,3

56,3

46,4

38,7

27,8

34,3

13,2

11

10,5

10

16,1

13,9

28,6

0 10 20 30 40 50 60 70 80 90 100

Up to KM 149

KM 149-249

KM 250- 499

KM 500-699

KM700-1000

KM 1000-2000

KM2000 or more

Only those who receive bribe Only those who give bribeBoth those who receive and those who give bribe Do not know

Chart 36 – Who should be punished?

A research conducted by IMAS (the Institute of Marketing and Polls) in January and February 2002 show how the citizens perceive the BiH reality.23 Comparing the economic situation of the citizens of BiH now and a year ago, a neglectable number of respondents say that they are much better off today (1.3% in FBiH, and 2.2 in RS). In comparison, even more alarming piece of information is that a significant number of respondents perceive the situation today a bit worse (22.1% in FBiH, and 24.3% in RS), or much worse (10% in FBiH and 18.7% in RS) in comparison with the year before.

Organized crime

Over the past few years, several attempts were made to assess the damage inflicted by corruption and organized crime in BiH. Representatives of the International Monetary Fund say that BiH looses USD 230 million per year because of the cigarette smuggling, and that the government shows very little interest for this problem. Republika Srpska looses around USD 100 million each year because of the cigarette smuggling, and additional USD 50 million because of alcohol and petrol smuggling. For the sake of comparison, annual budget of the Republika

23 IMAS – Institute for Marketing and Public Opinion, Report for FBiH, February-February 2002, Bucharest, 2002, p. 10 and Report for RS, February-February 2002, Bucharest, 2002, p. 10


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Srpska is approximately USD 400 million.24 Those activities are in BiH mostly related to the activities of organized crime. Before we move to analysis of economic consequences of organized crime, it is necessary to give a more precise definition of what is understood under ‘organized crime’. The key criterion for defining organized crime is existence of a criminal organization who is conducting illegal activities, and insight in the benefits and goal for which the activities are performed by one or more persons who belong or have ties with that organization. Therefore, organized crime exists where there are criminal organizations.25

Causes of development of organized crime in BiH are the following:

- War in BiH has contributed to creation of an environment which is a fertile ground for development of organized crime. The living standard of population was reduced, the government institutions were weakened, and the understanding of moral got deviated. The war profiteers, who have earned enormous wealth and power in illegal ways during the war, continue to sail in the same direction after the war. They are transformed into local powerful persons who, behind the curtain of private empires, continue to grow their wealth being engaged in organized crime.

- High unemployment rate, low salaries, as well as the large number of weapons in hands of general public make some individuals decide to get engaged in organized crime because, in their understanding, that is an easier way to get the money necessary for living. The main motto in this case is: “What I earn in this way in a month, I would not be able to earn legally in my lifetime”.

- Geographic position of BiH is a factor that encourages development of some forms of organized crime (smuggling people and weapons).

- Control of the border crossings used to be inefficient after the war, because the process of establishing the BiH institutions was in progress. Lately, some positive changes have been noted in this area, however, a lot more efforts will be needed to establish an efficient system of control

- Inexistence of good laws on fighting against organized crime have inhibited the existing institutions to start the fight against organized crime during the war, but also after the war. More recently, a systematic work is being made in adopting adequate new laws and harmonization of the laws between the entities.

24 Technical Paper 2 – Bosnia and Herzegovina, www.legal.coe.int/economiccrime/paco/PACOTP2(BH).pdf 25 United Nations Development Programme, Vulnerability Trends and Perceptions – Suspended Transition, January 2001., p.31-32.


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- Corruption of the judiciary, police and control agencies (Charts 29 and 35) has contributed to widening of the organized crime network. Quite often, the officials in those institutions are themselves one link in the chain of organized crime, making an interface between crime and government institutions.

Public awareness on the existence of organized crime in BiH is shown by the results of TI BiH study, and illustrated by Chart 37.

85,6

3,68,8 2,1

yes

no

do notknowrefuses

Chart 37 – Is there organized crime in BiH?

The following Chart shows the responses of the citizens who were asked to grade the extent of different forms of organized crime in BiH from 1 to 5. As most widespread is seen the smuggling with excise goods (tobacco, alcohol and naphtha), with the average grade of 4.57, and drug trafficking, with the average grade of 4.52.

One may note that the grades are similar in case of classifying the respondents by their age, profession and amount of monthly income, but when we classify them by their work status, it becomes obvious that the company owners feel mostly affected by organized crime, what is very problematic in terms of creating a good business environment.


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3,65

3,82

3,89

4,16

4,17

4,52

4,57

0 1 2 3 4 5

smuggling excise goods

drug trafficing

prostitution

smuggling arms

racketeering

human trafficking

sale of personal Ids

Chart 38 – Average extent of different forms of organized crime (scale 1 to 5) One of the main obstacles in fighting crime in BiH is the fact that the crime control is under responsibility of the entity governments, and that until recently, there was none or minimum cooperation at the state level. Criminal Code is also designed at the entity level, so we can say that there are two separate systems of criminal law in BiH. Such situation in the system of justice leaves a space undefined that is largely abused for criminal offenses. However, there is an initiative started by the Ministry of Civil Affairs and Communication, joined by five other ministries and coordinated by the OHR (Office of the High Representative) to propose a criminal code of BiH that would regulate the crime and corruption between the entities, i.e. at the state level.26

Weakening of the state credibility

Corruption erodes trust in the government institutions, the feedback of what is the capacity of the state to fight corruption. One additional threat is the increased crime rate, both organized and small. If there is any suspicion in the abilities of the state to ensure secure and stabile business environment, foreign investors shall treat the given state as a high risk zone for their investments.

26 Council of Ministers of BiH, FBiH and Ministry of Justice of RS, Anti-corruption Strategy for BiH, March 6, 2002.


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There are two main reasons why the attempts of the government to reduce corruption at the time period analyzed in this paper have failed: first, the fight against corruption has not been systematic, and second, too much emphasis was placed on identifying and possibly punishing individuals, while not so much has been done in creating institutional solutions that would have preventive effect on corruption. That the government have been working on individual corruption cases show the following statistics on economic crime in 2001. In FBiH, 13,183 indictments have been raised, plus 4.419 from the years before, on the basis of which 6.892 persons were convicted, and 1,564 were detained. The assessed total damage caused by this economic crime in FBiH amounts to KM27.734.621. In the Republika Srpska, 11,997 indictments were raised, plus 2,211 from the years before. A total of 5,049 persons have been convicted, of which number 1006 were sentenced to prison. Total assessed damage for the Republika Srpska amounts to KM12,661,000.27

However, the election promises on fighting corruption, that are focused only on resolution of individual cases and strong newspaper tiles that follow such actions are not enough. This is something that the BiH citizens are aware of, and they gave very bad marks to the efforts of the BiH governments to exterminate corruption among businessmen and government officials. The following tables summarizes the responses on the question whether the government is making serious efforts to exterminate corruption in those social groups (according to the TI BiH study):

% YES NO DO NOT KNOW

Among businessmen 25,9 61,6 12,5

Among higher government officials 21,1 67,1 11,8

Among lower government officials 26,0 61,1 12,9

Table 16 - Does the current government make serious efforts to exterminate corruption in the given groups?

In order to improve the credibility of the state, it is necessary to create an efficient anti-corruption strategy, that should include the following: • Raising public awareness and creating a climate where the corruption

will not be tolerated. The first stage in creating an effective anti-corruption

27 Preliminary data of the Council of Ministers of the BiH, FBiH and the Ministry of Justice of Republika Srpska, Anti-corruption strategy for BiH, March 6, 2002.


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strategy is raising the public awareness on harmfulness of corruption, and education of citizens on the methods of fighting corruption. One of the results of the TI BiH study that are most worrying is the readiness of BiH citizens to pay bribe for various services they are supposed to receive regularly without any mediation (employment, better utilities, better medical or legal services, etc.). This information indicate the necessity of raising public awareness of the fact that the tolerance of corruption leads only to the increase in the amount of bribe (higher demand – higher price), reduction of living standard, and in general, transformation of corruption into a way of life.

• Building public confidence in the state institutions through

participation of civil society in the government. The second stage is to increase pressure at the politicians by introducing representatives of civil society in monitoring of the state agencies work. Citizens may participate in politics by voting, joining political parties, or may influence the government through the civil society organizations (non-governmental organizations) that support certain interests and make pressure to the government. The first step that needs to be made in this direction is to introduce transparency in work of all government representatives, from the lowest to the highest levels, and creating the possibilities for the BiH citizens to be informed on what are the people they voted for doing, and whom they finance through paying taxes. Second step is to have citizens, through different non-governmental organizations, carefully monitor the work and decisions of the government, to regularly inform the public on this through the independent means of information, and thereby prevent government’s solutions that are not in the interest of the broader public.

• Creating a better climate for economic development. One of the

necessary things that needs to be done is to alleviate burden borne by the companies, and streamline the procedures of legal operations for the companies (registration and accounting procedures, too high tax rates and import duties), what would to a large extent reduce the scope of gray economy in BiH and increase the number of companies operating legally and paying taxes, what would again lead to a set of structural changes – increased budget revenues, improved living standard, etc. The reforms also include building a system of adequate measures to protect the main economic freedoms, rights of individuals and businessmen. This system of values should also include the efficiency, economic discipline, protection of property and the obligation to adhere to the contract, and the sanctions if the contrary is the case. On the other hand, changes as creation of a stabile and foreseeable legislation, good and quick administrative service, efficient


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judiciary and reduced corruption are necessary for the domestic market to start operating normally, but also to attract foreign investors.

• Fighting organized crime. For the purpose of eliminating corruption from

the BiH economy, what is necessary is a systematic approach to problem resolution, because this area has become very attractive for international crime (arms trade, drug trafficking, selling goods of unknown origin, money laundering, human trafficking, etc.), and the corruption is well rooted in all spheres of economic, political and social life. For this very reason, it is necessary to develop a cooperation with international institutions, and with neighboring countries, particularly with Croatia, Serbia and Monte Negro. Also, BiH must adopt modern standards in terms of preventing drug trafficking, arm smuggling, money laundering and organized network f selling stolen goods as it is being done in economically developed countries.

• Institution building. In one part of the public function, the one that deals

with fiscal administration, the order has started to be made through institutionalization of functions and increase of transparency. First of all, the introduction of treasury at the level of joint institutions and entity governments is very commendable. From early 2001, the Supreme Audit Institutions have also started their work, which submit regular independent reports to the parliaments at all levels of authority on the public spending. Those reports have contributed to introduction and strengthening of discipline in public services, and together with the treasury method of revenue management, the costs have been significantly rationalized. The other changes have to do with customs and tax systems, that in the first case enjoy an important donors’ technical support, and in the latter a firm initiative of the national agencies, particularly in the Republika Srpska. Introduction of transparency and responsibility in the work of those two institutions that are the main source of public revenues enables an easy increase of the basis and linear decrease of rates of both import duties and excises and taxes, what will in mid-term reduce the burden on the budgets of physical and legal persons. The said occurrences also stimulate the translation of the gray economy into the formal economy.

Property transformation With all its particularities, transition opens numerous venues to the corruption, which are not paved in the countries of market economy. This primarily has to do with the very property transformation, where most dominating state subjects changes the titles, and some of the public services or institutions either cease to


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exist, or continue in a significantly changed form. If the initial phase is corrupt, the suppression of corruption in the transition phase becomes very important, as well as positioning of different institutions and laws after the completed transition. In Bosnia and Herzegovina, few are the forces that support radical economic reform, first of all the privatization and domination of private initiative. Instead, most are actually resisting transition through their etatistic strivings, motivated frequently by personal or elitist interests. Presentation of such policy within national strategic framework defines the key political determinants of most governments from the Dayton onwards: national-socialistic parties with dogmatic cronyism. Under this kind of government at all sides, BiH has wasted almost five years that were foreseen for transition, in addition to the five years of war, what has additionally drawn back its citizens; it has increased its foreign debt and trade deficit; the only thing that it had reduced are the real values of the economic subjects and economic potentials. The gap between the rich and the poor, and ever more narrow niches of ever more rich elites has grown, with additional international indebtedness, that was mostly financed by the BiH citizens living abroad and donors community, practically subsidizing the growing corruption and crime. Resistance to changes The privileged position of state owned companies, and illegal gains made by both their directors, appointed on the basis of their party membership, as well as those very parties that are financed from this source, already at personal level dismiss any trend to change such situation. Further interests that are realized through fixed tenders, competitions, subsidies, credits that are in fact grant injections, etc. make the privatization less attractive and insecure option. The World Bank’s Diagnostic Study tackled this phenomena into more details, so the data from 2000 incidence that around 2.5% of the total turnover of state owned companies has been transferred to the party accounts that have appointed the management. The presumption state above is confirmed by the following statistics from the same source. As opposed to private companies, of which around 28% have signed contracts with state institutions, over half of large state owned companies have signed such contracts. Subsidies were received by 76% state-owned, and twice less private companies. 27% of the revenues of the large state owned subjects comes from sales to public institutions, while the private companies work much less with the public sector. Almost half state owned companies participate in public tenders, and less than 20% of private companies, because they are aware in advance of the unfair competition, and that the state owned companies are favored (most respondents state this as their reason for not


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participating). The private businessmen must pay more bribe more frequently in order to ensure their market position, what makes the business environment more difficult for themselves, and dissimulates any development and strengthening of the private sector. Such indicators lead us to the following conclusions: privatization becomes possible only when the political elites go through transition, and find the modes to earn illegal profits that way than they do through the current use of state owned resources. Objective expenditures in the process are made by the pressure put by the public and international community. Slow capacity building of the elites to use the gains of the very property transformation has caused a prolongation of agony through the state ownership and conflict of interests, nepotism and cronyism, which were represented by domination over the economy and state subjects. Direct consequences of such extremely irresponsible and structurally destructive behavior was inhibited development of private sector, marginalization of any kind of private initiative, continuous removal of assets from the balance sheets of state owned companies and their impoverishment, devaluation of state owned capital causing the purposelessness of the privatization process. By far more dramatic, long term and indirect consequences are: preventing the arrival of fresh capital, loosing other markets for domestic subjects, extremely bad business climate in the country, failure of the foreign investments to arrive, lack of interest in the BiH market, lay offs and closing production plants, paralysis of the economic system, brain drain and young people leaving the country, and impoverishment of citizens that have ultimately financed, or will finance the said losses through the tax policy. So the expenditures are multiple, but what is most important, they will not have to be covered in a short period, but in a generation time. Privatization process At the moment when sufficiently benefits from exhausting state owned companies was earned, and when the national and international public made sufficient pressure to start the changes anyway, , the benefits of privatization, as well as the costs of its delay have overweighed the benefits of the extended monopolistic position, that has diminished with every day of its devaluation. On the other hand, the transition rules and methods of acquiring extraordinary gain this way were studied very carefully. This has made it possible for privatization to begin The stakeholders remained mostly the same, and most often, those are the political parties with their put-up forward individuals, who are now taking over the burden of financing over the transition time, with, one must admit, insecure end.


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After having lost more than a year in choosing the privatization model that is the least important factor in devaluated economy, placing of companies on the so-called strategic list has once again postponed their privatization for some time. Mass privatization through certificates and vouchers has only poured worthless titles into privatization funds, to the citizens. One could even speak about negative values, the privatization of debt. Some smaller firms have been sold directly, in public competition, which were participated only by the individuals who had earned a certain amount of capital before that. However, one should not check the teeth of transition, nor pay too much attention to the origin of capital, because the main goal is to make the privatization and strengthen the domination of the private sector and start economy and economic growth. Unavoidably, there will be some capital occasionally of doubtful origin, frequently earned on the war suffering of others and/or additional impoverishment of vulnerable categories of population, but even such capital is better activated in the country than left to sit on the off-shore accounts. Such preconditions does not at all exclude anyone’s responsibilities for how they got their gains, nor it stimulates passivity of judicial agencies in investigating them. The so-called strategic companies are the profitable ones, or profitable monopolistic utility services, such as, for instance, the telecom or cash cows, such as breweries and hotels on one hand, and the industrial giants who had lost their markets long time ago, whose labor force is on “waiting lists” or de facto unemployed, on the other hand. In the latter case, the executive power, fearing social upheavals and consequently, election defeats, transfers the decision on liquidation to expensive international consultants, shifting the responsibility onto other, foreign institutions, excluding themselves. True, there are some conglomerates in this group the restructuring of which will lead to separation of limited healthy tissue that has economic future, what represents a real threat for such promising cores if their privatization is not strictly controlled and independently monitored. Otherwise, those companies could share the destiny of profitable strategic companies. And this destiny is the following: after as long as possible delay of privatization and continuous use of multiple benefits from those subject, through politically positioned management board and directors, what follows is the sale. International tenders, public sales, etc. are frequently only a mask for already done “deal”, where the bribe percentages are known, the conditions of managerial restructuring too (retaining certain staff for a certain time), different transfers to private accounts of the “deal makers” and operation of such entities after the privatization. So newspaper articles on low sales prices, non-transparent monitoring of several years long processes of additional capitalization, new employment, etc. The guarantees that the privatization projects will be really realized are minimal, and


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instable. Disputes on the very sale, not rarely ending up before the Constitutional Court, speak about massive irregularities, non-transparency of the process and ambiguous rules of transformation. All this, again in structural terms, drives away the potential foreign investors, and pulls over BiH a stigma of extremely uncertain, corrupt and non-conductive environment for business, what, combined with the already known problems of small,, fragmented and poor market, once again keeps the citizens of BiH away from a sustainable economic growth for a long time. The public verdict The Transparency International BiH study shows that the very same citizens are acutely aware of the said problems and damages caused by such handling of privatization. Although no transition were able to satisfy everybody and to have the broad public satisfied with how it was going on, there still are some gradations. In this respect, BiH has apparently sided with those worst examples of the property transformation. When asked how do they perceive the privatization up to date, the BiH citizens say the following:

4,5

11,2

37,4 38,5

0,7

7,8

0

5

10

15

20

25

30

35

40very successful

mostly successful

mostly unsuccessful

very unsuccessful

refuses

does not know

Chart 39 – How do you see the privatization in BiH so far? 86.3% of the people in the Republika Srpska said that the privatization was very or mostly unsuccessful, while the same dissatisfaction is shared by 70.8% respondents from the Federation BiH. This also says that the political management of Republika Srpska has been less scrutinized by the general public and corrective factor called international community, and accordingly, the results were much poorer, what is seen through the increased dissatisfaction of citizens.


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The following Chart speaks about the corruption in the privatization so far. In FBiH, only 6.3% say that there were no corruption, while only one percentage of respondents from the Republika Srpska agrees with them. This shows how little the governments on both sides have done to bring the privatization process closer to the citizens and to explain the results and, the most important thing, eliminate corruption from it. It is really disappointing for the governments when only 4.5% of people think that the privatization had been conducted properly.

4.5 %1.4 %

14.7 %

79.4 %

yes

no

refuses

does notknow

Chart 40 – In your opinion, has there been corruption in the privatization so far?

It is interesting and statistically relevant to consider the differences in work status of the respondents who had answered this question. 84.4% of the employees in private company perceives the corruption, while the same number is lower among the employees in state owned company – 77.2%. This once again indicates the privileged position of the state owned companies and the difficulties the private sector faces, which are much easier seen by somebody looking at privatization from outside. Employees in state owned companies are more inclined to either cover up the corruption, or to accept is as a “fate”, than the private employees, who had been operating in relatively harder conditions so far, and are much more sensitive on corruption.


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77,2

84,8

78,8

75

85,9

68,6

79

13,8

11,9

16,7

26,5

21

4

2,4

3,9

6,1

5,8

7,1

1

1,2

1,9

2,9

1

0,49,6

13,5

0 20 40 60 80 100

Employed in state owned company

Employed in private company

Company owner - self employed

Pensioner

Unemployed

Housewife

Student

Yes No Refuses Does not know

Chart 41 – Has there been corruption in privatization so far? (differences on the basis of the employment status)

It is certain that in a so highly corrupt privatization process, there has been some cases of earning extraordinary profits, and that the profits earned had their addresses. When asked who had the most material benefits from it, the citizens say the following:

31,2

26,7

20,9

7,2 5,2

0,7

8,1

0

5

10

15

20

25

30

35 Directors of state ownedcompaniesOfficials in the Agency/Directorate for privatizationOfficials in entitygovernments Councel of Ministers officials

somebody else

refuses

does not know

Chart 42 – Who has had the most material benefits of the privatization?


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Interestingly, the citizens opted mostly for the directors of state owned companies, probably being aware of the political connections they have. This is also a confirmation of all assumption, texts in newspapers and investigative proceedings that say that the directors of state owned enterprises had performed the so-called spontaneous privatization, i.e. they devaluated the state owned capital in order to reduce its price, and thereby create the good conditions for its purchase by a buyer known all along, or possibly to contribute to its liquidation after they had exhausted all options of possible rehabilitation. Companies and banks have been brought to a verge of disaster, with large financial doubts and debts have only three remaining options:

a) rehabilitation from the budget (at the tax payers’ expense), followed by sale;

b) sale at very low price; or c) liquidation procedure.

The most direct use and management of the whole procedure that had brought the company in such a position did the director of the company. He did that for his own gain, and gain of the narrow group he is a member of, and which had lobbied for his appointment to the given position. Direct harm and consequences will not be borne by them, but a much larger group – the citizens. That the manipulations were possible also with the so-called independent mediators in sale of the state owned capital, i.e. the agencies or directorate for privatization, confirms 26.7% respondents. It is certain that absolutely and relatively well paid officials in those institutions, being in position to negotiate the conditions of sale, were lobbying with the institutions of executive power to advantage of one or the other potential buyer, and that this unique and protected position enabled them to acquire illegal gain. Such mediators had access to confidential and privileged information, that could find their way to privatization funds or direct buyers, what was not adequately legally covered in BiH. Lack of codes of ethics, nepotism, again, partisan cronyism has justifiably placed the privatization agencies on the second place by corruption in connection with privatization. The officials in entity governments and the ministers are on the third place, with around one fifth of the total answers. Secure position of the final interpreter of privatization, seller of the state owned capital and arbiters in the negotiations, has positioned them adequately to use the situation. They are one more link in the party chain that needs to be closed in order to be able to do perform different machinations in transformation. Lack of transparent mechanisms and responsibility of those persons towards the voters between two elections has enabled them a direct influence on the development of privatization, and the benefit went in the proportion determined in advance to private and party accounts. Nothing


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particularly special for BiH, this procedure has been known in all transition countries, and was once again repeated in those territories. The similar reasons are in the Council of Ministers of BiH, although it does not have any direct responsibility for economy, privatization and internal business environment, retains all partisan connections and influence, creating thereby benefits for higher officials in joint agencies. Although the state directors are on top in both entities, with 34.3% in the Republika Srpska compared to 29.6% in the FBiH, meaning that they are seen as those who got more benefit out of the process by more people from the Republika Srpska. This difference is compensate by the perception of the FBiH citizens who think that the Federation Government Officials (23.4%) and Council of Ministers Officials (8.7%) have acquired larger illegal gain than their counterparts from the Republika Srpska think – 15.7% Government Ministers, and 4.2% the Ministers in the Council of Ministers. We should repeat here the inclination of the Republika Srpska population to relatively marginalize the joint institutions, and generally perceive them as less relevant than the respondents from FBiH do. However, it is evident that there exists a connection between the political and economic officials, who are united by membership to a same party, and the differences are only in the ultimate individual distribution of profits. A comparative study shows that in the FBiH, politicians had relatively more benefits from privatization, and in the RS the directors of state owned companies, but on the absolute level, the directors are those who gained the most. Increasing transparency Moral positions of the citizens have in most cases passed the test. Most of them do not agree with the statement that the corruption is unavoidable in the privatization process. In other words, most respondents are not willing to tolerate any form of corruption that is related to this process. This opens the doors for the activities related to increase of transparency in privatization and adoption both preventive and repressive measures or measures for punishing all irregularities, who will be easily mobilized by the BiH public. Only around 30% of citizens are ready or somewhat ready to accept the corruption in privatization and live with its consequences.


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31.8 %

0.7 %11 %

21.8 %

24.9 %

9.8 %fully agree

mostly agree

mostly disagree

fully disagree

refuses

does not know

Chart 43 – Do you agree with the statement that the corruption in privatization is unavoidable? It is far more important that 31.8% respondents do not think at all that the privatization must be accompanied with corruption, and additional 24.9% mostly disagrees that it should. Also encouraging is the information that the differences in positions among the citizens of both entities are statistically neglectable, that the people think similarly about this issue. Statistical exception only exists among the financially better situated individuals, where 54.2% citizens who have over KM 2,000 monthly income, fully or mostly agree with the unavoidability of corruption in the privatization process, and this opinion is shared by only 30.1% of those with the under KM 149 income, and 30.8% of those whose income ranges between KM 150 and 249. However, this parameter too is in accordance with the general trend that the rich pay less attention on corruption, because they are less affected by it (or in extreme cases, it even suits them), while it mostly affects the poor. Both in privatization and in general, once again we have a confirmation that the corruption makes the poor poorer and rich richer28. Still, it is obvious that the public is bitter with the implementation of privatization so far. Citizens are dissatisfied with the results and the progress made, i.e. the lack of any results or progress. They disagree with acquisition of illegal gains, and are very aware and well informed on who and how acquires it. They are hungry of preventive measures, and they are willing to support any action of punishing illegal

28 This assumption was seen as accurate by 60% of the citizens in the World Bank survey from 2000, what has been additionally proved by the average share of income of a household that is spent on bribe.


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actions related to privatization. Also, attention should be paid to the possibility that the events so far could result with discouragement of citizens on this topic, and possible loosing of support to the process itself, what could have very bad consequences for the transition as such. Every increase in transparency of the privatization process must be followed with strong media campaign that would mobilize a critical mass of support to the process of economic transition in general. Those findings lead to the conclusion that the monitoring of the privatization process should be entrusted to independent mechanisms, i.e. citizens themselves, through their associations – the non-governmental sector. In future, it will be necessary to conduct a thorough and independent analysis of the privatization process, and start privatization monitoring, with the approval of official institutions that handle this process. This privatization monitoring will be presented to the entity Privatization Councils, accompanied with simultaneous issuance of information to the public. Any lack of transparency, particularly the failure to abide by legal norms and procedures, must be urgently intercepted by the Council’s activities, which is the top agency for privatization implementation. On the technical side, it is necessary to ensure equal access to information for all potential investors, in accordance with tenders, public privatization procedures, as well as supervised contacts with the Agency before the submission of bids. A monitoring instrument, a NGO for instance, or an expert group selected for this purpose, must supervise signing of the final tender documents, submission of bids and bid opening, as well as the evaluation and selection. This team should also be included in the coming negotiations with the potential buyer, all the way until the final agreement has been reached29. With absolute information to the public, the progress and better expression of citizens in connection with privatization are guarantied. Public procurement Communist understanding of government as unquestionable and untouchable supreme instance has greatly contribute to the executive agencies act exactly like that. The understanding of the tax payer, i.e. citizen as the voter and financer of the power, towards which the government should act as a service, is still a foreign notion in the Balkans. The emancipation of citizens has not yet reached the level to demand such status, and government is certainly not making any effort to stimulate

29 Control of Corruption in Procurement: Monitoring of Privatization of Telecommunication Company - Bulgaria (V. Karadjov for Transparency International – Bulgaria), The Corruption Fighters’ Toolkit – Civil society experiences and emerging strategies, Transparency International, Berlin, October 2001, p. 98


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citizens to think in those terms, so the irresponsible spending of budget funds continues, leading to further fiscal burden on the population. According to some assessments of the United Nation agencies (UNCTAD and UNDP) on direct public procurement made by government, at least 6% of the GNP is allocated30 under conditions of tough budget restrictions. Translated into statistics in BiH, this equals at least USD 262 million at annual level31. Further calculations based on this assumption take us to the direction of the percentage of budget at all levels that are spent on procurement, and therefore, to revenue side, i.e. taxes. Regardless of the precise figures, it is evident that irresponsible public procurement policy results with higher tax rates and increased pressure on citizens. On the other hand, what is the status of legislation in this sphere? BiH Law on Public Procurement has been in procedure in 2002. In FBiH, there is a decision made by the Government, that is randomly adhered to, and the 2001 law in RS is under all legal norms and is far away from the two European Commission Directives on this area. Practically speaking – budget funds are spent in public procurement without any discipline, responsibility or restrictions. Or using the paradigm above, largest portion of the costs of such behavior of politicians is borne by the citizens who had elected them for legislative and executive functions. Although the privatization process is one form of public procurement, in terms of tenders, they may also include a wide business sphere, both in case of products and goods and in case of services. Direct violation of procurement rules is a manipulation that leads to awarding contract to the desired party through direct negotiations, without competition32. Since many public institutions procure things, TI BiH tried to analyze various institutional segments in its research, and to examine the extent of corruption in each of them. The results mostly depict the reality of lacking legislation on procurement. Depending on the particular institution, 1.8 to 7.3% of respondents assumes there is no corruption at all. However, what is the extent of corruption in the procurement process is described in the Charts below:

30 Transparency International Workshop – Serbia on Public Procurement in Local Government, Belgrade, November 30, 2001, with participation of the UN agency representatives. The data are valid for the South-Eastern European Countries 31 Key economic indicators, according to the sources in the World Bank and the International Monetary Fund – evaluated GDP for 2000 was 4,372 billion USD. 32 Definition from J. Wesberry: Preventing frauds in procurement and contracting, Improving Governance and Controlling Corruption, the World Bank Institute, Washington, 2001, p. 83


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10,6

23,7

30,2

19,7

7,38,6

0

5

10

15

20

25

30

35

Very much Rather muchMedium LittleNot at all Does not know/refuses to answer

Chart 44 –In your opinion, what is the extent of corruption in the public procurement in the following areas: military?

20,8

31,8

26,9

12

1,8

6,8

0

5

10

15

20

25

30

35


Chart 45 – In your opinion, what is the extent of corruption in the public procurement in the

following areas – health?

Perception of corruption in the public procurement process we deliberately start by the military procurement, because this institution in all parts of BiH enjoys


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relatively high level of trust and low level of corruption among citizens. However, even such army receives no high marks when we are talking about this issue – as little as 7.3% citizens think that there is no corruption in public procurement. There are also differences between the two entity armies: in the RS, 30.8% cumulatively think that there is much or very much corruption, while 36% of respondents accuse the Federation army for the same things. In terms of budget, military spending is one of the largest burdens anyway, and the sector is not productive, and do not produce a return on investment. In other words, the defense sector should use their revenues more rationally, because their revenues are the expenditures when we are talking about procurement. In terms of health, there is no any geographic division, and in both entities, as shown on the Chart 45, over half population think that the abuse of public procurement are very much widespread. Since the contributions to the health fund, i.e. their budgets are mostly spent for the purposes of procuring equipment, materials and services, it is not hard to guess the amounts that are the financially dubious, in the judgment of the general public. Social allocation for funds, from gross salaries (plus additional budget financing), are a quasi-fiscal burden on payroll, and irrational spending of such funds automatically means lower income for the citizens, and poorer health service on top of it. So non-transparent procurement results with provision of less health services for more money. Even more dramatic is the situation with procurement by entity governments, which are proportionally largest spenders in the administrative apparatus, and similar is the case with public works and reconstruction of infrastructure, the two things most of the money has been spent on after the war.


109

21,8

34,3

24,9

6,3

1,6

11

0

5

10

15

20

25

30

35


Chart 46 – In your opinion, what is the extent of corruption in the public procurement in the following areas – Entity governments

33,3

26,5

22,1

7,9

1,8

8,5

0

5

10

15

20

25

30

35


Chart 47 – In your opinion, what is the extent of corruption in the public procurement in the following areas – Public works and infrastructure reconstruction

Once again, lack of confidence in the institutions of executive power has been expressed through the following results: only 0.6% citizens of FBiH think that there is no corruption in public procurement, and 3.5% respondents from the RS who think that the Government conducts their procurement in a accountable and transparent way. The percentage of those who have the opposite opinion more or less significantly exceeds half of the population. It is worth reminding that the


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Government public procurement goes from paper and paper clips at the desks of the officials, through more or less necessary flower decorations, to luxurious limousines, and even newly constructed administrative buildings and apartments for the privileged personnel, what has been a common practice in the Governments until recently. This is the key hypothesis, that common practice of irrational or criminal procurement represent higher costs for the citizens, who finance it directly through payment of their taxes. And vice-versa – more regulated this area is, the same funds will provide more goods of services, meaning that the necessary minimum will be provided for less money, what opens new possibilities to reduce the tax rates and increase the personal incomes of citizens, improving their standard of living. How unaccountable in this respect the state owned companies are is shown on the following Chart:

29,1

34

21,7

6,9

1,9

6,4

0

5

10

15

20

25

30

35


Chart 48 – In your opinion, what is the extent of corruption in the public procurement in the

following areas – State owned companies As it is shown on the Chart, 37% of the RS citizens think that the corruption is very widespread in the state owned companies, which opinion is shared by 25.1% of the population from FBiH. A confirmation of this assertion may be found in an “outsider” data, where the total of 65.7% of BiH respondents working in the state owned companies see the procurement through their home companies as very or rather corrupt. All this speaks a lot both about the amount of information, and on the size of the problem in the public sector. Financing such illegal deals is, ultimately, once again a budgetary problem, no matter what form was used: subsidies, fixing damages,


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privatization with reduced income or liquidation, where the full price will again be paid by citizens. Additional indirect consequences are suppressing competition, healthy market game and equal participation in economic flows for all economic entities. This statement applies both on those whose participation in a tender has been made impossible because of the corruption, and on those businesses that suffer from favorable treatment of the state owned companies, through various mechanism of subsidies, based either on ever slimmer donor’s money, or relatively more expensive tax burdens. And those are the very companies whose positive and ethically correct work could attract new owners, fresh capital and investment in the domestic markets. And what follows is a new spectrum of structural problems that are not hard to understand using the logical sequence. The purpose of this analysis of perception of corruption in public procurement was to point at their real price for the citizens and structural costs that create long-term problems for economic and social development. Even with legally defined procurement sector, crime is still possible. This is exactly why the practice has forged a good quality legislation over decades. For instance, the laws that are incomplete are often avoided in the following ways:

a) by reducing the quantity of each individual procurement, so it does not exceed the maximum determined as discretionary right;

b) by reducing publicly available information, or in other words, giving complete and targeted information only to some participants in the tender;

c) by prescribing unimportant preconditions for participation, which can be fulfilled only by the targeted companies;

d) tailoring tenders in accordance with the competing product; e) disrespect of confidentiality of information supplied by the competition,

particularly the price; f) unfair evaluation of bids, and its driving towards the targeted subject; g) participant in the tender may bribe both the buyer and the competition; h) unrealistically low price for the purpose of securing the contract, etc.33

So corruption in procurement may be initiated both by the seller and by the buyer. A law that would effectively prevent the corruption starts from such negative practice, and establishes mechanisms for preventing it. Main precondition for quality legal solution is, first of all, the awareness of the citizens that it is their money being publicly spent, and that they have the right to get the maximum for it, and to expect such attitude from the executive agencies. This leads to economical use of the limited financial resources and establishment of the integrated code of public procurement. Typically, they follow the methods

33 J. Wesberry, ibid. p. 84-85


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already tried on, as it is the case with the above mention European Commission Directives, United Nations Rulebook, or the World Bank procedures. The last ones live in the BiH practice through the work of the World Bank project implementation units, which have been conducting all their procurement in accordance with strict regulations, and this is certainly a good example. Possibly, those PIUs could become a core of the future strategic offices of the Governments for public procurement, to deal both with laws, rulebooks, codes etc., as well as larger or more sensitive procurements, or, if necessary, be the skilled arbiters in case of disputed procurement. Transparent resolution and continuous improvement of the procurement regulations is the imperative that confirms the initial assumption of this text. Rational spending of budget funds benefits each tax payer, i.e. citizen, whose material position improves. Business environment In order for a fresh capital to avoid a transition economy, it is not necessary to have a corrupt privatization process, privileged state sector and non-transparent public procurement. A bad business climate, numerous, long and expensive administrative barriers, can also prevent its arrival. More progressive countries are entitled to a well regulated, efficient, quick and inexpensive entry of businesses into the market, its work and control mechanism, and leaving the market through liquidation. In other countries, where this process is difficult, unforeseeable and long lasting, corruption unavoidably appears, not only in one, but in a whole set of different levels and institutions. Much more often a foreign company will simply give up the whole procedure and go to the country where the same procedure is faster and cheaper, instead of trying to enter the market for very long time, bribing numerous individuals and paying expensive lawyers. The description above suits the situation in BiH, which, in spite of its market that is of little interest, and the structure of its economy, allowed to itself to have unfavorable administrative procedures for new investments. Comparing the differences in opinion with the work status of the respondents, the most serious problem BiH faces is corruption (25% of the company owners – self-employed respondents; 20% of employees in private companies, and 20.8 % employees in state owned companies), what suggests that the employed people, who are not directly concerned with finding jobs, as a problem that requires priority action recognize the corruption.34 In other words, corruption is barrier to

34 Identical results were brought forward by the IMAS research – the Institute for Marketing and Public Opinion from Bucharest, conducted in January and February 2002, separately in FBiH and


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normal work, to normal life. In other words again – when conducting their daily jobs, the employees come across such a high level of corruption that this problem surmounts all other problems.

16,7 2,6 20,8 8,7 12,5 22,8 1,90,6

0,3

12,8 0,3

14,8 5,2 20 6,7 13,8 20,5 11,9 1,9

14,3

15,4 3,8 25 15,4 9,6 21,2 1,9 7,7

13,1 3 14,3 8,3 11,9 21,4 4,8 4,81,2

15,50,6

1,2

10,8 3,2 22,9 6 8,8 34,1 2,40,8

0,8

10

12,7 2 16,7 4,9 8,8 30,4 3,92,9

2 12,7 21

14,8 3,7 22,2 3,7 6,2 32,1 1,21,2 2,5

12,3

0 10 20 30 40 50 60 70 80 90 100

Employed in stateowned company

Employed in privatecompany

ompany owner - selfemployed

Pensioner

Unemployed

Housewife

Student

Plitical instability Poor inter-ethnic relations CorruptionEconomic recovery Crime UnemploymentReturn of refugees Poor health care Trying war criminalsPoverty Something else Do not know

Chart 49 – The most serious problems faced with our society – division by work status

RS, on a sample of 610 and 1,034, respectively: urban population, citizens having higher and high education and those having higher living standards have ranked the corruption as a problem that is by 0.3 – 16.6% higher than the first-placed unemployed. IMAS’ Reports for FBiH and RS, Bucharest, 2002., p.5 in both documents


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Comparative position of BiH is best demonstrated by this year’s research of the World Bank’s Foreign Investment Advisory Service (FIAS) implemented in both entities, that proves critical bureaucratic expenditures and procedures in economic life of the businesses. Just the process of registration of a new business in RS lasts 55.6 days, and in FBiH as long as 124.4 days.35 The average for the Balkans region was around one month from the beginning of the registration process to the start of operation, and the research conducted by the Wall Street Journal research ranked BiH on the 19th position of 27 countries covered by the research – between the Armenia and Moldova36. The work permit and approval for use of workspace, which are needed by almost any company, each require over one month of visiting institutions, collecting required documents, paying expensive fees and layers who often obtain such documents in the name of the company, and very often, there are the so called informal expenditures, i.e. bribe, related to those documents. In addition to the two mentioned permits, an average business will need additional 4 to 5 permits, depending on the type of activity, and each additional permit carries with it new formal and informal giving. Starting a business brings its management before new institutions, temptations, liabilities, and, of course – corruption. The number of laws, regulations, decisions etc. that are governing a legal operation of a business has never been recorded, but according to some parameters of international financial institutions, there are thousands regulations in each entity. Translated into language of business, this means around 20% of manager’s time spent on administrative procedures, and many related financial expenditures that equal to almost one third of the total revenues37. In such a jungle of regulations, best oriented are equally numerous inspections that extensively visit companies where some rent collection is possible – i.e. all kinds of penalties, budget revenues or even bribe – private profits38. How common is the bribe in different segments of business is illustrated by the data from the TI BiH research, showing that over the last year, as many as 23.1% business owners were in the situation to be demanded to pay bribe at the customs, as well as 17.1% employees in private companies. 13.5% owners were requested to 35 Preliminary results of FIAS based on a sample of 302 companies (202 in FBiH and 100 in RS) which was conducted in February – March 2002. The data on business registration is an arithmetic medium of the total of 169 responses received from businesses that had to undergo the process of registration of the new and re-registration of the existing company relate to all steps and all institutions that some document necessary for the company operation should be obtained from, including the courts. 36 The Wall Street Journal: Central European Economic Review, November 1999.g. 37 Documentation of the World Bank for the Business Environment Adjustment Credit and preliminary results of the FIAS study for 2002. 38 The examples of the commercial entities mentioned in the report of the International Crisis Group (ICG): Why nobody wants to invest in BiH? from 1999, as well as in its follow-up from July 2001: Still Closed for Business: Instable Economy of BiH, Sarajevo


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pay bribe by the officials in public utility companies, as well as 10.5% employees in private companies. In the end, 25% business owners came across tax officials or inspectors who demanded bribe over the course of last year, along with additional 15.2% of those working in those firms. After giving the money, over 40% of them received the expected service (for instance, tax release or unreported offense), and only 46% were not in the situation to offer the bribe. The data are alarming in comparison with the bribe in other segments of life, because they vividly describe how difficult and uncertain business is in domestic conditions, what is again a structural problem. Corruption again threatens the development of this area over a decade.

29,5 3,5 59,9 7,1

41,9 5,7 45,7 6,7

40,4 5,8 46,2 7,7

25,6 6,5 63,1 4,8

28,5 6,8 59 5,6

25,5 2 65,7 6,9

28,4 2,5 64,2 4,9

0 10 20 30 40 50 60 70 80 90 100

Employed in state-owned company



Pensioner

Unemployed

Housewife

Student

Have received Have not receivedWere not in situation to offer bribe Do not know

Chart 50 – If you were in position over the last year to give bribe to a public official, have you

really received the expected service from him? (Split by work status) In terms of perception of the relevant situations, bribe is even more present than shown through the empirical analysis above. The Table below states the services and percentages of public opinion on their involvement in the bribing practice, with division into entities.

Federation BiH Republika Srpska % Ministries Inspection Customs Ministries Inspection Customs Almost all are

engaged 19,3 28,3 20,4 19,3 41,0 45,3

Most are engaged 36,9 32,3 36,4 40,0 37,8 36,5

Only some are engaged 34,3 27,8 36,5 19,8 15,5 12,3


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Almost none are engaged 3,0 6,4 2,9 0,8 1,5 2,8

Do not know/ refuses to

answer 6,6 5,4 3,9 20,3 4,3 3,3

Table 17 – Perception of engagement of administration in bribe According to the FIAS research of regulatory procedures, in FBiH such and such inspection visited a business at 2.26 times at average, with 2.5 inspectors per visit, and stayed there each time for 3.41 days. In RS, inspections visited 2.55 times, each time there were 2.77 inspectors, and used up 4.72 manager’s days at average per one control.39 Keeping in mind that most inspections have the mandate to close up the business at spot, and that the codes of conducts, frequency of visits, their mutual coordination etc. are very poorly or not at all planned, the repressive power inspections have becomes clear. That is why the high corruption rating of the control agencies is not surprising, and the percentages fit the statistical findings of the FIAS, that those agencies were more repressive in the RS during 2000 than in FBiH. The amount of bribe is difficult to determine, and ranges from KM 120 in each case at the level of BiH, according to the corruption study of the World Bank40, to over KM 421 KM in RS, or, according to the FIAS study, from KM278 in FBiH to the TI BiH data that suggest that the average amount of bribe paid to the inspectors is KM188. For the purpose of statistical precision, one should emphasize that in all three studies the respondents were very reluctant to speak about the amount of bribe (legally, bribing is treated as a criminal offense, with no difference between those who give bribe and those who receive bribe) and that the amounts are based on a relatively small number of answers. However, the mere fact that certain amounts repeat from one study to another proves that there is a bribe and how widespread it is among the control agencies. In the end, 23.6% of the private business owners reported to the TI BiH that they were in situation over the last year to receive demands for bribe from the inspectors, and 39.5% think that almost all employees in controlling agencies are engaged in the bribing practice. There is no use wasting words on any complaints to courts, and the integrity, efficiency and quality of judiciary in BiH is discussed in the next section of this publication. What needs to receive attention here is direct and indirect damage caused by this behavior of inspections. So, in addition to the costs related to illegal practice of bribing, which typically results with repeated controls for the purpose of acquiring higher gain, there is the work time lost, because management spends a 39 The Study has covered the following inspections in 2001: labor, protection at work, veterinary, traffic, fire inspection, civil engineering inspection, environment inspection, financial police, revenues administration and other specialized inspections. Almost all interviewed companies were subject to controls, and the average has been calculated by the number of answers received on each individual inspection. 40 Diagnostic Study, ibid. p. 17


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lot of time interacting with the inspectorates. On the other hand, if the bribe is paid in order to avoid reporting for offenses, for instance, violation of sanitary or health regulations, it is possible to bring into jeopardy the health of the whole local population. On top of it, harm is done to the budgets, because the regular revenues remain uncollected, or end up in private pockets, or most commonly, they are split between the managers of the company and the inspector, for instance, in the case of financial police, revenue administration, or market inspection. The indirect damage, felt by all budget users is that they have a much lower quality of services, because the funds have not been collected. And again, much broader basis, the citizens who are not running businesses, are bearing most of the expenses through their public fees. All this significantly harms the picture of business environment in BiH, what, in addition to the existing numerous problems and lack of attractiveness, raises additional barriers to foreign investments. The percentages of demanding and extorting bribe are closely followed by the percentages of the employees who are willing to pay bribe in order to pay, for instance, less tax: 30,8%, with 5,8% of those who do not know (what is the concealed number of those who are willing to pay bribe) among the business owners; 37,6% employees in private sector, with 4,8% of those who do not know; or 28,5% employees in public companies and 7,7% of those who do not know. At the average, this produces the number of a bit over 60% of individuals who are ready to join the mission of suppressing and fighting bribe among the control agencies, at any cost for the businessmen. In order to achieve a critical mass, in ideal conditions those percentages should be even higher, but that is the matter of education of this category of population on the harms and possible short-term benefits of bribe. On the other hand, public sector is still privileged. World Bank diagnostic study indicates the monopolies as the main problem in operation, what was said by over one third of managers41, while the TI BiH research shows that 51.4% of private businessmen think that the corruption is much, and 29.2% who think it is very much present in public companies. The percentages suit the distribution based on employment status, as shown on the Chart below:

41 World Bank Diagnostic Study, ibid. p. 32


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4,5 8,7

3,8

1,9

8,9

3,2

1

4,9

20,5

25,2

11,5

16,7

15,3

19,6

18,5

32,7

40,5

51,9

33,3

47,4

35,3

34,6

31,7

27,6

28,8

29,8

30,5

35,3

33,3

1,9

1,4

7,7

1,6

5,9

8,6

1,4

5,8

2

3,6

2,9

0 10 20 30 40 50 60 70 80 90 100

Employed in state-owned company


Company owner-unemployed

Pensioner

Unemployed

Housewife

Student

Very little Little Medium Much Very much Do not know

Chart 51 – What is the extent of corruption in different areas of society – state owned companies? The problems in operation, in addition to state monopoly, are created by the monopoly public utility companies. Prices of their services, for instance, electricity, telephone, water and roads were seen by as many as 77.7% of FIAS study respondents in FBiH and 71.7% of respondents in RS as a barrier. 46.5% of the RS respondents and 23.7% of the Federation respondents see them as a very serious problem.42 Their monopoly opens the space for criminal actions that nobody is able to process, and lack of competition and inability to choose services provided by somebody else is also proved by the TI BiH research. Telecom and PTT are seen by a total of 44.4% of respondents as much or very much corrupt, and the entity Elektroprivredas are seen by 53.2% respondents in the same way. The employees in public utility companies demanded bribe from 6.2 % in the previous year. Unfortunately, their monopoly is the reason why only 60% of total number of employees would refuse to pay bribe in order to secure for himself a utility. Taken from the overview of FIAS analysis43, the following problems are key and critical in creating better business environment:

% Federation BiH Republika Srpska

42 Preliminary data of the FIAS study, presented by the World Bank for the members of the government teams for implementation of the FIAS recommendation on removal of administrative barriers to investments, Neum 08-10 May, 2002.g. 43 Preliminary data of the FIAS study, ibid.


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Problem YES Very serious Serious YES Very

serious Serious

Costs of financing 82,0 43,8 24,1 69,0 59,4 24,6 Unfair competition 80,2 55,6 18,1 84,0 64,3 17,9 Utility prices 77,7 23,7 23,1 71,7 46,5 29,6 Enforceability of law 76,2 30,3 22,4 74,7 55,4 23,0 Tax rates 68,3 27,7 24,8 61,0 31,1 32,8 Nepotism / cronyism 66,8 36,1 24,8 61,0 59,0 23,0 Availability of financing 64,9 26,9 23,8 62,0 41,9 33,9 Visa regime 64,2 58,5 11,0 74,0 75,3 12,3 Corruption 61,4 44,3 16,4 62,0 51,6 22,6 Tax policy/administration 56,9 29,8 28,1 56,0 39,3 26,8

Table 18 – Overview of the top ten barriers to business

Distinguishing the said notions and different methodology used in the FIAS research has lead to the corruption, and even nepotism, not being emphasized separately as a global problem, but as a consequence of other problems that are individually covered by that study, focused exclusively on businesses operations. Such order of priorities suits a bit older corruption study conducted by the World Bank in 200044 , what means that no significant economic progress has been made. The public opinion research conducted by TI BiH did not go into unfair competition and gray economy, it is rather seen as a consequence of unregulated market in almost all other segments. Data on smuggling excise goods and elements of fiscal evasion are separately covered in the previous part of this chapter. No progress has been seen in the field of stabilization and increased predictability, or stability of laws and regulations. Although this is unavoidable in some extent in the transition economies, its building will certainly determine the level of entry of the fresh capital into the country. In the Diagnostic Study, 70% of managers in private and public sector think that the changes of laws are really unpredictable45, what even suggest some deterioration of the operating conditions over the previous two years. This paper has no intention to directly discuss the elements of tax policy, but it only notes that suppressing corruption in all above mentioned institutions and practice may significantly influence broadening of the basis and reduced rates. This would bring this question several steps down at the list of priorities. A similar explanation is given in terms of analysis of financial system, because only

44 World Bank Diagnostic Study, ibid. p. 32 45 World Bank Diagnostic Study, ibid. p. 19


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resolution of some burning problems could stabilize the domestic market and attract new and cheap capital, that would be deployed trough the banking and other financial institutions, whether domestic or foreign. Finally, the visa regime is primarily political question, but it is evident that visa issuance or termination of visas for the western countries would also follow after strengthening of the rule of law and establishing a sustainable economic growth in BiH. Executive power, both in the previous composition from 1998 to 2000 and in the current composition, has not put any significant efforts in exterminating corruption in economy, thus creating a better business environment.

34.1 %

6.6 % 8.2 %

19.4 %

27.3 %

4.5 %

very rather medium little not at all do not know/ refuses

Chart 52 – To what extent the previous 1998-2000 government (at entity/cantonal level) have invested serious efforts in exterminating corruption among businessmen?

When asked whether the current government at the same levels puts serious efforts in exterminating corruption among the businessmen, 25.9% responds positively, as opposed to 61.6% who do not think that such statement is accurate. The said 25.9% is still a bit more than the cumulative 12.7% respondents who said that the previous government tried this very or rather seriously, as shown in the Chart 52. Creating attractive economic space Establishing a deregulated, transparent, efficient and inexpensive business environment will give the opportunity to the government to eliminate most of the corruption nests, and to do much for the economy in this area in terms of making it more attractive, both for the domestic and for the foreign capital. Lifting administrative barriers, legislation that mostly reflects good practices of the


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European Union, and reduced bureaucratic apparatus to the extent that facilities realistic control of adherence to rules and legislation, is the recipe that may sound simple, but needs years and even decades of transition. There is almost no law that would remain untouched by the said process. However, this process must be started without delay, simply because it would take that long. FIAS has developed relevant recommendations for the BiH Governments already in 2001, and the governments have set up the work groups that will work on implementation of those recommendations. One political condition is stabile and long election period of the executive government, i.e. election for four-years mandates, so that such structural changes would have enough time to make good results, since a negative curve is mandatory in the beginning. On the other hand, it is necessary to achieve national consensus for changes, because they entail significant amounts of expenditures that affect majority and reduce the living standard. That the level of public awareness is ripened, and that the citizens of BiH expect transition of ownership, and thus the change of the economic system is confirmed by the TI BiH findings too. Being aware of the legislative vacuum that the lack of rule of law leaves, they recognize the state owned companies as corruption nests, and rank them shoulder to shoulder to the most corrupt categories, such as party leaders. In other words, the sate monopoly, state property, economic rule of minority, manipulations, theft and corruption following from it, and the salvation is sought in the still underdeveloped private sector, that needs to be properly regulated and helped while it is still in the development stage. Bad marks of the privatization so far can not ascribed to the lack of public support to transition, but by the discontent with the non-transparent methods used in its implementation. The TI BiH research results show that the so called transition of minds, i.e. ways of thinking and adjusting to the liberal capitalistic rules is gaining momentum, particularly among urban population, younger and middle-aged generation and high educated groups, and those are the ones that would build the future of this country. BiH has been waiting too long for transition – full ten years. This piece of information, added on top of the bad starting position from the perspective of the former Yugoslavia, means that, in addition to the transition, what is needed is further economic growth and development. Above all, the minimum necessary for economic sustainability of BiH will be catching up with the region, which is its competition, and in comparison with which the investors will make decision whether to come to BiH or to some other neighboring country In order to ensure the first thing – that they come to BiH – it will not be enough that BiH offers the conditions identical to the ones offered by others, because it already lags behind them – it will simply have to offer more and better conditions. This, in concrete terms, means the following:


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a) harmonized, or even lower tax rates, with transparent and rational public revenue management;

b) smaller, faster and cheaper administrative-bureaucratic apparatus, service oriented;

c) regulatory, but not repressive control system, which has to be professional and well coordinated;

d) independent and effective economic judiciary; e) legal regulations reduced to a minimum, its optimalization and

functionality; f) inexistence of trade barriers within the country and in the region; g) reduction of the state monopoly, improvement and reduced costs of

communication services, including infrastructure; h) emergency completion of the privatization process, with continuous

restructuring of the large economic entities, and fast liquidation where necessary; and

i) equalization of the rules of game for the private sector, and immediate termination of all privileges granted to the state sector, and removal of the politics and party personnel decisions from state owned companies.

The said measures will make a significant influence on formalization of gray economy, i.e. its incorporation into the legal flows. This will in return contribute to improved stability by introducing market discipline, and result with hither tax collection rates and better public services. Such economy, lead by the European Union rules, and rules of the region it gravitates to, will be strong enough to attract fresh capital, increasing its mass in the country, making it cheaper and more accessible to the legal and physical persons alike. All this must be accompanies by decisive establishment of the institutions of a state of law, including the fight against corruption and crime. Only with those conditions met, BiH may hope to become a desirable destination for doing business, and that is when it may hope to achieve economic and political integration with a large part of the Old Continent.


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JUDICIARY, POLICE AND INSTITUTIONAL SAFEGUARDS OF ORDER AND SECURITY

Introduction When defining the notion of corruption, the biggest problem is the inexistence of a single definition of corruption at international level, which would contribute to a more successful fight for its suppression. Corruption as a notion is more of a challenge for the theorists, who have dealt the most with it, judging on the basis of the number of published works.

So Jelačić and Stajić46 are of the opinion that there is a corruption in a narrower and in a broader sense. The corruption in narrow sense includes the “criminal offenses against official and other responsible duty”, while the corruption in broader sense means “negative phenomenon that exists from the very beginning and creation of the first countries, and has developed and changed its manifestation forms depending of the given historical, social, economic, political and other conditions, inflicting, by its immorality and its asocial and illegal essence, harmful consequences to the society. The corruption is deeply conditioned and caused directly or indirectly by social, economic and other contradictions and conflicts of interests between various groups in the society. This is the most dangerous form of crime, characterized by concealment, changeability, high level of social threat, many different manifestations, broad coverage and internationalization, caginess of the perpetrators, and the specific object threatened by corruption are the legal operation of government and economic institutions and services". Judiciary The current structure of judiciary and its operation in BiH are, first of all, restricted by the provisions of the Dayton Peace Accords and the legacy of the communist period, from which a large number of laws has been taken over. Those laws had been made under the pressures of that system and that time. Such laws are outdated and inconsistent, and the courts that are expected to implemented are too many, too expensive, and insufficiently efficient and too exposed to political influences. The post-war time and the transition period, along with those factors, have opened wide roads for the corruption to penetrate the judiciary and the police, who should be the axis of the anti-corruption defense. The tax evaders, smugglers, racketeers, drug

46 Jelačić M., Stajić Lj.: Corruption as a Contemporary Social Problem, 1995


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dealers, human traders, arms smugglers enjoying the protection of “those in power” have become a part of our every day lives, while the police and the judiciary, the way how they are currently organized, have no strength to confront them in a significant manner. Currently, there are 104 courts operating in Bosnia and Herzegovina, as opposed to 69 before the war, employing around 1500 judges.47

When speaking about judiciary as an important factor in suppressing corruption, Lazarević48 emphasizes that the courts and prosecution must be independent and self-standing, and if they are not, that leads to selectiveness both in discovering and in prosecuting crimes. In the process of suppressing corruption, the most important phases are disclosure and prosecution, and therefore the proper operation of the judiciary. We should also include here the police, who are the key factor in disclosing criminal offenses, what rounds up the whole repressive system. Constitution The desire to retain status quo is typically justified by the statement that the judiciary is not working properly because of the Dayton structure of BiH, which “proclaims democracy, but stipulates ethnically based government institutions, confirm human rights and legitimize ethnic majorization”, i.e. the fact that BiH judiciary is strongly dependent on the international community institutions significantly affects the pace of its transformation. Dayton Peace Accord49 essentially leaves 'implementation of justice’ to the entities, depriving thereby the state of any responsibility for establishing the system of judiciary. Bosnia and Herzegovina is, therefore, a country with two totally separate judicial systems. However, the new laws imposed by the leaving High Representative in May 2002 bring about significant changes in this respect. Current situation of normative regulation of corruption Bosnia and Herzegovina has taken over the criminal procedure and substantive criminal code of the former SFRY and SRBiH. As a result, the mechanisms of the criminal law Bosna i Hercegovina can not be as effective in the new conditions that exist in a country in transition.

47 Jurčević M., interview, Slobodna Bosna, 30. 05. 2002.g. 48 Lazarević J.: Independent Judiciary as a Factor in Combating Corruption, 2001 49 Prof.dr. Pobrić N.: Constitutional Law, Slovo, Mostar, 2001


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The current criminal legislation of the entities does not recognize the criminal offense of corruption as such, in other words, there is no incrimination under that name. The common word used in incrimination in this field is bribe. There are two different offenses: giving and receiving bribe. In practice, as well as in theory, many interchangeably use the two notions – corruption and bribe. If the corruption were only giving or receiving bribe, than, according to national legislation, only those who give or receive bribe would be engaged in corruption. Starting from the criminal-law aspect, the notion of corruption is much wider, and it includes, in addition to the criminal offenses of giving and receiving bribe, includes many other illegal actions and criminal offenses, such as: - abuse of position or authority, - embezzlement, - doing business unconscientiously, - making a harmful contract, - violation of law by a judge, - use of object in the service, - illegal mediation, - causing bankruptcy, - tax evasion, - violation of law on financial operations - violation of law on securities - violation of law on check and letter of exchange - violation of law on investment funds - violation of law on bankruptcy and liquidation. It is apparent from the above stated that, at the same time while there is so much discussion on corruption as a major problem in the country on one hand, on the other hand, our current legislation does not recognize that notion at all. The Republika Srpska has incorporated the provisions on stock exchange operations, false bankruptcy, misuse in the procedure of bankruptcy, etc. in its Criminal Code from 2000, and after the adoption of the changed Criminal Code of the Federation Bosnia and Herzegovina, there is a possibility that the legislators in the Republika Srpska take over some of the Federation standards subsequently. The Criminal Code of the Federation of Bosnia and Herzegovina is currently in the process of adopting changes and amendments. This will be a significant contribution to the fight against organized crime and corruption that would harden the punishments for criminal offenses related to corruption. The law changed in this way will take over the provisions of the Civil Law Convention on Corruption of the Council of Europe.


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In connection with the changes to Criminal Code, under preparation are also the changes and amendments to the Law on Criminal Procedure of the Federation Bosnia and Herzegovina and the Republika Srpska, where the new solutions would provide for more efficient investigation and processing of the corruption cases, and the investigation agencies would receive higher authority. The corruption perception study implemented by the Transparency International in Bosnia and Herzegovina shows that the citizens are aware of corruption, i.e. they are aware of punishability of both giving and taking bribe. No matter whether it were an unemployed person, a housewife, company owner or a student, thy share a similar position on who should be punished. For instance, 47.1% housewives, 50% company owners and 56.8% of students think that both those who give and those who receive bribe should be punished.

36,5

38,1

30,8

25,6

30,1

29,4

33,3

5,1

4,8

3,8

4,8

6,4

2

3,7

50,3

42,9

50

54,8

50,6

47,1

56,8

8

14,3

15,4

14,9

12,9

21,6

6,2

0 10 20 30 40 50 60 70 80 90 100

Employer in public company

Employer in private company


Pensioner

Unemployed

Housewife

Student

Only those who receive bribeOnly those who give bribeBoth those who give and those who receive bribeDoes not know

Chart 53 – Who should be punished (work status) Subjects and consequences of corruption in judiciary

1. Public prosecutors, when bringing up the indictment, giving up criminal prosecution, qualifying the offense, etc. A significant problem is that the public prosecutors are not sufficiently professionally trained to fight very sophisticated new kinds of corruption.

2. Judges – when making illegal judgments, by making legal decisions

quickly, by not making or stalling with decision making.


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3. Presidents of courts may exercise a significant effect on the outcome of a

case by giving certain cases to specific judges who are “open for cooperation”.

4. Expert witnesses (on whom the BiH judges rely in a great extent) by giving

false testimony or finding, or by deliberately neglecting available facts that may affect their conclusion or the whole proceedings.

5. Attorneys – by skillful use of procedural rules, or in direct link with the

judges.

6. Different clerks in courts (clerks in land book offices, couriers, executors, translators) who may affect the outcome of proceedings by their doing or failing to do something.

Corruption in judiciary has a larger significance than the corruption in other areas, because the judiciary is supposed to uphold the law, general and individual rights and interests. The data of the TI research on the extent of corruption in judiciary are very interesting.

1,64,8

24,5

35,129,3

4,8

0

5

10

15

20

25

30

35

Very little LittleMedium MuchVery much Does not know/ refuses to answer

Chart 54 – The extent of corruption in judiciary

In terms of judiciary, 35.1 % respondents said that the corruption is present much, and 29.3% very much. It means that 64.4% of the respondents are aware of the large extent of corruption in judiciary.


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The people knowing that there is corruption in the system of justice derogates the basic postulates of peoples behavior in accordance with the system and law, so the judiciary infects with corruption other spheres of life, and through it, the goals in different areas may be achieved. In the judiciary itself, for instance, it is possible to avoid criminal responsibility with the help of one or several of the above listed subjects. Certainly, after such experiences, the citizen and those around him turn to corruption as a decision of crisis situation in all spheres of life. The fact that the judiciary is not processing the corruption cases only means that there are no mechanisms for proving it. Unfortunately, the profession of the judge, who could be an example of independence and honesty and people’s trust, does not any more enjoy the same dignity, what can be seen from the results of the TI research.

21,5

34,4 33,9

4,8 5,4

0

5

10

15

20

25

30

35

almost all are engaged most are engagedonly some are engaged almost no one is engageddoes not know/ refuses the answer

Chart 55 – To what extent the judges are engaged in bribery?

It is certain that, according to a general opinion, there is a lot of corruption of judges, because as many as 55.9% respondents think that almost all, or majority of judges are engaged in bribing, while 33.9% respondents think that only few of them are.

Corruption in judiciary is reflected in exchange of every dishonest judgment for a dishonest gain. Those do not necessarily have to be material goods, but also the satisfaction of individual needs and interests, promotion in service, status, political


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function, services to family. What does such a 'primarius'50 offer in exchange is the verdict “as ordered”.

Judges often work under pressure, and are aware of their exposure, so they choose to follow the line of lesser resistance and make the decision requested from them. One of the best indicators is the number of the so-called economic disputes, because this is the area where, in spite of the tide of information on possible criminal offenses, we have ebb of disputes. According to the official statistics prepared in the Federation BiH in 2001, in cases of economic crime, of around 17,000 persons reported, 7,600 have been convicted. According to a statement by the Federation prosecutor, Mr. Marinko Jurčević, 9,327 indictments against the same number of persons have remained untried by February 15, 2002. In 2001, there were 1,191 cases in the Federation where the investigations took longer than six months.

.

31,4

60,3

8,3

0

10

20

30

40

50

60

70

yes no does not know

Chart 56 – Would you pay a bribe in order to win a judicial dispute? 31,4% of respondents are ready to pay bribe in order to win a court dispute, because they obviously have knowledge that this is an efficient method of overcoming the problem. In the surveys, citizens state what causes suspiction of even legal laymen, and that is: creation of special judicial panels for some cases, awarding cases outside the regular order, transferring cases from “unsuitable” judge to the other who is more “suitable”, progress of some judges without objective expertise, etc. Very often, the execution of court decisions is obstructed in spite of the fact that the valid decisions have been made.

50 Antonić D.: Corruption in Serbia, Belgrade, 2001


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Mitigation of punishments and pardons have become an area of particular interest for corruption, because there is no revision of the process after such decisions. The decision puts an end on the procedure, but unfortunately, all the ones who have perhaps conducted the procedure regularly, fairly and professionally, are thereby avoided.

The material position of judges is one of important links in improving the situation, but the recent attempt to resolve all the problems by increasing judicial salaries has failed, and showed that the problems run much deeper, and that much more radical moves would be required. Improvement of material status of judges, not being accompanied with adequate reforms and material measures in the rest of the judicial apparatus, will hardly lead to the ultimately positive outcome. Role of prosecution office The role of prosecution has a central significance and is found at the crossing point between the police, politics, judiciary, and organized crime. The activities in searching for solution how to concentrate prosecutorial function in special departments of two or three prosecution offices in each entity for the purpose of conducting more effective investigation of frauds, tax evasions, import duty evasion, etc. However, the expected merger of the roles of a prosecutor and investigating judge, will increase their importance, exposure and possibility of making pressure at them. So far, investigations were conducted by the police, customs, financial inspectors, etc., but from now on, the prosecutor will lead the investigation from the very beginning, what is expected to improve their efficiency in investigating criminal offenses of corruption. Introduction of defense from the earliest stages of investigation, as well as the possibility of plea bargain, will bring BiH closer to modern democratic system, and also provide the possibility to catch the larger perpetrators through the smaller perpetrators. Particularities of corruption in Bosnia and Herzegovina judiciary: Appointment of judges and prosecutors is still under direct influence of political parties, and as almost nowhere else, it does not depend on professionalism and work. This has resulted with some particularities of Bosnia and Herzegovina. The judiciary officials must implement party politics, or the politics of “powerful persons”, who misrepresent their own interests as party politics. If they show any sign of disobedience, they are immediately threatened with dismissal, different affairs are fabricated to compromise them, newspaper articles are ordered to show


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them in negative light, etc. Using this selection policy, very often, the persons with insufficient skills, without the necessary experience and with doubtful moral qualities are appointed judges. Straightforward cases of criminal responsibility remain buried deep in ‘drawers’, public prosecutors do not dare to indict certain persons, because they could become undesirable if they do so. The disputes are unnecessarily prolonged over several years in different ways, or the offenses are prequalified. New changes of the Law on Criminal Procedure of the Federation of Bosnia and Herzegovina and the current Law on Criminal Procedure of the Republika Srpska, are expected to speed up the processing of all forms of criminal offenses, including the corruption. New provisions would ensure more efficient investigation and processing of the corruption cases, as well as other crimes, and the investigative agencies would have a broader authority. Also, the new Law on Criminal Proceedings of the Federation of Bosnia and Herzegovina stipulate termination of the role of investigative judge, which is to be taken over by the prosecutor. How critical citizens are with respect to the system of justice is best seen from the opinion of the respondents on independence of judiciary:

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Chart 57 – When you think about the legal sustem, i.e. judiciary in the Republika Srpska/ Federation of Bosnia and Herzegovina, how often do you relate the notion ‘independent’ to it?

For instance, in the corruption perception study of TI BiH, when asked whether the legal system is independent, 33% respondents chose the answer “only exceptionally”, while 33.1% believe it is never independent, while only 4.9% say they are always so!


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always in most casesonly exceptionally neverdoes not know/refuses to answer

Chart 58 – How often the judiciary in the Republika Srpska/Federation BiH is able to implement its

decisions?

How much confidence the people have that the judiciary will implement its decision shows that as many as 41% respondents think that judiciary can do this only exceptionally, and 24,4% think they can not do it at all. Further on, 26.2 % respondents think that judiciary is able to implement its decision, and only 5.8% think that they are always able to do that, while 20.4% think they are able to do that in most cases. Measures taken so far for suppressing corruption Right now, there are no institutional organization at different levels of government that would implement a coordinated and integrated combat against corruption. True, a task team has been established in the FBiH to fight corruption. It was formed within the Federation Prosecution Office, and involves the Federation Ministry of Interior, Tax Administration, Customs Administration and Financial Police. The Prosecution Office has created an operational team, and the plan is to create similar teams in the cantons; however, it all goes on too slowly, and remains only a declaration, without any significant results reached so far. The Ministry of Foreign Trade and Economic Relations has adopted a proposal of an Action Plan for figting corruption. Its results are expected through its implementation following the conclusion of the public discussion.


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At international level, some countries have special offices to fight corruption. Such offices have in most cases proved to be useful because they provide independence from political pressures on one hand, and concentration of expert potentials on the other, at the same time being a place where the information are shared quickly. In connection with this, it is important to mention that there are two approaches to setting up anti-corruption teams. Some countries have chosen to have separately formed teams of experts organized in a special institution. Other countries specialized individuals within the existing institutions, freeing them up to work exclusively for the needs of anti-corruption activities. This approach strengthens the existing insititution with already defined horizontal and vertical chain of responsibility, and the activities are cheaper and more levelheaded. One of the most interesting parts of the Transparency International BiH research is the public opinion on who should create an anti-corruption team: 44% respondents said that this should be done by the government, and 25.7% wants to see international community involved in that exercise. What is encouraging is that the citizens still have a confidence in the state institutions of Bosnia and Herzegovina in their fight against corruption; however, this is changeable and limited in time. This can be seen through deterioration of trust in institutions over time, and this is certainly the high time for the state and entity government agencies to get involved in the fight against corruption.

Entities11%

Cantons14%

somebody else1% don't know

4%

State BiH43%

refuses to answer1%

Intenrational community

26%

Chart 59 – Who should create an anti-corruption team?

Another important problem is that the public prosecutors are not sufficiently professionally trained to fight very sophisticated new kinds of corruption, that are based on extremely close relationship between criminals not only within BiH, but throughout the Balkans region, or even wider. In such cases, the prosecutors


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depend on the expert witnesses, and there are not enough of those, what means that the foreign experts need to be called on, what makes the whole process complicated, expensive and long. Corruption in the police In spite of the fact that the police are supposed to be the cornerstone of the fight against corruption, the corruption has never been extinct in the police. Its scope in the police depends on the scope of corruption in the society in general, on the political system and the legal framework. What is the scope of bribing police officers can be seen from the answers of the respondents: 38.3% think that majority are engaged in corruption, 34.3% think that only some are corrupt, and only 3.3% respondents believe that there are no corrupt police officers.

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Chart 60 – To what extent the following professions are engaged in corruption: Police? Even more alarming is the conclusion of the research that in 22.2% cases over the last year the police officers demanded bribe for performing some illegal actions from the respondents. 74.2% respondents said they had not received such demands, and 3.7% said they did not know. This means that approximately every fourth citizen of BiH was requested in one way or another to bribe a police officer.


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yes no does not know Chart 61 – If you have been in the situation to be requested to pay a bribe over the last year, was the

request made by a police officer? The public is very sensitive of the corruption in police for a number of reasons. On one hand, the police are expected to suppress all forms of illegal actions, including corruption, and on other hand, people very often wand the police not to work in accordance with law and rules of service, but to do what is convenient for them in the given situation. It is important to mention that the citizens of Bosnia and Herzegovina understand better and better that they are the ones paying the police through different kinds of taxes, and that they are, because of that, entitled to expect an adequate service. This service needs to be quick and efficient, lawful and equal for all. Essentially, corruption in the police depends on the level of the position occupied by the corrupt individual officer. Uniformed officer at street may for a small favor, for instance, a tip, privilege or a small amount of money, oversee a violation, fail to take measures prescribed by law, or even give false testimony. According to the research made by TI BiH, it is obvious that the largest part of the population (over 85% cases) think that this is very much a corruption. Forms the corruption takes in the police forces vary; a police officer on a higher position may influence the police officers he supervises, and make them give up reporting an illegal action, or give wrong instructions that would result with discharging the report even against his will or wish. Also, the superior position enables him to abuse his position and alter the report or stop it. The alarming 92.3% of citizens, according to the survey, think that almost all, or at least some of the police officers, receive bribe. The police officers on positions often do things like this under the influence or at request of the higher level. Those “higher-ups” do this at request of politicians, or


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at request of “powerful individuals”. When we say “powerful individual”, most frequently we see an image of a person with exceptional influence, connected to politics, frequently with a very dubious reputation of a recent soldier, who is involved in suspicious deals, very often organized crime, but who has never been indicted. Frequently, those are the persons brought in connection with the affairs of “laundering” documents of stolen cars, false registration plates, issuing personal IDs or passports, particularly for the individuals from the territory of the former Yugoslavia, who have excellent connections, not only in the police, but also in other parts of administration, who can provide all needed documents etc. in a day, for a fee. Logically, they are outside the system, and the police is powerless. In the Herzegovina region, parts of the state border are often porous, and the police chiefs move the patrols so that, for instance, a privileged transport could go through unintercepted, for a fee. Fortunately, the establishment of the State Border Service (SBS) has narrowed down the space for such operations, although new forms of organization and violation of law are being intensively sought, whether through the SBS or otherwise. There are some serious, sometimes even legally proved indications that some police officers have gone further and forfeited goods not registering it, and then sold it later on unregistered. There are even the curiosities that a police officer, after the working hours, dresses in the uniform and starts regulating traffic, securing for himself extraordinary revenues. What is typical is that the powerful individuals rarely influence the police officers themselves, rather, they do that through politicians. The most drastic examples of corruption are those the public does not know of, or only speculates about. Those are the examples of misuse of official authority, position tax evasion, misconduct in imports or exports of goods, etc. that are discovered by the police, but not processed, or not even “reported” by the police themselves. Very often, large amounts of money are in the game, unthinkable for average people. When faced with such large values, the police officer, when they disclose such a scheme, instead of satisfaction with the success feel fear, what is partly understandable, because more and more often we see reports on planting explosive devices in automobiles, houses, or blackmail or threats, while the system, on the other hand, does not provide for an adequate protection that would make such individuals feel safe enough. There are speculations that the above described “powerful individuals” have divided some cities among themselves, to racketeer. This is a phenomenon more and more present in BiH. Those who are not paying the racket to the members of,


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in most cases, nationalistic political parties, could easily find bombs planted in their cars or private shops over night. Those are the post-war phenomena, and they came together with gradual formation of a small group of extremely rich people, so it is not hard to conclude what relations are those – in other words, it is clear that there was some crime going on. That is why it is not a coincidence that as many as 86.6% of respondents answered that there is organized crime in BiH. A general opinion is that the corruption is the reason for the police failing to do their job. However, the reality is never simple, and can not be defined in so simple terms. The lack of reaction on the part of police may be in most cases a result of corruption, but not always. Although over 22% citizens were forced to bribe a police officer during the course of last year, it is also possible that this police officer is disappointed by the fact that one his case has finished “in the drawer” of his chief. There are examples when some model police officers changed their behavior after such a thing, or even, as an exceptional case, that they left the police. This means that the corruption is spreading within the police apparatus, diminishing the will and courage of individuals to adhere to the standards of service and their personal principles, they loose their enthusiasm, and they start asking themselves why should they be honest in such an environment in the first place. Police officers fear negative reactions of their police bosses, politicians, and since recently, IPTF too, as well as most other international agencies. Almost any action of the international factors taken against the police has ended to the detriment of individual uniformed policeman. However, there are no known example that a domestic or an international factor has ever stood to defense of a police officer who is not in the “mercy” because of his professional and lawful work, nor there are any mechanisms to identify and award such cases. This is an idea, similar to the SOS phone for the journalists, that should be introduced for the police officers. Although the skills are subject to revision of the responsible international training agencies, still, many police officers are not able to operate in accordance with law and profession because of lack of professional training. In principle, and in most cases, non-professional conduct is a consequence of corruption, however, the circumstances are so much different that the problems can never be resolved with the disciplinary procedures alone, taking away the licenses, what are the only remedies currently in existence. A special problem in the work of the police is a form of corruption that could entail the attribute “political”. Although the information to which political option belong the ministers and top officials of the police forces is public, the fact remains that


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their parties bring them to their positions to favor the interests of the party and its members in a certain expected measure. That is why there is a proverb that has taken root in the case law: “when two different politics collinde in the police, who gets hurt are the law and the profession”. All participants in public life of Bosnia and Herzegovina concede to this kind of corruption, if one were to judge on the basis of qualifications they received in the TI BiH research, where the political parties and political activists are taking the lead. That is why it has been a frequent practice so far that the ‘powerful individuals’ simply change their political party in accordance with the election results, and thereby resolve their economic survival in the grey or black zone. If the party is opportune by some criteria of the international factor in BiH, then everybody accepts such a solution, while the millions of evaded tax and money earned by crime stop being a hot topic, in exchange for their political cooperation. Such things completely professionally destimulate the police officers of the medium and lower ranks. This practice of a vicious cycle of corruption has been discussed a lot in the TI BiH studies from previous years.51 Direct consequences of all the described circumstances are shocking for the ordinary people. Police officers more frequently do not react on the events they exist for than they do. That is why the public perception of the work of police is so negative, with 64.7% respondents seeing it as very much and much corrupted, and only 3.3% respondents think that almost no police officer is involved in bribe. On top of it all, the criminogene persons – the “powerful individuals” insult and humiliate them, and even physically attack, while they can only suffer in silence. Unfortunately, such an atmosphere is making too many of them start perpetrating crimes that we had described above. Activities on creation of the rule of law Over the last year, the understanding that the rule of law at all levels and the system of “country of law” is a condition sine qua non future of Bosnia and Herzegovina has ripen. So the most important aspect of institutional building in BiH is the system of justice, and operation of judiciary. There is almost a generally shared awareness and ripe understanding in the whole BiH that the system of justice that is able to operate independently, concretely and efficiently, is one of the fundamental preconditions for economic development of the country, together with a professional police, organized, trained, and depoliticized. It is very important that the judicial authorities also possess the mentioned characteristics.

51 TI-BiH Reserach: “The International Community is Not Imune to the Plague of Corruption Either”, Sarajevo, 2001.


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The reform that will inevitably follow, or is already under implementation in one of the mentioned areas, includes the following:

1.Rationalize the organization of courts and prosecution offices by reducing their number from the current one, and appoint that many judges and prosecutors that are required by the amount of work that needs to be done.

2. Adopt new procedural laws, at the level of Bosnia and Herzegovina, or laws

harmonized between theentities (Law on Criminal Procedure, Law on Civil Procedure, Law on Adminsitrative Procedure, Law on non-litigation proceedings, and the Law on Administrative Disputes). The Criminal Code should contain a criminal offense of corruption as a separate offense, in the already existing and extended segments and forms (privatization, prosecution, police, health, money laundering, phantom firms, executive power, etc.)

3. Not waiting for adoption of all those procedural laws, the Entity

Governments should give to the Parliaments a whole package of anti-corruption laws, and adopt the law on inter-entity cooperation in the area of combat against crime, and set up the anti-corruption teams for that purpose.

4. Harmonize the laws vertically – at different levels of government – and

horizontally – among the entities and Brcko District, and achieve the highest possible level of harmonization that would ensure compatibility of systems. At the same time, prevent introduction of dfferent legal practices (continental vs. common law) that are frequently a result of different donor’s and consultants’ approaches. All this, combined with the inherited legislation and the mix of laws from SFRY, SR BiH, RBiH, HR HB, HZ HB, district, FBiH, RS, and BiH brings in a large dose of confusion, diminishes transparency of the legal system, making it overly regulated. That is why, in addition to reviewing the laws and modernizing them accordingly, we must also deregulate the legislative framework.

5. The decision of the High Representative has established the High Judicial

and Prosecutorial Council at the state level, and in both entities, and the State Law on Inter-Entity Cooperation in the Area of Judiciary was enforced. The proposals for such regulations came even before, from the ranks of judges themselves.52 Certainly, a big progress was made in the fact that the Councils will have and implement clear criteria for the system of direct and independent appointment of all judges and prosecutors, except

52 Vlado Adamović:31.05.02. Dani


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the judges of the Constitutional Court. A significant progress is expected to follow from the fact that those Councils will be able to take disciplinary measures against judges and prosecutors. Appointment of the members and international members of those Councils is expected to happen soon (by 2003). The Entity Prime Ministers are in charge of starting the negotiations on setting up a single High Judicial and Prosecutorial Council, what will certainly suit the practice of the European democracy, and ensure identical implementation of the standards of independent judiciary throughout Bosnia and Herzegovina. When the Judicial Couincils announce vacancies for all positions of judges and prosecutors in Bosnia and Herzegovina in September this year, it is expected that the key criterion will be their qualification. Those changes will be a strong encouragement in the fight against corruption, for which an independent judiciary must be a cornerstone.

6. A similar incentive to fight against corruption will be the newly proclaimed

Law on Legal Aid and Cooperation in Criminal Matters between the two entities and the Brcko District. It simplifies the procedure of cooperation between the courts, prosecution offices and internal affairs agencies. All that used to slow down the work of the courts, along with different political pressures, is thus avoided: serving arrest warrants, serving court orders, everything that can be done more simply.

7. Lack of preparation on the part of some judges has often be a barrier to a

more efficient combat against corruption. OHR’s setting up a Center for Development of Judges and Prosecutors in Sarajevo and Banja Luka will make it possible for the candidates for judicial and prosecutorial positions to receive the education they need. Those centers (or Institutes for Judicial and Prosecutorial Training, as they will be called) will cooperate with the High Judicial Council for the purpose of establishing an independent and professional judiciary. That will establish the institution, procedure and contents of a permanent education system for judges, which is also related to the process of appointment.

8. The proposel of the new High Representative on creating a court, or a

council that would deal with more exposed cases is considered very constructive, because this wold create the preconditions for a more efficient fight against corruption. Creation of such council would alleviate some of the burden from the existing system, and resolution of such cases will create a better atmosphere for additional strengthening of the fight against corruption.


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9. All those changes and laws imposed by the High Representative will strengthen the system of overseeing and prevent misuse of authority in the public sector, what is one of the main generators of corruption.

10. A special role in near future will have the newly adopted Law on Conflict

of Interest, which contains provisions on incompatibility of political mandates and positions in the sphere of economy, as well as the rules to which the elected officials and public functioners will have to adhere in terms of receiving gifts and financial compensations for the activities they perform outside their official duties. The conflict of interst exist when a public official has a private interest that may influence the legality, transparency, objectivity and impartiality of his work in public office. This law will work best in combination with the Law on Freedom of Access to Information, which had been already adopted in both entities.

11. For the purpose of securing financing for the judicial institutions, the Laws

on Budgets of Courts and Prosecution Offices need to be adopted to ensure permanent and independent financing to those institutions, thus protecting them from political pressures.

12. Adopt new codes of judicial and prosecutorial ethics, which would

emphasize the independence of judges and prosecutors, their obligation to uphold the Constitutions, to be impartial and fair, and the prohibition of their belonging to any political party.

13. In all anti corruption activities, the UNMBiH initiative on police

commissioner should be supported, which establishes the function of independent police commissioners at operational level, in all cantonal ministries of interior in FBiH. In this way, the police forces at appropriate level will be put under a single chain of command, by professionals unrelated to politics. This will prevent cantonal ministries to exercise influence on the immediate police activities. So far, only on paper were the Federation and Cantonal Ministries of Interior linked into a single operational strucute; therefore, and particularly for the purpose of fighting corruption, the conditions should be created in near future for the Federation MoI to get new authoritie, similar to those that the MoI of the Republika Srpska already has, that would expand on the whole entity. This would improve the efficiency of the fight against corruption, which would overcome all administrative borders, following the course of crime.

14. Implement in BiH various conventions adopted at the level of the Council

of Europe, as follows:


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a. Convention on Money Lanudering, Search, Seisure and Confiscations of Ill-Gotten Gains

b. Civil-Law Convention on Corruption; c. Criminal-Law Convention on Corruption, etc.

15. The ultimate goal of the reform of judiciary in Bosnia and Herzegovina is,

first of all, to be committed to actual implementation of the Article 6 and Articles 2-4 of the Protocole No. 7 of the European Convention on Human Rights (right to fair trial).

16. It is necessary to organize a broad action to educate people on corruption,

using the non-governmental sector and international organizations, and involving them in all forms of fight against corruption. Also, it is necessary to raise public awareness on the necessity and ways to eliminate corruption.


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SOCIAL INSTITUTIONS, EDUCATION, HEALTH AND NON-GOVERNMENTAL ORGANIZATIONS

Introduction

Although frequently mentioned solely in the context of immoral behaviour, ‘corruption’, as a term, has a very complex and varying definition. In the analysis of corruption percepcion in health, education and non-governmetnal organizations in BiH, what the topic of this section of the report, we will define corruption as behavior of public officials whereby they acquire illegal wealth, using the public authority vested upon them. The notion of corruption is defined into more detailes in the report titled “What is Corruption and How to SUpress it?”53, where the author presents two kinds of corruption: political and administrative. While the first one is related to corruption that “corrodes” election process thus inflicting harm to independent operation of the legislative bodies in the society, the second type of corruption, the so called administrative corruption, is the corruption that “… affects the sector of public services, public revenues, and sector of judiciary. This corruption infects the public officials… and the corruption also affects the work of number of services… that are in charge of implementing public programs or provide public services to people from some community or state.” Speaking about corruption in social institutions means talking about this, administrative, corruption. In addition to the corruption being considered morally harmful for the society, it is often the main reason of ineffectiveness of state. Public officials in state institutions frequently try to meet their private interest going beyond their outhorites, by intentional use of public resources, what at the same time (in)directly inflicts harm to the quality and scope of provision of services intended to the end beneficiaries. So, for instance, if the doctor accepts money or gift from his patient in exchange for provision of faster service or provision of service at all, while in the same time the doctor has the duty to offer his service to the patient within his working hours, we may say that the doctor has harmed the quality of the service provided by a health institution, thereby directly affecting the spending of that institution. Therefore, corruption involves the practices such as bribing, i.e. receiving money or gifts for the purpose of influencing the decisions of the public authorities; nepotism, i.e. use of unprescribed or family criteria when making decision on public matter; abuse of position for personal gain. The last type of corruption mentioned includes the practice of illegal use of public good, i.e. service.

53 Huremović D., 2000, p.5


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The results of the Transparency International BiH research show that the perception of widespreadness of corruption before the war is much lesser than today. As many as just over half respondents think that the corruption had been present little or very little before 1992. The answers to the same question concerning the prioed up to 2001 show over-half majority (84%) of those who think that the corruption is common or very common. This is additionally confirmed by the statistics on the number of court cases in FBiH. Only in 2001, the public prosecution of the Federation BiH had been conducting 13,183 proceedings against physical persons on the economic crime cases. In the Republika Srpska, this number is a bit lower, 11,997.54 Certainly, those numbers do not include all cases of corruption in public instititutions. For the needs of this Report, 1200 citizens of BiH selected on the basis of a representative method have been asked about the actual widespreadness of corruption. Public services in transition It is generally known that in the former system, most social services were free, and almost equally accessible to almost all citizens. The old Yugoslav system of health protection and compulsory free education, according to the assessment of the United Nations Development Program (UNDP), has significantly contributed to basic human development, as it was the case in other post-communist societies.55 After the end of the war, being pressured by different international financial institutions, and learning from the experiences of other transition countries, BHJ has started the road of selective provision of social services, like health and education. So the transition process is using different means to encourage reduction of budget funds for non-productive industries, meaning the public serctor services, including education, health, housing and social care for the population, etc. “In the past, the functions of the family or the society have become the resoponsibility of the state, to the detriment of certain processes in the civil society. The present society is inclined to leave those functions unprotected or to privatize them. So the services that in or countries meet the basic needs, particularly in the poor sectors of the society, have been reduced to the minimum."56 Such approach, unavoidable in the process of transition, brings about a significant decrease in quality of the services provided by the mentioned institutions, and additionally, results with a lowering of morals of public officials, what paves the road to the corruption. The results of the Transparency International Research on percepcion of corruption in BiH show that the respondents see the corruption nas one of the most serious problems of the present BiH society. As the first problem, most respondents state

54 MVTEO BiH; 2002, p. 13 55 UNDP, 1999 56 Makinson, D., 2000, p. 211


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the unemployment (25,8%), while one fifth (20.3%) say that the corruption is number one problem. Over two thirds of respondents (63.9%) define corruption as a harmful phenomenon that should be fought against in all possible ways. A bit over one fifth of the respondents think that the corruption exists, and it will always exist. It is interesting to note the difference in the opinion between the respondents of different work status. For instance, the pensioner consider corruption is the fourth biggest problem of our society, while most working people place the corruption at the first position. The main culprit for the occurrence and widespreadness of corruption is BiH, according to most respondents, are the lawlessness and inexistence of rule of law, while the second and third place on the list of causes are occupied by the ”immorality” and “dishonesty”. According to the respondents, corruption is therefore not a resulto only of a mechanism of private interest and personal choice of citizens and public officials, but is also a result of social pressures felt by the poorest part of the society. Taking all those information into consideration, it is possible to conclude that the mentioned spheres of life are mutually very closely linked by corruption that penetrates both economic and political institutions of our country. Instabile political situation in the country results with creation of unfavorable climate for foreign investment, what in return brings about an increase of the unemployment rate. Lack of readiness and continuous postponement on the part of public institutions to finally put an end on corruption in public and private sector create a favorable environment for development of ever more profitable and imaginative forms of corruption. In this way, corruption spreads further, creating wider and wider gap between the rich and the poor. Perception of corruption in health Before having analyzed the research results on corruption in health, it is necessary to remind of the actual present situation of health in BiH, where it is one of the poorest public sector areas. In the Republika Srpska, for instance, the health workers in Trebinje, Banja Luka, and then in Doboj too, tried recently to resolve the problem of unpaid salaries for 2000 by a strike. Federation of BiH is also seeing more and more frequent strikes in public health institutions. Doctors and other medical staff are poorly paid, while in some cases the staff is not receiving the compensation for “warm meal”, which is prescribed by law.


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Since the state is performing its obligations to the health institutions in its ownership with growing delays, more and more health institutions at the cantonal and municipal levels turn to direct collection of payments for health services from the insurees. The same insurees have already paid their contributions for health, but this fact is typically neglected. The new way of additional charge is known as the “participation”, and has been introduced with the aim to enable direct compensation of medical services, in order for the health institutions to be able to cover their operating expenditures. A similar situation was with the health system in the Russian Federation. The National Human Development Report for the Russian Federation from 1997 states: “The amount of salary of 90% of health workers in public health of the Russian Federation does not suffice to ensure pure survival; in addition, the salaries are late between 2 and 7 months… As a result, the best qualified and most dynamic medical staff moves to commercial institutions, what diminishes the principle of health protection accessible to all."57 Public health institutions in BiH have had a similar destiny. Unsatisfied with how they were treated by the state, the doctors often turn to private practicve. So in Bosnia and Herzegovina there is a parallel system of private medical offices, that provide to the citizens with deeper pockets a good quality health service in exchange of direct payment for their service. Private health in BiH is still in its early stages, and for vast majority of people still inaccessible. Also, one can in no way say that the network of private ordinations developed so far may replace health institutions in their obligation to provide full health protection. The sudden segregation of health system and decreased accessibility of health services have been observed in other transition countries too, for instance, in Molodva, where 270 private health institutions have been registered since 1997. As a result of introduction of private health insurance, the most valuable medical staff is largely leaving public sector and seeks employment in better paid private clinics. As a combined result of all those factors, the public health in BiH has opened its door widely to development of the mechanism of corruption. When asked “how present is corruption in health”, over 50% respondents said much (30.4%) or very much (20,6%), what raises some concerns, particularly if taken into consideration together with the percentage of respondents who chose the answers medium (25.5%), meanting that a total of 76.5% of respondents confirm that there is corruption in health. A more detailed presentation of the responses is given in the Chart below.

57 UNDP, 1997, p. 57


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7,4

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35

Very little Little Medium Much Very much Does not know / refuses to answer

Chart 62- How present is corruption in health? If we divide the responses on the widespreadness of corruption in health in accordance with the employment status of the respondents, we may concluded that those woring in public companies, and houswifes, have most trust into the low level of corruption in health. Over 50% of employees in private companies, and almost the same percentage of students, pensioners and unemployed persons think that the corruption is much or very much present in health, what is shown on the chart bellow.

9,6

5,7

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4,4

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1,2

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20,5

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0 10 20 30 40 50 60 70 80 90 100


Employed in public company

Company owner

Pensioner

The unemployed

Housewife

Student

Very little Little Medium Much Very much Does not know

Chart 63 – How present is corruption in the following areas: health? (by employment status of the respondents)


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In the respondents’ opinion, in parallel with other public institutions, health takes the fourth place in terms of how widespread the corruption is, right behind the policital parties, customs officers and judiciary. Of the possible twelve institutions this question dealt with, as many as 7.5% stated health as the public institution where the corruption was most widespread.

23,9

36,3

32,4

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0

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30

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40

almost all are engaged most are engagedonly some are engaged almost none are engageddoes not know/refuses to answer

Chart 64 - To what extent the members of the following professions are involved in the practice of

bribe? – doctors Perception of corruption in health, according to the results stated so far, does not specify particular individuals who would be possible culprits for such extent of corruption in this area. However, when asked: “To what extent are the doctors engaged in bribe?” (Chart 64), almost two thirds of respondents blamed this profession, chosing the answer “almost all are engaged” (23.9%), or “most are engaged” (36.3%). As little as 4.1% of the respondents believe that no doctor is engaged in the practice of bribe.


149

26,2

43,4

23,7

21

27,8

24,4

30,5

70,1

53,9

73,6

74,4

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4,2

3

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0 10 20 30 40 50 60 70 80 90 100

Farmer

NK-PK worker

KN-VV worker

Clerk

Private businessmen

Expert

No profession


Chart 65 – If you were in a situation to be demanded a bribe, was the demand made by the doctor or medical staff? (divided by profesions of the respondents)

The results further show that most of those participating in bribing doctors and medical staff, willfully or not, are the worker with low qualification or semi-qualified workers, and those with no profession. So for instance, when asked: “If you were in the situation to be demanded a bribe, was it been by the doctor or other medical staff?”, 43.3% of low-qualified and semi-qualified workers, as well as 30.5% workers without profession answered yes. One could conclude that the corruption is very widespread among the doctors, much more so than among members of other professions. It is interesting to mention that in addition to obtaining better medical service using bribe, the interviewees would in most cases be more ready to do the same thing only in the case of employment, i.e. paying bribe for finding employment (57.7%). One fourth of respondents had experience in bribing doctors, what is indicated by that the numer of 26.6% of respondents who were in situation to be demanded to pay bribe over the last year for treating a medical problem. Most other listed professions58 came up much less frequently in the answers. One should not blame only one side for such situation in health. When asked whether the respondents personally would pay bribe if so demanded by the responeible official in the situation when he needs a better medical service, 58.5% of respondents answered “yes”, while 36.3% would refuse to do so. Dividing the results of the answer to this question by total monthly income of the respondents

58 Other offered professions were: teacher, professor, municipal official, judge, customs officer, private enterpreneur and police officer.


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(Chart 66), it is apparent that 80% of the interviewees whose income exceeds 2000 KM are wiling to pay bribe for better medical service. With a decline of monthly income, the number of those who would get engaged in corruption in exchange of better medical service declines along. This distribution of answers additionally confirms the stability of market for development of private medical practice that are currently very few in BiH.

51,5

48,4

63

67,1

64,5

70,9

80

41,4

51,6

34

26,4

29

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20

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0 20 40 60 80 100

0-149 KM

150-249

250-499

500-699

700-1000

1000-2000

2000 i više

yes no do not know

Chart 66 – Would you pay bribe if demanded by the responsible official in order to get yourself a bette medical service? (Division by monthly income)

Perception of corruption in education Corruption in education is also rooted in the former government system. During the socialistic organization, when the education system was formed in accordance with the requests of the labor market demands, very little attention was paid to educating the young to use their knowledge in practice. Education system concentrated on facts, frequently prepared in centralized institutions at the state level, largely dominated by marxistic ideology and outdated work method. Centralized planning and education system management, aided by thegenerally difficult economic situation in the country, has significantly affected the investment in the development of the overall education system in the former Yugoslavia. With the lack of financing in the system of high education of the time, the number of students enrolled in high education institutions was also reduced. So


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from the number of 1,461 enrolled students per 100,000 people in 1981-82, the number went down to only 846 in 1991.59 During the war, three different education systems were created in BiH, while the education institutions in some parts of the country have totally collapsed. On the majority Croat territory, education was put under jurisdiction of the Croatian Community/Republic of Herzeg Bosnia that had existed at the time, while on the majority Serb territory, the Ministry of Education, Science, Culture and Sports of the Republika Srpska took over the control over all areas of education. Education institutions in other territories of BiH remained under the responsibility of the Ministry of Education, Science, Culture and Sports in Sarajevo. After the signing of the Dayton Peace Accord in 1995, education was placed under the jurisdiction of the entities, what had decentralized the education system in thewhole country. State of BiH, after signing this agreement, was not any more able to legally represent both entities in the processes of international cooperation in the area of education. So most of the decisions made today in connection with education are made at the entity level. In the Republika Srpska, the system where the entity Ministry of Education keeps responsibility for the overall system was kept in most part. At the same time, a further decentralization was introduced in the Federation of BiH, transferring the biggest part of responsibilities to the entity ministries of education. This decentralization of the education system has changed the main aspect of education, which is financing. In the whole BiH, the education financing was transferred to the level of entities and cantons (FBiH), what, as in the case of health, poses new obastacles to provision of equal access to education system for all citizens of BiH. Quality of education over the last years is also well illustrated with the information that only in the Bosnia – Podrinje canton, only 54% teachers working in primary schools posses the qualifications required for the job. The numbers are similar in other cantons too. Concerning the tertiary education, attended by fifty persents graduated secondary schoolers, the situation is almost alarming. Professors’ salaries in some high education institutions are several months late, while the authorities at different levels argue about who is responsible and who will finance this sector of education. Curricula are too broad, and based exclusively on theory, while the work experience is almost completely neglected. Students have a lot more subjects than their European colleagues.

59 ACA Consortium, 2000, p. 13


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The combination of the said factors, starting from the poor quality of the service provided to poorly motivated staff, opens the door to corruption and “buying” education, as it was the case in Armenia. UNDP Report on National Human Development in Armenia for 1997 gives a typical example of the effects of corruption in education: “… high marks are “sold” to students; students loose motivation; only 60% finish secondary school. "60 Perhaps this is the very reason why the fact is not surprising that of all students enrolling high education in 1999, only 10% of them successfully complete the studies without having to repeat a year. The analysis of the TI research on corruption perception in education in BiH shows a significant difference in opinions of the extent of corruption in the primary and secondary education. Speaking on education in BiH in general, the citizens in most cases agree that the extent of corruption in this public sector is medium, small or very small, what is shown on the Chart 67:

10.5

24.4

37.6

18.4

6.3 2.8

0

10

20

30

40

Very little LittleMedium MuchVery much Don't know / refuses to answer

Chart 67 - What is extent of corruption in schools?

Only 16.7% think that the extent of corruption in education is large or very large. The same results show that the respondents with higher education level believe a lot less in existence of corruption in education. As many as 40.4% of the respondents with high or higher education think that there is little or very little corruption in this area. This number is even lesser in case of the respondents with four grades of education, who mostly think that the extent of corruption is medium, large or very large. This is probably more related to the fat that the latter group is relatively much more affected with corruption in education, and they are much more ready to note it. 60 UNDP Armenia, 1997, p. 54


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9.6

7.9

9.6

14.2

15.4

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24.5

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0 10 20 30 40 50 60 70 80 90 100

Four grades

Primary school

Secondary school

High and higherschool

Very little Little Medium Much Very much Don't know

Chart 68 - What is extent of corruption in the following areas of social life: education? (divided by education level)

The presence of corruption in institutions of high education is illustrated with a number of 13% respondents who think that almost all professors are engaged in bribe, while almost one third (30.4%) respondents think that most professors are corrupt. What raises concern is a high number of 45.9% citizens who think that only some university professors are engaged in corruption. Combiniation of all those numbers brings as to the data that as many as 89.3% of respondents think that the corruption exists among university professors. Therefore, this is a general opinion of the overall population.

13

30,4

45,9

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almost all are engaged most are engagedonly some are engaged almost none are engageddoes not know / refuses to answer

Chart 69 - To what extent the university professors are engaged in corruption?


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The extent of corruption in primary and secondary education institutions, as seen by the respondents, is much lesser. Only a bit over one fifth of the respondents (22.1%) thinks that almost all or most teachers are engaged in corruption (Chart 70). Most respondents, some 58.8% of htem, think that only some teachers are corrupt. Having analyzed the responses to this question in light of the education level of the sample, the group of respondents with primary education clearly stands out, mostly believing in engagement of teachers in bribe and corruption, probably, once again, since they are the ones mostly affected by this.

4,8

17,3

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almost all are engaged most are engagedonly some are engaged almost none are engageddoes not now / refuses to answer

Chart 70 - To what extent the teachers are engaged in bribe?

Out of the small number of the respondents who were in the situation to be demanded to pay a bribe to a teacher, most were students, while among those who were demanded to pay bribe to university professors, most were the company owners, and people employed in the private companies, typically parents whose children were studying. Non-governmental sector and international organizations Non-governmental sector in Bosnia and Herzegovina is certainly one of the most developed in Southeastern Europe. Only in 1999, there were 1,300 non-governmental and international organizations registered in BiH. Of this number, only between 300 and 500 are national active associations. 61 Certainly, the role of this sector is unquestionable in any democratic society. The founders of those organizations and associations see themselves as representatives of different self-organized minority groups, whose interests were not possible to realize in any other way. The state, however, often sees the NGOs as an excellent tool to fulfill 61 USAID: NGO Sustainability Index Report 2000, p. 49


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its obligations to the ordinary people, for whom the state has not made the appropriate allocation from the budget. Such a large number of NGOs have developed in Bosnia and Herzegovina because of the necessity to ensure a better access to legal aid, and better information of the population on human rights and requirements of civil society. USAID’s Report on Sustainability of Non-Governmetnal Sector in BiH for 2000 state among the reasons for so quick development of non-governmental sector in BiH after the war the need for employment. “Partly because of the economic situation, establishment of many post-war non-governmetnal organization was motivated more by the need to find employment, than by loyalty to a particular mission.”62 However, the non-governmental sector, as opposed to the governmental, i.e. public sector, very often does not suffer from delayed payment of salaries, or insufficient funds. For this very reason, this part of the report shall dwell on corruption with somewhat different roods. The extent of corruption in non-governmental organization, from the point of view of the respondents, is medium (21%), much (14.4%) and very much (11.1%). Only one third of the respondents think that there is little or very little corruption in non-governmental sector.

15.4

20.4 21

14.4

11.1

17.7

0

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25

Very little Little Medium Much Very much Don't know /refuses to answer

Chart 71 - What is the extent of corruption in non-governmetnal organizations / associations?

The analysis of the results on the extent of corruption in international organization also shows a large difference in answers given by respondents with different income. So for instance, only 11.4% of citizens who have KM 2000 or more per month think that the corruption is much or very much present in international

62 USAID: NGO Sustainability Index Report 2000, p. 49


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institutiosn. When answering the same question, almost three times as much people with the lowest monthly income (up to KM149) think the same. As perceived by the respondents, of the 11 offered public institutions63, in addition to the armies, international and national non-governmental organizations are seen as the institutions with the least widespread corruption. At this table, the international organizations take the top position When making a detailed study, 13.5% of the respondents see the presence of corruption in international associations as very little, and 21.5% thinks that there is little corruption, while 14.9% of respondents find that there is very much corruption in international organizations.

17.2

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31.8

13.513.8

0

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almost all are engaged most are engaged only some are engagedalmost none are engaged don't know / refuses to answer

Chart 72 - To what extent the representatives of international community are engaged in

corruption? - The results of the TI study show that a large number of respondents think that the representatives of international community are engaged in corruption. 23.7% think that most are engaged, while 17.2 think that almost all representatives of international community are engaged in this practice (Chart 72). Having analyzed the obtained data, splitting the results by the employment status of the respondents, an interesting parameter is that most people working in state owned companies – as many as 49.7% - sees the representatives of international community as participants in corruption. A similar number of 43.4% is seen again with the 63 Responses offered: Government of Federation BiH/RS; Telecom/PTT; Military, Government of the Brcko District, NGO; tax administrations of Republika Srpska/Federation; international organizations; Ministry for Refugees and Displaced Persons; Elektroprivreda of Republika Srpska/Federation; and do not know.


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respondents who are not employed, and those are the two categories that blame, among others, the representatives of international community for their difficult social position. Another important indicator is the difference in answers received from different age groups. So as many as 46.1% respondents of the age 45-59 think that almost all or most of the representatives of international community are engaged in bribe and corruption. This number gradually goes down with reduction of the respondent’s age. Having analyzed the answers to the question on the extent of corruption in international organization by the education level, there is an obvious difference in answers given by the respondents with high and higher education level, who generally think that there is little or very little to medium level of corruption in international organizations, or 61.4%. As little as 46.2% respondents with four grades of primary school gave the same answer. However, the most interesting is to compare data between the respondents from the two entities. Very apparent is drastic lack of trust of the Republika Srpska citizens towards the international community, and there is a large difference in percentages if compared to the citizens from the FBiH. While almost half of the FBiH population find the IC very little or little corrupt, this opinion is shared by only 14% of population in Republika Srpska. Smilarly, 53.1% respondents from the Republika Srpska think that IC is mostly or almost completely engaged in corruption, what is shared by much lower percentage of 29.4% respondents from the Federation BiH.

How corrupt are they? FBiH RS How much are they engaged in the practice of bribe?

FBiH RS

Very little 17,5 5,5 Almost none is engaged 17,8 5,0 Little 28,0 8,5 Only some are engaged 35,9 23,8 Medium 18,9 17,8 Most are engaged 17,8 25,3 Much 11,4 23,8 Almost all are engaged 11,6 27,8 Very much 11,0 22,8 Don’t know / refuse 11,9 18,3 Don’t know / refuse 13,3 21,8

Table 19 – Perception of corruption in the international community in BiH Viewed globally, international organizations are detected in the research results as one of the segments of political system that is the least affected with corruption. From the aspect of bh reality, this is a relatively encouraging piece of information. International organizations have taken upon themselves a significant role in revitalization of the post-war society, but they to a good extent supplement the inefficiency of public services that are very slow in responding to the stimuli from the society, insisting on awkward, slow and overly formalized procedures that are inappropriate for quick changes that are characteristic of transition.


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Public institutions – equal access for all Corruption, as well as some other negative phenomena in a transition society (poverty, economic instability, etc.) are the follow-up negative parts of the processes that must be performed for the purpose of overcoming the already existing systems of bureaucratic operations of the state, and turning into democratic, market oriented systems of work. Even when the transition process is completed, and Bosnia and Herzegovina becomes a member of the European family, it is unavoidable that he corruption will remain an integral part of the society, but of course, its extent will be much less than it is today. We can read every day about the examples of corruption of enormous proportions in some of the most developed countries in the world. Only in the USA, a special government agency for compating corruption (TRAC) processes around 2000 cases of bribe and public procurement set ups. In Germany, which is closer to us, the police investigated as many as 2.400 cases of corruption in 1998 alone.64 Perhaps a little less surprising, the corruption in the countries that have not suffered the war destruction like BiH is a lot more widespread. In their report on the success of transition in Eastern Europe and Commonwealth of Independent Countries, the UNDP states the example of Bulgaria, where 41% respondents said in a study that they would very gladly offer money to a public official, while only 7% said that they would feel ashamed if they had done so. Additionaly, the extent of corruption in this country is confirmed by the information that 50% of the interviewed public officials said that they would gladly accept money or gift from a party for performing their job. The same Report clarifies that this perception of corruption is developed by institutional and organizational culture… marked by the gap between administrative responsibilities and personal interests, resulting with a clientelism, hindering bureaucratic treatment of the party, that often borders with disrespect of human dignity. "65 UNDP’s 1999 Report on Human Development Status in Europe sais on the possible consequences of corruption and ways to suppress it the following: “With the increase of this “corruption culture”, the country stops operating effectively in its job of implementing economic and social policy… Therefore the job of fighting crime and corruption is a strategic goal of essential importance for the overall success of transition into market – oriented economy and political democracy. "66 Bosnia and Herzegovina, whowever, has wasted too much time in the post-war period ignoring the fact that the corruption was spreading with unbelievable speed

64 Source: Marić, D.; 2001; p. 61 65 UNDP Bulgaria, 1998, p. 18 66 UNDP, 1999, p. 26


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throughout various levels of governments and in economy. So a respectable American daily, “New York Times”, in a text on the report of the American congress on corruption in BiH, states the crime and corruption as the main obstacles in successful implementation of the Dayton Piece Agreement in Bosnia and Herzegovina, and recommends suspension of assistance to BiH for as long as the local governments show readiness to fight those things. The same Report states the opinon that “there is no measurable progress in reduction of crime and corruption in the four years after the war."67 So in BiH, some minimal steps in fight against corruption were already made. In early 2000, BiH has formally acceded to signing the Civil Law Convention on Corruption, thus becoming a member of the group of countries committed to fight against corruption (GRECO). The same document obliges BiH to, among other things, incorporate in its legislation the appropriate procedures for protection and compensation of damages to the persons who have suffered injustice as a result of the corrupt activities. At the same time, the Council of Ministers of BiH, in cooperation with the World Bank (WB) developed the Diagnostic Study of Causes of Corruption in BiH. This study has served in developing the anti-corruption program by the BiH government, that had followed shortly.

26

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no

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Chart 73 - In your opinion, does the current government at the entity/cantonal level put serious

efforts in exterminating corruption among lower government officials who are in a direct contact with citizens?

The Office of the High Representative (OHR) has also developed an anti-corruption strategy, that was used later on as a basis for the same strategy at the entity level. Bosnia and Herzegovina has developed a corruption suppression project as one of the prerequisite for final fight against poverty. Although this is a

67 Gall, C. and Marquis, C., 2000


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very broad and ambicious project, it must be implemented by a good and regularly paid, motivated and trained staff, such as almost does not exist in public sector in BiH. Media and non-governmental sector (NGO) also have a significant role to play in suppression of corruption. The first, being one of the most powerfull trools in fighting corruption, must take upon themselves the task of educating the public, with the prupoes of creating an anti-corruption environment in the country. Media are not only able to expose possible cases of corruption, but they can also prevent them. “Money stronger than moral”says the following: “Although they are not one hundred percent safe protection of general interests and public moral, the media in democratic countries prevent politicians and other public functioners to easily fall to the temptation of corruption and other forms of abuse of position.”68 The non-governmental sector, on the other hand, must serve ordinary hands, so that they could more easily get involved in the processes of making important decisions on implementation of public sector reforms. Together with the media, the non-governmental organizations in BiH should educate ordinary people at the lowest level (known as the “grassroot level”) on the harmful and devaluating effect of corruption at the general community. Only a strong non-governmental sector, being a main factor in development of a democratic civil society, can, together with ordinary citizens, make a social pressure to establish transparent systems of operation of public services. A large number of international organization of great significance for BiH regularly proposes programs that are supposed to diminish the effects of corruption on the BiH development and create the system of as effective as possible public institutions. For instance, already in 2000, the World Bank has conditioned the award of USD 10 million, demanding from the government of Bosnia and Herzegovina to establish a state agency for standardization of pupils and students. Using the same principle, the formation of the coordinating board for high education was requested to coordinate economic subjects and high-education institutions. Just as in almost any other sector of the society, health reform is already advanced. In July 2000, the European Commission started, through the PHARE program, a project of BiH health reform support, through which it intends to strengthen the entity ministries of health in implementing the planned reform in this sector. Through the training of management of health institutions, doctors and other medical staff, the goal of this p roject is to transform public health from a system that currently partially depends on humanitarian assistance, to a self-sustainable

68 Marić, 2001, p. 63


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system, where a more effective use of available resources would make the health institutions much more effective.

18.3

41.3

29.3

7.8

0.9 2.5

05

1015202530354045

corruption can not be supressedthere will always be corruption, although it can be reduced to an extentcorruption can be significantly lowered in our societycorruption in BiH can be totally extinctnonedon't know/refuses

Chart 74 - In terms of corruption, what of the following opinions is the closes to yours?

Encouraging are the information of this TI study that say that most BiH citizens, or interviewees in this study, are optimistic about the future in the fight against corruption. More than three fourths of respondents think that the corruption may be reduced somewhat or significantly in our society, while 7.8% think that it can be fully exterminated. Only 18.3% respondents do not believe in the possibility to suppress corruption. Similar results show the diagnostic study of corruption in BiH, which was made by the World Bank, which discovers among the 700 respondents who were public officials a strong support to different reforms of public sector, including the reform of public service, transparency in financing of political parties, and involvement of the civil society in the Government’s decision making.69 Detailed analysis of all corruption perception research result in social institutions of BiH has shown a strong presence of corruption in our society, so the following steps may be proposed as the initial steps in fighting this negative phenomenon:

69 60% to 80% of the interviewees in the diagnostic study of corruption of the World Bank said that they would support the reforms in those areas. (Shkaratan, M.; 2001; p. 7)


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- Creating legal barriers to corruption by drafting laws on public service that would clearly define the authorities of public officials, both in the areas of health and education, and in other public sectors.

- Establishing a task force to analyze ethical causes of corruption in education and public health. This task force would work on the causes of the “moral crisis” in our society, the existence of which is evident in the result of the TI study.

- Establishing independent bodies at the level of state, entities and cantons for fighting corruption in public institutions.

- Mobilizing media to educate population on the consequences of widespread corruption in health and education.

When concretely asked what are the ways the Transparency International can get engaged in the problem of fighting corruption, the largest percentage of citizens 38.9% think that a pressure needs to be put at the government agencies to be more effective, but they also think that there should be a permanent monitoring that leads to control of the government agencies (23.8% respondens), and the corruption issue should be in the focus of attention all the time (14.3% respondents) and education of citizens (11.9 respondents).

38,9

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Pressure on the government to be more effective Control of the government agenciesPermanent pointing at corruption issue Education of citizensDo not know Refuses

Chart 75 - What are the ways in which TI BiH can do something?

The non-governmental sector, that retains the trust of most citizens and is seen as the least corrupt, for instance, Transparency International BiH, must also take a part in anti-corruption activities, such as:

- preparation of the advisory publications for the patients, students’ parents andstudents, with clearly described procedures of reporting corruption


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cases to the responsibleagencies. A similar publication has already been issued by the office of ombudsperson for human rights;

- regularly reports on the work of public institutions and level of corruption in them. Such reports would show the actual trend of development of corruption in BiH, and possibly indicate the successful and inefficient programs of fighting corruption.


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CONCLUSIONS AND A PROPOSED ACTION PLAN Summary of the situation in Bosnia and Herzegovina Fighting unemployment, in the first place, and corruption, in the second, is at the same time the only effective anti-poverty strategy. This study shows that poverty is itself a consequence of those two problems, and conditioned by them, what means that it can only be remedied by taking concrete actions in opening new jobs and introducing rule of law into the system. Those two elements are not unconnected. Any regulation of the grey market and bringing the economy into theregular flows, as well as the institution building and strengthening legal framework, will contribute to regaining confidence in this territory, and attract both national and international capital, what would open new jobs. In other words, fight against corruption is also very directly a fight against unemployment by creating an attractive economic environment. On the other hand, individual answers in the analysis of corruption show that it can be further divided into components, what makes it a lot easier to do something against it. Each component is a specific alley of corruption, through which it infiltrates the system and continues to create and spread a good soil for its growth. Therefore, the action plan is a schedule of cutting the channels and prevention of its penetration into the society, i.e. its extermination through the sanction of those places where it is already well rooted. Range and forms of expression of corruption in the society of Bosnia and Herzegovina undoubtedly point at the administrative or large scale corruption that infects all segments of the society, making all categories in the society, except a very narrow elite, feel its negative effects. The broadest group of citizens feels it through the increased cost of living (10 to 20 percents of additional costs, that are a direct result of bribe, unnatural monopolies, etc.); foreign debt, that becomes a burden because the regular revenues are not collectable; lack of foreign investment, for which we can freely say would amount to as many as 100% more if the corruption were under control; there is no the desired development fo private sector that would be more appropriate for more advanced countries in transition; the funds are spent on non-productive sectors, and particularly on the expensive and complex government apparatus, etc. Therefore, everybody suffers, and even those privileged will suffer in long term, and we can only unhappily take note of the young and perspective, well educated labor force leaving, and of a whole set of structural, far reaching changes.


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How recognizable is the pattern of corruption in public sector shows the following citation from the Transparency International Sourcebook 2000, that gives a global description, but locally implementable on BiH, as well as on all other countries in the region: "Most corruption-sensitive are the following segments: - public procurement - (re)zoning of land - collection of public revenues - government appointment - local authorities. The methods of corruption are also unbelievably similar, and include: - cronism, connections, family members and relatives; - political corruption, through donations to parties, particularly in the eve of

elections; - “incorporation” in the government contracts; - taking bribe and similar frauds"70 In the countries where the vertical system of accountability does not work, as it is the case in BiH, it is particularly important to establish a horizontal system, i.e. strengthen the institutions, and equip them for impartial and transparent operation. Although a whole myth has been developed around te word “transparency”, it means nothing else but exposing something to the daylight – in other words, public and open work. In terms of any sector financed by public revenues, i.e. tax paid by citizens, the maneuvering space for secret actions is very much narrowed, close to inexistence. Only private segments – individuals and companies – are entitled to secret life and hiding from the public eye in the extent that is the best for them. All other layers of the society, who live off work of somebody else, must act very responsibly towards that facts, and they need to be accountable for all funds spent, without any exception, and in due time, and to be ready to bear all legal sanctions for misuse of those assets. In order to ensure such order of things, it is necessary to start setting up a system of national integrity, integrity of horizontal responsibility, as the top guarantor of democracy in the society and rule of law. Such system is based on social values and publicity of work, and is made of eleven integrity pillars representing institutions in the state: 1. Legislative power 2. Executive power 3. Judiciary

70 J. Pope, Sourcebook, ibid.


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4. Supreme auditor 5. Omudsperson 6. Monitoring agencies (watchdogs) 7. Public services 8. Media 9. Associations of citizens – non-governmental organizations 10. Private sector 11. International community At the top of this shrine of integrity will be the social goal, i.e. the outcome of establishing four strong pillars: sustainable development, rule of lw, and quality of living. Corruption in transition With the transition of functions from the public (state) to the private sector, the practice of corruption also shifts, but its effects are present in the broader scope. The TI BiH’s survey demonstrated many irrationalities, myths and prejudices as well as a common acceptance of such misperceprions. Therefore corruption is not a cultural issue in the sense of a ‘domestic practice’. Likewise, lower salary levels are not the cause for corruption and the cure against it, but an irresponsible excuse of the corrupt governments, which camouflages their cleptocracy. Citizens of BiH are aware of the fact that the rule of law is not reserved only for the developed nations and do not trust the political humbugs that “this is not attainable here”. This removes the ultimate hurdle, which is corruption as a taboo issue, the main precondition for its efficient combating. Our areas are characterized by different forms of corruptive abuse of power to personal gain. However, many forms are not unknown to the developed western democracies. The following examples of irregularities have been discovered in the developed countries over the past several years that are very similar to the corruption in transition countries: - 'Sale’ of discretionary rights of the ministers - Percentage of public procurement of officials - Wellcoming companies with interest - Conflict of interest, when the politicians have their own companies - Travel abroad – misuse of per diems - Non-transparent financing of political parties - Taking brabe in exchange for tax breaks or interest - Spending to speed up the administrative procedure - Ghosts on payroll.


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A bit more peculiar are the developments similar to thise in the transition countries, so in addition to all said aboce, the following is equally typical of BiH: - Increased discretionary rights and monopoly position of institutions emerged

from socialism - Bureaucratic apparatus that multiplies itself for the purpose of obtaining illegal

gain - Biased legal system and privileged hierarchy (not applied equally to all) - Arbitrariness of decisions and autocracy - Massivity of the system and its complexity instead of clarity and

streightforwardness - Possible exceptions and “special treatment” - Privatization of state owned capital and regulation of process for the purpose of

taking future positions - Insecurity that surrounds the system (if there is one) – lack of legitimacy and

institutions in underdeveloped but overly complex administrative and political struyctures

- Organized crime in better shape than the state, that becomes weak and irrelevant - Pressure to go back to the old system caused by inexistence of adequate solutions - De-regulation that is not followed by consistet building of the new system. National integrity system All those developments indicate the urgent need to establish the above mentioned horizontal anti-corruption system. In shortest, the Table bellow describes the main roles of each pillar of social integrity.

SYSTEM PILLARS ROLE IN THE SOCIETY Parlament Fair elections Executive power Preventing conflict of interest Judiciary Independence, civil liberties Supreme Auditor Reporting to the public Ombudspersons Collecting public reports Monitoring agencies Implementation of laws Public services Public services’ code of ethics Media Access to information Citizens’ associations Freedom of speech Private sector Competition, public procurement rules International Community Mutual legal and judicial support

Table 20 – Pillars in the national integrity system

Only simoultaneous development of all functions may lead to proper development of society, meaning that all pillars and all institutions are equally important and


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that hey need to be established in parallel, because they need each other to work properly. This means that the gaps and weaknesses must be systematically identified, just as the opportunities for strengthening or upgrading each of the pillars within a coherent unity. If the system were to rely too much on individual pillars, for instance, of a ‘benevolent dictator’ who suits international community for achieving some “higher” political goals, but at the same time is corrupt and makes the country or his entity even poorer, than we have an unsustainable scenarion, that draws BiH back for several years, at the same time raising its debt. Such examples could be felt in practice until recentlyu. It is also wrong to rely on a small number of pillars that in short term may leave the impression of a working system ,for instance, through fair and democratic elections, while many other elements lead to long-term collaps of the state of law, what makes this pillar also unsustainable, i.e. it will show indications of colaps, no matter how stabile it may seam in the current stage. The national integrity system does not look at the pillars individually. Understanding their correlation and the degree of mutual cooperation is much more important. That is exactly why did TI BIH point at the need to strengthen institutional ties and responsibilities of, for instance, international community in BiH, which has such an important role. This is a wholistic approach to the system with combined effectiveness. In other words, any strengthening of the judiciary without implementing simultaneous measures in the police, prosecution, public attorney’s office, attorneyship, etc. will not bring any moves ahead. This is the problem BiH faced at the time of arrival of new government at the 2000 elections, since what time a progress has been made in professionalization of judiary, and even the police and other institutions of legal system, and the elected government was much more democratic and reform-oriented. However, the lack of the communication and cooperation between the parallel pillars has failed the system, and two years after the establishment of that government there has not been serious sanctioning of crime from any one previous period. This has confirmed the presumption of the long-term unsustainability of an uncoordinated system, because in the meantime, even the current government, having understood all gaps and shortages, has used the remaining corruption chanels for quick acquisition of illegal gains and rent from such system, or from the lack of such system. The first measure that needs to be implemented, which would result with a realistic action plan, is organizing a national integrity workshop at all vertical levels. This means that the state level authorities (including the unfairly neglected Brcko district, particularly in terms of fighting corruption) should be first to introduce in their practice gathering of all the mentioned institutions at heir level, and invite other, lower levels of government to get involved. An identical scenario will be


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needed at the level of the two entitites. After that, organization of similar workshops is expected in the Federation BiH, and they will certainly be organized in the Republika Srpska, and cantons, and each canton should invite all municipalities to get actively involved. Only in this way, by mobilizing all levels required for implementation of reforms, the concept of “ownership” will be possible to realize, or in other words, that the BiH authorities start fighting the plague of corruption themselves. The organization of the workshops should achieve the following:

- Individuals who live and work in the country know that country the best and understand its problems. There is no consultant who can offer better solutions because they do not understand neither the roots nor the practice of corruption that was caused by many socio-economic elements. In this, both representatives of authorities and all other pillars have equal right to participate in organization, and this particularly applies to associations of citizens; and

- the notion of integrity goes beyond ethnic or partisan division, and that is why it is important to include all relevant factors, however opportune it may seem not to invite them to cooperate. All this is for the purpose of achieving a national cocensus, which is a preconditions for successful implementation of any action plan that may follow from such workshops.

The two-day long workshops would deal in the plenary with the diagnostic of the situation, for which, as an opening material, may be used this analysis. After that, the expert discussion will continue in groups that will develop activity plan by spheres that are, onece again, similar to the structure drafted in this publication, and they would incorporate all pillars of the society. Diagnostics of the present situation will require preparation in advance of a list of laws that have been adopted, those that are in the process of adoption, and those that are yet to be adopted, divided in groups in line with the split into the working groups from the plenary. That is why it is necessary to make thorough preparations of such workshops, where the executive power will have the task to carry out a survey of the actual legislative situation. The group work will be organized around the lists of laws, and around other activities that are necessary for institution cooperation and strenghthening as well. All the measures need to be delivered in writing, and submitted to the plenary after the completion of all sessions. This will make it possible to organize a second round of workshops within a planned time, which is in turn linked to the agreed pace of work, for instance, in 12 to 18 months, where the progress will be identified at all given issues, and foundations will be prepared for new activities.


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Involving the civil initiatives and media in such gathering could lead to very efficient implementation monitoring, what is a key factor in terms of successfulness of the fight against corruption, because they may act as a quick and thorough corrective and point at the pillar where the stalling or obstruction come from. Institutionalization of this dialogue and the workshop will make possible the publicity of the whole event and mobilization of the nation around this important question, and security for all participants, i.e. any individual actions on critical positions of some pillar of the society.

Measueres in the fight against corruption

All analysis made so far point at a small number of really narrow areas that have far reaching importance in fighting corruption, so they must be the development priority. The TI BiH Study, in direct conversation with the citizens, or through indirect identification of sensitive points, calls on immediate resolution of the following segments of the state of law:

1. Improve accountability and transparency of public sector: public

finance management, clear budgets, prohibition of conflict of interst, depolitization of administration.

A significant move has been made here by establishing, most importantly, the institution of Treasury at all levels, as well as the institution of the Supreme Auditor, who chenks public expenditures on behalf of the parliament and submits the reports to elected representatives. At the same time, a new Public Revenue Administration has been organized, first in the Republika Srpska, and more recently in the Federation BiH, and this helped introduction of more order in the domain of fiscal r evenues, expand the basis and tax without exception a much broader mass of tax payers, what will contribute to a better budget policy. However, a lot remains to be done in the sphere of preventing conflict of interest, where appropriate laws have not been adopted yet, nor the bodies responsible for its implementation and supervision were founded. This law will efficiently put an end to conflicting functions, abuse of public position for private purposes, and reduce the participation of bribe in administration. Administratin must be professionalized, what requires both adoption of the appropriate law at all levels, and transparent employment and staff training policies, and establishmet nof the Public Administration Institute to deal with all relevant activities free from all political influences.

2. Increased competitivness of public sector through restriction of

administrative procedures, demonopolization, termination of individual benefits.


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Although a coordinated process of analyzing and removing administrative barrier for business and investment has started, its pace is still to slow, and the results neglectable. The recommendation of the Foreign Investment Advisory Service (FIAS) of the World Bank may be used as an excellent starting point for creating a good business environment, and any progress will be measured by increased inflow of foreign investment to BiH. The approach to implementation of this plan should be similar to the above described national integrity workshops, but, first of all, it requires precisely defined terms and their independent monitoring. Demonopolization is closely, but not exclusively, related to privatization. Privatization must be urgently completed, because right now, the largest expenditures are incurred by its delay, not by the sale price of the state owned capital. At the same time, it is very important to terminate the privileged position of the public utility companies, who are a large obstruction to business and creation of a better business environment, and consequently employment. This means that, for as long as there is a monopoly of telecommunic ation services and of power supply, their tarrifs and maximization of profits must be reduced to reasonable level, using even counter-market measures where necessary. In general, any exception, for instance, in tax, agricultural or export policies would be caunter productive at this stage of development, and one rule should be implemented in all segments of planning, which is, that the rules of the game must be the same for all players, without providing privileged treatment to anyone, because such privileges immediately lead to the policy of exceptions and non-transparent awarding of the exceptional status. For instance, the tax base needs to be broadened, and instead of providing incentives to any one industry, the tax rates should lineary go down, and the market should decide about competitive advantages.

3. Involving citizens: associations for controlling and fighting corruption, partnership with governments, organizing political parties, influence on the leaders.

So far, little attention was paid to the work of the non-governmental sector, monitoring agencies, etc., but also to the institution of the Ombudsperson, or even to the Supreme Auditor in terms of understanding their functions and benefit they bring to the society. Mutual cooperation of all listed pillars of the society is an imperative, in addition to already existing media, who need to be additionally trained in investigative journalism. All the mentioned institutions are corrective factors, and as such, have a lot of responsibilities in the social integrity system. They can also supervise political party financing, particularly in the election period, and prevent conflict of interest by monitoring the illegal symbiosis between


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the government and the institutions with the narrow, elitistic political interests. By their active and effective work, all the mentioned factors will have a positive effect at the work of the political leaderships, who need to understand that their long-term interest is at issue here. The Law on Publice Service should define the authorities of all public officials, including the sphere of social institutions.

4. A comprehensive law reform must lead to rationalization of courts and prosecution offices, and adoption of all laws that will contribute to their professionalization and effectiveness. The work of the police must also be subject to ongoing reforms, and in FBiH, coordination between different levels must be improved.

Modern laws, harmonized between the entities, are still missing. The most important among them are: the Code of Criminal Procedure, Law on Civil Procedure, Law on Administrative Procedure, Law on Litigations, Law on Administrative Disputes. The Criminal Code should be amended to include a separate criminal offense of corruption, by already existing and expanded segments and forms: (privatization, prosecution, judiciary, police, health, money laundering, phantom companies, executive power, etc.) As an interim solution, the Anti-Corruption Law needs to be adopted, firstly at theentity level, which will institutionalize the fight against corruption, using, whenever possible, the National Integrity System described above. In doing this, we need vertical harmonization of laws – at different levels of government, and horozontaly – achieve among the Entities and the Brcko District the largest possible level of harmony, which indicates compatibility of the system. At the same time, prevent introduction ofvarious legal practices (continental vs. anglo-saxon) that are often products of various donor’s and consultant’s approaches. All this, combined with the inherited legislation and mixture of laws from earlier and current periods introduces a lot of confusion, increase the non-transparency of the legal system and keeps it over-regulated. That is why, in addition to reviewing htelaws and modernizing them, the legislative framework also needs to be deregulated. The continued work on establishing the High Judiciary Council is expected to continue with appointment of professionals with higher level of integrity. Similarly, another important Law is the newly-proclimed Law on Legal Aid and Cooperation in Criminal Matters between the entities and the BRcko district. The work should also continue on setting up the Center for Trainign Judges and in Sarajevo and Banja Luka, for the purpose to provide continuous education of the judges, dependant on the process of appointment. In order to ensure financing of institutions of justice, it is necessary to adopt Laws on Budget of Courts and prosecutors, and we, prosecutors, would be one more grenade of the legal system.


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Although the action is a bit late in this area, BiH must implement different convention adopted at the level of the Council of Europe: a) the Convention on Money Launderring; b) Civil Law convention on Corruption; c) Criminal Law Convention on Corruption. The role of the Transparency International BiH TI BiH sees itself as an equal partner in the National Integrity System, as one of the bearers of the citizens’ association pillar. TI BiH is for the time being only non-governmental organization that is dealing with the matter of corruption, and its significance is even bigger since this is an original and independent national association. TI BiH has already made a preliminary analysis of the National Integrity System, that has placed BiH among the last countries in terms of rule of law, between Jordan, Nepal and Kazahstana below, and Bangladesh, Brazil and Bocwana above it. One of the future projects will be a full analysis of the System, that will officially classify BiH on this international ranking list, on the basis of unique methodology for the Transparency International. One should say that BiH has not yet been included in TI’s global corruption perception index that covers around one hundred countries, but only the countries where there are enough independent corruption perception studies developed, that are made by specialized international houses outside the borders of different countries. The mere fact that BiH is not included speaks about how uninteresting it is in international circles, particularly for in-flow of capital, what is the only category worse than being on the bottom of the list in terms of corruption. That is whi TI BiH wants to, in a partnership with all other pillars of social integrity, which certainly include the legislative and executive power, participate in strenghthening the system on partnership grounds, and as a well intendend collective factor. TI BiH agrees with the suggestions of the public that indicate that there are some pressures made at the government agencies, continuous control of them, permanent pointing out and building awareness of the corruption problem, and education of the public. The Association is also satisfied by the assessment of its work, that has been very positive, taking into account that there has been only one year since its establishment in BiH. TI BiH feels sufficiently ready and organized to accede the integrity system and accept formally awarded or socially caused role of an independent monitor of the implementation of the activities in fighting corruption, and is willing to work on it


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conscientiously. Through its unique global network and connections with other branches, whether in the Balkans region or elsewhere in theworld, it will place t disposal the best implemented legislative or institutional practices that are applicable to BiH. Also, through a continous internal monitoring based on the principles of this rsearch and study, it will follow any progress in fighting crime, and inform thereabout the general public, sticking to its role in the society and not interfering with the competencies of other institutions. This Study that you have before you is only the first one of a series, and each new study will be compared to this, basic one, and using the methodology specified here, so it will be an instrument to emasure progress made by the government in fighting corruption, but also establishing the institutions in accordance with the National Integrity System. This work will be repeated periodically, and it will be quantitative, and hopefully, qualitative contribution of civil society to establishment of a firm system and rule of law.

In Banja Luka, Mostar and Sarajevo, June 2002


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-- Karadjov V. Transparency International Bulgaria: Controlling Corruption in Procurement – Monitoring Privatization of Telecommunication Company - Bulgaria, The Corruption Fighters' Toolkit – Civil society experiences and emerging strategies, Transparency International, Berlin, October 2001. -- Kregar J.: Corruption, www.ijf.hr/hr/pojmovnik/Corruption.htm, Pravni fakultet, Zagreb -- Criminal Code of the Federation BiH, (“Official Gazette of the Federation BiH No. 43/98), -- Criminal code of the Republika Srpska, No. 22/2000 -- Lukić R.: Političke stranke, Beocity, 1975. -- Makinson D. (ed.): International Social Science Journal, No. 164, Blackwell Publishers & UNESCO, London, 2000. -- Marić D., article titled: Money Stronger than Moral, Business Magazine, Sarajevo, 2001. -- International Crisis Group: Still Closed for Business – Instable Economy of BiH, Brussels/Sarajevo, 2001. -- International Crisis Group: Why nobody wants to invest in BiH?, Brussels/Sarajevo, 1999. -- Ministry of Foreign Trade and Economic Relations of BiH - MFTER BiH: Anti – Corruption Action Plan, MVTEO BiH, Sarajevo, 2000. -- Petrović B.: O korupciji i mjerama za njeno suzbijanje, Pravni fakultet Unirvezitet u Sarajevu-Pravni savjetnik -- Pobrić N.: Ustavno pravo, Slovo, Mostar, 2000. -- Pope J.: TI –Source book 2000 – Confronting Corruption: The Elements of a National Integrity System, Transparency International, Berlin, 2000. -- Sadiković Ć.: Politički sistem, Studentska štamparija Univerziteta, Sarajevo, 1998. -- Sadiković Ć.: Politički sistem, (second edition), Pravni fakultet, Sarajevo, 2000.


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-- Foreign Investment Advisory Service-FIAS: Bosna i Hercegovina – Commercial Legal Framework and Administrative Barriers to Investment, Washington/Sarajevo, 2001 . -- Council of Ministers of BiH, FBiH and Ministry of Justice of RS: Anti-korupciona strategija za BiH, March 2002. -- Smith D.: State of the World Atlas, Penguin, London, 1999. -- World Bank: Diagnostic study of corruption in BiH, prepared at request of the BiH Government, June-September 2000, Washington/Sarajevo, 2001. -- World Bank: Business Environment Adjustment Credit (BAC) documentation (BAC), Washington/Sarajevo, 2002. -- Transparency International Bosna i Hercegovina: Corruption Perception Study in BH – data base, February-March 2002, Banja Luka/Sarajevo, 2002. -- Transparency International Sekretarijat: Transparency Internatonal Corruption Perception Index, Annual TI report for 2001, Berlin, 2002. -- Transparency Internatonal BiH: Transparency International Bosna i Hercegovina, (brochure issued when opening the branch in the country), February 2001, Banja Luka, 2001. -- Transparency International Moldova: Corruption and Quality of Governance - The Case of Moldova, Chisinau, 2001. -- Tomaš R.: Analysis of the Grey Economy in Republika Srpska, United Nations Department of Economic and Social Affairs, Banja Luka, March 1998. -- Udovičić Z., Jusić T., Halilović M. i Udovičić R. i istraživački tim Media plan instituta: Mediji na prekretnici: medijska slika BiH, Media Online, Sarajevo, 2001 . -- United Nations Development Programme: Vulnerability Trends and Perceptions – Suspended Transition , January 2001. -- United Nations Development Programme UNDP: Human Security in South-East Europe, United Nations Development Programme, New York, 1999. -- United Nations Development Programme UNDP: National Human Development Report for Armenia United Nations Development Programme, New York, 1997.


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-- United Nations Development Programme UNDP: Human Development Report for Central and Eastern Europe and the CIS 1999, United Nations Development Programme, New York, 1999. -- United Nations Development Programme UNDP: National Human Development Report for Russian Federation, United Nations Development Programme, New York, 1997. -- United Nations Development Programme UNDP: National Human Development Report for Bulgaria, United Nations Development Programme, New York,1997. -- United Nations Development Programme UNDP: National Human Development Report for Bulgaria, United Nations Development Programme, New York, 1998. -- UNDP:, Early Warning System, UNDP, Sarajevo, 2000; 2001. -- USAID: NGO Sustainability Index Report, USAID, Washington, 2000. -- Vidović D. i Divjak B.: Bosnia and Herzegovina, Regional Corruption Assessement Report (Bosna i Hercegovina), Southeast European Legal Development Initiative-SELDI, Sofia, 2002 -- Visković N.: Država i pravo, Studentska štamparija Univerziteta , Sarajevo,1996. -- Vukotić V. i Maksimović S.: Sistem i Corruption, IDN, Beocity, 2000. -- The Wall Street Journal: Central European Economic Review , November 1999.g, Washington, 1999. -- Wesberry J.: Preventing Fraud in Procurement and Contracting, Improving Governance and Controlling Corruption, World Bank Institute, Washington, 2001. -- Web page of the Poverty Reduction Strategy in BiH: www.prsp.info -- Web page of the PHARE program of the European Union for health reform: www.phare-ba.org -- Web page of the SOROS Institute for Bosnia and Herzegovina: www.soros.org.ba -- Web page of USAID-a: www.usaid.org

http://www.prsp.info/

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