CIGI Research Blog

Bosnia and Herzegovina(BiH) is one of the most corrupt states in the world, despite the cessation of conflict over a decade ago.   This is in spite of extensive efforts by the international community to reform state institutions and fight worsening corruption levels in BiH, where efforts have been effectively undermined by the ruling elites, who want to maintain the status quo, which serves their self-interests.   On the other hand, the international community has often been blamed for allowing corrupt elites to continue with their illegal self-interest activities of siphoning-off state resources and entrenching their hold on power.   To sum up: duality of power, perpetuated by the international community, eliminated responsibility and accountability from both the elected leadership and the international community from running some of the state affairs of the country.   Moreover, lack of clarity relating to reform priorities, the role of donor agencies, and development aid as well as their exit strategies, following the cessation of hostilities, only led to more corruptive behaviour.  

In his paper, Boris argues that following the end of hostilities, over a decade ago, billions of dollars and extensive analysis in humanitarian and development assistance have poured into BiH. However, this has had little impact on reducing corruption in government, given the ineffective institutions that exist.   It was no wonder that the country was ranked 93 ^rd in Transparency International’s 2006 Corruption Perception Index, which ranks nations in terms of the extent of perceived corruption that exists in over 163 states around the world.

Boris stresses that, although good laws exist on the statute books, inadequate and inconsistent implementation mechanisms have led to an increase in public mistrust of state institutions and has subsequently led to decreased investor confidence in the state’s ability to regulate bureaucracy and strengthen the accountability and transparency mechanisms in government.   Based on a number of corruption surveys, the author points out that corruption is particularly endemic at the local government administration level since most interactions between the state’s citizens and government occur at this level.   Media reports of mismanagement of public companies, misappropriation of public funds and irregularities in the privatization process have been blamed on local government officials.   However, it is often thought that corruptive behaviour found in local government administrations could only have taken place with the consent and direct engagement of high-ranking central government officials.

Furthermore, Boris argues that corrupt behaviour by state officials and the endemic patronage systems found in government has often been linked to political party affiliation.   Local government representatives willingly engage in corrupt activities, given the protection they receive from higher ranking officials from their political parties.   Thus, public perception of political parties in the country is considerably negative.   Often enough, political parties have been associated with cronyism, fraud and theft, affecting the integrity of not only the legislative and executive branches of government but also the law enforcement agencies.

According to Boris, the public sector has largely been ineffective in addressing the governance issues relating to anti-corruption efforts.   So far, the three anti-corruption efforts, two of which have been organized by the international community, have failed to make a dent in corruptive behaviour in government.   A number of reasons have been given as to why this has been the case.   These include a lack of political will by government officials; lack of institutional commitment; and close collaboration between corrupt state officials and anti-corruption commission officials; thereby undermining the whole process.  

While the corruption proceeds unabated, it continues to take its toll on the country’s economic development strategy.   In the past, endemic proportions of corruption have discouraged foreign investors from investing in the country.   Foreign investors have voiced their opposition and frustration in dealing with a bureaucracy that continuously extorts money from them on every business transaction.   Fast food outlets, such as McDonald’s have been reluctant to invest in the country.   It is no surprise that no significant trade business or multinational manufacturing companies have invested in the country thus far.   In 2005, BiH had only managed to attract foreign direct investment amounting to EUR 239 million, the lowest in the Balkan region for the year.   This discouraging news does little to boost the government’s resolve to reduce unemployment, currently put at 40% and the formalization of the informal economy, estimated to encompass approximately 50% of all economic activity in the country.

Apart from its negative impact on economic development, corruption has in the past helped fuel conflict.   Boris points out that the actual cause of the conflict in the former Yugoslavia and the Bosnian drive for independence from Belgrade could be blamed on wartime parties aiming to fund their military and political activities.   The former Yugoslavia represented the largest redistributing mechanism of national wealth - which may have prompted the wartime party leaders to seek greater control of these boundaries.   This is largely due to the fact that most of these autonomous republics, prior to the break up of Yugoslavia , were handicapped by their limited industrial and manufacturing capacity and were largely dependent on trades of goods and services, reaching in some cases up to 85% of GDP.   Thus, a firm grip over borders helped facilitate their control over the trading that transpired over their borders, which in turn helped direct all proceeds from new levies, duties and fees, not counting bribes at state borders, to state coffers and individual bank accounts overseas.

For a good number of years, the nationalist parties that led the Bosnian independence drive from Belgrade entrenched their hold on power, while strengthening their hold on economic flows, bureaucratic mechanisms and public revenue systems.   These political party officials effectively placed party cronies to manage state enterprises and customs offices across the country - which ensured a systematic flow of state resources in government control and, more disturbingly, donor aid.   Boris points out that the international presence in the country, following the cessation of hostilities, was marred by a weak administration, whose powers were vested within the office of the High Representative.   The financial aid donated, amounting to approximately $5.1 billion was largely dispersed with little supervision and monitoring scrutiny.   This did little to improve the lives of ordinary citizens, who became increasingly disillusioned about the whole process.

However, much to the dismay of ordinary Bosnians, there have been a number of media reports that have criticized the international community and particularly, donor agencies, over their disbursement and procurement procedures.   Donor assistance during the country’s reconstruction period was marred by a high turnover rate of international consultants plus a lack of transparency and accountability in the disbursement of aid.   Moreover, immeasurable discretionary powers of a number of international donor agencies have been condemned - due to the leniency given to their staff to abuse institutional arrangements to their personal benefit on a number of occasions.  

Boris concludes his analyses of the problems surrounding corruption during the reconstruction period in BiH by stressing that the dual responsibility shared by national governments and the international community, particularly the Office of the High Representative, have perpetuated the endemic nature of corruption in the country.   They have both refused to shoulder the blame for the failures of the anti-corruption initiative while quickly taking credit for the few instances of successes.   This has done little to boost the credibility of the whole process among the general population.