Month: October 2012
A costly enterprise
Insider is a popular Serbian investigative documentary TV programme produced by brave young journalists committed to seeking the truth. Over the past several years, Insider has managed to discover numerous unlawful activities, including serious instances of organized crime and high-level corruption, many of which involve prominent domestic politicians. In some cases Insider‘s revelations led to police investigations, but few have resulted in official verdicts due to the inefficiency of Serbia’s judicial system. After a series on criminal activities of Serbian football hooligans, the interior ministry immediately gave Brankica Stanković, the producer of Insider, 24/7 police protection.
The latest serial by Insider, called “Patriotic Pillage,” deals with financial damage to Serbia’s budget as a consequence of its Kosovo policy. In four episodes broadcast so far, viewers have seen how Serbia is losing millions of euros through tax evasion and other fraud. Insider has brought to light evidence of what was already long suspected.
It began in 2005, when the Serbian government under then prime minister Vojislav Koštunica exempted domestic companies from paying value-added tax for the commodities sold on the territory of Kosovo. Officially, the intention was to ease the life of Kosovo Serbs by allowing them to buy goods at lower prices. In practice, the government’s decision has given rise to enormous malversations.
The way it works is simple. A company from Serbia receives a purchase order from its partner company in Kosovo. Sometimes, the owner of the company based in Serbia would open another company in Kosovo, which then orders commodities from the original company only to secure the documents needed for VAT deduction. That way one is virtually selling one’s own goods to oneself. The company’s truck is then dispatched to a customs checkpoint at the boundary/border with Kosovo, where it gets the certificate necessary for exemption from VAT. But instead of proceeding to Kosovo, the truck turns back to Serbia and the goods supposed to be sold in Kosovo at a lower price are eventually sold in Serbia at the full price. The company thus appropriates the amount of the VAT as hidden extra profit.
In some cases, though, a portion of the load is smuggled into the northern – Serb-dominated – part of Kosovo via so-called “alternative roads.” The Insider team managed to covertly film transshipment from bigger trucks to smaller ones, as well as a Serbian police vehicle escorting a convoy of trucks down an alternative route all the way to the boundary/border. In cooperation with their Albanian counterparts, Serb businessmen from the North have also developed a smuggling network through which goods from Serbia are being smuggled into the territory south of the Ibar river, which is under Priština’s authority.
Another form of malversation concerns Serbia’s budget expenditure for Kosovo. The Insider team has calculated that since Serbia lost sovereignty over Kosovo in 1999, the country has, on average, been spending on its former province around 650 thousand euros per day. This is a large amount of money in Serbian terms: over 230 million euros per year. Rather than being transferred to people in need, the bulk of this money has ended up in private pockets of politically favored individuals. Many of them are receiving salaries from both Belgrade and Priština, and some do not even live in Kosovo anymore.
Most political leaders of the Serbs from northern Kosovo – particularly members of Koštunica’s Democratic Party of Serbia (DSS) – have repeatedly refused Insider‘s request to tell their version of the story. Instead, they continue to condemn the Insider team as “anti-Serb propagandists who only want to divide Serbs, pitting them against one another.” Such rhetoric is strikingly reminiscent of how the Milošević regime demonized its political opponents in the 1990s.
Members of the Insider team were not allowed to attend a recent joint session of Serb delegates from northern Kosovo municipalities, even though it was formally open to the public. A group of men, who appeared to be engaged as private security personnel, prevented Insider‘s journalist from entering the building where the meeting was held. Journalists from other media were allowed in. The only politician who has meanwhile apologized to the Insider team for the incident is Krstimir Pantić, the Mayor of Northern Mitrovica.
Unlike Serb politicians from northern Kosovo, some former Serbian government officials agreed to appear in the series. While they did not try to deny the evidence presented to them – since it entirely consists of official documents issued by Serbian authorities – their reaction generally came down to a shrug. They claimed they had no instruments to control how money was used once it had reached Serb-governed institutions in Kosovo.
In response to the “Patriotic Pillage,” the government in Belgrade has announced that those receiving double salaries – i.e. from both Belgrade and Priština – will soon have relinquish one of them. Deputy prime minister Aleksandar Vučić, who is also the coordinator of all security and intelligence services, has promised a thorough investigation into the practices discovered by Insider. But there are loopholes in the legislation that may make legal what would normally be considered illegal. People are generally inclined to believe those loopholes were created deliberately, which points to their deep mistrust of the country’s institutions.
Whatever the outcome, the “Patriotic Pillage” serial has demonstrated that excessive “patriotism” can sometimes prove a costly enterprise. The price of not recognizing the Kosovo reality is not only political but also economic.
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To concert is a virtue
The weekend allowed me to look at a number of interesting reports on the Balkans. The common thread of the two I cite below is the recognition that the issues still plaguing Albania and Bosnia require concerted regional and international approaches. It is often difficult to take concerted action, but when we do we tend to get results that are worth the effort.
1. Antoinette Primatarova and Johanna Deimel, Bridge Over Troubled Waters? The Role of the Internationals in Albania. Unsparing, they fault the internationals for failing to see the negative implications of 2008 constitutional amendments that ushered in a retrograde period in Albania’s young democracy. But they see hope in the EU commission’s advocacy of 12 key priorities, now embraced by the Albanian government and opposition and supported by the U.S.
2. Kurt Bassuener and Bodo Weber, Croatian and Serbian Policy in Bosnia-Herzegovina: Help or Hindrance? Equally unsparing of past mistakes that allowed Croatia and Serbia to favor their conationals within Bosnia and thereby undermine the country’s unity, they want to see a more concerted U.S., EU and Turkish effort to turn Zagreb and Belgrade in the direction of supporting the Bosnian state. I’m not seeing this one posted yet on the Democratization Policy Council’s website, but I’ll come back and install a link when it appears there (and someone tells me so).
I haven’t seen a recent report on the international mistakes in Kosovo and the importance of concerted action there to overcome remaining problems between Belgrade and Pristina, but of course one could be written. We saw in September the completion of the internationally imposed agenda for the four and a half year period of Kosovo’s “supervised independence.” Last week, with the meeting between Prime Ministers Thaci and Dacic, we witnessed how effective concerted action by the U.S. and EU can be in pushing the remaining issues to the political level, even if there is good reason to be concerned with the lack of implmentation of earlier “technical” agreements.
Of course none of this figured in this week’s presidential debate, but it is relevant: collaboration with the EU enables the U.S. to help resolve Balkans problems on the cheap, committing little more than the diplomatic and political weight of its oversized missions in Belgrade, Pristina, Sarajevo and Zagreb plus the occasional phone call from Hillary Clinton or one of her minions. The EU provides the bulk of the troops, money and “European perspective” required to rescue countries that 20 years ago were basket cases. Sharing burdens is a lot better than carrying them on our own, especially if our vital interests are not at stake. Which they are not in the Balkans.
After I’d written the text above, the State Department announced yesterday that Lady Ashton, the European Union’s High Representative (foreign minister, more or less) and Hillary Clinton will travel together to Bosnia and Herzegovina, Serbia and Kosovo October 29-November 1. This is very much the right approach. If they can concert their messages as well as their travel plans, there is nothing really important in the Balkans that can’t be solved. That includes the political mess in Bosnia as well as the difficult relations between Belgrade and Pristina.
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From silos to networks
Who are peacebuilders? What do they do? Where do they come from? Do they work together, and if so, how? These are the questions that Peacebuilding 2.0: Mapping the Boundaries of an Expanding Field seeks to answer, according to Melanie Greenburg of the Alliance for Peacebuilding. The report, developed by the Alliance with help from the Joan B. Kroc Institute of Peace and Justice and the United States Institute of Peace, will be released this summer. On Friday, representatives of these groups launched the report with a discussion of its highlights.
We have entered a new era of peacebuilding, according to Necla Tschirgi of the Kroc Institute. Over the past decade the world has experienced prolonged conflict and militarization. By some measures, people may be less violent, but tensions have flared over environmental, food and energy issues. The funding for organizations like the United States Institute of Peace is at risk and more and more of the U.S.’s international aid is coming under the Department of Defense’s purview.
The Peacebuilding Mapping Project (PMP) administered two surveys for Peacebuilding 2.0. The first, given to Alliance for Peacebuilding members, received 44 responses and showed that peacebuilders work in 153 different countries in pre-conflict, conflict mediation, and post-conflict. Roughly 90% of the organizations surveyed focus on basic peacebuilding processes, like building trust and social cohesion, and they put these processes to work in a variety of areas, including women’s issues, youth issues, and development. Despite such a wide mandate, 60% of the organizations operate on a budget of less than $500,000 and 25% on a budget of less than $50,000.
The PMP gave the second survey to a wider range of organizations working in many different fields and 75 responded. Fifteen replied that they do not identify directly as peacebuilders, but eleven of these fifteen report that they have peacebuilding projects. Many of the organizations in this survey tend to be older and better endowed. Few have mission statements that include conflict-related language.
There are several important implications of this data. First, there are gaps in our knowledge. There is no clearly identifiable shared body of methodologies or principles. It is not clear how peacebuilding or peacebuilding-related organizations network and work together. Second, changes must be made to improve future peacebuilding efforts. Practitioners, academics, and politicians must recognize the wide range of organizations that are involved in peacebuilding and use a “conflict sensitive lens” for work related to conflict. The field must become more cohesive so that different organizations can easily collaborate.
A panel including Hrach Gregorian of Institute of World Affairs, Joceyln Kelly of Harvard Humanitarian Initiative, Sharon Morris of Mercy Corps, John Agoglia of IDS International, and Paul Williams of Public International Law and Policy Group discussed the implications of Peacebuilding 2.0 in their own professional contexts. Morris explained that Mercy Corps projects are most successful where peacebuilding and development work are combined, but collaboration is difficult because the two groups of practitioners do not know how to talk to each other. Agoglia explained the need for greater cooperation between the Department of Defense and peacebuilding organizations. Williams agreed that communication is a problem and added that in conflict situations, there are often a number of organizations interested in helping, but officials are not able to coordinate so many players. Kelly concluded that transitioning from “silos” to “networks” is essential in order to address all of the problems people face in conflict zones.
Gregorian said that in the 80’s, people were wondering if peacebuilding was even a field. Today we are discussing the established field’s boundaries. This shows how far peacebuilding has come, but also shows what we need to work on in the future.
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Good news
It wasn’t just excess wonkiness that made me tweet about the World Bank’s “Doing Business” report website. It was this tidbit I found there: Kosovo jumped up 28 places in the rankings (from 126 to 98). Big improvements were in protecting investors, starting a business and dealing with construction permits. Serbia also saw a jump of 9 places in the rankings (from 95 to 86), with most of the improvement in starting a business and resolving insolvency.
I did my own unscientific survey last summer of a few entrepreneurs I met at a barbecue in Pristina. They all reported that it was easy to open a business and to operate one without serious problems. That’s better than I can say for my experience in DC.
This, to me, is very good news. It takes concerted effort to jump ahead the way Kosovo and Serbia have done. It also gets harder as you move up the rankings, for obvious reasons. I won’t be surprised if progress is uneven. The important thing is that both continue in the right direction.
Why is this important? Above all because it is the opening and growth of small businesses that will create stronger economies throughout the Balkans and raise the standard of living. Both Serbia and Kosovo have seen strong growth in recent years, but both appear to be slowing now due to the financial crisis plaguing all of Europe. Kosovo uses the euro as its currency, which in my way of thinking is a big plus since it eliminates monetary policy issues that are difficult to manage. But as a result, it cannot devalue to improve its trade position, as Serbia can.
The improvement in business climate is also an important indication that governance is improving. I’ll hope to see those improvements reflected in Transparency International’s Corruption Perceptions Index in the future. Neither Kosovo nor Serbia can be proud of their most recent (2010/11) scores there. In the long run, it is the willingness, or not, of Serbia and Kosovo to adopt the needed reforms to improve business conditions and governance that will determine whether and when they are ready to enter the European Union.
Of course there are other factors, not least the willingness of Belgrade and Pristina to normalize their relations and resolve the many outstanding issues between them. The meeting last week of the two prime ministers was a step in the right direction. Later, Serbian Prime Minister Dačić said that the issues to be discussed with Pristina
include missing persons, rights of the Serbs in northern and southern Kosovo, protection of the cultural and church heritage and property and privatization
This looks to me a good deal like former President Tadić’s four points. from early this year, which represented an effort to greatly reduce Serbia’s “asks” of Kosovo.
The big missing item is partition, which Dačić will more than likely raise again in due course. He is deeply invested in the idea. Neither Dačić nor Tadić has been prepared to put recognition of Kosovo’s sovereignty and territorial integrity as well as establishment of diplomatic relations on the table. Those things will come at the end of the process, not at the beginning, but come they must. The EU and U.S. will need to provide the leverage required to make Serbia swallow pills Belgrade has made much more bitter by its diehard resistance.
In the meanwhile, let’s celebrate what there is to celebrate: two countries that are moving, however haltingly, in the right direction. I wish I could say as much for my other friends in the Balkans, in particular Bosnia.
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A sad commentary, even if my man won
It’s hard to write more than 140-character tweets about last night’s “foreign policy” debate. Governor Romney lined up behind President Obama on almost all current policy issues. He even liked foreign assistance, gender equality, democracy promotion and diplomatic efforts to end Iran’s progress toward nuclear [weapons?] capability. Not to mention their agreement on drones, sanctions, withdrawal from Afghanistan and support for Israel. And they agreed that America’s strength abroad depends on the health of its economy and educational system at home. We’ve got a bipartisan foreign policy, whether we like it or not.
The real problem is that the Ryan budget, which Romney supports, is not aligned with what the Governor advocated. This is particularly clear on foreign aid, which the Ryan budget guts. I realize this is a wonkish concern, but it is also a real one. Priorities not reflected in budget proposals are not real priorities. We can be sure that a Romney presidency would not do what Romney says, because he would not fund it. He would prefer a massive military buildup, on top of the massive military buildup of the past ten years.
The disagreements last night were almost entirely about past events. Romney wanted to leave many more troops in Iraq than Obama and blames the president for the failure to reach a status of forces agreement. The fact that the Iraqis were not willing to bend on legal jurisdiction over the Americans remaining went unmentioned. By the way: the issue is not “immunity,” as most of the press would have it. American troops remain liable in U.S. courts for criminal acts committed abroad, even if the “receiving country” agrees to waive its jurisdiction. The administration resisted tightening Iran sanctions, until of course it no longer resisted because it thought the timing right.
If you want to check the facts, the Washington Post offers a good rundown. I don’t think there was much advantage or disadvantage in the errors, though it is a bit troubling that Romney does not know that Syria does not border Iran, which has ample routes “to the sea.” I wish Obama had not exaggerated the increase in exports to China. The numbers are pretty good without embellishment.
I agree with Peter Beinart: George W. Bush won this debate. Both Obama and Romney defined American foreign policy purely in military terms. This is a serious misreading of the challenges we face as well as the instruments needed to meet them. While pointing repeatedly to problems like Mali’s Islamist insurgency, Iran’s nuclear program, Pakistan’s failing state and Egypt’s economic deterioration, neither talked about the civilian instruments required to resolve them. Diplomacy, foreign aid, international law enforcement, multilateral financial and other institutions simply don’t register on the presidential level, even with my preferred candidate. That itself is a sad commentary on what we call foreign policy, bipartisan or not.
PS: Here is a Voice of America piece I participated in before the debate:
PPS: And here is the piece KSA2 (an English-language Saudi station) did the night of the election:
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Not a good idea
Governor Romney will no doubt repeat tonight that he will label China a currency manipulator on his first day in office. This is what he won’t say:
1. The Chinese have already revalued their currency a good bit (yuan/dollar), much of it during the Obama administration:
2. The designation of currency manipulator is one provided for in U.S. law, not in international agreements. Labelling China one would only require that the U.S. government negotiate with Beijing about their sin, something it has been doing for years (with the results portrayed above). There is no other legal consequence in domestic legislation. Washington could file a complaint with the International Monetary Fund or the World Trade Organization, but the consequences of doing that are unclear. Neither organization has tried in the past to provide a remedy for currency manipulation.
3. The Brazilians have been accusing the U.S. of manipulating its currency downwards (through the Fed’s “quantitative easing,” which injects dollars into the world economy), in order to compete more effectively. Any success we have in pursuing a remedy against China will pave the way for a Brazilian complaint against the U.S.
4. The most likely immediate Chinese reaction would be to halt the appreciation of the renminbi in preparation for a difficult negotiation with Washington. This would certainly harm U.S. exports. The Chinese could also retaliate in other ways: not buying U.S. bonds or blocking U.S. investment.
Bottom line: we have a lot more to lose than gain from a rhetorically stirring but ineffectual declaration that China is a currency manipulator. Maybe that’s why the Bush and Obama administrations have both passed on the option Romney is pushing?
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