[Joint House and Senate Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
COMBATTING CORRUPTION IN
BOSNIA AND HERZEGOVINA
=======================================================================
HEARING
BEFORE THE
COMMISSION ON SECURITY AND COOPERATION IN EUROPE
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
MAY 25, 2016
__________
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Commission on Security and Cooperation in Europe
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COMMISSION ON SECURITY AND COOPERATION IN EUROPE
LEGISLATIVE BRANCH COMMISSIONERS
HOUSE
SENATE
CHRISTOPHER H. SMITH, New Jersey, ROGER F. WICKER, Mississippi,
Chairman Co-Chairman
ALCEE L. HASTINGS, Florida BENJAMIN L. CARDIN, Maryland
ROBERT B. ADERHOLT, Alabama JOHN BOOZMAN, Arkansas
MICHAEL C. BURGESS, Texas RICHARD BURR, North Carolina
STEVE COHEN, Tennessee JEANNE SHAHEEN, New Hampshire
ALAN GRAYSON, Florida TOM UDALL, New Mexico
RANDY HULTGREN, Illinois SHELDON WHITEHOUSE, Rhode Island
JOSEPH R. PITTS, Pennsylvania
LOUISE McINTOSH SLAUGHTER,
New York
EXECUTIVE BRANCH COMMISSIONERS
Vacant, Department of State
Vacant, Department of Commerce
Vacant, Department of Defense
[ii]
COMBATTING CORRUPTION IN
BOSNIA AND HERZEGOVINA
----------
May 25, 2016
COMMISSIONERS
Page
Hon. Roger F. Wicker, Co-Chairman, Commission on Security and
Cooperation in Europe.......................................... 1
Hon. Christopher H. Smith, Chairman, Commission on Security and
Cooperation in Europe.......................................... 12
Hon. Jeanne Shaheen, Commissioner, Commission on Security and
Cooperation in Europe.......................................... 19
Hon. Robert Aderholt, Commissioner, Commission on Security and
Cooperation in Europe.......................................... 21
MEMBER
Hon. Scott Perry, Representative from the State of Pennsylvania.. 15
WITNESSES
Amb. Jonathan M. Moore, Head of the OSCE Mission to Bosnia and
Herzegovina.................................................... 3
Thomas O. Melia, Assistant Administrator, Bureau for Europe and
Eurasia, USAID................................................. 4
Srdjan Blagovcanin, Chairman of the Board of Directors of
Transparency International, Bosnia and Herzegovina............. 7
Dr. Valery Perry, Sarajevo-based Independent Researcher and
Consultant and Senior Associate at the Democratization Policy
Council........................................................ 9
[iii]
APPENDICES
Prepared statement of Hon. Roger F. Wicker....................... 30
Prepared statement of Hon. Christopher H. Smith.................. 31
Prepared statement of Hon. Benjamin L. Cardin.................... 32
Prepared statement of Amb. Jonathan M. Moore..................... 33
Prepared statement of Thomas O. Melia............................ 37
Prepared statement of Srdjan Blagovcanin......................... 41
Prepared statement of Dr. Valery Perry........................... 43
MATERIAL FOR THE RECORD
Submission for the record from Srdjan Blagovcanin................ 46
Response for the record from Thomas O. Melia..................... 76
COMBATTING CORRUPTION IN
BOSNIA AND HERZEGOVINA
----------
May 25, 2016
Commission on Security and Cooperation in Europe
Washington, DC
The hearing was held at 2 p.m. in Senate Room 212-10,
Capitol Visitor Center, Washington, DC, Hon. Roger F. Wicker,
Co-Chairman, Commission on Security and Cooperation in Europe,
presiding.
Commissioners present: Hon. Roger F. Wicker, Co-Chairman,
Commission on Security and Cooperation in Europe; Hon.
Christopher H. Smith, Chairman, Commission on Security and
Cooperation in Europe; Hon. Jeanne Shaheen, Commissioner,
Commission on Security and Cooperation in Europe; and Hon.
Robert Aderholt, Commissioner, Commission on Security and
Cooperation in Europe.
Member present: Hon. Scott Perry, Representative from the
State of Pennsylvania.
Witnesses present: Amb. Jonathan M. Moore, Head of the OSCE
Mission to Bosnia and Herzegovina; Thomas O. Melia, Assistant
Administrator, Bureau for Europe and Eurasia, USAID; Srdjan
Blagovcanin, Chairman of the Board of Directors of Transparency
International, Bosnia and Herzegovina; and Dr. Valery Perry,
Sarajevo-based Independent Researcher and Consultant and Senior
Associate at the Democratization Policy Council.
HON. ROGER F. WICKER, CO-CHAIRMAN, COMMISSION ON SECURITY AND
COOPERATION IN EUROPE
Mr. Wicker. Welcome. Welcome all. I am United States
Senator Roger Wicker, and I'm happy to convene this hearing on
the fight against corruption in Bosnia and Herzegovina.
Chairman Smith and I have visited Sarajevo together in the
past, and I appreciate his continued leadership toward ensuring
a stable and prosperous country.
The United States, as we all know, cares deeply about the
sovereignty, stability, recovery, and future prosperity of
Bosnia and Herzegovina. Since my first visit in 1995, the
country has made tremendous progress. However, more needs to be
done by the international community and Bosnian leaders to
sustain these advancements.
Here in Congress, my fellow commissioners, Senator Jeanne
Shaheen and I were among those working to nurture private-
sector entrepreneurship in Bosnia and Herzegovina. Last July,
we participated in a presidential delegation to commemorate
Srebrenica's 20th anniversary. We heard from Bosnians eager to
create and grow their own businesses. On the 20th anniversary
of the Dayton Accords in November of last year, we introduced
the Bosnia and Herzegovina-American Enterprise Fund Act to grow
small- to medium-sized businesses throughout the country.
Unfortunately, corruption in Bosnia and Herzegovina is
widespread. Recent news reports have highlighted scandals
involving senior politicians and concerns that financial
assistance to communities that experienced flooding in 2014 may
have been misused. In its Corruption Perceptions Index,
Transparency International ranked Bosnia behind all other
countries in the region except Kosovo and Albania.
Demonstrative steps need to be taken by all levels of
government to improve transparency and the rule of law. Left
unchecked, corruption will hinder Bosnia and Herzegovina's
integration into Europe and NATO. Twenty years after Dayton,
there is no excuse for corruption and the risk it brings to
prosperity for future generations.
I have raised these concerns with officials at the State
Department. I encourage the administration to continue to
support prosecutors and judges who focus on high-profile
corruption and economic crime cases. The United States
Government should also continue its support for investigative
journalism and nongovernmental organizations advocating reform.
We cannot gloss over the country's deficiencies.
Transparency and the rule of law are critical pillars to the
future prosperity of Bosnia and Herzegovina. The people of
Bosnia have already suffered through so much.
I want to thank our government and the NGO witnesses for
joining us this afternoon. The Helsinki Commission looks
forward to your insights and counsel on the steps required to
enhance transparency and the rule of law in Bosnia and
Herzegovina.
Now, when other members arrive, perhaps they will have
statements also, but we'll get right to witnesses.
Our first witness today is Ambassador Jonathan Moore, head
of the OSCE Mission to Bosnia and Herzegovina. The ambassador
is well-known to the Helsinki Commission, with previous
postings not only in Sarajevo but also in Belgrade, Minsk and
Vilnius. Ambassador Moore also served as a congressional fellow
in the Office of the Speaker of the House, as a national
security fellow at Stanford University's Hoover Institution,
and as a deputy chief of mission at the U.S. embassy in
Namibia. So welcome to Ambassador Moore.
Our second witness is the Honorable Thomas Melia, assistant
administrator at USAID for Europe and Eurasia. Mr. Melia is
also well-known to the Helsinki Commission for his time with
the National Democratic Institute, Freedom House, and as deputy
assistant secretary in the State Department's Bureau for
Democracy, Human Rights, and Labor. Earlier in his career,
Assistant Administrator Melia worked on the staff of the late
Senator Daniel Patrick Moynihan. Given his extensive career
focus on human rights and democratic development, we look
forward to his insights regarding the issue of the day.
Next, Mr. Srdjan Blagovcanin, our third witness, is
chairman of the board of the Bosnia Chapter of Transparency
International. Transparency International has done much to
expose corruption and to counter corrupt practices in Bosnia
and Herzegovina, throughout Europe, and around the world. Mr.
Blagovcanin has more than a decade of experience as a promoter
of good governance and anti-corruption reforms, and of rule-of-
law initiatives. I want to thank you for traveling to
Washington to participate in this hearing.
And finally, Dr. Valery Perry, an independent researcher
and consultant who has worked for various organizations,
including the United Nations Office on Drugs and Crime, the
U.N. Development Programme, the OSCE, and NATO in Bosnia and
Herzegovina. Dr. Perry is currently studying ways to counter
violent extremism in Southeast Europe and Turkey. The
Commission looks forward to Dr. Perry's recommendations on ways
to promote the rule of law and promote transparency in
Southeast Europe.
So, we will get started with our witnesses right away, and
we will begin with a statement by Ambassador Moore.
AMB. JONATHAN M. MOORE, HEAD OF THE OSCE MISSION TO BOSNIA AND
HERZEGOVINA
Amb. Moore. Mr. Chairman, good afternoon, and thank you
very much for this opportunity and for the attention that you
and all the members of the Helsinki Commission give to Bosnia
and Herzegovina. You know very well that everything in the
Balkans is political, and that all politics is local. In that
spirit, the OSCE team throughout Bosnia and Herzegovina is
engaged across the country with partners at all levels of
society to help foster stability, build respect for human
rights, and put its citizens on the path to prosperity.
Let me give you some quick and concrete examples. Education
was one of the many victims of the war. Communities and ethnic
groups were divided, and so were their schools. OSCE in Bosnia
and Herzegovina has engaged at all levels to support quality
education and bring schools and students together.
Simply lecturing politicians and parents is not effective.
As you know from your constituents, they have a right to be
heard. We have found places where schools can be combined,
meaning that children learn with each other and from each
other, instead of being separated. And instead of trying to
impose our will, we have negotiated successfully with those
same parents, as well as with politicians and religious
leaders, to tear down barriers. Zepce, a mixed community in
central Bosnia, is a shining example of this.
Our OSCE mission is very active in the sector of rule of
law. We are one of many partners fighting trafficking in
persons. We have an extensive team monitoring war crimes cases,
where more than 20 years after the war justice has not been
done. In this, the mothers of Srebrenica are some of our most
enthusiastic and effective allies.
Our network of local partners is also essential for
combating violent extremism. Terrorist attacks in Bosnia and
Herzegovina, much more than elsewhere, fundamentally threaten
the country's stability. The 19 Coalitions Against Hate that
the OSCE Mission in Bosnia and Herzegovina support have already
proven their value in calling for tolerance and community
values instead of division and revenge. Thanks to the Coalition
Against Hate in Zvornik, as well as to the mayor and Islamic
community among others, the community there found positive
common ground after the terrorist attack which occurred there
in April of last year.
Our skills and achievements in those areas, and our large
field network of 10 offices around the country, give us a clear
view of corruption, the main topic of today's hearing. We are
engaged with our domestic and international partners, including
Transparency International, to bring public and media attention
to the problem, to support reform efforts, and help lessen the
burden of corruption on the people of Bosnia and Herzegovina.
It is clear that simply having laws and institutions is not
enough. Laws must be implemented and obeyed, and prosecutors
and judges must do their jobs. Furthermore, old patterns of
political patronage must stop. A lack of transparency in hiring
employees in public institutions, concealing budgets, and even
enrolling university students on political grounds blocks
opportunities for the country's talented young people and also
obstructs, as we've seen, foreign investment.
We have geared up our rule-of-law team at the OSCE Mission
to Bosnia and Herzegovina to monitor corruption cases, where
there have been far too few convictions. And we strongly
support the cause of greater transparency. The public has a
right to know who is working in public enterprises and for how
much. Both with regard to prosecution and transparency,
Sarajevo Canton is a particular leader.
In conclusion, thank you again for this special
opportunity. A personal note: We have seen each other on
Capitol Hill, Vilnius and Minsk, Medjugorje and Dubrovnik,
Belgrade and Tirana, Sarajevo and Srebrenica. Please visit us
again so I can show you what OSCE in Bosnia and Herzegovina is
doing, and introduce you to the people whose success is our
goal. I very much look forward to your questions, Mr. Chairman,
and to the views of my fellow panelists. Thank you.
Mr. Wicker. Well, thank you very much. And it has been a
pleasure to be with you, Ambassador Moore, and to speak to
individuals in these various locales one-on-one. There's
nothing like a personal visit, and I certainly think when
Senator Shaheen gets here she might mention what an honor it
was to join with Secretary Albright and President Clinton and
Congressman King in being part of the official delegation to
the 20th anniversary of the Srebrenica massacre. And I believe
we made a real contribution in a bipartisan and bicameral way
in that regard. So thank you for mentioning that, and whenever
I get a chance I do encourage my colleagues, to the extent that
we can take care of business at home and for our constituents,
that we do look to our role internationally.
And we'll move to Mr. Melia and take your statement, sir.
Thank you for being here.
THOMAS O. MELIA, ASSISTANT ADMINISTRATOR, BUREAU FOR EUROPE AND
EURASIA, USAID
Mr. Melia. Thank you, Senator Wicker, for the opportunity
to testify today on corruption in Bosnia and Herzegovina and
the region, and on the efforts of the U.S. Agency for
International Development to address this challenge.
As Secretary of State Kerry said in his remarks at the
recent Global Summit on Corruption in London, ``criminal
activity literally is a destroyer of nation-states.''
Furthermore, corruption is a significant obstacle to national
social, economic and political development--the focus of my
agency.
Corruption leads to a weakening of democratic institutions,
economic decay by discouraging investment, increased
inequality, and it deprives states of the resources they need
to advance their own development. In the wider European region,
states weakened by corruption are also more susceptible to
malign pressure and manipulation from Putin's Russia, as any
semblance of a rules-based order often seems to take a backseat
to power, influence and greed.
Finally, endemic corruption threatens states by depriving
them of the most important resource of any democratic
government: the trust and confidence of its citizens. Where
public trust is absent, there can be little expectation of
cooperation by citizens with government to build resilient
democracies, let alone to do what is needed to counter emerging
threats like violent extremism.
For these reasons, the Obama Administration sees addressing
the problem of corruption--and the need for open, effective
representative governance--as a significant U.S. national
security priority. Understanding that, we in the U.S. Agency
for International Development work with governments, civil
society, independent media, political actors and citizens to
build the capacity to limit the likelihood of corruption, and
to uncover, investigate and punish corruption when it occurs.
It is a sad fact that corruption is a major problem
throughout the Balkan region, and Bosnia is no exception. As
you pointed out in your opening statement, Senator, Bosnia has
a very low score on the Transparency International Perceptions
of Corruption Index. More troubling, perhaps, is that according
to this index, Bosnia is actually losing ground in its fight
against corruption, its score having fallen by four points in
the last three years. This is consistent with findings from
Freedom House's Nations in Transit data series on anti-
corruption measures in Bosnia, and on democratic reforms more
broadly, which show that the modest gains that were made in all
measures peaked around 2006, with stagnation or backsliding in
the years since.
All of this indicates that corruption in Bosnia and
Herzegovina is bad, even by Balkan standards, and possibly
getting worse. When one takes into account Bosnia's multiple
levels of government and the fact that by some estimates the
public sector makes up 50 percent of Bosnia's GDP, the depth of
the problem and its impact on citizens' lives becomes all the
more clear. Therefore, growing the size and strength of the
private sector in Bosnia is of critical importance, both for
the prospect of economic development and as a concrete means to
limit the impact of corruption by limiting the opportunities of
public officials to engage in rent-seeking behavior.
USAID does this in several ways. For example, we have a new
Development Credit Authority agreement in place with three
commercial banks, valued at $30 million, as well as three older
agreements valued at $46 million. To date, these loans have
enabled the banks to disburse loans to more than 120 private
firms, supporting close to 2,800 private-sector jobs and
generating over 500 new jobs in the private sector.
USAID is considering new opportunities, as well. This week,
a team of economic experts from USAID is in Bosnia assessing
what other options may be available to support the country's
economic growth and prosperity. This is in part in response to
the proposal that you and other members of this Commission have
made in sponsoring legislation to authorize an enterprise fund
for Bosnia. Our team in Bosnia this week is looking at whether
this would be the right approach, in tandem with looking at
some of the other mechanisms that we have in place or might be
able to put in place.
We are also working to make public finance more transparent
and accountable, reducing opportunities for irregularities and
corruption. We have projects that are working to expand
electronic services for payment of direct taxes and in the
procurement process in Bosnia so that there are more
opportunities for competition and for small businesses to
participate in government contracts, but also there's more
transparency, which reduces the possibilities for corrupt rent-
seeking.
Corruption also occurs when local producers skirt
regulatory standards--think of watered-down milk and other
diluted products--to keep costs down. And especially when it
comes to medicines and things like that, it puts consumers at
real risk.
We have a USAID project being implemented by Cardno
Emerging Markets that helps to mitigate corruption by
supporting agricultural producers to adopt stringent EU
regulatory import standards. This program facilitated EU
approval for a number of dairies to export milk to the EU,
contributing to the economic growth.
On the demand side of the equation, we support watchdog
NGOs and investigative journalism, including Transparency
International, but also including a network of independent
journalists whose reports connect the dots as part of
professional investigative journalism, and these civil society
and journalist stakeholders have brought to light a number of
corrupt officials and their corrupt dealings. This advocacy is
critical, since three-
quarters of Bosnia's annual $1.7 billion worth of procurements
is done non-competitively, and hundreds of these procurements
are awarded to companies owned or co-owned by elected
officials.
We're also working to support the institution of a new
special anti-corruption unit in the Bosnia and Herzegovina
federal prosecutor's office, mandated by a 2014 anti-corruption
law.
Organized crime often depends on the inability of law
enforcement to track illicit activity across borders. So that's
why the journalists and the NGOs who can cross borders and
report widely on their findings play an important role in
advancing the exposure and control of corruption.
In conclusion, though the threats posed by corruption in
Bosnia to its economy, its public service, and to the state
itself are great, we in USAID are working with our partners to
limit opportunities for corruption, uncover them when they
occur, and see that they are investigated and punished. We're
doing this together with our European partners, who in some
cases enlarge our AID programs with donations from other
governments' donor agencies. We're also working closely with
other U.S. Government agencies, such as the Department of
Justice, which provides expert advice and assistance to
investigators, prosecutors and judges.
This effort will require significant political will from
Bosnia's leaders, NGOs and citizens. Progress will not be easy,
and constraints related to the structure of the constitutional
system in Bosnia may limit the possibilities for dramatic or
early progress. Nevertheless, we will remain engaged.
Thank you for the opportunity to testify, and I look
forward to your questions.
Mr. Wicker. Thank you very much, Mr. Melia.
Mr. Blagovcanin.
SRDJAN BLAGOVCANIN, CHAIRMAN OF THE BOARD OF DIRECTORS OF
TRANSPARENCY INTERNATIONAL, BOSNIA AND HERZEGOVINA
Mr. Blagovcanin. Thank you very much, Senator Wicker and
Chairman Smith. Thank you very much for this opportunity for me
to speak on what I consider a very important topic.
There are a lot of arguments to rightfully claim that
corruption is the biggest problem today in Bosnia and
Herzegovina. Direct damage to the country reaches hundreds of
millions of dollars disappearing from the budget due to
corruption. Indirect damage, due to a lack of investment caused
by corruption, is difficult even to estimate.
The crux of the problem is political corruption, which
involves the highest political and public officeholders. Twenty
years after the war, Bosnia and Herzegovina remains a country
completely captured by corruption, where it is virtually
impossible to get any public service without having to resort
to corruption.
Most relevant studies clearly indicate that in recent years
Bosnia and Herzegovina has not seen any progress in
strengthening the rule of law and the fight against corruption.
Corrupt political leaders hold sway over key institutions in
the country. This allows them to use all economic resources of
the country in their own private interests.
Political control over the judiciary and law enforcement
agency allows corrupt leaders to be protected from prosecution.
There are almost no cases of political corruption that result
in judgments of conviction. Political corruption is ignored by
public prosecutors because of political influence.
The crux of the corruption problems lies in how political
parties are organized. Devoid of basic internal democracy, they
operate in a mafia-like manner. Their basic principle of
operation is based on the distribution of the spoils. Their
booty are budgetary funds, public companies, and public
institutions.
Political elites use clientelistic appointments as the main
method of exercising control over institutions. In this way,
political leaders create clientelistic networks, which they use
to run the country. The real and almost unlimited power lies in
the hands of a few ethno-political leaders.
The political leaders are therefore not interested in
reforms and European integration. They have learned their
lessons from Croatia and Romania, two countries that had to
tackle political corruption and prosecute their political
leaders as part of their process of joining the EU. Therefore,
the interest of political elites in the country is solely and
exclusively to maintain the status quo. Any progress in the
reform implementation directly affects and limits their power,
and exposes them to criminal prosecution. Therefore, their
strategy is to rhetorically accept reforms, while in practice
they only feign reforms.
Pervasive corruption affects human rights and freedoms.
Cases of repression against the media and civil society remain
widespread. Corruption within institutions prevents citizens
from accessing justice. A backlog of over 2 million cases, in a
country of 3.5 million people, means that the judicial system
is completely blocked. Adjudication of disputes takes years to
complete.
The consequences of corruption are felt by citizens on a
daily basis. Corruption exposes them to additional costs to pay
for health, education and administrative services. Also,
corruption undermines economic development of the country,
trapping the majority of its people in poverty and depriving
them of employment opportunities. The way the market is
organized has a pernicious effect on the private sector.
Privileged access to public tenders and privatization processes
is reserved for cronies.
Therefore, I want to reiterate what I said at the
beginning: corruption is the biggest problem in Bosnia and
Herzegovina today. Without progress in fighting corruption, it
is not possible to make progress in the implementation of any
other reform.
How to make a breakthrough? As Fukuyama rightly pointed
out, all reforms are inherently political. Therefore, it is
about generating political will for reforms and not only
strengthening capacity of the institutions. Leveraging and
articulating the public's deep mistrust in the government
through citizens' active involvement in decisionmaking should
be prioritized in order to avoid another wave of destructive
protests like those of 2014.
Past experience shows that simply calling on leaders to
undertake reforms and to take responsibility is not sufficient.
Generating a genuine and articulated internal demand for
reforms is key to achieving sustainable progress. Thus, I
believe that reforming the way political parties operate and
introducing internal party democracy would create conditions
for dismantling the clienteleistic networks run by political
leaders.
Another important aspect of the reform concerns the
strengthening and reforming of the judiciary. The judiciary
must finally assume responsibility for prosecuting corruption.
For this to happen, it is imperative to ensure that it is
independent in its work and free from any political
interference.
In any case, Bosnia and Herzegovina still needs strong
international support in undertaking reforms to strengthen the
rule of law and fight against corruption. This also requires
that the current EU reform agenda be expanded to include a
detailed and specific plan for combating corruption and
strengthening the rule of law.
Thank you very much again for the opportunity to serve as a
witness at this hearing today. And in addition to my written
statement that I submit, I would like to ask you to include in
the record a paper that I recently authored for Johns Hopkins
University. I believe it's highly relevant for the discussion
today.
Mr. Wicker. Without objection, it will be admitted into the
record at this point.
Mr. Blagovcanin. Thank you very much, Senator Wicker.
Mr. Wicker. Well, thank you, sir. And that was about as
breathtakingly downcast a report as I've heard about a country
in a long time, but helpful nonetheless.
Dr. Perry.
DR. VALERY PERRY, SARAJEVO-BASED INDEPENDENT RESEARCHER AND
CONSULTANT, SENIOR ASSOCIATE AT THE DEMOCRATIZATION POLICY
COUNCIL
Dr. Perry. Thank you. And I'd like to thank everyone for
organizing this hearing today to put this very important issue
back on the agenda.
We've heard a number of vivid descriptions about the
situation of corruption in Bosnia and Herzegovina today. And
it's clear that the politics of corruption makes meritocracy
impossible, weakening institutions and promoting brain drain of
the best and brightest of the country. The politics of
corruption also results in a system in which floods can
devastate one-third of a country and no leaders or officials
are held responsible or are held accountable for their failure
to prevent, protect, prepare, or respond to such a disaster.
The politics of corruption weaken the notion of civil
society, shared purpose and joint vision, instead strengthening
informal practices, patronage networks and exclusionary
practices that are particularly damaging to a country only one
generation removed from the most violent conflict since World
War II. No political system anywhere is immune from corruption.
Systems, structures and incentives either encourage or impede
corruption. Societies ideally organize themselves in a way that
minimizes corruption and maximizes the public good. This can be
hit or miss anywhere and no design is ever perfect.
However, Bosnia's political economy was shaped by the war
and by the Dayton Peace Agreement that ended it in 1995. Dayton
was, and remains, a made-in-America product. For this reason,
it's important that we're having this discussion. The problem
of corruption in Bosnia is not a technical problem. It's a
political problem. In the absence of fixing the core political
problems that both prevent accountability and allow impunity,
all of the projects, capacity building, technical support and
money in the world will not overcome the fundamental inherent
weaknesses and democratic contradictions at the core of
Bosnia's unaccountable political system.
In fact, after two decades and literally thousands of well-
intended projects, it's time to consider not only the
diminishing returns of such approaches, but the broader
negative impact of such efforts actually maintaining the
illusion that a system that has failed for 20 years can in fact
somehow be made to work. Continuing to prop up a system proven
to be ineffective is akin to hoping that updating the software
on your 15-year-old computer will help its performance. At some
point you need to recognize that the problem isn't the software
but the hardware, and that no patches or workaround will
improve its performance.
So what should be done? I'll focus on three specific
recommendations today. First, a package of legislative reforms
aimed at reducing the possibilities for official corruption,
abuse of office and collusion should be developed and
supported. This would include laws related to conflict of
interest, political party financing, and freedom of
information, among others. And Transparency International has
written on this in the past as well. Laws, by-laws and statutes
regulating public enterprises also need to be urgently
overhauled in line with available guidelines and international
good practice. Many existing USAID and other U.S.-funded
programs--ranging from support for investigative journalism to
critical justice sector reform--can be better coordinated and
recalibrated to support this effort.
It's important to recognize that there will be political
and, in turn, institutional resistance to such reform, and
every effort will be made to evade proper implementation. We've
seen this happen for years. However, there would be
overwhelming public support among the citizens. Further, such
an initiative would be very much in line with the European
Union's own reform agenda, and in fact the notion that the
country's business environment can be improved without
improving this environment of corruption reflects a fundamental
misunderstanding of the political economy in Bosnia today.
Second, the lessons of unsuccessful past privatizations in
Bosnia must be studied, learned and applied by domestic and
international interlocutors alike to understand both their role
in further strengthening an oligarchical class of political and
party leaders, and to understand why part of the country that
has privatized nearly all of its public assets, the Republika
Srpska, has in fact failed to enjoy any broad and durable
economic or social benefits after such privatization. Future
privatization should be put on hold until such time as there
are reforms to the broader ecosystem to ensure fairness and
transparency. Otherwise, the country risks seeing a further
enriched and emboldened political elite, accompanied by
questionable foreign investment in enterprises which is often
more about real estate and asset stripping than about building
a robust economy for the people of Bosnia.
Third, it's critical to understand how the election system
in Bosnia contributes to the lack of accountability and makes
it not only possible, but natural, for politicians to be
elected and reelected without delivering anything to their
voters other than limited and targeted patronage. Much has been
written about this issue. Current election law reforms being
discussed will in fact make it harder for new or small parties
or independents to participate in the political system. This
will further entrench the dominant political elite and party
machines that have held control for a generation, further
eroding the checks and balances needed to fight corruption.
Substantial election reform is needed so that citizens
actually know who really represents them at every level of
governance and can vote them in and out of office; so that they
have constituent services offices in their community that they
can address with their interests and concerns, and, most
importantly, to ensure that people in Bosnia and Herzegovina
have the chance to be represented on the basis of being a
citizen, not on the basis of being a Bosniak, Croat a Serb, or
the always marginalized others. These reforms could effect
substantial change, and in fact do not require a Dayton II. In
fact, any elite-driven, foreign-sponsored effort to try to
engineer such reforms would very likely create a system even
worse than the one we see today. Instead, reforms need to be
citizen-focused, combining coordinated top-down support and
bottom-up grassroots activity to create momentum among all
political players and squeeze the elites to listen to their
constituents.
Bosnia and Herzegovina is a small country of less than 4
million people. And it's fair to ask why the U.S. should
continue to spend time on it, considering the many other
foreign policy priorities and humanitarian crises facing the
world today. The answer is simple: If the U.S. and its partners
cannot support the development of a functional and accountable
system in Bosnia, how can it possibly hope to support positive
and peaceful political outcomes in other parts of the world? If
the U.S. and its partners do not learn the lessons of failed
postwar power sharing in Bosnia, there is the potential that
similar foundational weaknesses will be introduced into other
areas in crisis around the world, creating an illusion of peace
and stability while corruption and spoilers flourish, social
discontent is manipulated and society becomes entrenched in a
state of frozen conflict.
Finally, the same systemic failures and factors that allow
corruption and unaccountable governance to thrive in these
frozen conflicts actually foster the civic marginalization,
social alienation, and in the worst cases enable the rise of
extremist groups and radicalized individuals seeking extra-
institutional remedies to political and social maladies.
In closing, corrupt politics and the pain of an economic
transition which has delivered very little benefit to the
majority of people have not only reinforced public frustration
with the post-war situation, but has revealed increasing
dissatisfaction among people with the very ideas of democracy
and capitalism, promotion of which have been some of the core
U.S. foreign policy goals for more than two decades.
It's not too late to reverse these recent negative trends,
though the clock is ticking as social divisions have reified
and hardened in the divide and rule politics of the past
generation. More ethnic politics and virtual partition will not
help. Laws, strategies and initiatives that seek to hardwire
accountability into the system, backed up by meaningful
conditionality and enforcement mechanisms, can. I'm hopeful
that this hearing will put this discussion back into the
spotlight, and generate momentum for the change that's so
desperately needed if the promise of Dayton Bosnia is to be
fulfilled. Thank you.
Mr. Wicker. Well, thank you very much, Dr. Perry. And I do
think everyone in the room can agree that the statements made
have been vivid today. And obviously we have a lot of room for
work.
It's my pleasure now to recognize Chairman Chris Smith for
whatever opening statement he might have.
HON. CHRISTOPHER H. SMITH, CHAIRMAN, COMMISSION ON SECURITY AND
COOPERATION IN EUROPE
Mr. Smith. Thank you very much, Mr. Chairman.
In lieu of the opening statement, I would ask consent that
it be part of the record since we're well into the hearing.
Mr. Wicker. Without objection.
Mr. Smith. And I thank you, because this hearing was your
idea. I thank you for chairing it and for bringing us all
together. This is extremely important and very, very timely.
Just a couple of questions. And I'm sorry I missed some of
the testimonies. We had votes on the House floor--Mr. Perry as
well--so that's why we are late.
Mr. Melia, in reading your testimony you've made some
excellent points about the importance of journalists. As we all
know, in Azerbaijan, a Radio Free Europe stringer, or reporter,
Khadija Ismayilova, was released. She had a seven-year prison
sentence. We actually had a hearing of the Commission on her
and the concerns that an American--you know, a woman writing
for Radio Free Europe was arrested because she exposed just
that, corruption, everything we're talking about today. We're
awaiting more details about what has happened, but you talked
about your journalist initiative and how important that is. And
I'm wondering how unfettered those journalists really are. Are
they able to report robustly, go anywhere, report any time
without fear of retribution, physical or criminal liabilities?
Secondly, let me ask a question about the about the
noncompetitive contracts you talked about, which obviously are
a grave invitation for fraud of the highest order. All of you
might want to speak to this--in our efforts to promote reform
are we pushing low-bid and, even more importantly, best value?
We've found in our procurement here in the United States that
it's not always necessarily the lowest bid, but best value
where objective criteria used by the procurers to ensure
they're getting the best deal from competent vendors? And it
seems to me, since so many of these contracts are
noncompetitive, we've learned so many lessons in America about
sole-source procurement. Sometimes it works. Sometimes it
absolutely does not. And many times, particularly at the state
and local level where there's even less transparency in the
United States, a lot of people make a lot of money illicitly
using noncompetitive sole-source contracting.
Thirdly, several weeks ago I met with Ms. Munira Subasic
from the Association of Mothers Action of the Srebrenica and
Zepa Enclaves. She herself lost her husband, son and 20 others
at Srebrenica in July of 1995. Her frustration today regards
the seeming impunity of hundreds of people, an estimated 850,
implicated in the violation of international humanitarian law
during the war who had their cases transferred from the
international tribunal to the Bosnian courts. To this day these
cases have not been processed, not one of them, which is
outrageous on the face of it. And my question would be the
extent to which corruption in law enforcement may be playing a
role in that prosecutorial discretion where they do nothing.
On trafficking, a similar issue. The numbers have gone down
in terms of prosecutions and convictions. We're awaiting the
most recent TIP report. It will come out shortly. We'll get a
better feel for where Bosnia is. But it was tier two last year.
And the prosecution side of the report points out in 2014 one
prosecution, no convictions in 2014. That's not a good record.
And we know in the United States, every country, the
commodification of women, the selling of women is increasing,
not decreasing. We just had a major briefing of that last week
from some of the NGOs that are involved, including ECPAT, which
is the End Child Pornography and Trafficking organization. So I
ask you what role corruption might play in that.
And finally, Mr. Chairman, when we were at one of our OSCE
Parliamentary Assembly meetings--I believe it was 2000, in
Bucharest--it was all about corruption. As you pointed out,
Secretary Kerry's statement about how it ruins democracies. And
that's exactly what that entire conference was about, how it
hijacks democracies and is the equivalent of the worst of the
worst of human rights abuses.
Mr. Melia, if you would start.
Mr. Melia. I can take a crack at a couple of those. I think
Ambassador Moore and the others may be better suited to respond
to your latter couple of questions.
Let me say on journalism, you asked if the investigative
journalists are unfettered and able to do their work. They are
to a large extent, although a lot of their work doesn't get
reported in the mainstream media. There's a fair amount of
sensationalist faux-
investigative journalism where scandals of one politician
leaking information about his or her rival pops up in the
newspapers or on television--that kind of clouds the discourse.
The work that we support through the RIJN, which is the
Regional Investigative Journalism Network, which is connected
to the larger worldwide Organized Crime and Corruption
Reporting Project, which got so much attention with the Panama
Papers release in recent weeks, is dedicated to professional,
fact-based, triple-checking-your-sources kind of journalism.
It's led by an American reporter from the AP named Drew
Sullivan, who has trained a generation of journalists across
the wider region, including Khadija Ismayilova, who you
referred to. It was great news today that she was released on
the eve of her 40th birthday. I don't know if that was
coincidence or not. But I think the worldwide campaign against
her unjust imprisonment had a lot to do with it as well. So
she's a part of this network. It was founded in Sarajevo 20-
some years ago, and grew region-wide from this very place. And
so their work may not always be on the headline evening news in
Bosnia, but it does get out and is around and is a constant
fact-based source and a key reference point. So it does have an
impact, even if it's not always on the evening news.
On procurement, which as I think we've all said in
different ways and, as you know, is where political corruption
interfaces with economic perversion of the marketplace. In
Bosnia, as in a number of other countries from Ukraine
throughout the region, where we have willing partners in
legislatures and in ministries we do have a number of
programs--and this is true in Bosnia--where we are helping to
build out systems for increasingly transparent electronic
procurement so that it's out there what's being sought by a
government agency. On the one hand, it enables additional
bidders to get involved, so small businesses who may be located
in small towns or remote from the capital get a chance to get
in the marketplace. This contributes to lowering prices in some
cases. But it is also clearer what the government is buying,
and for how much.
This is a work in progress. These systems get designed, get
legislated, get put out there in regulation. I would say in all
these countries, including in Bosnia, we're in midstream in
trying to help build them out and get people trained to use
them, and then increasingly put more and more stuff online into
these systems. So I think the electronic age has many ups and
downs in our lives, but I think in this one regard e-
procurement is an important step for combatting corruption.
Mr. Smith. Yes, Ambassador Moore.
Amb. Moore. Chairman Smith, thank you very much for the
opportunity. We look forward to seeing you back in Bosnia
again. Enjoyed our trip together to Medjugorje.
Let me just make some quick responses. First of all, when
it comes, of course, to media freedom OSCE works very closely
with a citizen of Bosnia and Herzegovina, Dunja Mijatovic, who
is in an additional year as OSCE's representative for freedom
of the media. Our mission and our media team work very actively
directly with journalists, of course, and editorial offices and
all around the country to support them.
There have been some very concerning cases of raids of
editorial offices, including by police armed with weapons, the
seizure of computers, as well as individual assaults against
journalists, most recently in the town of Visegrad, when
journalists trying to report on a rally of the so-called
Chetnik Movement were assaulted. These cases need to be
investigated and prosecuted. The authorities responsible for
rule of law as well as the police need to keep in mind what the
rights and freedoms of journalists are. We use our voice--
hopefully--eloquently, but we have certainly not solved the
problem. It is a big part of what we try to do when it comes to
media freedom issues.
On transparency, we had the chance slightly earlier to talk
about absolutely the need for transparency so that people know
what is being spent in the name of the citizens, how many of
their taxes are going to whom, what the salaries are, who gets
what jobs. I pointed to Sarajevo Canton as a particular good
example of this. Working with the media, they released salary
information, the names of key employees in all kinds of public
institutions. And although people know that corruption is
everywhere, it was extremely interesting for the public to
actually have the facts to see how outlandish and excessive a
number the salaries were. We very much encourage that. And that
example in Sarajevo Canton needs to be repeated throughout the
country.
And thank you also, of course, for mentioning Munira
Subasic and other Mothers of Srebrenica. We spend a tremendous
amount of time with them. Munira has asked for the support of
the OSCE mission. And just a couple of weeks ago we co-
sponsored a conference where we also brought in Serge
Brammertz, the chief prosecutor of the court in The Hague, to
talk about exactly this sort of issue. There are too many
unresolved cases. The war ended more than 20 years ago and
Munira and the other mothers, the other survivors, and in the
name of the people--victims of genocide and war crimes, they
need to be--that needs to be respected.
Criminals need to be brought to justice. The OSCE mission
supports this process; we're working with judges and
prosecutors at different levels, we've engaged a very
comprehensive expert-level analysis to make sure that the
courts and the prosecutors, especially at the state level, are
doing their job. We hope to have the results of that in the
near future. It is unacceptable to all of the victims and to us
that more persons have not been brought to justice there.
Mr. Smith. Did anybody want to touch on trafficking and the
decrease in prosecutions and convictions?
Amb. Moore. With regard to trafficking in persons, yes,
you're exactly right. Of course, you know very well that the
report will be coming out soon. I don't know what the content
of that report will be, since I am coming from OSCE structures.
But on all levels, we want to see more prosecutions brought
about. Sarajevo Canton is a good example of this because young
people and women who have been victims have not felt
comfortable coming forth with testimony and speaking directly
to prosecutors.
With our assistance, the prosecutor in Sarajevo Canton has
specifically made space and reached out to victims, so that
they feel more comfortable coming into the office and telling
their stories. They're concerned that there might be
retribution against them. And the prosecutor there, Dalida
Burzic, has done an excellent job of creating a welcoming
atmosphere so that victims of trafficking can also feel that
their rights are upheld.
Mr. Smith. Thank you, sir.
Mr. Wicker. We are joined by Representative Scott Perry of
Pennsylvania, Representative Robert Aderholt of Alabama, and my
colleague Senator Jeanne Shaheen of New Hampshire.
Representative Perry, do you have questions for the panel?
HON. SCOTT PERRY, REPRESENTATIVE FROM THE STATE OF PENNSYLVANIA
Mr. Perry. I do, sir. Is now the time?
Mr. Wicker. Now is the time.
Mr. Perry. Excellent. Well, I apologize also for being late
and missing your testimony--Dobar dan!
I know the discussion is generally about corruption, but I
do have something I think potentially relates to at least some
types of corruption, if not the corruption of society in
Bosnia, and particularly with their security situation, in
particular the security risks that relate to the infusion of
Saudi financing for things such as the King Fahd Mosque, which
was associated with the teaching--I guess at least the
teaching--and some of the rhetoric for the attacks in Paris
and, of course, some of the ammunition and the weapons came
directly through Bosnia. And I'd like to hear some comments on
that as well.
And, Dr. Perry, I'm sorry I missed your presentation. We
just went over trafficking, but I'm interesting in your
solution set for governance. When I was there, I was with the
Stabilization Force. And I know it was stabilized. Nobody saw
that as long lasting or efficient in any way. And quite
honestly, I'm amazed that it's lasted as long as it has. But
I'd like to know your perceptions--as shortly as you can, or as
briefly as you can--about what America's involvement in that
regard should be. With those two questions.
Mr. Wicker. OK. Shall we start, then, with that question
and then we'll go to the issue of the issue of the influence of
foreign money? Dr. Perry.
Dr. Perry. Thank you for getting right to the core of the
crisis of political accountability in Bosnia. Over the last 20
years there have been a number of different efforts to try to
re-engineer the structure and the politics and the constitution
of Bosnia. And none of them have succeeded for a variety of
different reasons. Now there are a lot of different actors who
feel that the main way to move the country forward is by EU
accession. And everybody does agree that EU membership would be
good for the country. It's just not going to happen anytime
soon. It took 12 years for Croatia to finish its accession
process. And Croatia agrees that it's a country. And that's
something that's still lacking in many ways in Bosnia and
Herzegovina.
However, it doesn't mean that it's impossible to try to
look for some fundamental changes in the system in Bosnia. For
example, there's a number of structural reforms that could make
a big difference and also demonstrate to citizens, to civil
society, to regular people that change is possible. For
example, there is no ministry of agriculture of Bosnia and
Herzegovina, no state-level ministry of agriculture, which has
led to numerous roadblocks in terms of people being able to
export their goods. While there has been a lot of technical
support to try to help dairy farmers and others to be able to
meet the criteria at various levels to export their goods, in a
market of 3.5 million people, the notion that there's no
concerted statewide agricultural development strategy is, quite
frankly, a bit ludicrous.
And what's even most frustrating is that there is quite
broad public support for this. A majority of Serb citizens in
the Republika Srpska surveyed recently, but also going back to
2013, support this because they recognize that they're losing
from this current system. Developing a set of reforms to the
constitution to allow for a ministry of agriculture would
demonstrate that this is possible and that the sky does not
fall, that people are no more or less a Bosniak or a Serb or a
Croat than they were before. And it would also show civic
groups, NGOs, that change is possible and that they can drive
it. And so I would want to support that. There's other low-
hanging fruit related to health care reform, which would enjoy
very broad support, and a campaign on trying to ensure and
promote health care mobility around the country, which doesn't
exist, would be another fundamental structural change that
would be possible.
These structural changes would also, in the longer term, be
complemented with some fundamental changes to the way that
people elect their representation. If you ask the average
Bosnian citizen who represents them in the state or entity or
cantonal parliaments, they can't give you a name. Sometimes
they'll say, well, this party does, but they can't tell you
somebody who they can hold accountable. And this is a
reflection of the system, the election law, and the
constitution, which the parties, quite frankly, like because
this way it's harder to be voted out for failing to deliver for
your constituents.
The one layer of government that does function the best is
the level of the municipality. And I don't think it's any
surprise that mayors are directly elected. The problem is that
if you keep the system in place right now, the mayors hit a
ceiling. There's only so much they can do because almost all of
the money is controlled by the ethno-dominated cantonal and
entity budgets. And it's always manipulated.
We saw some very interesting examples of some very good
mayors who responded appropriately in the 2014 floods. And
those who sought to try to work across party or ethnic lines
were often punished in the media and by a number of other
politicians who want to keep these issues alive. So again, I
would argue for an effort to look at some structural reforms in
the short term, to create some new state-level competencies
supported by citizens, but then also try to find a way to make
sure people know who represents them and that there's actual
responsibility and accountability in that relationship.
Mr. Wicker. Before we get to part two, Dr. Perry, Mr.
Blagovcanin suggests that laws need to be amended with regard
to the political parties. Apparently you agree with that. If
both of you could comment on what specifically is wrong with
the laws governing how the parties operate, and how does that
contribute to corruption?
Dr. Perry. Sure. One law is the law on political party
financing, which creates an awful lot of ambiguity about money
coming in from public enterprises and other sources, and then
funding not the public good and not politicians, but funding
party machines in a very cronyistic manner. And so this could
very easily be amended. When you look at a number of other
pieces of legislation, there's no requirement for transparency.
So again, as was noted earlier, it's very difficult for people
to find out what's going on and to really be able to hold
people to account in that way.
I would also now note that when we're looking at some of
these issues of political party democracy inside the parties,
because of the way that electoral units have been gerrymandered
following the war, creating generally ethnically clean election
districts, this means that there's never ever any reason to be
moderate or to put your hand across to the other side. In fact,
it behooves you to be extreme and to keep ethnic fear and
tensions alive. And until that changes, we're not really going
to see anything positive happening. And we've had a couple
interesting examples where a political party will lose a
substantial number of municipalities in local elections and
there will still be no change in leadership in that party. This
is not normal politics. Usually when a party substantially
loses there is change in the leadership at the top. But that
does not exist because it's still a very clientelistic system.
And I'm sure Srdjan would be able to provide some more light on
that.
Mr. Wicker. Mr. Blagovcanin, is it public money or is it
donor money, as Dr. Perry put her finger on the problem?
Mr. Blagovcanin. I would say it's public money, but in
addition to that----
Mr. Wicker. It's taxpayer money?
Mr. Blagovcanin. Exactly. But in addition to that, I would
like to add to what I mentioned in my statement, that I believe
that the key problem when it comes to political corruption is
how political parties are organized. Without internal
democracy, political parties are functioning like mafia
structures. Their only goal is to secure spoil. And spoil is
public finances, public institutions, public companies. So I
believe that introducing legislation which will provide for
internal democracy inside the parties would be extremely
important to democratizing the country as whole.
Mr. Wicker. Now, before we move to Senator Shaheen,
Ambassador Moore, can you help Representative Perry and the
panel out on the issue of the influence of foreign money coming
in?
Amb. Moore. Absolutely. Mr. Perry, thank you very much for
your question on the issue of radicalization. Terrorist attacks
in Bosnia and Herzegovina, much more than in many other
countries, fundamentally threaten the country's stability. We
have recent numbers which are probably low estimates that there
are 130 citizens of Bosnia and Herzegovina in Iraq or elsewhere
in that region, part of Daesh or other forces. About 43 of them
have been killed in that fighting. About 50 have returned. And
they're being tracked very carefully, although I have to say
that sort of work is not the kind of work that OSCE directly
engages in.
Radicalization is a huge problem. There are certain
questions, obviously, about how some of the funding gets to
Bosnia and Herzegovina. There have been huge--theoretically
humanitarian--donations to fund the building or rebuilding of
religious institutions, houses of worship, in different parts
of the country. The issue of fundamentalism and increasing
radicalization, especially through social media, the Internet,
in some cases people who've returned from Syria who are trying
to recruit people to go to Syria, is a very comprehensive
problem.
At the same time, I would say it's slightly outside the
scope of the OSCE mission, which doesn't cross lines into
intelligence work. Our focus is on working more directly with
the public. And we've had a lot of success with local
communities where mayors and neighbors and the Islamic
community, Catholic and Orthodox communities, are very aware of
what's going on in those communities. They come together to
talk about community values. That's something actually the OSCE
mission in Bosnia and Herzegovina supports--19 coalitions like
that around the country. After some concrete terrorist attacks
like the one in Zvornik in April last year, the community came
together again. Instead of calling for revenge, Orthodox and
Islamic leaders sat down together and said: This is not what
our community is about. We have to investigate this. We have to
move forward. We have to come together. So it is a
comprehensive issue.
In terms of exact sources of funding, some of them are
private, some of them come through, of course, states. You
mentioned the interest of some countries in the Middle East in
Bosnia and Herzegovina. There are, of course, individuals--that
seems to be the bigger problem--who were radicalized, who
came--in fact, I'm sure you're very familiar from your military
service with those who came to Bosnia to help fight on that
side--and some of them have stayed. Not enough of them have
left. But the level of radicalization in society is a huge
problem. And again, while any terrorist attack has terrible
consequences for the victims, in Bosnia and Herzegovina it
could really tear the country apart. So we pay very close
attention to this and, speaking on behalf of the OSCE mission,
particularly at the local level, as well as with the Ministry
of Security.
Mr. Wicker. Before I recognize Senator Shaheen, Dr. Perry,
have you observed, as have I, that mayors trained in New
Hampshire are really better mayors in Bosnia and Herzegovina?
Dr. Perry. Perhaps we should start sending more politicians
to train. No, it is interesting, though, that for the past two
decades, there have been a lot of different capacity
development efforts to try to build a new cadre of political
leaders. But there's very little that we can see that has
actually transferred into the day-to-day business of politics.
It's very difficult to make that leap. Either people go to New
Hampshire, fall in love with it, and decide to never leave and
never go back to Bosnia. Or, sometimes if they go back to
Bosnia, they seek to try to change things from within, but they
get so frustrated because they're not actually able to
operationalize the new things they learn, that they either give
up or try to go and get a job at an embassy or the OSCE or
someplace else that's a little bit better than the private
sector.
And so it's very difficult to try to find examples of
individuals who have been able to make it past this ceiling to
try to really change the level of discourse in politics. And
this is after 20 years and probably thousands of people trained
by either American or other funds.
Mr. Wicker. Senator Shaheen.
HON. JEANNE SHAHEEN, COMMISSIONER, COMMISSION ON SECURITY AND
COOPERATION IN EUROPE
Mrs. Shaheen. Well, for those of you who don't know,
Senator Wicker was referring to the mayor of Srebrenica, whose
family fled to New Hampshire after the massacre and who went
back and became mayor. So we're very proud of him.
I want to follow up on that line of questioning because I
think you mentioned, Dr. Perry, that there are enclaves of the
different ethnic groups and that sort of has gotten baked into
the way government works in the country. How much of that is
the result of the Dayton Accords and how much of it can
actually be changed at this point?
I was struck--and I'm sure everybody on the panel has been
to the country--but I was struck when I was there that much of
the challenge around getting people to work together seemed to
be based on the fact that when the peace was set up after the
war, the country was so divided by ethnic groups that it was
very hard to think about how to get people to work across those
ethnic lines for the benefit of the whole country.
So I wonder if you could speak to that and to the extent
that that's baked in, and is there a way to fix it. You talked
about some reforms, which I think make a lot of sense, but it
sounds like those are sort of tinkering around the edges.
Dr. Perry. Sure.
At the 20-year anniversary of Dayton event in Dayton this
past November, it was interesting to see that pretty much
everyone who was there noted that when they were working on the
Dayton Agreement and the Dayton constitution, that they never
thought that the structure would remain in place 20 years
later. There was always an assumption that the issue would be
readdressed and overhauled at some point because they
recognized the inherent contradictions within the draft even as
they were doing it.
But that fundamental reform hasn't happened, and you're
right that we've ended up seeing instead municipalities,
cantons, entities and then the state level, and even the lower
levels have really been dominated by various ethno-national
issues, meaning that there is no sense of political ideology in
the country in terms of left-right. It's just, you know, they
are crooks, but they are our crooks and people feel a need to
try to protect that in that way.
What's frustrating is that many people look at the war in
Bosnia and say it wasn't an ethnic conflict; it was a conflict
about power and influence in which ethno-national issues and
religion were manipulated by the leaders fighting it. But now,
20 years later we've seen that a number of these identity
issues have begun to harden in a way that will not be fruitful
for the long-term future of the country. There is no incentive
for cross-group coordination. While there's nothing technically
preventing a number of municipalities in Herzegovina from
working together to develop a business enterprise zone, the
political parties don't want to see it because they want to
maintain the control that they have within the current
environment.
And what's most troubling to me is that when I see people
who are my age, different people who are parents, et cetera,
they remember what joint life was like. They remember what it
was like to fall in love with someone from the other side and
to go to concerts and to travel. Their children don't have
that. There have been a number of different efforts, mostly
with foreign funding, including the OSCE, to try to bring kids
together on different study trips, et cetera. But these are
never, ever done by the local officials, and they're never done
with any real effort to try to change the education system.
And I think this is one of the big risks. The problem in
the education system is not about school buildings. It's about
what children are learning. Right now we have a system where
there is essentially a Catholic curriculum, an Orthodox
curriculum and a Muslim curriculum, and about 40 percent of
this content is different among the three. So children are
growing up and coming of age and never being able to see that
they're citizens of the same society. And until we tackle what
children are learning, the future looks grim.
And I would also just point out that this is very much
related to radicalization, because the lack of having any
critical thinking, media literacy and analytical thought
mainstreamed into the primary and secondary school systems
means that a lot of people, especially in poorer rural areas,
don't have the skills to try to counter effective grooming by
radicals.
And so, unfortunately, educational reform is necessary in a
substantial way, and the politicians and political parties will
resist it because the best way to maintain control is by making
sure that citizens can't question the system, and don't know
how to change a system in which they're not being served.
Mr. Wicker. Representative Robert Aderholt is chairman of a
subcommittee on the Appropriations Committee in the House and
is vice president of the OSCE Parliamentary Assembly.
Robert, we're glad to have you join us.
HON. ROBERT B. ADERHOLT, COMMISSIONER, COMMISSION ON SECURITY
AND COOPERATION IN EUROPE
Mr. Aderholt. Thank you, Senator. It's good to be here.
Thanks for everybody being out for this hearing.
Dr. Perry, you mentioned something I want to just follow up
on. A little earlier you talked about the way that districts
are drawn and you said they're drawn in such a way where there
is no encouragement to reach over to the others. Expand on that
a little bit and talk about how these districts are drawn and
if there is any way that you see that this could be changed for
the future.
Dr. Perry. Unfortunately they largely reflect the ethnic
cleansing that happened during the war and then the
legitimization of all of these various units of administration
after the Dayton Agreement.
The sad fact is a lot of municipalities and regions that
were once quite mixed are now more or less homogenous. And
that's been maintained, and would take some time for that to
reverse. Return has not been complete because of the many
political impediments over the past 20 years as parties have
sought to maintain homogenous districts. I wouldn't seek to
start trying to change lots of lines of municipalities, et
cetera, but there are different ways that you can change the
vertical integration among the various levels of government to
try to have more political responsiveness in terms of the
election systems.
Right now nobody needs to campaign on issues saying, you
know what, I cleaned up the community park, I put lights in and
I've gotten a new highway paved. They basically campaign on
issues of us-versus-them ideology and then also on patronage,
basically promising that they'll continue to pay privileged
pensions to veterans of their group, that they will continue to
pay various different payments and subsidies to their people,
as opposed to an actual issue-based campaign.
And unfortunately, I'm pessimistic that this can change
because over 20 years a lot of very smart people, from the
National Democratic Institute, from a number of different USAID
agencies and European agencies, have sought to try to change
this to create an environment where issues are front and
center. And after 20 years it really hasn't changed, and the
elections we saw over the past couple cycles were more of the
same. And in fact, the election results in 2014 took us back to
the same parties that started the war in 1991 and 1992. So I
think there's a need to sort of try to fundamentally look at
where are these points that are keeping this ethnic system in
place?
Mr. Aderholt. So where we would see this is like, for
example, in Republika Sprska. When the parliament meets in
Banja Luka--I think it's Banja Luka where the Republika Srpska
Assembly meets--they would have the districts drawn within the
Republika Srpska are very ethnically----
Dr. Perry. More or less. I mean, one very interesting thing
right now is that while a census--the first postwar census was
conducted in 2013--the results have not been released because
the various political parties can't agree on how the data
should be counted or analyzed. And this is because they really
don't care about some of the basic census issues we would think
of: how many people live in a family, what their roof
construction is made out of and whether they get their water
from a well or from a sewer system, a public system. All they
want to do is try to consolidate and formalize the ethnic
redistribution that has happened over the past number of years.
In Republika Srpska you do have some areas where return has
been moderately successful. However, it's still much more of a
majority-minority relationship as opposed to any sort of joint
ideologically driven, issue-driven coalitions at any level of
government. And unfortunately, as time has passed and as return
slowed down, and in a number of cases has even reversed, it's
getting harder and harder for people who are either a minority
or who choose not define, to try to find any political home and
influence the system, which is creating a cycle where dominant
ethnic politics is getting even stronger instead of weaker.
Mr. Wicker. Mr. Melia, you mentioned that you are--I guess
USAID is looking at S.2307, the Bosnia and Herzegovina-American
Enterprise Fund Act, authored by Senator Wicker and Senator
Shaheen, and that you're not quite sold on it yet. As you know,
this bill would authorize an enterprise fund modeled after the
support for Eastern Europe Democracy Act of 1989. It would fund
small- and medium-sized enterprises. It would be directed by a
board of six American investors. USAID would be involved. It
doesn't score, I assume, the appropriation bill funding it
would score but it is presently scored as having no cost.
What needs to be done, in the opinion of any of you that
are familiar with this act, to make it work? And is it an
opportunity for us to put some conditions there that the
enterprise fund would kick in if progress or steps were made in
the direction of a more pluralistic approach to government and
concrete steps to avoid corruption?
Mr. Melia. Two kinds of thoughts in reaction to the
proposal come to mind. One is that, to the extent that a new
enterprise fund might make sense--and it might--I would ask the
question about whether it should only apply to Bosnia and
Herzegovina. As we look around the region, we've had these
enterprise funds in Albania, in Bulgaria and Romania, and then
further to the north in Hungary, Slovakia, Poland and the
Baltics. So one question would be: Why only Bosnia and
Herzegovina? There are other countries in the neighborhood that
might be in the same situation. So that's one question.
The second question or second set of issues is really about
what the need for it is in Bosnia and/or in other countries.
That's why we have a team on the ground now of finance experts
who are doing dozens of interviews with people in the business
world, in the banking sector to explore the credit marketplace
there. In part, this is driven by the bill. We wanted to get a
fact-based assessment in order to inform our reply to it or our
suggestions on how it might be refined.
Mr. Wicker. And we appreciate that.
Mr. Melia. So that assessment is underway now. We have a
team out there that will be back in the next week or two and
we'll be putting together a report that we'll share hopefully
before the legislative process advances much further.
We have in place five finance mechanisms in Bosnia and
Herzegovina. They're called Development Credit Authority
guaranties, which essentially provide kind of backstop loan
guarantees for banks to invest more readily in small and medium
enterprises and in privatized businesses. They have not been
fully subscribed. That is, there's money on the table that
could be lent out to businesses that has not been borrowed.
Part of the assessment is looking at why that is, why
there's money available to be invested in businesses and the
businesses aren't asking for it. It may be administrative or
other hurdles. It may be a lack of awareness of how credit
works. Obviously the lending authority is different than an
equity investment that was the hallmark of the earlier
enterprise funds.
They actually bought stakes in companies and, through that
ownership share, would provide technical assistance on
corporate governance and business development and all that. So
it was more than just a loan from a bank. It was a loan with--
or it was an investment with--benefits, and it came from the
know-how of the people involved in the enterprise funds.
So that's the difference. If there's this alternative
model, which is the enterprise fund as opposed to the credit
authority, that would make a difference in way that makes sense
in Bosnia, then we'd be----
Mr. Wicker. Have they worked anywhere?
Mr. Melia. Yes, they've worked in several places. If you
look at the----
Mr. Wicker. But where could you point us?
Mr. Melia. Well, nearby in Albania.
Mr. Wicker. Albania has been a success, on balance?
Mr. Melia. There's been a number of businesses that were
jumpstarted and rebooted and succeeded. And the fund then sold
off its shares and cashed out at a certain point and the
businesses went on their way.
Mr. Wicker. Was it 30 million [dollars]?
Mr. Melia. Albania, I don't recall offhand. It may have
been 30 million [dollars] was put in there originally.
Mr. Wicker. OK, well, let us know on the record other
success areas.
You know, why Bosnia and Herzegovina? Senator Shaheen, I
think it's for the same reason we're having this hearing, for
the same reason that we have a capacity crowd in here, it's
that the very power and influence of the largest superpower in
the history of the world was brought to bear to end a
conflagration and to see if we can make pluralism work in the
area that gave rise to the term ``balkanization.''
Ambassador Moore, do you have any thoughts to add? I'm sure
you don't, but--[laughter]--let me pull them out of you.
Amb. Moore. Mr. Chairman, I'm a diplomat; I always have
thoughts. Thank you for the opportunity.
Mr. Wicker. And on the one hand--[laughter].
Amb. Moore. I only have one hand.
Mr. Wicker. OK.
Amb. Moore. I swore the oath to the Constitution of the
United States with it.
To be clear, there are some success stories. And we've
found it very successful to focus on them. Senator Shaheen made
reference to the mayor of Srebrenica. The mayors in towns like
Zepca and Zvornik and Bijeljina, they are multiethnic
communities. They don't have the balance they had. Valery is
exactly right to point out that there hasn't been enough
return, but you have Serb majors trying to talk about the
rights of their Bosniak fellow citizens. Again, I quoted the
former speaker: All politics is local. Absolutely. All the more
so in the Balkans.
A way to focus and highlight and perhaps fund--whether it's
brick-and-mortar projects or it's to support entrepreneurship
in those communities where mayors have reached out to all of
their fellow citizens to try and make a difference, to try and
counteract all of the tensions and the divisions that were,
it's true, enshrined in the Dayton Agreement--there are some
positive examples that we can build on. When those
opportunities are shown in a certain set of communities, they
can be seen elsewhere.
Reference was made earlier to the fact that before the war
everybody lived together. Well, yes, they did but they still
went to war. Just having them live next to each other isn't
enough. This is why our focus, of course--following the
guidance from the Helsinki Commission and looking at human
rights--it's not just, yes, I have a neighbor who is one of
``those'' but their kids go together to the same schools, they
work in the same enterprises, they respect each other's right
and freedoms, they celebrate each other's holidays together.
That's a very comprehensive project.
And Valery is right in that framework too. Political
parties are very reluctant and generally unwilling to do that.
It's the sort of thing that the international community can
encourage. OSCE is trying to do that on the ground there. Your
visits and your attention help to foster that as well. There
are so many people telling good stories and doing good things.
Unfortunately, they may be the exception rather than the rule,
but we need to support them.
Mr. Wicker. Mr. Blagovcanin.
Mr. Blagovcanin. I just need to add one thing. Sometimes,
or even maybe oftentimes, a religious community or communities
in Bosnia and Herzegovina are playing a role which is not quite
positive. Sometimes the orientation is towards homogenization
of the ethnic groups in Bosnia and Herzegovina, and sometimes
they are inspiring interethnic problems in terms of hatred and
similar things. So that's just in addition to positive
examples. Since I'm not a diplomat, I'm always trying to find
the negative. [Laughter]
Mr. Wicker. Senator Shaheen.
Mrs. Shaheen. Well, thank you.
I would add to why is this room full and why does this
hearing matter the fact that what happens in Europe matters to
us, that the trans-Atlantic partnership is critical to our
security and that, as we've seen, one of the places that is
still not whole, free and at peace in Europe is the Balkans.
And so it is not in our interest, just as I think it's not
in Europe's interest, not in Bosnia and Herzegovina's interest,
to have continued ethnic strife, to have continued recruitment
of foreign fighters, to have continued concerns about
impediments to the country becoming a functioning democracy. So
that gives opportunity for all of its citizens. So I would say
there is a lot at stake here and it's important for us in the
United States to pay attention.
Ambassador Moore, I would like to go back to the earlier
reference to the Mothers of Srebrenica because they have also
been in our office. And as you know, the mandate of the
International Tribunal on War Crimes in the former Yugoslavia
is to expire next year. Can you talk about whether you think
that it should be renewed, what the chances of that are, and
what the prospect of continuing to go forward with the
prosecutions are? You mentioned it a little bit.
Can I then also ask you or others on the panel to talk
about what's being done to counter violent extremism, the
efforts to recruit foreign fighters that are going on in the
country?
Amb. Moore. Senator Shaheen, thank you very much for that.
Yes, certainly in regards to all the members of the
Commission from the Mothers of Srebrenica, I was so pleased
that Munira and other mothers we were able to cosponsor this
event just a couple of weeks ago. They were very keen to see
justice done, and we want to see justice done as well.
There is a huge backlog of cases. These crimes occurred
more than 20 years ago, and yet in so many instances, the vast
majority, nobody has been brought to justice. The prosecutors
and judges need to do their job. They need to do a better job.
And we are trying to help them do that by monitoring the
process of conducting these trials. We are supporting the
mothers and other institutions in trying to get as much
attention to these issues as possible.
You mentioned ICTY, the International Criminal Tribunal for
the former Yugoslavia. It is wrapping up by the end of next
year. I think that's a good, illustrative example. Everyone
reacted in various ways to the conviction of Karadzic, the
acquittal of Seselj. In both cases the chief prosecutor, Serge
Brammertz, with whom we work very closely, is appealing those
judgments, seeking a longer sentence in the Karadzic case and
of course seeking a conviction in the Seselj case. No one was
universally satisfied by those verdicts. ``It wasn't enough or
it was too much,'' et cetera.
The same problem does exist in Bosnia and Herzegovina. I
think it's unfair to have some people on the local level there
look at everything through a political compass. It's not true
that each conviction and each acquittal has political overtones
or antecedents, but each and every case is seen in that
political context. We want to make sure that it's a question of
seeing justice and not politics. We want to make sure that the
prosecutors present strong cases against all of the potential
defendants with all of the evidence that's before them.
In terms of the major cases that ICTY is dealing with, they
have those two appeals to deal with. They also have the Mladic
case. It's been their intention and they've taken these steps
to forward other cases involving war crimes and genocide in
Bosnia and Herzegovina to the courts in Bosnia. That process is
still underway. Again, the work needs to be improved, and we're
trying to help that done in the name of all of the victims and
in the name of bringing justice.
Mr. Wicker. Let me ask you this: Do you think there is,
among a majority of leaders in the rank-and-file Bosnians, a
desire to end the corruption and to devise a better, more
inclusive, pluralistic government without all of these hyphens,
and yet they just can't seem to bring themselves to a place
where this gets critical mass?
What I'm asking is if there is something to be said for
inviting all the parties back to Dayton, or to a Dayton or to a
Geneva or someplace and see if everyone could agree to hold
hands and have a do-over and get this right this time? We know
that 20 years ago we never dreamed that the structure we
imposed would still be there in 2016. So would anyone like to--
Dr. Perry, you're about to jump at that. Yes. [Laughter.]
Dr. Perry. Yes. No, I think that while fundamental
constitutional reform and structural reform is needed, a Dayton
II would be the wrong way to do it because the leading
political parties don't have a vision and don't have a desire
for a joint life in which you've got civic parties in a
pluralistic community. And there's really no interest in
pressing forward with these reforms. There's a lot of----
Mr. Wicker. Among the public?
Dr. Perry. I'm saying among the political parties.
Mr. Wicker. No, but what about among the public?
Dr. Perry. I think there's more of a sense that this is
unsustainable among the public, but the people really just
don't know what to do. We saw in 2013 and then 2014 a number of
civic protests that started to come out, very often related to
issues related to corruption and ineffective governance, but
they fizzled out for a number of reasons that have been
analyzed and studied. Really, there was no political option to
which they could hitch their wagon, so to speak.
And so dealing with the political elites on any of these
unresolved issues at a Dayton II would, in my view, be almost
worse than what we've got now because it would probably end up
creating a complete partition by creating a Croat entity, a
Serb entity, and a Muslim or Bosniak entity, because that's the
writing we see on the wall today. And we're seeing a lot of
steps happening under the guise of federalism to create more
ethno-territorial borders within the country so everyone has
their own fiefdom, and this is completely----
Mr. Wicker. And actually they've got quite a bit of company
around in Europe, don't they?
Dr. Perry. They do, and this is what's quite troubling
again. There are many very functional federal states, but
they're looking for ethnic federalism where you're only
representing the people who are from your ethnic/religious
group and no one else. And this will do nothing to make a
cleaner, more effective, more accountable democracy.
And I was glad you used the word ``pluralism'' earlier
because, unfortunately, we're seeing less and less pluralism as
things move forward because there's almost an end-run end game
now as political parties and politicians and some of the elites
who have gained a lot of money and influence over the past two
decades are seeking to consolidate everything they can before
the party ends.
Mr. Wicker. But, gentlemen, we're taking steps backwards.
Everyone agrees. Is there any big idea to break the logjam in
this little country and make it work? [Pause.] Thank you.
[Laughter.]
Amb. Moore. No. Again, all politics is local. There are
local successes. If we can bring more attention to them, maybe
we can inspire, maybe we can in some cases shame people to act
differently, but there is no single fix.
And Dayton II--I have to agree, Dayton II is not an option.
The circumstances that forced an end to the war after three-
and-a-half years of terrible crimes are just not there, not in
the region and not elsewhere in the world. The mechanisms
exist. If they choose to agree, they choose to amend their
constitution, they have the ability to do that. The
international community doesn't.
Mr. Wicker. So there's not a desire to move to something
different----
Amb. Moore. No.
Mr. Wicker. ----just the inability to get there.
Folks, thank you very much. Does anyone else have anything
to add for the good of the order? Final comments, Mr. Melia.
Mr. Melia. One last comment to take this back to where we
started about corruption. I think in various ways everybody has
said that it is this overlarge, interlocking governmental
structure that has the public sector at every level so
overlarge. That is a driver of corruption. There's just too
much, too many public officials handling the people's money.
Mr. Wicker. And I think Freedom House recognized that in a
recent report.
Mr. Melia. So this is a driver of corruption and I think we
need to understand that this constitutional structure is one of
the contributors to this problem, among other problems.
Mr. Wicker. Final comment, Dr. Perry.
Dr. Perry. Sure.
Again, I think that we really need to try to speak directly
to the 99 percent of citizens in the country rather than only
going through the filter of the political parties and trying to
reach out to do some of these things. When you talk to people,
when you talk to teachers and farmers and small business
people, and young people who simply want to get on with it,
they're not talking about the same issues that we hear the
political parties talking about.
They're not concerned about which census forms to count or
not count so you can have more or less Muslims or Catholics in
a given piece of territory. They want something normal. It's
just that there are no tools right now to try to easily vote
people out of office or in office, or to try to get prosecutors
to start cases to prosecute and hopefully incarcerate people.
Mr. Wicker. Term limits maybe.
Dr. Perry. Some people would like that, I bet, in many
countries, I suspect. And I think that we need to work with the
public in this way to create more of a grassroots sense of
reform and possibility supported by a top-down set of
conditionality and pressure related to the EU and other drivers
to try to squeeze the middle that has simply been completely
unresponsive to the needs and desires of the vast majority of
citizens.
Mr. Wicker. Final comments from Ambassador Moore and Mr.
Blagovcanin. Ambassador Moore.
Amb. Moore. Well, we're there, of course, to make sure
that, like other participating states in OSCE, Bosnia and
Herzegovina fulfills its OSCE commitments. And one of the ways
they can do that and fight this effort against corruption is by
pursuing the path to integration. They have declared their
interest in joining NATO. They're on the path towards the EU.
It's a long and slow path, but they need to make some very
specific reforms on that path. That should help in some areas,
but there are still concrete things that we can do, especially
by shining a light on the positive examples that do exist
there. And when you come there again and you see that, I hope
you will agree.
Mr. Wicker. Surely the EU is not going to admit a
government that's structured like it is.
Amb. Moore. I am unaware of any pre-decision by the EU in
terms of exactly what the structure should be. There's a long
list of requirements that they need to fill, the thousands of
pages of the acquis communautaire, the different chapters that
have to be reviewed. They will need to implement all kinds of
laws, not just introduce those laws, when it comes to public
financing, when it comes to political parties and their
activities, when it comes to how the judiciary works. It's not
a perfect fix, but there's work that they'll have to do.
Mr. Wicker. But as you say, they also have to decide they
actually are, in fact, a country.
Amb. Moore. The sense of nationhood in Bosnia and
Herzegovina we haven't touched on, but of course it's a very--
--
Mr. Wicker. We touched on it briefly.
Amb. Moore. Yes.
Mr. Wicker. And, Mr. Blagovcanin, you have the last word of
this hearing.
Mr. Blagovcanin. Very briefly, starting point for
consideration of all future reforms should be that political
elites in a country do not have any interest to reform
anything. That's the best system in the world for them. They
are accountable to no one. They control everything. They
control public finance, public companies, lives of the people.
So it's about articulating the people's deep mistrust in the
system, how to ensure that citizens can influence what's going
on in the country. Thank you very much.
Mr. Wicker. Thank you very much.
Let me speak on behalf of the entire panel here. We are
absolutely thrilled at the turnout today, the interest
expressed by the attendance of rank-and-file individuals from
whatever organizations or backgrounds. And we are grateful to
the panel for their expertise and testimony. Thank you all. And
this hearing is closed.
[Whereupon, at 3:28 p.m., the hearing was adjourned.]
A P P E N D I C E S
=======================================================================
Prepared Statements
----------
Prepared Statement of Hon. Roger F. Wicker, Co-Chairman, Commission on
Security and Cooperation in Europe
The United States, as you all know, cares deeply about the
sovereignty, stability, recovery, and future prosperity of Bosnia and
Herzegovina. Since my first visit to Bosnia and Herzegovina in 1995,
the country has made tremendous progress. However, more needs to be
done by the international community and Bosnian leaders to sustain this
progress.
Here in Congress, my colleague Senator Jeanne Shaheen and I are
among those working to nurture private sector entrepreneurship in
Bosnia and Herzegovina. On the 20th anniversary of the Dayton Accords,
we introduced the ``Bosnia and Herzegovina-American Enterprise Fund
Act'' to grow small- to medium-size businesses throughout the country.
In Bosnia and Herzegovina, however, corruption is a widespread
occurrence. News reports have highlighted scandals involving senior
politicians. There has been concern about where outside assistance to
communities who experienced flooding in 2014 really went. Transparency
International has ranked Bosnia behind all other countries in the
region except Kosovo and Albania in its corruption perceptions index.
Demonstrative steps need to be taken by the state-level, entity-
level and local governments to improve transparency and the rule of
law. Left unchecked, corruption will hinder Bosnia and Herzegovina's
integration into Europe and NATO. Twenty years after Dayton, the
conflict is no longer an excuse for corruption amongst the bureaucrats
and politicians who are stifling the prosperity of future generations.
With youth unemployment at 60%, young people leave the country if they
get a chance. Bosnia and Herzegovina is losing its future.
I have raised my concerns with State Department and believe these
concerns are shared. The United States should continue to support
prosecutors and judges who focus on high-profile corruption and
economic crime cases. The United States should also continue its
support for investigative journalism and non-governmental organizations
advocating reform.
If we support Bosnia and Herzegovina, we cannot gloss over the
country's deficiencies. The people of Bosnia have already suffered
through so much. We need to support them and their aspirations for
themselves and their children. We need to insist that their political
leaders are responsive to the needs of the people they represent and
accountable for their own actions. With this, opportunity and progress
will follow.
Prepared Statement of Hon. Christopher H. Smith, Chairman, Commission
on Security and Cooperation in Europe
Today's hearing focuses on a country of traditional concern to the
Helsinki Commission--Bosnia and Herzegovina--but also on a concern that
pervades the Western Balkans and many other states of the OSCE--
corruption.
Twenty years ago, Bosnia was in the first and most difficult phases
of its recovery and reconciliation following the brutal conflict that
began in 1992 and ended in 1995 with outside intervention under U.S.
leadership culminating in the Dayton Peace Accords. The country was
devastated, and its people traumatized by conflict marked by the ethnic
cleansing of villages, the shelling of cities and numerous other
crimes, including the genocide at Srebrenica.
Today, many of the physical scars of that period are gone, but the
country still struggles under a complicated political framework
reflecting the war-ending compromises adopted at Dayton. Beyond the
well-known ethnic divisions, Bosnia's progress in the past decade has
been stymied by official corruption to the detriment of its citizens'
quality of life and the prospects for the country's integration into
Europe. While corruption is, indeed, not unique to Bosnia, perhaps it
is worse there than elsewhere in part because of the lack of post-
Dayton reforms. Rather than fix what's wrong with the country, which
could threaten those currently holding political power, officials at
all levels simply focus on helping themselves to the privileges and
opportunities that come with that power.
People who have been through so much already deserve something
better than this.
This hearing will examine the current situation regarding
corruption and its causes in Bosnia and Herzegovina, and look at
efforts by the United States and the international community, along
with civil society, to combat it.
As they proceed, I hope our distinguished and expert witnesses
could address two issues that may be related to corruption and are of
particular concern to me.
First, several weeks ago I met with Munira Subasic from the
Association of ``Mothers' Action of the Srebrenica and Zepa Enclaves.''
Munira had herself lost over 20 members of her family at Srebrenica in
July 1995. Her frustration today regards the seeming impunity of
hundreds of people--an estimated 850--implicated in violations of
international humanitarian law during the war, who had their cases
transferred from the international tribunal to the Bosnian courts. To
this day, these cases have not been processed, which is an outrage.
I would like to know to what extent corruption in law enforcement
and the judicial system protects possible war criminals from facing
justice. I also would like to hear whether these same people implicated
in horrible crimes during the war might today be part of the corruption
problem. I assume that someone willing to engage in ethnic cleansing
would not hesitate from also taking a bribe, or committing fraud.
Second, trafficking in persons remains an ongoing problem across
the globe, including the Balkans and Bosnia and Herzegovina. In the
immediate post-war period, the heavy international presence in Bosnia
generated a tremendous, unforgivable but, unfortunately, largely
unpunished demand for trafficked women as part of the sex trade, and
the suppliers were as blatant as they were aggressive in their criminal
enterprise. Measures were eventually taken in response, and Bosnia's
record improved markedly until recent years when the trend has been
generally downward.
Trafficking is a crime that takes organization, but it can be most
successful in countries vulnerable to corruption. I would therefore
like to know the extent to which our witnesses feel Bosnia's record in
regard to trafficking in persons is linked to its record in regard to
corruption.
With this introductory comments and concerns, I would now like to
turn to the Commission's Co-Chairman, Senator Roger Wicker of
Mississippi, who has been vocal in regard to the need for Bosnia to
address corruption issues and will chair the remainder of this hearing.
Prepared Statement of Benjamin L. Cardin, Ranking Member, Commission on
Security and Cooperation in Europe
The Helsinki Commission, which celebrates its 40th anniversary next
week, has a long history of support for Bosnia and Herzegovina--before,
during and after the 1992-1995 conflict there--which continues to this
day.
Much of my contribution to this effort has focused on the need to
provide justice for war crimes, crimes against humanity and genocide.
In that regard, the sentencing earlier this year of Radovan Karadzic by
the International Criminal Tribunal brought particular satisfaction to
those of us who pressed for years to have him apprehended and
transferred to The Hague.
Unfortunately for far too many people in Bosnia and Herzegovina,
any satisfaction they may feel is overshadowed by frustration over the
situation in their country today, and the struggle simply to make ends
meet. The collective privileges of the major ethnic groups take
priority over the individual human rights of those belonging to those
groups, let alone those who do not.
Inside what Freedom House has called these ``ethnic fiefdoms,'' we
see patronage and corruption that benefits and protects the political
elite. We do not see transparency. We do not see accountability. As a
result, we do not see much progress in Bosnia today. We have tried
repeatedly--during hearings, or during congressional visits to Sarajevo
like the one I led in 2009--to encourage reform. It is frustrating to
see how little has been accomplished given what we know is the
country's potential.
We rightly criticize Bosnia's political leadership for this
situation. However, the international community--mostly the European
Union but also the United States--has a large role to play in Bosnia
and, as a result, some responsibility for encouraging their behavior.
In particular, there has been an emphasis in our policies and
assistance on maintaining existing stability at the expense of
promoting positive change. Intransigence is accommodated, while
conditions--such as resolving the Sejdic-Finci ruling to give Roma,
Jews and others equal access to public office--are cast to the side. We
helped create government institutions but negotiate with party bosses
and often ignore civil society initiatives. We have encouraged
constitutional and other types of reform but have focused too much on
getting quick, incremental results when the people deserve something
more.
While corruption is a profound problem throughout the Western
Balkans, this situation exacerbates it, and I hope this hearing and
other efforts will encourage the international community to take a
tougher line in combatting corruption.
Within the OSCE, I have been active over the years in encouraging
multilateral efforts to combat corruption, such as removing immunity
from corrupt parliamentarians. I also welcomed the adoption in 2012 of
the Dublin Declaration on Strengthening Good Governance, giving renewed
emphasis to work in this area. One recent suggestion made in the spirit
of this Declaration has been to follow the Financial Action Task Force
recommendations for reviewing the financial activities of ``politically
exposed persons.'' Public figures never like to have their financial
activities scrutinized, but the public interest in thwarting abuses
such as money laundering, bribery and fraud is clear. It will build
trust within Bosnia and between Bosnia and its trading partners.
Finally I want to also mention that much of my current work
regarding the OSCE has been focused on countering various forms of
intolerance in our societies. We know that, throughout Europe, enforced
segregation of communities, discrimination based on creed or color and
a more general denial of opportunities for advancement, puts democracy
at risk, and provides fertile ground for violent extremism, including
that which can lead to terrorism. Some of these conditions exist to
varying degrees in Bosnia and Herzegovina, a country made more
vulnerable by its sense of victimization in the 1990s. The corruption
that exists could encourage their development and make it more
difficult to thwart terrorist or other violent threats. I hope our
witnesses can address this issue in their remarks.
Prepared Statement of Ambassador Jonathan M. Moore, Head of the OSCE
Mission to Bosnia and Herzegovina
I am deeply grateful to Helsinki Commission Co-Chairs Smith and
Wicker and Commission members and staff for the opportunity to address
key topics of relevance to Bosnia and Herzegovina and the wider
community of OSCE participating States. I would like to especially
thank the Commission's Policy Advisor Bob Hand, who stands as a shining
example of expertise and commitment due to his abiding interest and
decades of engagement in the Balkans. On behalf of my distinguished
team, I would like to express our appreciation for your attention and
support.
Bosnia and Herzegovina faces many challenges. The OSCE Mission to
Bosnia and Herzegovina, with an extensive network of 10 offices
throughout the country and 320 dedicated professional staff, works
every day with people in local communities as well as the most senior
political leaders--and everywhere in between--to help keep the peace,
protect fundamental rights, ensure the rule of law, and build
prosperity.
The framework for OSCE activities is grounded in the Dayton Peace
Accords, negotiated at Wright-Patterson Air Force Base in November 1995
and signed in Paris, France one month later. ``Dayton'' is far from
perfect, but it succeeded where other efforts failed. The peace accords
and the constitution enshrined in them--which can only be changed
through democratic means--continue to serve as a key foundation for
Bosnia and Herzegovina and its citizens. Dayton brought OSCE to Bosnia
and Herzegovina, giving us a special role in conducting and observing
the elections. The role of the OSCE Mission has evolved: the Central
Election Commission took on the responsibility of running elections in
2002. While taking on other tasks with the goal of helping the country
achieve its OSCE commitments and integration aspirations, our Mission
has maintained an diverse and active field presence and is engaged in a
variety of fields, seeking and keeping very close ties with
institutions, organizations, and individuals at all levels of society.
The Mission's work encompasses OSCE's three dimensions--politico-
military, economic and environmental, and the human dimension--with the
assistance and guidance of the Chairman-in-Office, the Secretariat, and
other institutions, including the Parliamentary Assembly and this
Commission. Our international partners include the Office of the High
Representative, the United Nations, the European Union, the
International Criminal Tribunal for the Former Yugoslavia, the Council
of Europe, and bilateral embassies. The Mission's role in Bosnia and
Herzegovina is expertly facilitated by strong media and policy planning
teams, who advance and promote our extensive programmatic work in the
areas of education, human rights, security cooperation, democratic
governance, and the rule of law.
Given the special opportunity to address to Commission today, while
I will speak with particular focus on the main topic of corruption, I
would also like to raise education, where our Mission has the lead role
for the international community; the rule of law, where we have a
comprehensive role in monitoring the work of the courts and
prosecutors; and combating violent extremism, where the Mission has
achieved some concrete successes, particularly at the local level.
Education
Education has been identified by many as one of the country's
highest priorities. The children of Bosnia and Herzegovina will only
prosper if they have quality education: they need the skills,
knowledge, and judgment to succeed in a modern and increasingly diverse
world. Quality education requires well-trained teachers, professional
administrators, effective curricula, up-to-date materials, safe
conditions, and an inclusive environment. The protection of various
distinctions, including languages of instruction, is an accepted
international principle, one sought by most parents in Bosnia and
Herzegovina.
At the same time, segregated education is an obstacle that must be
removed. In many schools, children of different ethnicities have no
opportunities to interact with each other. That interaction is a vital
element of the learning process. In the aftermath of the war, it is a
reality that for many people in Bosnia and Herzegovina their identities
are defined by their language and religion: denying that fact is not a
path to a solution, and those rights must be respected. Administrative
unification of schools--such as in Zepce, a community where we have
very close cooperation--has been proven to be a positive step. By
bringing children together, they gain insight into how to be better
citizens of BiH and the world. In addition, by saving money wasted on
duplicative staff and programs, more resources are available to repair
school buildings and purchase the equipment and technology needed to
provide quality education.
The OSCE Mission to BiH works with schools, parents, teachers,
administrators, and political leaders to advance these goals. The fact
that numerous jurisdictions have distinct and separate responsibilities
for education makes work in this sector difficult; there is no single
authority. It must also be said that in some communities the problems
seem all but impossible to solve. Nevertheless, there are others where
we have found and encouraged examples of success; where diversity,
tolerance, respect, and vision have led to improved social and
educational conditions. Religious communities have also played a very
positive part in these efforts.
We are proud to have engaged the most senior political leaders in
joint events and statements to define the importance of the issue: at
the same time, the best proof of success is seen in visits to those
schools--even in the smallest communities--where children are getting
the instruction their parents want, and where unnecessary and
artificial barriers between ethnic and religious groups are fading
away.
Rule of Law
Victims and witnesses are critically important for the successful
processing of war crimes. The OSCE Mission to BiH is playing an
established role in this field, with a team of legal experts that focus
on the processing of war crimes cases. In that work, we have the full
support of the country's High Judicial and Prosecutorial Council, close
collaboration with ICTY, and comprehensive relations with judges and
prosecutors at all levels. This effort, supplemented by important
funding from the European Union, helps bring war criminals to justice
so many years after the end of the war.
While our international partners are essential, it is a source of
pride for the Mission to have the endorsement of victims' families for
what we are doing in this area. Just a few days ago, our Mission
supported an international conference hosted by the Mothers of the
Srebrenica and Zepa Enclaves and the Association of Victims and
Witnesses of Genocide.
Our relationships with judges and prosecutors and our proven
professional capacities equip us for engagement in other areas as well.
We are the only international actor assisting judges and prosecutors in
processing hate crimes. Separately, we are a partner in efforts to
combat trafficking in persons, and are preparing a rule book for the
processing of trafficking cases.
Combating Violent Extremism
The problem of Foreign Terrorist Fighters (FTF) attracts much of
the international community's attention. Reliable estimates of the
numbers of FTF in Syria and Iraq vary: Minister of Security Mektic has
stated that there are approximately 130 citizens of Bosnia and
Herzegovina currently in Syria and Iraq, while 43 citizens have been
killed in the conflict and around 50 have returned. However, far higher
numbers have travelled from other OSCE participating States, and the
impact of violent extremism within Bosnia and Herzegovina is a deeper
concern.
At home, Bosnia and Herzegovina has seen four terrorist attacks
over the past six years, resulting in the deaths of two soldiers, two
policemen, and the wounding of a third policeman in the October 2011
attack on the U.S. Embassy. The country's authorities are working to do
what they can, but Bosnia and Herzegovina is vulnerable. Given the deep
scars left by the war, terrorist attacks could greatly damage the
stability of the country if they lead to acts of revenge and a growing
cycle of conflict.
Combating violent extremism requires extensive coordination as well
as the collecting of key data. The OSCE Mission to Bosnia and
Herzegovina, given its mandate and capacities, is not in a position to
gather or analyze sensitive information. However, we are taking
advantage of our grass roots-level involvement throughout the country
to make a difference: as in other areas, we see clear evidence of the
essential role played by local communities. Having helped establish a
series of 19 Coalitions against Hate across Bosnia and Herzegovina, we
found in them natural allies to build tolerance and combat violent
extremism. These are locally-constituted groups of individuals and NGOs
dedicated to working with each other as neighbors to emphasize positive
and common rights and build broader respect and understanding
throughout their communities. After the April 2015 terrorist attack in
Zvornik, the local coalition there played a central role together with
the mayor and the Islamic community in calling for calm and tolerance
and opposing acts of revenge.
Building on a project funded by the U.S. Government, we have now
integrated the fight against violent extremism as a permanent element
of our security cooperation effort, one joined by colleagues from all
policy and programmatic areas.
Corruption
As the Helsinki Commission has noted, corruption presents a
comprehensive challenge to Bosnia and Herzegovina, where it can be
found in numerous forms and at different levels. It threatens the
functionality of public and private-sector institutions, wastes public
resources, deters foreign investment, and damages citizens' trust in
government and the political system. Despite Bosnia and Herzegovina's
political figures and agencies increasingly voicing their concerns over
the perennial dangers presented by corruption, there has been limited
activity or political will to combat the issue directly. There are some
innovative and important efforts underway to prosecute cases of
corruption and to provide greater transparency, and we are using our
voice and our resources to support them. In Sarajevo Canton, the
government has set a high standard by revealing the salaries of many
public officials, and the cantonal prosecutor is making headway on a
comprehensive case of corruption where the management of a public
enterprise blocked foreign investment. However, there are not enough
examples of that, and clearly existing laws and institutions are not
enough: more work must be done.
The OSCE Mission to BiH has considerable potential added value for
work in this sector, including: our expertise in rule of law and
judicial affairs, as noted above; our heightened visibility and
political leverage; our close support for governments at multiple
levels; our regular engagement with various public sector institutions;
our expertise with gender issues; and our extensive field office
network and consequent local knowledge and working relationships. As in
other areas, this last point is particularly relevant to our strengths
in complementing the work done by others in the international
community.
Our Mission has met with numerous stakeholders, all of which
responded positively to the prospect of greater Mission involvement in
anti-corruption work, especially at the local level and in the area of
trial monitoring. We have heard from various partners and potential
donors that significant extra-budgetary funding might be available for
anti-corruption projects initiated or run by the Mission. In addition
to emphasizing the need for anti-corruption work with our existing
partners such as educators, the media, local and higher-level
representative bodies, and security institutions, there are two
particular areas where we are well placed to do more:
1) Corruption case monitoring: Despite the high number of allegations
and investigations concerning corruption in BiH, there are relatively
few indictments and still fewer convictions. A low prosecution rate in
suspected corruption cases undermines public faith in state agencies,
as officials widely believed to be guilty of corrupt practices are seen
to act with impunity. We are prepared to use our existing expertise and
practices in trial monitoring to develop a framework for expanding and
more comprehensively following and scrutinizing the prosecutorial
processes and capacities of BiH authorities. A potential U.S.
Government-funded project ($500,000) includes a needs assessment for
capacity-building activities based on trial monitoring findings which
will be a crucial first step.
2) Good economic governance and transparency/anti-corruption ``Beacon
Scheme'': As noted above, most international partners are focusing
anti-corruption activities at the entity and state levels, but the
Mission has a unique capacity for more localized engagement. The Beacon
Scheme in Bosnia and Herzegovina was launched in August 2005 by the
OSCE and the Council of Europe as a means to identify, recognize, and
promote innovation and excellence at the municipal level of government.
Based on the UK Beacon Scheme, each year a number of themes are
selected, and municipalities are invited to provide evidence of how
they have achieved excellence in these areas. Successful municipalities
receive a small grant to enable them to share their best practices with
other municipalities, thereby improving the overall standard of local
governance in Bosnia and Herzegovina. It is a proven methodology that
encourages best practices and positive re-enforcement between
municipalities. Existing templates and established practices mean that
the Scheme could be rapidly implemented. Moreover, it demonstrates
positive action to the public at the local level, where citizens most
frequently interact with state authorities. Municipal and city
authorities could be encouraged to innovate and adopt new practices for
improving (financial) transparency and/or tackling corruption at the
local level and promoting a positive business environment. Taking
advantage of our field office network, the Mission could also utilize
our Governance and Press and Public Information teams to further
replicate and publicize best practices countrywide. These activities
could go hand in hand with other possible initiatives in the area of
good governance, e.g. reducing barriers to local economic development,
increasing accountability mechanisms and promoting concepts and
standards of good governance at the local level.
Conclusion
Thank you again for the important opportunity to discuss these
issues. I can tell you that from my many contacts with the people of
Bosnia and Herzegovina that they want better lives for themselves and
their children. They are tired of rhetoric and platitudes: they want
results. Your attention and support will help us to continue to achieve
positive results. Please take the opportunity to visit us so we can
show you what we are doing and introduce you to the people whose
success is our goal. I look forward to your questions, and to hearing
the views of my fellow panelists.
Prepared Statement of Thomas O. Melia, Assistant Administrator, Bureau
for Europe and Eurasia, United States Agency for International
Development
Thank you, Mr. Chairman, Mr. Co-Chairman, and members of the
Commission, for the opportunity to testify today on corruption in
Bosnia and Herzegovina (BiH), and on the efforts of the United States
Agency for International Development (USAID) to address this challenge.
I would like to begin by describing the consequences of corruption, and
then placing corruption in Bosnia in a broader regional context.
Finally I will describe how USAID is working to help BiH, its citizens,
government and NGOs, to fight corruption and to mitigate its harmful
impact
on society.
It is fitting that the Commission for Security and Cooperation in
Europe is addressing this topic, because corruption is an issue of
national and regional security. As Secretary of State Kerry said in his
remarks at the recent global summit on corruption in London, ``criminal
activity literally is a destroyer of nation states.'' Corruption poses
a direct security threat to states by enabling the smuggling of arms,
persons, and drugs.
Furthermore, corruption is a significant obstacle to development,
the focus of my Agency. USAID's mission is to partner to end extreme
poverty and promote resilient, democratic societies while advancing our
prosperity and security. But corruption leads to a weakening of
democratic institutions, economic decay by discouraging investment,
increased inequality, and deprives states of the resources they need to
advance their own development.
In the Europe and Eurasia region, states weakened by corruption are
more susceptible to malign pressure and manipulation from the Russian
Federation and other countries, as any semblance of a rules-based order
often seems to take a back seat to power, influence, and greed
including oligarchs, whose geopolitical goals do not respect
international commitments to transparency, rule of law, and fair play.
Finally, endemic corruption threatens states by depriving them of the
most important resource of any democratic government--the trust and
confidence of its citizens. Where public trust is absent, there can be
little expectation of the cooperation of citizens with government to
build resilient democracies, let alone do what is needed to counter
emerging threats like violent extremism.
For these reasons the Administration sees addressing the problem of
corruption, and the need for open, effective, representative governance
as a significant priority. U.S. foreign assistance plays an important
role in formulating country-specific anti-corruption strategies, and
USAID democracy, rule of law, and governance programming is in the
forefront in many of these efforts. In the transitioning countries of
Europe and Eurasia, USAID cannot succeed in our mission as an agency if
corruption is permitted to go unchecked and unpunished. Understanding
that, the Agency works with governments, civil society, independent
media, political actors, and citizens to build the capacity to limit
the likelihood of corruption, and to uncover, investigate and punish
corruption when it occurs.
To understand the problem of corruption in BiH, it must be seen in
its regional context. It is a sad fact that corruption is a major
problem throughout the Balkan region, and BiH is no exception.
According to the most recent Transparency International Perceptions of
Corruption Index (2015), BiH had a score of 38 (on a 100 point scale,
with lower scores indicating higher perception of corruption), placing
it 76th out of 168 countries surveyed, behind all of its Balkan
neighbors except Albania (88th) and Kosovo (103rd). More troubling,
perhaps, is that according to this index BiH is losing ground in its
fight against corruption, with its score falling one point in the past
year, and four points from 2012. According to the World Bank's World
Governance Indicators (2015), control of corruption in BiH has changed
little, if at all, from its worst days immediately after the conclusion
of the war. This is consistent with findings from Freedom House's
``Nations in Transit'' data on anti-corruption measures for BiH, and on
democratic reforms more broadly, which show that modest gains that were
made in all measures peaked around 2006 with stagnation or backsliding
in the years that have followed.
Finally, USAID's National Survey of Citizens' Perceptions 2015
reports that over one in five persons surveyed reported paying a bribe
to a public official, most often to doctors, nurses and police
officers. Sixty-three per cent of citizens nationwide believe that the
judiciary is not effective in combating corruption, and 62 per cent
believe that public officials who violate the law are neither
identified nor punished.
All of this indicates that corruption in BiH is bad by Balkan
standards, and possibly getting worse. When one takes into account
BiH's multiple levels of government, and the fact that, by some
estimates, the public sector makes up fifty per cent of BiH's GDP, the
depth of the problem and its impact on citizens' lives becomes all the
more clear.
To combat corruption and limit its impacts on the state and
society, the United States is supporting both democratic, inclusive
governance (including by strengthening the justice sectors and civil
society) and economic growth (including through private sector
development, fiscal reforms, and reform of the energy sector).
Growing the size and strength of the private sector in BiH is of
critical importance both for the prospect of economic development and
as a concrete means to limit the impact of corruption by limiting the
influence of public officials in rent-seeking behavior. USAID is
working to do this in several ways. For example, USAID has new
Development Credit Authority agreements in place with three commercial
banks valued at $30 million dollars, as well as three older agreements
valued at $46 million dollars. To date, loans have been disbursed to
120 private firms, supporting close to 2,800 private sector jobs and
generating over 500 new jobs in the private sector.
In addition, recognizing that governance and economic development
at the local level are crucial to success, USAID is implementing
Business Friendly Certification (BFC). By reforming municipalities and
increasing transparency, BFC will improve the business enabling
environment, ultimately contributing to additional private sector
growth.
USAID is always considering new opportunities as well. This month,
a team of economic growth experts from USAID is in Bosnia assessing
what other options may be available to engage to support the country's
economic growth and prosperity. Several members of this Commission have
sponsored legislation authorizing an enterprise fund for Bosnia, and
this team is looking at whether or not this would be the right approach
to grow the private sector.
The Agency is also working to make public finance more transparent
and accountable. With a local partner, Finit Consulting, USAID works to
eliminate non-
transparent nuisance taxes for businesses, reducing opportunities for
irregularities and corruption. The project will also improve
transparency in government finance through the provision of IT
solutions for budget management and the Treasury by introducing and
expanding e-services for payment of direct taxes. This support will
also be used to help entity tax administrations to conduct risk-based
audits.
Due to the risk posed by large transactions, the energy sector is
an area of specific concern in the fight against corruption. Through an
activity implemented by Advanced Engineering Associates International,
USAID is working to transpose EU Energy Directive requirements into
local legislation to govern the operation of the energy sector in BiH.
Transparency in areas including the permitting of energy infrastructure
projects will help to limit opportunities for corruption in this
sector.
Corruption also occurs when local producers skirt regulatory
standards (say, with watered-down milk) to keep costs down, putting
consumers at risk. A USAID project, implemented by Cardno Emerging
Markets, helps mitigate corruption by supporting agricultural exporters
to adopt stringent EU regulatory import standards, particularly food
safety and veterinary and phytosanitary procedures. Recently, this
program facilitated EU approval for eight dairies to export milk to the
EU. As more producers meet EU standards there will be less room for
corrupt practitioners to compete.
While our economic growth efforts look to limit opportunities for
corruption, other efforts are building the capacity to help citizens
and civil society to uncover corruption when it occurs, and helping
state bodies effectively investigate and punish
culprits.
For example, partnering with a local Bosnian organization, the
Center for Media Development and Analysis, USAID is helping to build a
coalition of 60 local NGOs to advocate for implementation of anti-
corruption reforms necessary for EU integration. USAID supported civil
society and legislative stakeholders as they initiated adoption of
whistleblowers' protections in 2013. Last year, with our assistance, a
group of local NGOs started an advocacy campaign to increase
transparency, competitiveness and accountability within the public
procurement system and align it better with EU standards. This advocacy
is critical since three quarters of BiH's annual $1.7 billion dollars-
worth of procurements is done non-competitively and hundreds of these
procurements are awarded to companies owned or co-owned by elected
officials. A few weeks ago Transparency International, also supported
by USAID, presented legislative proposals to clarify and de-politicize
the issue of conflict of interest in BiH. Similar actions are planned
in the areas of public employment, health and education, which have
proven to be sectors highly susceptible to corruption. The program also
promotes civic monitoring, supports the production of independent,
investigative video documentaries to expose corrupt individuals and
provide evidence for prosecutions. Finally, as part of this project's
efforts to raise awareness and understanding of corruption affecting
citizens, USAID, together with our NGO partners, staged a traveling
exhibit on the lack of procurement transparency in BiH's public sector,
featuring a dozen items procured by entity governments at grossly
inflated prices. The exhibit opened in Sarajevo, and was staged in ten
major cities. A Facebook post on the exhibit generated more ``likes''
than any post in the page's history, and was viewed by over 170,000
people.
The justice sector is another critical front in the fight against
corruption. Partnering with Millennium DPI Partners, USAID helps
prosecutors, judges, other justice sector officials and institutions be
more responsive and accountable in the administration of justice, to
better serve the needs of citizens. This effort, along with other U.S
government efforts including that of the Department of Justice,
counters corruption by encouraging more efficient prosecution of cases
of corruption and organized crime, and by strengthening justice sector
institutions' ability to uphold public integrity and mechanisms of
self-accountability. Through this project, USAID has partnered with all
19 prosecutor's offices to help them to prosecute cases of corruption
and organized crime more effectively and efficiently by improving the
performance and authority of prosecutors, recognized as the weakest
link among officials. USAID is also working with the Department of
Justice's Office of Overseas Prosecutorial Development, Assistance and
Training (OPDAT) on advising anti-corruption prosecutors, improving
police-prosecutor cooperation, and providing case-based mentoring to
Bosnian counterparts in anti-corruption cases. We are also working,
through mentoring, training and technical assistance to BiH's High
Judicial and Prosecutorial Council (HJPC), to institute new management
systems for appointment of new judges and prosecutors--the most common
``entry point'' for politics into the work of the justice sector--and
to conduct performance appraisals, give merit-based promotions and to
provide incentives and rewards for the successful prosecution of cases.
Regional collaboration is also key to fighting corruption. USAID is
working with other countries in the region to ensure that regional best
practices are shared with Bosnian counterparts. We will also support
the institution of a new special anti-
corruption unit in the BiH Federal Prosecutor's Office, mandated by a
2014 anti-
corruption law. USAID is also helping to increase cooperation and
coordination among hundreds of state, entity, and cantonal law
enforcement and justice sector institutions to prevent leaks of
sensitive information that undermine the investigation and successful
prosecution of corrupt cases. To strengthen disciplinary procedures for
judges and prosecutors, USAID helps the state-level Office of the
Disciplinary Counsel to better manage complaint procedures and
autonomously review the conduct of judges and prosecutors and to
recommend appropriate sanctions for unethical conduct and corruption of
judicial officials.
Finally, since ``justice delayed is justice denied,'' this project
initiated improvements in the efficiency of enforcement of judicial
decisions through a data-driven process that has led to
recommendations, including a Judicial Effectiveness Index to identify
bottlenecks and inefficiencies, which were embraced by the HJPC.
While corruption and organized crime often depend on the inability
of law enforcement actors to track illicit activity across borders,
journalists are not bound by such limitations. Sunshine, as they say,
is the best disinfectant. The first step in countering corruption is to
expose it. Through the Regional Investigative Journalism Network
(RIJN), journalists receive more intensive training and practical
experience in producing documented, high-quality investigative
journalism based on best international standards and practices. The
program is designed to link these journalists across borders, improve
their investigative skills through on-the-job training, and use
innovative digital technologies to collaboratively produce cross-border
investigative reports. It also works to build citizen demand to reduce
corruption, fraud, and other criminal activities through increased
exposure to professionally produced investigative journalism. RIJN has
proven its ability to serve as a platform for getting results in
exposing corruption, from its revelation that a prime minister in
Bosnia and Herzegovina received a free apartment, leading to his
indictment and eventual resignation, to its current reporting on
regional corrupt leaders' links to offshore accounts in the Panama
Papers. RIJN has carefully tracked the impressive dividends from its
reporting across the region: the recovery of at least $600 million in
hidden assets by tax authorities; the closure of more than 1,300
companies; investigations, indictments, and arrests by law of 80
people--including an ex-president; and the resignation or sacking of
ten government officials.
In conclusion, though the threats posed by corruption in BiH--to
its economy, its public services and to the state itself--are great,
USAID is working with our partners to limit opportunities for
corruption, uncover them when they occur, and see that they are
investigated and punished. We are doing this together with our European
partners, in some cases leveraging U.S. Government funds with donations
from allies. USAID is also doing this with other U.S. Government
agencies, such as the Department of Justice, which is providing expert
advice and assistance to investigators, prosecutors, and judges in BiH.
The existence in BiH of the EU reform agenda, the broader EU
Association process, and initiatives such as the Open Government
Partnership offer BiH and its partners an opportunity to intensify
efforts to fight corruption.
This needs to be an ambitious, substantive, and multifaceted agenda
for changes in law and in practice--changes that will impact the daily
lives of Bosnia's citizens. This effort will require significant
political will from BiH's leaders, NGOs and citizens. Progress will not
be easy, and constraints related to the structure of the constitutional
system in Bosnia may limit possibilities for dramatic progress. But
despite these challenges, our decades-long commitment to peace in BiH
demands our best effort.
Thank you for the opportunity to testify. I look forward to your
questions.
Prepared Statement of Srdjan Blagovcanin, Chairman of the Board of
Directors of Transparency International, Bosnia and Herzegovina
Thank you very much, Mr. Chairman, Thank you very much for this
opportunity for me to speak on what I consider a very important topic.
There are a lot arguments to rightfully claim that corruption is
the biggest problem today in Bosnia and Herzegovina.
Direct damage to the country reaches hundreds of millions of
dollars disappearing from the budget due to corruption in public
procurement and privatization. Indirect damage, due to a lack of
investment caused by corruption, is difficult even to estimate.
The crux of the problem is political corruption, which involves the
highest political and public officeholders. There are numerous well-
documented corruption cases involving political leaders and top party
officials.
Twenty years after the war Bosnia and Herzegovina remains a country
completely captured by corruption, where it is virtually impossible to
get any public service without having to resort to corruption. Most
relevant studies clearly indicate that in recent years Bosnia and
Herzegovina has not seen any progress in strengthening the rule of law
and the fight against corruption and, as such, is among the worst-
ranking countries in the region.
Corrupt political leaders hold sway over key institutions in the
country. This allows them to use all the economic resources of the
country in their own private interest.
How pervasive corruption actually is can be seen on an everyday
basis. Due to corruption in public procurement, taxpayers' money--that
is the money of the citizens of BiH--is used to procure goods, services
and public works at prices that are severalfold greater than their
actual cost.
The example of the two recently collapsed banks also reveals the
ruthless extents of corruption, with total damage exceeding half a
billion dollars. The two cases involve the highest public
officeholders, and the indictments against them have not been brought
yet.
Political control over the judiciary and law enforcement agencies
allows corrupt leaders to be protected from prosecution. There are
almost no cases of corruption that result in judgments of conviction.
Political corruption is ignored by public prosecutors because of
political influence.
The crux of the corruption problem lies in how political parties
are organised. Devoid of basic intra-party democracy, they operate in a
mafia-like manner. Their basic principle of operation is based on the
distribution of the spoils. Their booty are budgetary funds, public
companies and institutions. Political elites use clientelistic
appointments as the main method of exercising control over
institutions. In this way, political leaders create neopatrimonial-
clientelistic networks which they use to run the country.
The real and almost unlimited power lies in the hands of a few
ethno-political leaders, while institutions remain devoid of any
content and are mere shells without any power.
The political leaders and the ruling political parties are
therefore not interested in reform and European integration. They have
learned their lesson from Croatia and Romania, two countries that had
to tackle political corruption and prosecute their political leaders as
part of their process of joining the EU. Therefore, the interest of
political elites in the country is solely and exclusively to maintain
the status quo. Any progress in reform implementation directly affects
and limits their unbridled power and exposes them to criminal
prosecution. Therefore, their strategy is to rhetorically accept
reforms and advocate for the country's progress towards the EU, while
in practice they only feign reform.
Pervasive corruption affects human rights and freedoms. Corrupt
politicians turn a blind eye and a deaf ear to the criticism coming
from civil society organizations and the media. Hence, cases of
repression against the media and civil society remain widespread.
Corruption within institutions prevents citizens from accessing
justice. A backlog of over 2 million cases, in a country of 3.5 million
people, means that the judicial system is completely blocked in
practice. Adjudication of disputes takes years to complete. Court
rulings, even those made by the Constitutional Court, are not complied
with unless they are in the interest of the privileged few.
The consequences of corruption are felt by citizens on a daily
basis. Corruption exposes them to additional costs to pay for health,
education and administrative services. Administrative corruption is
part of everyday life for citizens.
Another consequence of corruption is the growing inequality, where
the privileged few have access to all public resources, while the vast
majority of citizens are deprived of access to public services.
Also, corruption undermines economic development of the country,
trapping the majority of its people in poverty and depriving them of
employment opportunities. For years Bosnia and Herzegovina has been
among the worst-faring countries in Southeast Europe when it comes to
attracting foreign investment.
The way the market is organized has a pernicious effect on the
private sector. Privileged access to public tenders and privatization
processes is reserved for cronies, operating on the principle that
losses are ``socialized'' while profits are privatized.
Therefore, I want to reiterate what I said at the beginning of my
talk. Corruption is the biggest problem in Bosnia and Herzegovina
today. Without progress in fighting corruption it is not possible to
make progress in the implementation of any other reform. It is
impossible to reform the judiciary if it is corrupted. It is impossible
to reform education if it is corrupted. Or public administration, or
any other field for that matter.
How to make a breakthrough?
As Fukuyama rightly pointed out, all reforms are inherently
political; \1\ therefore it is about generating political will for
reforms and not only strengthening capacities of the institutions.
Leveraging and articulating the public's deep mistrust in the
government through citizens' active involvement in decision making
should be prioritized in order to avoid another wave of destructive
protests like those of 2014. Past experience shows that simply calling
on leaders to undertake reforms and to take responsibility is
insufficient. Generating a genuine and articulated ``internal demand''
for reforms is key to achieving sustainable progress toward integrating
the country into the EU.
---------------------------------------------------------------------------
\1\ Fukuyama (2014).
---------------------------------------------------------------------------
A viable solution to the problem of political corruption must be
found at the level of the political system. Which in this case means
the democratization of the political system and, above all, the key
actors of the political system, namely political parties. Reforming the
way political parties operate and introducing intra-party democracy
would create conditions for dismantling the clientelistic networks run
by political leaders that have captured the country's institutions.
Furthermore, it would allow a wider range of people to influence
the political processes and this would, in turn, lead to better
articulation of the demand for change and reforms.
Another important aspect of the reform concerns the strengthening
and reforming of the judiciary. The judiciary must finally assume
responsibility for prosecuting corruption. For this to happen, it is
imperative to ensure that it is independent in its work and free from
any political interference. To counter political interference, it is
crucial to ensure transparency in the appointment of judges and
prosecutors.
The judiciary has to gain public trust. This implies that the work
of the judiciary is based on the principles of transparency and
accountability.
In any case, Bosnia and Herzegovina still needs strong
international support in undertaking reform to strengthen the rule of
law and fight against corruption. This also requires that the current
EU reform agenda be expanded to include a detailed and specific plan
for combating corruption and strengthening the rule of law.
Thank you very much again for the opportunity to serve as a witness
at this hearing today.
Prepared Statement of Dr. Valery Perry, Sarajevo-based Independent
Researcher and Consultant and Senior Associate at the Democratization
Policy Council
Introduction
I would like to thank Representative Smith, Senator Wicker, and the
Helsinki Commission for organizing this hearing.
We've heard a number of vivid descriptions of the problem of
corruption--and the politics of corruption--in Bosnia and Herzegovina
today.
The politics of corruption makes meritocracy impossible, weakening
institutions and promoting brain drain of the country's best and
brightest.
The politics of corruption results in a system in which floods can
devastate one third of the country and no leaders or officials are held
accountable for their failure to prevent, prepare, or respond to such a
disaster.
The politics of corruption weaken the notion of civil society,
shared purpose and joint vision, instead strengthening informal
practices, patronage networks and exclusionary practices that are
particularly damaging to a society barely a generation removed from the
most violent conflict in Europe since World
War II.
No political system anywhere is immune from corruption. Systems,
structures and incentives either encourage or impede corruption.
Societies ideally organize themselves in a way that minimizes potential
for corruption and maximizes the public good. This can be hit or miss;
no governmental design is ever perfect.
Bosnia's political economy was shaped by the war and the Dayton
Peace Agreement that ended it in 1995. Dayton was, and remains, a
``Made in America'' product. For this reason it is important that we
are having this discussion today.
What Should Be Done
The problem of corruption in Bosnia is not a technical problem; it
is a political problem. In the absence of fixing the core political
problems that both prevent accountability and allow impunity, all of
the projects, capacity building, technical support and money in the
world will not overcome the fundamental weaknesses and democratic
contradictions at the core of Bosnia's unaccountable political system.
In fact, after two decades and literally thousands of well-
intended projects, it is time to consider not only the diminishing
returns of such approaches, but the broader negative impact of such
efforts actually maintaining the illusion that a system that has failed
for 20 years can in fact somehow be made to work. Continuing to prop up
a system proven to be ineffective is akin to hoping that updating the
software on your 15-year old computer will help its performance. At
some point you have to recognize that the problem isn't the software,
but the hardware, and that no patches or workaround will improve its
performance.
So what should be done? I will focus on three specific
recommendations today.
First, a package of legislative reforms aimed at reducing the
possibilities for official corruption, abuse of office and collusion
should be developed and supported. This would include laws related to
conflict of interest, political party financing, and freedom of
information, among others. Laws, by-laws and statutes regulating public
enterprises also need to be urgently overhauled in line with available
guidelines and good practice. Many existing USAID and other U.S.-funded
programs--ranging from support for investigative journalism to critical
justice sector reform--could be better coordinated and recalibrated to
support a holistic approach.
There will be political and in turn institutional resistance to
such reform, and every effort will be made to evade proper
implementation; we have seen this happen for years. However, there
would be overwhelming public support. Further, such an initiative would
be very much in line with the European Union's own Reform Agenda, and
in fact, the notion that the country's business environment could be
improved without these reforms reflects a fundamental misunderstanding
of the political economy in post-Dayton Bosnia.
Second, the lessons of unsuccessful past privatizations in BiH
must be studied, learned and applied by domestic and international
actors alike, to understand both their role in further strengthening an
oligarchical class of political and party leaders, and to understand
why part of the country that has privatized most of its public assets
(the Republika Srpska) has failed to enjoy any broad and durable
economic or social benefits from these transactions.
Future privatization should be put on hold until reforms to the
broader ecosystem have been implemented; otherwise the country risks
seeing a further enriched and emboldened political elite, accompanied
by questionable foreign investment in enterprises which is often more
about real estate and asset stripping than about building a robust
economy for Bosnia and its people.
Third, it is critical to understand how the election system in
Bosnia contributes to the lack of accountability and makes it not only
possible but natural for politicians to be elected and re-elected
without delivering anything to their voters other than limited and
targeted patronage. Much has been written on this topic. Current
election law reforms under consideration will in fact make it harder
for new or small parties or independent candidates to participate in
and influence political life. This will further entrench the dominant
party machines that have held control for a generation, further eroding
the checks and balances needed to resist and deter corrupt practices.
Substantial election reform is needed so citizens know who really
represents them at every level of governance and can vote them in and
out of office; so constituent service offices operate in communities
and serve as a link between representatives and the citizens they
represent; and to ensure that citizens have the chance to be
represented in government at every level. Representation should not be
based on ethno-national affiliation--whether a voter is a Bosniak,
Croat or Serb, or the consistently marginalized ``Others''--but simply
whether a voter is a citizen.
These reforms could effect substantial change, and do not require
a ``Dayton 2.'' In fact any elite-driven, foreign-sponsored effort to
engineer reforms would very likely create a system even worse than the
one we see today. Instead, reforms need to be citizen-focused,
combining coordinated top-down support and bottom-up pressure to create
momentum among a population that is ready for such change, but
uncertain how to disempower the system that has so effectively captured
the country for so long.
Why Does BiH Matter?
Bosnia and Herzegovina is a small country of less than 4 million
people. It is fair to ask why the U.S. should continue to spend time on
it, considering the many other foreign policy priorities and
humanitarian crises facing the world today.
The answer is simple: if the U.S. and its partners cannot support
the development of a functional and accountable system in Bosnia, how
can it hope to support positive and peaceful political outcomes in
other parts of the world?
If the U.S. and its partners do not learn the lessons of failed
post-war power-sharing arrangements in Bosnia, there is the potential
that similar foundational weaknesses will be introduced into other
peace deals, creating an illusion of peace and stability while
corruption and spoilers flourish, social discontent is manipulated and
society becomes entrenched in a state of frozen conflict.
Finally, the same systemic failures and factors that allow
corruption and unaccountable governance to thrive in frozen conflicts
foster civic marginalization, alienation, and in the worst cases enable
the rise of extremist groups and radicalized individuals seeking extra-
institutional remedies to political and social maladies.
In closing, corrupt politics and the pain of an economic
transition which has delivered little benefit to the majority of the
population in Bosnia have not only reinforced public frustration with
the post-war situation, but has revealed increasing dissatisfaction
with the very idea of democracy and competitive markets--promotion of
which have been core U.S. foreign policy goals for more than two
decades.
It is not too late to reverse recent negative trends, though the
clock is ticking as social divisions have reified and hardened in the
``divide and rule'' politics of the past generation. More ethnic
politics and virtual partition will not help. Laws, strategies and
initiatives that seek to hardwire accountability into the system,
backed up by meaningful conditionality and enforcement mechanisms, can.
I'm hopeful that this hearing will put this discussion back into
the spotlight, and generate momentum for the change that is so
desperately needed if the promise of Dayton Bosnia is to be fulfilled.
Thank you.
M A T E R I A L F O R
T H E R E C O R D
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[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
June 17, 2016
The Honorable Roger F. Wicker
Co-Chairman
Commission for Security and Cooperation in Europe
Washington, DC
Dear Co-Chairman Wicker,
At the May 25th Commission for Security and Cooperation in Europe
hearing ``Combatting Corruption in Bosnia and Herzegovina,'' you asked
that I provide additional details on the successes of the U.S.
Enterprise Funds in Europe and Eurasia.
Starting in the early 1990s, following a Congressional mandate, the
U.S. Agency for International Development established ten investment
funds throughout Central and Eastern Europe and the Former Soviet Union
with total authorized funding of nearly $1.2 billion, collectively
known as the Enterprise Funds. These funds were intended to jumpstart
capitalism and entrepreneurship, as the funds would provide equity
investments in newly privatized companies or start-up businesses. These
ownership stakes would enable the fund managers to participate in the
governance of the enterprises, which provided opportunities to model
best practices in law-abiding corporate governance, consistent with
free-market principles. After a period of ten or more years--during
which time many of these businesses thrived and generated jobs--the
funds would sell off their ownership stake. In many cases, the funds
made gains on their investments when they sold these stakes.
Enterprise Funds are an innovative development technique that achieved
sustainable economic development impact while catalyzing additional
investment resources. They also generated significant income that
enabled the U.S. later to endow longer-term Legacy Foundations, which
continue to pursue the overarching objective of private sector
development, while also returning substantial sums to the U.S.
Treasury. The following is a summary of the substantial economic and
development impacts provided by funds originally endowed by the U.S.
Congress in Europe and Eurasia:
Over 300,000 jobs were created or sustained through
investment and development activities;
Significant development capital was provided to SMEs and
entrepreneurs operating in early-stage transition countries where
private investment capital was limited, which helped create an
environment where the culture of private enterprise could flourish;
The Funds and their portfolio companies modeled good
corporate governance and ethical business practices demonstrating that
it was possible to operate successfully while paying taxes and not
paying bribes;
$9.8 billion of additional capital was raised from co-
investors and the creation of new private sector investment vehicles
over the life of the Funds;
To date, the Funds have returned $225.5 million to the
U.S. Treasury; and
Remaining proceeds of approximately $1.2 billion have
funded nine long-term philanthropic ``legacy'' foundations, which
continue to promote private sector development, and continue to build
goodwill between the US and their host countries after USAID has exited
the country.
The Enterprise Funds have demonstrated significant success in achieving
their original goal of promoting economic growth and private sector
development in the region. These achievements include a wide range of
tangible and intangible development accomplishments which are not
captured by traditional financial indicators such as profit and return
on investment. Still, the Enterprise Funds managed to overcome the
challenges of investing in transitioning economies while achieving,
collectively, positive overall returns on their investments even though
this outcome was not the primary focus of the initial mandate.
As might be expected, the efficacy of individual Enterprise Funds
varied by country, based on the economic and political conditions on
the ground, as well as the overall investment strategy and specific
investment decisions made by each Fund's Board and management team. The
countries in which enterprise funds operated benefited significantly
from an economic development perspective. Some of the notable
achievements include:
The Polish-American Enterprise Fund established the
largest micro-finance institution in Poland, disbursing $183 million
through 69,275 loans;
The Romanian-American Enterprise Fund pioneered
investment banking to support privatization of state owned enterprises,
including two banks and energy companies, attracting over $200 million
in FDI;
The Baltic-American Enterprise Fund developed the
necessary legal structure to support an annual $100 million consumer
mortgage industry and the first mortgage backed securities in Eastern
Europe;
The Bulgarian-American Enterprise Fund helped develop the
necessary legal structures for mortgage backed securities and real
estate investment trusts; and
The Albanian-American Enterprise Fund established a
nation-wide bank in Albania, providing Western-style credit cards,
ATMs, mortgages, commercial banking services, and $50 million in
syndicated loans for public/private infrastructure projects.
Thank you for your interest in this issue and for the opportunity to
testify.
Sincerely,
Thomas O. Melia
Assistant Administrator
Bureau for Europe and Eurasia
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