Boris Divjak Transparency International BiH Sarajevo, 05. 03. 2003.g. Fighting corruption – improving quality and reducing the costs of public services Boris Divjak Transparency International BiH Sarajevo, 05. 03. 2003.g.

Problems in BiH Problem BiH RS (%) FBiH (%) Unemployment 25,8 25,6 25,4 Corruption 20,3 17,0 21,9 Political instability 14,0 12,3 14,9 Poverty, low standards 12,6 12,5 Crime 10,9 12,0 10,4 Economic basis 7,3 11,0 5,5 Bad inter-ethnic relations 3,3 2,3 3,9 Return of refugees 1,8 2,6 Unsatisfactory health care 1,7 1,4 Trials of war criminals 1,2 0,8 Something else 0,4 1,3 0,0 Refuses 0,3 0,5 0,1 Source: Transparency International BiH Survey, March-April 2002, sample–1200 respondents from whole BiH

Where and how much? Involvement in corruption of officials at various levels of government in BiH, by regions. Percentages relate to “high” and “very high” involvement. Source: Survey TI-BiH, 2002

State Capture How many officials are involved in corruption? Source: Research TI-BiH, 2002

Harmfulness of Corruption Source: Survey TI BiH, 2002.

Corruption and economic development Counter-proportional relation between the GDP per capita and CPI Source: IMF working papers, 2001.

Economic costs of corruption Negative effects on investment and growth Negative effects on private sector development Increase in administrative expenditures Negative effect on public sector Reduced quality of goods and services Increased poverty rate Organized crime Reduced credibility of the state

Corrupt privatization Who benefited most from the privatization (Source: TI BiH, 2002)

Corrupt public procurement What is, in your opinion, the extent of corruption in public procurement by Entity Governments (Source: TI BiH, 2002)

Corrupt business environment Example: supervisory agencies (inspection, tax officials) FBiH – inspections visited companies 2,26 times with 2,5 inspectors per visit, during 3,41 days (Source: FIAS) RS – inspections visited companies 2,55 times with 2,77 inspectors per visit, during 4,72 days (Source: FIAS) Average bribe: 120 KM (Source: SB, 2000.) 421 KM in RS and 278 KM in FBiH (Source: FIAS, 2002.) 188 KM (Source: TI BiH, 2002.) Frequency of bribe: 23,6% private entrepreneurs were asked bribe in the last year (TI BiH) 39,5% private entrepreneurs find that almost all employees in the supervisory agencies are engaged in bribe

Basic measures Increased accountability and transparency in public sector operations: public finance management, public budgets, prohibition of conflict of interest, depolitization of administration Increased competitiveness of private sector through reduction of administrative procedures, de-monopolization, termination of individual privileges Civic involvement: associations for controlling and fighting corruption, organizing political parties, influence on the leaders Comprehensive legal reform must lead to rationalization of courts and prosecution, and adoption of all laws that would contribute to their professionalization and improved efficiency. The work of the police must be subject to ongoing reforms, and in FBiH also needs to improve coordination between the different levels

Economic measures harmonized or even reduced tax rates, with transparent and rational public revenues administration smaller, faster and less expensive administrative and bureaucratic apparatus, client oriented regulatory, not repressive control system, professional and coordinated independent and efficient commercial judiciary legal regulations reduced to minimum, its optimization and functionality inexistence of trade barriers in the country or region reduced state monopoly, improvement and reduction of costs of utility services, including the infrastructure urgent completion of the privatization process, with continuous restructuring of large economic entities, and speedy liquidation where necessary equalization of rules for private sector and immediate termination of protecting state sector, as well as leaving the politics and appointments along the party lines from the the companies

Public sector management Increased public sector responsibility and transparency: management of public finances, transparent and foreseeable budgets and fiscal policy, preventing conflict of interest and establishing a professional administration Treasuries established at all levels Supreme audit institutions established and regularly report to the parliaments and public Reforms of tax and customs administrations: institutional and legal Preventing conflict of interest – implementation of the new law at all levels (with more effective implementation of the Law on Free Access to Information) Professinalization and depolitization of administration – setting up public administration + institute for staff training and strategic planning; leaving behind the principle of national quotas

Competitiveness and private sector development Increased competitiveness of private sector through removal of administrative barriers, de-monopolization and creating identical conditions of doing business for all  FIAS’s Administrative Barriers Study: a Working Group established and Action Plan of privatization of the remaining state owned capital adopted Privatization of state capital in companies and banks ongoing It is necessary to ensure continuous work of the Work Group and to update the Action Plan by increasing the ownership of the BiH agencies, not international community (e.i. Bulldozer Commission), established internal and external domestic mechanisms to monitor the implementation Unnatural monopolies must be eliminated, or the price ceilings must be set for services (for instance, telephone and electric energy) Privatization of the remaining capital must be done quickly and through the stock exchanges. It is necessary to urgently implement the law on bankruptcy and liquidation All internal trade barriers and privileged treatment must be terminated

Anti-corruption partnerships Civil involvement: anti-corruption NGO and “watchdogs”, independent institutions of state integrity, partnership with governments and public pressure Established ombudspersons TI BiH is the only BiH anti-corruption NGO OHR’s Anti-Fraud Department is active in investigating “large scale” corruption and strategy development Independent media – young sector that develops quickly OSCE has developed the rules of transparent political party financing – continuous role of the Election Commission in supervision Insufficiently defined and inexistent mechanisms of conflict of interest supervision Law on Public Services is necessary, which would cover as wide as possible range of services

State integrity system Sustainable development Rule of Law Quality of Life STATE INTEGRITY Parliament Executive power Judiciary Supreme auditors Ombudspersons Monitoring agencies Public services Media Civic association Private sector International community PUBLIC KNOWLEDGE (PUBLICITY IN WORK) SOCIAL VALUES