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Anti-Corruption Fight Moves Slow in Serbia

During the 10 years that Slobodan Milosevic ruled Serbia, economic activity was dominated by business groups with close links to the former president. Five years after Milosevic was driven from power, many of the same business leaders are still in place - their influence only marginally reduced. They control leading banks, are active in the media, and often have lucrative deals with Western companies.

A recent study by Washington's Heritage Foundation, a political research organization, ranked Serbia near the bottom of its index of economic freedom. The foundation's latest report says Serbia's power structure remains in the grip of what it calls war criminals, corrupt security chiefs and ultra-nationalist politicians.

University of Belgrade economist Miroslav Prokopijevic says the West has been fooled that the people now running Serbia are reformists. In economic thinking, he says, they are not much different from the socialists they replaced. He says not only the current leadership, but former Prime Minister Zoran Djindjic, assassinated two years ago, did not significantly deal with corruption. "They (Serbia's post-2000 leaders) realized immediately that they were able to get rich even without reforms. How? Through corruption," he said.

An underground criminal group is generally regarded as responsible for the assassination of Prime Minister Djindjic.

Mijat Lakicevic, editor of Belgrade's Ekonomist weekly, also says the current leadership has failed to attack corruption. But Mr. Lakicevic also labels as corrupt several of the managers of the large communist-era state enterprises that have still not been privatized.

"They know where is the money. They know where is the good equipment. They know what to buy. And they know not only the situation in their own country, Serbia, but they know the people in the West," he said.

But both economists say the situation in Serbia, bad as it is, is no worse than what prevails in neighboring countries. Mr. Prokopijevic points to an index of corruption compiled by the non-governmental organization Transparency International. "In the region Turkey is at the top. They are champions of corruption, followed by Romanians, Bulgarians and then the rest of the Balkans with the Slovenes at the end of the list," he said.

Both economists believe western businesses tend close their eyes to corruption in order to gain a foothold in local markets.

Bozidar Djelic, until recently Serbia's finance minister and a member of Mr. Djindic's Democratic Party, defends the government's anti-corruption efforts. "Is there corruption in Serbia? The answer is yes. Is it getting better? The answer is yes. When you compare it to other countries in the region (including Hungary, Slovakia and the Czech Republic) is it about the same or even better? The answer to me, given direct experience, is yes. My advice to western business people is don't enter the game. Don't give bribes," he said.

Mr. Djelic is now an investment banker, advising foreign companies on how to enter the Serbian market.

Professor Prokopijevic of Belgrade University says corruption is also behind the slow reform of Serbia's judicial system. He says those who have benefited fear that a strong, independent judiciary would send them to jail. Mr. Prokopijevic says corruption makes voters cynical. "The general voter thinks that when somebody is in power, it is natural that he becomes rich while being in power. And that is something that is very customary in this region, unfortunately," he said. "And any change is connected to changing this perception of the voter. What should be expected from the people we have elected?"

As evidence of slow reform in Serbia, the economists cite the absence of an active stock exchange and capital market, the slow pace of privatization and a relatively low level of foreign direct investment. They also cite the absence of an effective bankruptcy procedure that would close down some of the money-losing state enterprises that are a drain on the government budget.