Governance structures instituted in Bosnia and Herzegovina (BiH) by the Dayton Peace Accord and the United Nations Office of the High Representative (OHR) have facilitated widespread corruption. This paper analyses structural and cultural factors which affect the relationship between corruption and the constitutional arrangements based on the Accords. Incentives such as social protection and income generation are needed to redress local level clientelism and ethno-national loyalties and replace social contracts forged by political elites.
As a result of decentralisation policies fostered by the 1995 Dayton Accord to end the war in Bosnia, economic power in BiH is fragmented. Regional and local governments set their own budgets and have the autonomy to raise revenues. The state cannot pursue fiscal policies or economic development independently of regional and local government entities.
Ethno-nationalist political parties now control industries and enterprises. Confidence in politics, institutions and administration, including international offices, remain low. Economic development and foreign investment have been major casualties of the post-Accord political distribution of economic rewards, concessions, licenses and privatisation. Corruption is endemic at all levels.
While recent anti-corruption laws in BiH reflect good global practice, inconsistent, weak implementation, lack of political will and lack of results have decreased public trust in government institutions. In addition:
- While corruption is most pervasive at the local level, misappropriation of public funds, mismanagement of public companies and irregular privatisation leads to the top levels of power. Political elites siphon proceeds from the national treasury and transform bureaucracies into bribe-collection agencies that impede business.
- Corruption prevents businesses from investing in new operations and drives away foreign investment.
- OHR and other International agencies fail to ensure rule of law and transparency prior to disbursing grants and development loans. Their management of the country’s day-to-day business prevents local ownership of the need for integrity.
- The more transition benchmarks laid down by neo-liberal reformers have been met, including labour market liberalisation, the higher the rate of unemployment, the more resilient are informal economies and the more young people want to leave the country.
- The neo-liberal economic paradigm has been unable to force a new social contract to replace Yugoslav and republic welfare, end war-time and post-war aid dependence, eliminate ethno-nationalist clientelism and reduce reliance on the informal economy.
Can existing links between the political elite and corruption be weakened and social cohesion built around a less corrupt culture? The following factors could help guide BiH towards a political and social culture determined by the rule of law and institutional standards of accountability and transparency:
- Granting of a region of ‘exception’ to European Union accession standards or any conflict-provoking attempt to undo Dayton;
- Increased policing of corruption, including creation of a well-regulated business environment;
- Improved institutional capacity to exert controls and revision of the political roots of transition; and
- Review of the adverse impacts of macroeconomic stability and economic liberalisation.