About Megan Duffy

Megan Duffy is a graduate student at the Fletcher School of Law and Diplomacy at Tufts University. Her research focuses on governance and development in Southeastern Europe. She has previously worked in the Economic Section at the U.S. Embassy in Bosnia and Herzegovina and as a Peace Corps Volunteer in Albania.

How the EBRD Can Help Fight Structural Corruption in the Western Balkans

The European Bank for Reconstruction and Development (EBRD), created in 1991 to help former Eastern bloc countries undergoing economic transitions, is a multilateral bank that uses investment as a way to build market economies and integrate them into regional and global systems. The EBRD started out primarily investing in private enterprises with commercial partners, but its focus has since expanded to the public sector, which now accounts for over 50% of its portfolio in about a third of its countries of operation. The EBRD, like other international financial institutions, recognizes the risks that corruption and other forms of misconduct pose to the effectiveness of its projects and to its own credibility, and has taken extensive precautions to prevent misconduct by project clients and the EBRD’s own staff.

While the EBRD has worked hard to guard against corruption in the bank’s investment projects, the EBRD can and should do more to explicitly promote anticorruption reform—particularly in regions like the Western Balkans, where corruption is widespread and reforms have stalled. The EBRD, by virtue of being one of the region’s biggest lenders, and one with a good reputation, has considerable leverage and legitimacy. Of course, sustainable reform ultimately needs to come from domestic agents, and EBRD officials are understandably cautious about what they can realistically accomplish (a point that Sergei Guriev, the EBRD’s former chief economist, noted in a KickBack podcast last fall). All that said, the EBRD can and should do more to shape domestic anticorruption agendas in the countries it assists, beyond simply insisting on integrity and regulatory compliance for EBRD grants and loans.

To its credit, the EBRD has explicitly recognized and emphasized the importance of good governance to economic development, and has started to look at ways to promote lasting governance-related reforms and structural change. In pursuing this agenda in the Western Balkans, the EBRD should apply lessons learned from its more aggressive anticorruption efforts in Ukraine, and in particular should push for reforms in three main areas: Continue reading

The U.S. Qualified Opportunity Zone Program Is Vulnerable to Corrupt Manipulation by Politically-Connected Investors. Here’s How To Fix It.

The U.S. federal government’s Qualified Opportunity Zones Program, a program established as part of the 2017 Tax Cuts and Jobs Act, is supposed to drive investment to certain low-income neighborhoods (so-called “qualified opportunity zones,” or QOZs) by allowing investors to defer (or, in the case of sufficiently long-term investments, to avoid) capital gains taxes on their investments in these areas. The process of designating QOZs works as follows: First, the U.S. Department of the Treasury provides each state with a list of eligible “economically distressed” neighborhoods. This list is based on census data, but, importantly, it includes not only neighborhoods located in poor census tracts, but also neighborhoods that are adjacent to poor neighborhoods, or that overlap (even slightly) with areas designated as “empowerment zones” under a Clinton-era redevelopment initiative. Next, each state governor has the authority to nominate up to 25% of these eligible neighborhoods for designation as QOZs. The governors’ lists are then submitted to the Treasury Secretary, who has the final authority to certify these neighborhoods as QOZs. As of July 2020, 8,700 neighborhoods had been designated as QOZs.

Many have questioned the wisdom and efficacy of the QOZ program on a variety of grounds, with some characterizing the program as little more than a new form of tax avoidance for the wealthy that fails to address structural poverty. Even if one puts those concerns to the side, there are serious concerns that the existing QOZ program—and in particular, the process for selecting QOZs described above—has been corrupted by wealthy interests, who are able to exploit their political connections to get certain areas designated as QOZs, even when professional staff deem such designations inconsistent with the established program criteria. Consider just a few high-profile examples: Continue reading

Finding Politically Feasible Anticorruption Reforms in Bosnia and Herzegovina: The Case for Indirect Approaches

Bosnia and Herzegovina (BiH), like many of its neighbors in the Western Balkans, is beset by endemic, seemingly unsolvable corruption. Understandably, many Bosnian citizens would like to see the prosecution and conviction of high-level officials engaged in corrupt practices. Local activists and the international community have pressed for improvements to BiH’s judicial sector and law enforcement capacities, at least in part to make such high-level prosecutions more likely, and more likely to succeed. Yet while convictions of corrupt senior officials should indeed be one important goal, in the short term it will be very difficult to achieve, for the simple and familiar reason that political leaders will vigorously resist any changes that could put themselves at risk of criminal prosecution. Ending the culture of elite impunity in BiH, while necessary, will remain a long-term project.

That doesn’t mean, though, that there’s nothing that can be done about corruption in BiH in the short-to-medium term. Indeed, there are a number of measures, besides direct criminal prosecutions, that could reduce corruption in ways that are more indirect, and therefore less threatening to those currently in power. That feature, coupled with the fact that many of these reforms would also produce substantial economic benefits even independent of their corruption-reducing effect, makes these kinds of reforms more politically feasible. Reforms in the two following economic areas are examples of how BiH could cut opportunities for corruption and make everyday life better for Bosnians, and do so in a way that might be acceptable or even attractive to incumbent politicians. Continue reading

Albanian Political Leaders Are Using Covert Tactics to Silence Anticorruption Watchdog Groups

Civil society and investigative journalism have long played key roles in exposing corruption, and many CSOs and media watchdogs—especially newer, younger organizations—now make extensive use of social media platforms to engage with the public. In Albania, for example, relatively new organizations like Nisma Thurje and Faktoje frequently expose instances of corruption via Facebook, one of the most popular social media platforms in Albania. However, corrupt politicians are taking notice of these innovative tactics and finding equally innovative ways to silence their critics. In addition to ongoing efforts to censor the media and harass activists (see, for example, here and here), the Albanian elite has undertaken more clandestine efforts to attack civil society and journalists.

One savvy scheme involves Acromax Media GmBH (Acromax), a German digital rights company owned by two Albanians, which has close ties to Albania’s ruling Socialist Party. Acromax has contracts with over 95% of Albanian television stations, with far-reaching rights to take action on its own initiative against alleged copyright violations. For example, when a civil society group like Nisma Thurje posts a story on Facebook about a politician’s corruption, and includes a link to interviews or clips of the politician’s speeches that were originally broadcast on one of those TV stations, Acromax files a complaint with the social media platform alleging a copyright violation—even though re-sharing public content that clearly displays the original source is common practice around the world and does not meet the definition of copyright infringement. Moreover, Acromax only files such complaints with respect to stories that are critical of the government; pro-government posts, including clips from these same channels, are not flagged as intellectual property infringement by Acromax.

Distressingly, even though the claims of intellectual property infringement seem bogus, Facebook has largely complied with Acromax’s demands to take down content. This may be due in part to the European Union’s recent 2019 Directive on Copyright in the Digital Single Market, Article 17 of which makes content-sharing platforms, not just individual content uploaders, liable for intellectual property violations, which in turn has caused Facebook to employ even more automation to deal with its new legal responsibilities. Unfortunately, the automated algorithms currently in use cannot reliably distinguish genuine copyright infringement from legal re-sharing, and the algorithms are sufficiently complex and opaque that it is very difficult for CSOs to challenge the take-down decisions and get their content reinstated. Acromax has exploited these weaknesses in the system to make legitimate civil society watchdogs look like serial copyright infringers. Indeed, Acromax’s harassment campaign has been so successful that two of Nisma Thurje’s founders had personal social media pages shut down because of complaints from Acromax, and Facebook further labeled Nisma Thurje “a dangerous group” and limited the range of Nisma Thurje’s social media capabilities. The technology giant further warned Nisma Thurje that its page would be shut down entirely if Facebook received even one more copyright infringement claim.

Acromax is a well-tuned operation for squelching civil society watchdogs that threaten to expose government wrongdoing, and may serve as a model for similar censorship efforts. Tackling this problem seems daunting, but these are some concrete steps that various actors—including governments, technology companies, and the civil society groups themselves—can take to address this new kind of assault. Continue reading

Picking the Wrong Targets: Tirana Mayor Erion Veliaj’s Crackdown on Street Vendors Punishes the Victims of Corruption, Not the Perpetrators

These days if you Google “Tirana,” Albania’s vibrant capital city, you will find a plethora of articles highlighting the city’s rapid transformation and reinvigoration, with much of this positive change attributed to the vision of its young, Western-educated mayor Erion Veliaj. Mr. Veliaj, who took office in 2015 after a career in the NGO world, was a political outsider and rose to power on a wave of hope that he would introduce a new brand of governance—one that included cleaning up entrenched, systemic corruption. Mr. Veliaj frequently emphasized this theme, together with the need for greater accountability more generally. He represents a cohort of young politicians in the region who promise radical change to voters craving leaders truly dedicated to fighting for everyday people instead of special groups and political machines.

Yet despite his professed commitment to clean government, Mr. Veliaj hasn’t been terribly vocal about high-level corruption (including the scandals within his own Socialist party), nor has he done much to address concerns about a lack of transparency in public procurement. Instead, he has focused on going after some of his municipality’s most vulnerable populations, like street vendors (see here). Yes, it’s true that these vendors typically do not have the requisite licenses, and some pay bribes in order to be able to operate. However, these street vendors, who work in the informal economy out of necessity, are hardly the engine of corruption in Tirana and wider Albanian society. Rather than treating the street vendors as criminals, Mr. Veliaj would do better to adopt an alternative strategy that would both protect this vulnerable population by integrating them into the formal economy, and tamp down the associated corruption problems. Continue reading