How the European Union Can Work with China To Advance Anticorruption Goals in the Western Balkans and Beyond

The European Union has traditionally imposed strict anticorruption rules for its lending and development projects. In the Western Balkans in particular, the EU’s Western Balkans Investment Framework attaches transparency and anticorruption conditions to EU investments. Moreover, the EU has made clear that progress on anticorruption reform is a main requirement for attaining EU membership, a core goal of all countries in the region. The EU’s approach, however, is under increasing pressure given competition from China, which has steadily ramped up its investment in Southeastern Europe—especially in the energy, transport, and telecommunications sectors—via its Belt and Road Initiative (BRI). China is willing to invest heavily in the region (largely via loans) without attaching any anticorruption conditions. This approach can be more appealing to many of the region’s (corrupt) public officials, who would like to build infrastructure quickly and under less scrutiny.

Because of competition from China and its demonstrated negative effects on local anticorruption efforts, the EU needs to reevaluate its approach. While last year the EU published a strategic outlook paper labeling China a “systemic rival” and toughened its overall approach to the country, the EU should actively pursue more cooperation with China when it comes to investment in Southeastern Europe. This does not mean that the EU should relax its strict anticorruption and governance conditionalities. The EU still retains considerable leverage in the region, and can and should continue to use this leverage to push an anticorruption agenda. But the EU’s efforts would be more effective if the EU directly engaged with China on this topic. Indeed, the EU may even be able to work with Chinese companies in ways that raise the latter’s integrity standards and safeguards. Continue reading

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

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

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