Bridges to Nowhere

This report has benefited from numerous contributions from anti-corruption policy-makers and practitioners from Southeast Europe and the world during a series of good governance fora, seminars and briefings over the course of 2022 and 2023.

The European Chief Prosecutor Laura Kövesi’s continued engagement with the region has provided inspiration for drafting and proposing bold anti-cor- ruption reforms in times of global turmoil. We would like to extend special gratitude for their unwavering commitment to promoting transparency and anti-corruption to Ambassador Jørn Eugene Gjelstad, Royal Norwegian Em- bassy in Belgrade, Ambassador Christopher R. Hill, United States Embassy in Belgrade, Ambassador Gudrun Steinacker, Vice President of the South East Europe Association, Daniel Freund, Member of the European Parliament from the Group of the Greens/Europe Free Alliance, Dragana Rakić, Member of the National Assembly of the Republic of Serbia and Vice President of the Democratic Party, Dirk Lorenz, Head of the Political Section at the European Union Delegation to Serbia, Milena Jenovai, Project Manager of Rule of Law and Anti-Corruption at the U.S. Agency for International Development who took part in the policy forum “Tackling State Capture in Southeast Europe: Delivering on the European Rule of Law Promise” on 25 January 2023 in Belgrade.

CSD would like to note the close involvement of the Bulgarian Minister of Jus- tice Krum Zarkov and the Director of Strategic Development and Planning at the Ministry of Justice Mira Ivanova, who were instrumental to strengthening public-private cooperation for anti-corruption under the Summit for Democra- cy. The meeting of the democratic cohort within the Year of Action was held in Sofia as an Anti-Corruption and National Security Forum on 21 March 2023. The forum hosted more than 100 participants from the SEE region and the Euro-Atlantic community.

Desislava Gotskova, Head of Secretariat, and Aneta Aranudovska, Anti-Cor- ruption Expert at the Regional Anti-Corruption Initiative, Sarajevo took the lead in implementing three practical webinars with over 150 participants from Southeast Europe. These showcased the best methods for identifying corrup- tion risks in the central – local level budget distribution and spending, main- streaming systemic corruption risk assessments and promoting public admin- istration integrity via regional cooperation. The creation of this report gained from discussions about the EU anti-corruption agenda with representatives from the Directorate-General for Migration and Home Affairs Janina Berg, Policy Analyst in Anti-Corruption/Organized Crime, Korneel de Schamp, Pol- icy Officer in Anti-Corruption, and Francesco Clementucci, Policy Officer in Fight Against Corruption.

Christopher Walker, Vice-President for Analysis and Studies, Assia Ivantcheva, Senior Director for Europe and Kevin Sheives, Deputy Director at the International Forum for Democratic Studies at the National Endowment for Democracy, and their teams, have shared invaluable ideas and provided encouragement in taking anti-corruption reforms forward. The Center for International Private Enterprise’s Jeffrey Lightfoot, Program Director, Europe and John Kay, Program Manager, Europe have provided guidance and ideas about private sector solutions and the role of constructive capital in tackling corruption and state capture risks. The Swiss Cooperation Programme, notably Roland Python, Head of the Swiss Contribution Office in Romania and Bulgaria and Thomas Stauffer, Head of the Swiss Contribution Office in Bulgaria, has continuously worked to strengthen anti-corruption in the region.

CSD would like to thank the R2G4P members and contributors from the public and civil society sectors in Southeast Europe, as well as R2G4P’s International Advisory Board for their invaluable support and feedback. The Albanian Ministry of Justice, the Association of Albanian Municipalities, the Albanian High Inspectorate of Declaration and Audit of Assets and Conflict  of Interest, the Agency for the Prevention of Corruption and Coordination    of the Fight against Corruption in Bosnia and Herzegovina, the Bulgarian Commission for Combatting Corruption and Confiscation of Illegally Acquired Property, the Croatian Commission for the Resolution of Conflict of Interest, the Hungarian Integrity Authority, the Agency for the Prevention of Corruption of Montenegro, the State Commission for Prevention of Corruption of North Macedonia, the Romanian National Integrity Agency, and the Agency for Prevention of Corruption of the Republic of Serbia have been among our most devoted partners.

The CSD team that ensured thorough and meticulous research and editing comprised Boyko Todorov, Senior Fellow, Dr. Alexander Gerganov, Director of the Sociological Program, and Gloria Trifonova, Analyst and Communica- tions Officer, while CSD’s interns Guillaume Pichelin, Nourane Hentati, Jason Seter, Mihaela Ivanova, Aymen Aulaiwi, and Simon Staubitzer assisted in pre- paring the background analyses, data collection, and referencing.

R2G4P national contributors:

Dr. Zef Preci and Aurora Halili, Albanian Center for Economic Research, Albania
Darko Brkan, Haris Karabegović, Ismar Milak, Zasto Ne, Bosnia and Herzegovina
Dr. Vanya Petrova, Kristina Tsabala, Center for the Study of Democracy, Bulgaria
Dr. Branko Stanić, Dr. Martina Pezer, Dr. Predrag Bejaković, and Marko Tutek, Institute of Public Finance, Croatia
Dániel Kofrán, Piotr Majda, Government Transparency Institute, Hungary
Milica Kovačević, Milena Gvozdenović, Nina Đuranović, Center for Democratic Transition, Montenegro
Misha Popovikj, Institute for Democracy Societas Civilis, North Macedonia
Simona Ernu and Andrei Macsut, Societatea Academică din România, Romania
Ana Milinković, Мiloš Pavković, and Andrija Mladenović, European Policy Centre, Serbia

R2G4P knowledge partners:

Chr. Michelsen Institute / U4 Anti-Corruption Resource Centre, Norway
Regional Anti-Corruption Initiative, Bosnia and Herzegovina
State Commission for Prevention of Corruption, North Macedonia

EXECUTIVE SUMMARY

INTRODUCTION

FISCAL RELATIONS BETWEEN CENTRAL AND LOCAL GOVERNMENTS: GOVERNANCE RISKS AND MITIGATION POLICIES

THE IMPACT OF CENTRAL-LOCAL POLITICAL ALIGNMENT ON PROCUREMENT INTEGRITY

— Public procurement integrity at local level
— Achieving transparency in public procurement
— Evaluation of the public procurement processes
— Political favouritism in local public procurement – statistical analysis and case studies
— Central-local political alignment and public procurement allocation
— Electoral competition and public procurement allocation
— Political alignment, electoral competition and public procurement allocation
— Conclusions

THE WAY FORWARD: REDUCING THE RISKS FROM CLIENTELISTIC INTERGOVERNMENTAL TRANSFERS

ANNEX 1. KEY OVERSIGHT INSTITUTIONS IN SEE COUNTRIES

ANNEX 2. LEGISLATION COVERING FISCAL RELATIONS BETWEEN CENTRAL AND LOCAL GOVERNMENT IN SEE COUNTRIES

Figure 1. Level of fiscal decentralisation in SEE

Figure 2. The intergovernmental spending channels exposed to corruption and state capture risks

Figure 3. Lack of impartiality and integrity in municipalities

Figure 4. Negative cumulative effect of compromised procurement integrity at all levels

Figure 5. Frequency distribution of winning margin

Figure 6. Frequency distribution of logged public procurement spending

Figure 7. Analysis results for alignment predictor

Figure 8. Analysis results for winning share predictor

Table 1. Features of the multi-level governance framework and key local level bodies in SEE

Table 2. Subnational government revenue by category (% of total subnational government) for the nine SEE countries, 2020

Table 3. Subnational government expenditure as share of public expenditure and GDP (2020)

Table 4. Intergovernmental transfers systems in SEE

Table 5. Description of available electoral data

Box 1. Unmasking party-political agendas at the local level: unveiling election-powered fiscal flows through data and statistical analysis (Croatia and North Macedonia)

Box 2. Fight against fraud to EU’s financial interests

Box 3. Financial management guidelines