(uption and Governance) Marija Zurnić - Corruption and Democratic Transition in Eastern Europe_ The Role of Political Scandals in Post-Milošević Serbia-Palgrave Macmillan (2018)

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MARIJA ZURNIĆ
POLITICAL
CORRUPTION
& GOVERNANCE
Political Corruption and Governance
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Marija Zurnić
Corruption and
Democratic Transition
in Eastern Europe
The Role of Political Scandals in Post-Milošević
Serbia
Marija Zurnić
Belgrade, Serbia
Political Corruption and Governance

ISBN 978-3-319-90100-8 ISBN 978-3-319-90101-5 (eBook)
https://doi.org/10.1007/978-3-319-90101-5
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Acknowledgements
I am grateful to all those with whom I had the pleasure to work dur-
ing the preparation of this book. I would especially like to thank my
colleagues Oleksandr Nadtoka, Dr. Mladen Ostojić, Dr. Bojan Bilić,
Dragomir Olujić and Dr. Slobodan Tomić for the insightful guidance,
encouragement and advice they have provided throughout this project.
I would like to express my gratitude to the New Europe College—
Institute for Advanced Study in Bucharest (NEC) for making it possible
for me to work on my book as an NEC Research Fellow. This fellow-
ship was of great importance, as it provided me with invaluable academic
experience and significant financial support during 2015 and 2016.
My thanks are extended to my dearest friends Nevena Nikolić, Jelena
Jovanović, Alan Kennedy, Dr. Zoran Milutinović and Dr. Milijana
Odavić, whose support made my field research in Serbia and the UK
possible. I also very much appreciate the time and effort that Matthew
White, Katherine Danflous and Ivan Kovanović invested in editing and
proofreading the manuscript.
Finally, I would like to give my wholehearted thanks to the people
without whom this work would not have been completed: my family and
friends in Serbia and the UK.
v
Contents
1 Introduction: Political Scandals and Transition in Serbia 1
2 Yugoslavia from Kingdom to Socialist Federation:

Political Order and Political Corruption 23
3 Milošević’s Rule and Corruption 47
4 Confronting Corruption in Post-Milošević Serbia:

Discourse and Institutions 75
5 Money Laundering and Privatisation: The Money in

Cyprus Scandal and the Privatisation of Jugoremedija 107
6 State, Interest and Political Corruption: The

Bankruptcy of Sartid and the Privatisation of C Market 143
7 Institution-Building and Institutional Corruption: The

Port of Belgrade Privatisation and Swine Flu Scandals 169
8 Conclusions: Political Scandals and Political Action 195
vii
viii Contents
Annexes 205
Bibliography 217
Index 255
Abbreviations
AC Anti-Corruption
ACA Anti-Corruption Agency
CEE Central and Eastern Europe
CoE Council of Europe
CoE CrLCC Council of Europe Criminal Law Convention on Corruption
DOS Democratic Opposition of Serbia
DS Democratic Party (Serbia)
DSS Democratic Party of Serbia
EAR European Agency for Reconstruction
EBRD European Bank for Reconstruction and Development
EC European Commission
EP European Parliament
ESOP Employee Stock Ownership Plan
EU European Union
FIA Forensic Investigative Associates
FRY Federal Republic of Yugoslavia
FYROM Former Yugoslav Republic of Macedonia
GRECO Group of States against Corruption
ICTY International Criminal Tribunal for the former Yugoslavia
IMF International Monetary Fund
IPA Instrument for Pre-accession Assistance
LC League of Communists
MONEYVAL Committee of Experts on the Evaluation of Anti-Money
Laundering Measures and the Financing of Terrorism
MP Member of Parliament
NGO Non-governmental organisation
ix
x Abbreviations
OECD Organisation for Economic Co-operation and Development

OSCE Organisation for Security and Co-operation in Europe
PACO Council of Europe Programme against Corruption and
Organised Crime
RAI Regional Anti-Corruption Initiative
SAA Stabilisation and Accession Agreement
SAI State Audit Institution (Serbia)
SBPOK Service for the Fight against Organised Crime (Serbia)
SEECP South East European Co-operation Process
SFRY Socialist Federal Republic of Yugoslavia
SIGMA Support for Improvement in Governance and Management
SDK Social Accounting Service
SPO Serbian Renewal Movement
SPP Serbian Progressive Party
SPS Socialist Party of Serbia
SRS Serbian Radical Party
SSJ Party of Serbian Unity
TI CPI Transparency International Corruption Perception Index
UBPOK Office for the Fight against Organised Crime (Serbia)
UNCAC United Nations Convention against Corruption
UNDP United Nations Development Programme
UNMIK United Nations Mission in Kosovo
WB World Bank
WHO World Health Organisation
List of Figures
Fig. C.1 Institutional formation and change in the area

of anti-corruption in Serbia (2000–2012) 215
Fig. D.1 Timeline of debates—The Money in Cyprus scandal 216
xi
CHAPTER 1
Introduction: Political Scandals

and Transition in Serbia
This book examines the politicisation of corruption in an Eastern

European country undergoing democratic transition. By exploring the
nature and dynamics of the anti-corruption discourse in Serbia and the
actors involved in it, it aims to identify the political behaviour that is
understood as corruption in public debate. The issue of corruption is
analysed from the perspective of concept formation, while exploring the
potential influence of public debate around corruption on the institu-
tional framework. More specifically, the analysis explores how different
understandings of corruption relate to the way corruption is defined in
the legal framework. The book restricts its analysis to those elements of
corruption that are present in public debate, including the concepts of
state, power, property and interest.
The anti-corruption discourse and its politicisation are explored in this
book in the context of the democratisation of a post-communist soci-
ety undergoing transitional reforms, including market liberalisation, pri-
vatisation and intensive institution-building. It is generally accepted that
post-communist transition is associated with high levels of corruption in
terms of both actual incidences and perceptions. There are many expla-
nations for this tendency. Economic reforms are often viewed as genera-
tors of structural opportunities for corruption, while the underdeveloped
legal and regulatory framework of transitional states and the inefficiency
of their judicial systems are also identified as a cause. It is certainly true
that countries in transition often experience a large number of scandals,
© The Author(s) 2019 1

M. Zurnić, Corruption and Democratic Transition in
Eastern Europe, Political Corruption and Governance,
https://doi.org/10.1007/978-3-319-90101-5_1
2 M. ZURNIĆ
which are revealed by the media and developed in the extra-institutional

realm into protracted stories about corruption and in some cases never
reach a conclusion in the courts.
The specific political and economic developments of Serbia’s recent
past make it a fascinating case study for exploring the politicisation of
corruption. The country was in the international media spotlight dur-
ing the Balkan wars of the 1990s, and for a decade (1992–2001), it was
subject to a UN embargo aimed at preventing further regional conflicts.
Although Serbia’s economic and diplomatic relations with the interna-
tional community were severed during its decade of isolation, political
developments in Serbia were followed eagerly by the international media.
However, since Slobodan Milošević was ousted from power in October
2000, ending Serbia’s international isolation, political developments in
the country have drawn significantly less attention, apart from occasional
coverage of the territorial dispute over Kosovo.
In the early 2000s, after a decade of isolation and with multiple pre-
conditions being set for the country’s re-integration into international
institutions and organisations, the post-Milošević establishment made
significant efforts to catch up with developments in the international
arena. This concurrence of political and economic circumstances pre-
sents a rare opportunity to gain further insight into how a post-com-
munist transitional society reorganised its political, economic and social
life according to new rules on the legality and morality of political action
introduced as part of transitional processes. As the book will show, cor-
ruption controversies cut across the processes of state-building and
economic development, constantly challenging the post-Milošević estab-
lishment’s political struggle for legitimisation.
The most frequently used instrument in the discursive political
struggles was accusations of corruption, that is to say the politics of scan-
dals. Moreover, a variety of issues besides corruption were discussed in
the anti-corruption debate, especially matters related to the ongoing
transitional process. Over the decade studied in the book, public debate
over corruption in Serbia became a platform for ideological contestation
between various groups in society whose members voiced their opin-
ions on the nature of corruption and what constituted “proper” political
behaviour, putting forward their vision of a desirable community and an
ideal state.
In this book, I argue that in the process of post-communist transition,
political discourse becomes increasingly contested. Political scandals and
1 INTRODUCTION: POLITICAL SCANDALS AND TRANSITION IN SERBIA 3
corruption—which might be seen as a challenge to political stability and

an obstacle to economic development—can offer a path to a more dem-
ocratic politics. Moreover, unlike the bulk of existing literature on cor-
ruption, which argues that political scandals trigger institutional change
and improve democratic institutions, this book shows that the corrup-
tion scandals analysed here have not been a corrective for the system in
Serbia.
As the book argues, the anti-corruption discourse was used by the
post-2000 political elites to distance themselves from the previous
regime under Milošević. Furthermore, the anti-corruption discourse
was used by the new post-Milošević establishment as a tool to introduce
systemic economic changes to Serbia, such as market liberalisation and
privatisation. Thus, an understanding of corruption based on a strict sep-
aration between public and private, which was first introduced discur-
sively by post-Milošević governments, was later institutionalised through
a number of anti-corruption legal measures. The change in the concep-
tion of corruption in the post-2000 era was not a single event; rather, it
is an ongoing process.
The book explores the public debate on corruption which emerged
and developed between 2000 and 2012. This period covers the terms
of office of four post-Milošević governments: the DOS government
(2000–2004), the Koštunica governments (2004–2007, 2007–2008)
and the Cvetković government (2008–2012). The book explores how
six high-profile corruption scandals affected the political community
and made the actors in public debate shift between ideological positions
over time. With the aim of aiding better understanding of the current
anti-corruption debate in Serbia, the book offers a brief overview of how
corruption has been understood in public discourse in the country’s
recent history and incorporated into the national legal framework and
state policy.
Political Scandals and Corruption

Analysing scandals is highly relevant to the study of corruption owing
to the complex relationship between the two concepts. Scandals do not
always emerge from a corrupt act, but can have a life of their own. A
high incidence of scandals can decrease trust in institutions and politi-
cians and result in political disengagement. Moreover, corruption scan-
dals can empower non-democratic political options or can encourage
4 M. ZURNIĆ
involvement in corrupt practices by creating a perception in society that

“everyone is corrupt”.
The literature written in the early stages of “scandalogy” analysed
political scandals as an extra-institutional phenomenon or an unintended
consequence of political processes (Markovits and Silverstein 1988; Doig
1984; Noonan 1987). More recent literature understands scandals from
the perspective of communication studies and defines them as mediated
events (Entman 2012; Thompson 2000; Tiffen 1999). It is generally
accepted that once a scandal has been investigated and those involved
prosecuted, the result is long-term institutional changes that prevent the
incident from reoccurring. Therefore, it is considered that political scan-
dals often trigger corrective action and thus contribute to the improve-
ment of democratic institutions.
The generic definition of corruption refers to the abuse of power for
the purpose of illicit gain, which implies conflict between the public good
and private interests. The bulk of academic research on anti-corruption
policy assumes that this conflict has been an intrinsic part of the concept
of corruption in all societies since ancient times. However, a closer look
at the problem of corruption in Eastern Europe’s post-communist coun-
tries reveals that the separation between private interests and the public
good—as understood in established Western democracies—only became
dominant with the transition to parliamentary democracy and the free
market economy in the 1990s, and in Serbia as late as the early 2000s.
The extensive economic and political transformation including changes
to ownership rights and political representation and the emergence of
nation states, has significantly affected the way corruption is understood
in the post-communist world.
In the policy sphere, a number of conventions aimed at harmonis-
ing anti-corruption efforts internationally—such as the UN Convention
against Corruption and Council of Europe initiatives—also understand
the public–private divide as being at the core of the concept of corrup-
tion. Anti-corruption policies transferred to the national level through
these instruments focus mainly on strengthening principles of good gov-
ernance and preventing private interests from harming the public good, or
otherwise ensuring the separation of the public and private spheres. The
European Union in particular pays special attention to the issue of corrup-
tion, especially as part of its enlargement processes. Candidate countries
for EU membership are expected to implement significant institutional
reforms in the area of anti-corruption policy, in line with EU standards.
After the accession of Bulgaria and Romania to the EU in 2007,

which was burdened with problems concerning corruption and organ-
ised crime, the European Commission paid special attention to this issue
in further EU enlargement in the Balkans. The accession process now
involves more developed instruments for institution-building, policy
transfer and regular assessment of progress in the area of anti-corruption.
This includes institutional reforms in line with EU standards, financed
through the Instrument for Pre-accession Assistance (IPA) and the appli-
cation of conditionality at all stages of negotiations. Over the past dec-
ade, Serbia has adopted a large number of anti-corruption laws aimed at
strengthening state institutions’ capacity to deal with the problem of cor-
ruption. However, the European Commission’s annual progress reports
have raised concerns that the main challenge faced by Serbia is not the
adoption of anti-corruption legislation but its implementation (European
Commission 2005–2012).
In addition to the Copenhagen criteria (European Council 1993)—
which oblige accession countries to establish a stable political system
and a functioning market economy, and harmonise their legislation
with the EU acquis—Serbia was additionally required to cooperate with
the International Criminal Tribunal for the former Yugoslavia (ICTY).
Among other conditions, this involved the extradition of Serbian citizens
suspected committing war crimes during the 1990s. As the book shows,
the EU accession process significantly influenced the public debate on
national and state interest, as well as how the notion of political corrup-
tion was understood.
Corruption Scandals in Serbia

This book explores one of the most striking features of political life in
post-Milošević Serbia, political scandals. Local media outlets report
on corruption on a daily basis, and a large number of corruption scan-
dals have emerged over recent decades. When analysed closely, political
scandals in Serbia reveal a great many conflicting yet coexisting ways of
understanding political reality. Moreover, competing conceptualisations
of corruption involve fiery debate over important national issues. Debate
over scandals shows that the notion of corruption encompasses concepts
including state and national interest, the exercise of power and the legiti-
macy of privatisation, which are understood in many diverse and conflict-
ing ways.
6 M. ZURNIĆ
While political scandals in Serbia have attracted vast media atten-

tion, there has been a limited response from state institutions. Most of
the scandals analysed in this book have either not been investigated or
the courts have not reached a final decision. The lack of institutional
involvement in the investigation of cases of alleged corruption has mul-
tiple implications. For example, it is difficult to argue with certainty that
the selected scandals involve corrupt practices at all from the legal point
of view, or that the alleged political misconduct is illegal. What is more,
scandals have not led to the problems, caused by informal practices,
being solved nor have they triggered any long-term changes which could
prevent such incidents from recurring.
Analysis of public discourse on corruption reveals that a wide variety
of meanings are ascribed to the concept of corruption, while a number of
ways of combating corruption are suggested by the actors in the debate.
This book approaches the notion of corruption as a cluster concept, con-
sisting of the sub-concepts of state, property, interest and power. These
concepts are highly contested in Serbian society, and consequently, the
criteria for assessing what is in the best interests of society, how a desira-
ble state should look and how ownership rights should be granted have
always been fiercely debated. It can be argued that these conflicting views
over what constitutes an act of corruption arise from the lack of consen-
sus over the elements that constitute the concept, which are also the sub-
ject of dispute.
Democratic Transition in Serbia

After the general elections in October 2000, Slobodan Milošević, the
incumbent President of Yugoslavia (which at the time consisted of Serbia
and Montenegro), was removed from the political scene along with his
Socialist Party of Serbia. The change did not go smoothly, as Milošević
refused to acknowledge the election results. This triggered street demon-
strations and provoked revolutionary enthusiasm among Milošević’s
opponents. Soon afterwards, Vojislav Koštunica was officially recognised
as the new president and the Democratic Opposition of Serbia (DOS)
coalition formed a government. These developments are known in pub-
lic discourse as the Fifth of October Revolution and are often presented
as a new era in Serbian politics. Since the fall of the Milošević regime in
2000, the Serbian political landscape has been characterised by processes
of intensive political and economic transformation.
As in many other countries in Eastern Europe, transition in Serbia

can be characterised as a multifaceted change, involving democratisa-
tion, marketisation and state- and institution-building processes. Under
Milošević’s rule, transition had a specific character and rhythm that dis-
tinguishes it from transitional processes in other post-communist coun-
tries in Eastern Europe. More specifically, as Chapter 3 shows, the
Serbian economy in the early post-communist period can be character-
ised as state capitalism with close links—both formal and informal—
between the political and economic spheres. The rules of parliamentary
democracy were often disregarded by Milošević’s establishment, includ-
ing the right to free and fair elections. As for the economic sphere, pri-
vatisation was not a priority for the governments of the 1990s, which
resulted in the coexistence of a variety of ownership rights, including
state-owned, private and collectively owned property.
Serbia’s transition is therefore unusual, in that certain aspects of the
economic system from the communist era persisted until the early 2000s.
For example, some economic enterprises were owned and managed by
the companies’ own employees, as was the case in the self-management
economy of communist Yugoslavia. The first post-Milošević government,
run by the DOS coalition, introduced changes to legislation that priori-
tised private ownership rights over state and collectively owned property.
This diversity of ownership rights, and the way the sweeping privatisation
processes put an end to it, had a significant influence over how private
interests and the public good were understood in society.
Moreover, Serbia’s emergence as a nation state has also been a com-
plex process. The armed conflicts of the 1990s and the consequent UN
sanctions led to unstable political relations with neighbouring countries
and severe economic difficulties. Sovereignty and territorial integrity
have been prominent issues in Serbian politics over the past two decades,
owing to the dissolution of the Yugoslav Federation and ongoing territo-
rial disputes pertaining to Kosovo.
Discourse and Institutions: Theoretical Background

As this book explores anti-corruption discourse, it is important to note
that discourse is conceptualised here as both ideas and the process of
communicating them (Schmidt 2010, 2011; Schmidt and Radaelli
2004). Furthermore, institutions are understood as being simultaneously
both fixed and contingent. This is because the constituent elements of an
8 M. ZURNIĆ
institution—its members and the ideas associated with them—represent

the main force in the process of institutional change (Schmidt 2010,
2011). This conceptualisation of institutions as flexible discursive struc-
tures that are open to change is suitable for analysing the anti-corrup-
tion discourse in Serbia, as the majority of high-profile political scandals
in Serbia have not been investigated or prosecuted by state institutions.
This enables narratives about corruption to remain open-ended over an
extended period of time and to be discussed within informal institutions.
Therefore, a conceptualisation of institutions as structures and processes,
that is as fora in which members of the political and business elites, aca-
demia and NGOs voice their opinions, is most suitable for analysing the
anti-corruption discourse in Serbia.
However, it is important to emphasise the difficulty of defining ideas
in a way that means they can be observed and their impact on politi-
cal behaviour measured (Lowndes and Roberts 2013; Peters 2012). This
methodological limitation is common to all ideational theories (Berman
1998: 15), owing to the difficulty of conceptualising ideas as phenomena
separate from their context and irreducible to other variables. Despite
this, an increasing number of studies have been conducted with the aim
of using ideational theories to explore the causal relationship between
ideas and institutional change. For example, Sheri Berman used a pro-
cess-tracing method to explore the ideas that led to various policy solu-
tions (Berman 1998, 2010), while Vivien Schmidt observed matched
pairs of country cases in which the impact of discourse on welfare adjust-
ment was assessed while other variables were controlled (Schmidt 2002).
Moreover, other studies observed the impact of discourse on political
action through analysis of the speeches and debates of political elites
(Kajsiu 2015; Wincott 2010; Rich 2010; Art 2006; Dobbin 1994; Hsu
2001). The limitations of discourse theory in terms of the causal rela-
tionship between the ideas identified in public debate and institutional
change also had an impact on this research. As Chapter 4 explains in
more detail, this analysis traces only the direct effect of the studied scan-
dals on the institutional framework in the form of long-term measures at
the state level that sanction practices perceived as corruption.
Another challenge faced by all discourse analysts is how to present
public debate as “realistically” as possible. It is impossible to depict the
multifaceted and fluctuating nature of discourse, because every analyt-
ical approach inevitably involves “freezing” the communication flow
in order to tease out its content and dynamics. Therefore, it is only
possible to observe a specific moment in the constant fluctuation of

meaning in public debate. No matter how hard one attempts to pres-
ent public debate in the most accurate way possible, the multiplicity of
voices and the changeability of the discourse cannot be preserved in its
entirety.
It should be noted that there was a significant risk of “flattening”
the discourse in this research. For the above reasons, the fluidity of the
debate and the variations in arguments over a decade could not be pre-
sented in all their detail. Therefore, as Chapter 4 explains, the analysis
foregrounds several ideational streams in public debate which include a
variety of other less pronounced and somewhat differently articulated
voices. Moreover, the analysis shows how the actors in the debate altered
their positions as they joined different groups of actors over time.
In an attempt to draw a more complete picture of this fluctuation,
this study includes quantitative data relevant to the topic. Surveys and
opinion polls which were conducted during the study period (Mihailović
1997, 2000, 2010; Lazić et al. 2013) offer insightful information on the
extent to which the divisions in the political community over the issues
that surfaced in public debate about corruption scandals have shifted
over time. For example, the survey results show levels of perceived cor-
ruption, citizens’ expectations of transitional reforms, their attitudes to
the EU accession process and so forth. The sources are informative and
insightful, as they include research on the views of representatives of
Serbia’s political and financial elites (Lazić 2016) as well as members of
the public (Mihailović 1997, 2000, 2010). The data were collected in
several rounds between the 1990s and 2012, which allows comparison
over time. However, quantitative data only apparently avoid the afore-
mentioned pitfalls related to the multifaceted and fluctuating nature of
discourse and its truthful representation. This is largely because quanti-
tative approaches start with the assumption that the social reality is fixed,
and what is more that it is measurable and comparable.
Bearing this in mind, the book is not an attempt to analyse the
full extent of public debate, nor to isolate the ideas debated and ana-
lyse them separately from a sociopolitical or historical context, but has
an entirely different ambition. As Bojan Bilić points out in his study
of anti-war discourse in the (post-)Yugoslav space, “[t]he objective
is … to map the options and provide a snapshot reflective of both the
particular historical moment in which it is taken and the choices made by
the researcher him/herself” (Bilić 2012: 42). In line with this comment,
10 M. ZURNIĆ
when analysing discourse, self-observation is as relevant as observation of

the subject matter; rather than insisting on the comprehensiveness of her
approach, the researcher may benefit more from being aware of her own
position in relation to the research topic.
The Political Scandals Selected for Analysis

This research is designed in a way that allows in-depth analysis of the
embedded case studies to provide better insight into the nature of the
anti-corruption discourse and how it changed over time and enables
the impact of the discourse on the institutional framework to be ana-
lysed. The book examines six high-profile corruption scandals that arose
over a twelve-year period (2000–2012) covering the terms of office of
four post-Milošević governments: the money in Cyprus Scandal, the
Jugoremedija privatisation, the Sartid bankruptcy, the C Market privati-
sation, the Port of Belgrade privatisation and the flu vaccine scandal. The
criteria according to which these case studies were selected are detailed in
Annex A.
Objectivist and constructivist strategies were combined in order to
ensure that the most representative scandals were selected. The objec-
tivist approach considers that the main criterion for considering a story
to be a scandal is the extent of media coverage about it, or the num-
ber of media reports. Constructivists, however, identify scandals accord-
ing to the public reaction to the alleged misconduct. It is important
to stress the relevance of the constructivist approach to selecting scan-
dals, as the anti-corruption debate has been formalised in various ways
other than through media coverage, such as by printing and distribut-
ing leaflets about workers’ rights during the privatisation of state com-
panies, screening films made of strikes and organising public debates in
abandoned factories. These events were arranged outside the remit of
state institutions and were not reported in the media. Furthermore, the
objectivist criteria for the selection of case studies do not include com-
munications on Twitter, Facebook, blogs and other media, even though
these sources have played an important role in recent years in spread-
ing information about corruption scandals and organising anti-corrup-
tion activities. Consequently, these forms of communication may have
had an influence over whether certain corruption stories were perceived
as scandals. Furthermore, state institutions have initiated investigations
into most of the scandals studied here. This suggests that the selected
scandals are highly relevant to the anti-corruption discourse and have

provoked reactions from the domestic anti-corruption body and interna-
tional authorities.
More recently, the current government, which took power in July 2012,
has intensified the investigation and prosecution of several of the corrup-
tion scandals selected for this research, including the C Market and Port of
Belgrade privatisations. Moreover, members of the incumbent political elite
often refer to the controversial money transfers to Cyprus, the privatisa-
tions of Jugoremedija and Sartid and so forth in their public speeches. This
can be understood as support for the argument that studying the selected
scandals can aid better understanding of the anti-corruption discourse in
Serbia. However, the reopening of these cases has significantly influenced
the dynamics of the field research conducted for this book, as a large num-
ber of Serbian civil servants and politicians who were invited to participate
in the research refused to be interviewed and did not want to, or were not
allowed to, share information and discuss the cases.
The Multiplicity of the Anti-corruption Discourse

in Serbia
As has been noted, any attempt to categorise voices in public debate is

just an attempt to map the existing possibilities or produce a snapshot
of the main ideational currents in public discourse. However, despite
its limitations, differentiating the positions in the debate allows certain
insights to be gained and conclusions to be reached. On the basis of
the content of the news media, several broad positions can be identified
concerning the misconduct seen in corruption scandals. One group of
actors did not consider that the alleged transgressions involved in the
scandals were cases of corruption. These actors were mainly members of
the incumbent political elite and civil servants with strong direct influ-
ence on anti-corruption policies. Their views were often reported in
the country’s mainstream print and electronic media, such as the daily
newspaper Politika or the national broadcaster Radio-Television Serbia
(RTS). In this book, this group of actors appear in the debate around all
six high-profile corruption scandals. It can be argued that these actors
interpret scandals from the perspective of the legal definition of corrup-
tion. They therefore tend to react to criticism by emphasising the lack of
evidence proving that the misconduct involved a breach of the law.
12 M. ZURNIĆ
Another group took the opposite view, considering that the alleged
misconduct involved in the scandals represented a form of corruption.
From this perspective, strengthening the rule of law was identified as
the most efficient way of preventing similar scandals from recurring.
According to this view, more consistent implementation of existing leg-
islation, the adoption of new laws and regulation of areas vulnerable to
corruption would reduce the number of transgressions in politics and
increase citizens’ trust in politicians, institutions and the political system.
Moreover, members of this group mostly promoted anti-corruption pol-
icies based on legal punishment in order to increase the political elite’s
accountability and citizens’ level of trust.
This group’s arguments appear in all six case studies, reported by a
wide range of media organisations, ranging from those critical of the
government to those with a mainstream orientation. A majority of
members of this group worked for independent oversight bodies with
a mandate to advise on institutional change in the anti-corruption area.
However, their suggestions are not legally binding for decision-makers,
who are largely advocates of the first discourse. For example, the State
Anti-Corruption Council and the Anti-Corruption Agency are mainly
focused on raising public awareness about the harmful effects of corrup-
tion and designing integrity plans. These institutions have no mandate to
investigate cases of corruption or prosecute the implicated parties.
Another group identified in the anti-corruption debate argues that
corruption can only be curbed if radical changes to the system are intro-
duced. This critical discourse emphasises that the corruption-prone
environment of Serbia’s existing political system means that the official
anti-corruption measures promoted by the first two discourses do not
reduce systemic corruption in the country. Actors in this group thus
advocate for existing institutions in the sphere of politics and the econ-
omy to be replaced by new organisational forms, such as informal net-
works that promote workers’ solidarity, self-management production
and so forth. The actors in this discourse do not attempt to provide
evidence for political corruption and rarely insist that their conceptual-
isation of corruption be legally codified. Moreover, the main argument
in this discourse is that corruption originates in the incumbent political
parties’ elitist approach to transitional processes. According to this view,
a majority of the population is excluded from decision-making processes
around economic and political reforms, such as privatisation, which are
the main generators of corruption scandals. This group consists mainly

of members of grass-roots organisations, such as minor-shareholders’
associations, critical non-governmental organisations and so forth. Their
views are rarely represented in the mainstream media, but are dissemi-
nated by digital technology and the Internet, or at demonstrations and
rallies. A somewhat different articulation of this discourse surfaced at the
end of the study period, and this time it was members of the business
community who advocated this view. From this perspective, various state
policies, including taxation and granting subsidies to specific economic
sectors, represented legalised and institutionalised corruption as they dis-
torted the functioning of the free market.
It is of the utmost importance to emphasise that the aforementioned
groups of actors and the understandings of corruption they articulated
in discourses are not mutually exclusive. On several occasions, as will
be pointed out in the analysis, certain actors advocated more than one
discourse, or different groups of actors formed discourse coalitions that
increased the visibility and transformative potential of their ideas.
The Anti-corruption Debate and Political Dialogue

in Serbia
There is a widespread belief that the numerous scandals in Serbian pol-

itics do not contribute to the fight against corruption; rather, they
strengthen the belief that all Serbian politicians are dishonest, that state
institutions are inefficient, and what is more, that scandals cause politi-
cal disengagement and apathy. This research challenges that view, show-
ing instead that the anti-corruption discourse represents a vibrant and
dynamic public space in which social groups voice their discontent and
passionately and persistently defend their interests. Moreover, this book
argues that corruption scandals have created an authentic network of
meanings—a political language—which has made it possible for a specific
form of discursive conflict to take place in public debate. As the book
shows, in Serbia scandals represent politics by other means, involving
persuasive communication, careful consideration of one’s opponents’
views and readiness to join the debate in order to defend certain inter-
ests. Although the public debates studied did not lead to a consensus on
important issues—such as what constitutes an act of corruption, or what
state interest is and how it should be defended—the discursive conflicts
14 M. ZURNIĆ
achieved one important goal: they brought a political dialogue to a

Serbian society that is deeply divided along political, social, regional, eth-
nic and gender lines.
As the book will show, during the study period (2000–2012) there
was a lack of consensus in the anti-corruption discourse over a variety of
issues affecting Serbian society. Actors took positions that were strongly
opposed to each other, and on some issues were irreconcilable. The
literature on democratisation in Serbia, based on modernisation the-
ory, tends to account for this tendency by interpreting it as dissonance
between society’s norms and values (for empirical elite research, see
Lazić 2011; Cvejić et al. 2010). From this perspective, a concurrence
between norms and values is necessary for the reproduction of social
relations, but it is not unusual in post-communist transition countries for
there to be a pronounced lack of concurrence. Moreover, according to
this view, the dissonance between norms and values in countries under-
going democratisation is expected to decrease as capitalism is consoli-
dated and processes of social stratification advance.
However, political developments since the end of the study period in
this book suggest that it is possible to reach different speculative con-
clusions. It is reasonable to argue that public discontent with state poli-
cies and the lack of opportunities to bring about change through existing
structures have triggered the emergence of new forms of political action.
The emergent autonomous activism and the empowerment of the civic
sphere have brought about a significant reconfiguration of Serbia’s polit-
ical sphere. Ever more local pressure groups and civic movements are
getting involved in politics, organising civic protests and acts of non-vi-
olent direct action and mobilising citizens to take part in acts of civil
resistance, addressing burning social issues such as the rise in unemploy-
ment resulting from de-industrialisation and controversial privatisations.
A number of other issues are affecting local communities, including the
ongoing process of intensive gentrification, the lack of adequate envi-
ronmental protection policies and so forth. Some civic organisations in
Serbia have developed into more formal structures and are already taking
part in party politics, running in local elections, campaigning for polit-
ical candidates or working to increase voter turnout, such as the initia-
tive Don’t let Belgrade d(r)own and the association It’s Enough–Restart.
Other groups remain active in extra-institutional politics, organising
direct action in situations where this could help solve a social issue.
It is reasonable to believe that civic activism in Serbia will become a

more widely accepted way of engaging in politics and that local initiatives
will develop stronger connections with regional and international civic
movements. In this respect, the discursive conflicts about corruption scan-
dals that are the focus of this book can be viewed from today’s perspective
as a decade-long attempt by various social actors to become involved in
managing the social issues that concern them. As this book shows, the
attempt was unsuccessful, since the public debate on corruption failed to
bring about any long-term change that was able to prevent and punish
the practices the actors in the public debate understood as corruption.
Thus, it is likely that what the bulk of the democratisation literature
interprets as a normative-value dissonance is more than just a sign of
disharmony and a deviation from the “generally accepted” understand-
ing of social reality. It is more productive from an academic and politi-
cal perspective for researchers, practitioners and citizens to recognise and
understand the potential for social change that civic activism can bring to
Serbian politics. If this trend of civil resistance gains momentum in the
near future, it could potentially create the conditions for a more demo-
cratic politics.
The Wider Relevance of the Book

The aim of this work is to contribute to existing studies of corruption
by examining discourse and concept formation in a post-communist state
undergoing democratisation. It challenges the view that the concept
of corruption has always been understood as a conflict between private
interests and the public good, as these concepts are defined in Western
democracies. The book also explores how the anti-corruption discourse
has been used for political mobilisation and in government politics gen-
erally. This approach contributes to the debate over the link between a
lack of consensus on how to define corruption and the perceived level of
corruption, resulting in dissatisfaction with democracy.
Secondly, the book constitutes an addition to the literature on polit-
ical scandals. It is the first work to thoroughly examine the relationship
between corruption scandals and transitional processes and challenge
the view that corruption scandals are only possible in consolidated
democracies.
Furthermore, it contributes to the debate over the effectiveness
of externally driven anti-corruption policies and thus supplements the
16 M. ZURNIĆ
literature on Europeanisation by offering a critical perspective of top-

down processes that fail to become functional at the national institu-
tional level.
Lastly, an important contribution of this book is its innovative frame-
work for parallel analysis of anti-corruption discourse and policy within
the context of national and international political developments. This
framework advances research on corruption and is applicable to other
transitional states and societies. For example, Montenegro, Bosnia and
Herzegovina, the Former Yugoslav Republic of Macedonia (FYROM)
and Kosovo (the latter under UN and EULEX administration) also deal
with corruption in contexts of peacekeeping, institution-building and
state-building, in addition to the EU accession process. Researchers
looking at political corruption in post-Soviet states, including Ukraine
and Russia, may find this approach fitting, as armed conflict and eco-
nomic sanctions in those countries result in trends similar to those seen
in Serbia, as analysed in this book.
The book communicates with a wide range of audiences, such as
scholars concerned with the study of corruption or discourse analysis and
political scandals. Political sociologists interested in the modern history
of the Balkan region’s transitional countries, and Serbia in particular, will
find the book of interest. Political scientists may gain better insight into
party politics and institutional formation, as the book explains how key
policy issues are developed in new democracies. Furthermore, the indi-
vidual case studies can be read as self-contained accounts of each par-
ticular subject area. For example, Chapter 5 will appeal to students of
nationalism and Chapter 6 to global political economy scholars, while
Chapter 7 contributes to debates on global health security. In addition to
its academic audience, the book’s empirical content will appeal to practi-
tioners, non-governmental organisations and media outlets dealing with
corruption and organised crime. The book combines the terminology of
corruption studies, political theory and narratives, making it an interest-
ing and engaging read for the broader public beyond academia.
Plan of the Book

The book is structured as follows. Chapters 2 and 3 offer a brief over-
view of the recent past of Serbia and Yugoslavia. Chapter 2, Yugoslavia
from Kingdom to Socialist Federation: Political Order and Political
Corruption, starts with a brief discussion of the Kingdom of Yugoslavia,
but largely focuses on the socialist period. Chapter 3, Milošević’s Rule

and Corruption, focuses on Serbia during the 1990s, following the
demise of the socialist state. Both chapters explore the notion of cor-
ruption, including the concepts of state, power, interest and property, as
they were understood in public discourse and in the institutional setting
of the given historical context.
Chapter 4, Confronting Corruption in Post-Milošević Serbia: Discourse
and Institutions focuses on the Serbian authorities’ anti-corruption
efforts since Milošević’s removal from power in 2000. The chapter
focuses first on the dynamic relation between discourse and institutions
and presents a binary classification for scandals based on the level of
institutional response, drawn on empirical evidence from the Serbian
case. The chapter then shows that the post-2000 authorities in Serbia,
driven mainly by external forces such as the EU accession process, con-
fronted the issue of corruption by strengthening the legal and regulatory
framework. The chapter argues that the newly established institutions
contributed to the consolidation of a notion of corruption based on the
distinction between the public and private spheres, as it is conceptualised
in international frameworks, including that of the EU.
The next three chapters analyse six political scandals, discussing the
nature of the anti-corruption debate and its impact on institutions.
Chapter 5, Money-Laundering and Privatisation: The Money in Cyprus
Scandal and the Privatisation of Jugoremedija, presents two political
scandals from the early post-Milošević years relating to organised crime
and privatisation. The Money in Cyprus Scandal concerns the investiga-
tion of a money-laundering scheme that the Milošević regime developed
with Cypriot banks. The second scandal, concerning the privatisation of
pharmaceutical company Jugoremedija, focuses on distributive conflicts
that emerged as a reaction to the irregularity of the privatisation process.
The contested concept of corruption here includes the notion of individ-
ual economic rights and the possibility of equal participation for all social
actors in the economic transformation process.
This chapter describes the emergence of a political discourse on
corruption in Serbia and explains the role this discourse played in
Milošević’s removal from power in 2000. Furthermore, the chapter gives
an account of the re-conceptualisation of political corruption in public
debate in Serbia. The chapter’s central argument is that political corrup-
tion shifted from being seen as a betrayal of national interests or a failure
to protect state sovereignty during the Milošević regime to a conception
18 M. ZURNIĆ
based on a clear distinction between the public and private spheres. At

the core of the new concept of corruption were the use of public money
for private gain and a lack of transparency in political decision-making.
The findings suggest that the Money in Cyprus scandal contributed sig-
nificantly to the delegitimisation of the Milošević regime, resulting in it
being characterised as authoritarian and corrupt. However, the scandal
did not produce any long-term impact on anti-corruption institutions.
The chapter argues that the anti-corruption discourse in Serbia lost its
transformative potential soon after the change of regime.
Chapter 6, State, Interest and Political Corruption: the Bankruptcy of
Sartid and the Privatisation of C Market, focuses on two scandals con-
cerning the privatisation of the Sartid steel factory in the heavy industry
sector and the C Market food retail company. The discussion reveals the
relation between the concepts of corruption and the national interest.
At the time the scandals surfaced, Serbia was dealing with problems of
territorial integrity, state sovereignty and national identity, owing to the
dissolution of the state union with Montenegro in 2006 and Kosovo’s
declaration of independence in 2008, concurrent with the EU accession
process, which had started in 2005. The chapter argues that the under-
standing of corruption in public debate was largely based on the concept
of state interest, which was articulated differently by the various actors
involved in the discussion. There was a sharp division between views that
saw the state’s interest as promoting and strengthening the free market
or alternatively as protecting the national market from foreign capital.
Chapter 7, Institution-Building and Institutionalised Corruption:
the Port of Belgrade Privatisation and Swine Flu Scandals, analyses two
highly controversial scandals over the privatisation of part of Belgrade’s
transport infrastructure—the Port of Belgrade—and the procurement of
flu vaccine. These scandals emerged in a period marked by economic cri-
sis and unstable government (2008–2012). In both cases, the anti-cor-
ruption debate focused on the selectiveness of the state’s anti-corruption
efforts. Here, the concept of political corruption was contestable in the
sense that participants in the anti-corruption debate accused all other
actors of reinforcing corruption mechanisms, either discursively or by
adopting inadequate legislation—the latter being known as institutional-
ised corruption. The chapter argues that these two scandals had no direct
influence on the institutional anti-corruption framework, which agrees
with the findings of the previous two empirical chapters.
The final chapter, Conclusions: Political Scandals and Political Action,

presents findings on how corruption was understood in public debate
in Serbia. The research on which this book is based suggests that con-
ceptualisations of corruption in public discourse differ significantly from
its legal definition, while opinions on what corruption actually is remain
irreconcilable. Furthermore, the irreconcilable conceptualisations of cor-
ruption seen in Serbian public debate since 2000 result from a lack of
consensus on other concepts that are incorporated in the understanding
of corruption in Serbia, including state, property, interest and power.
The book also contains annexes, which provide more detailed infor-
mation. Annex A offers information about the research design, includ-
ing the criteria used to select the case studies and details of the fieldwork
conducted in Serbia. Annex B outlines anti-corruption legislation and
institutions in Serbia between 2000 and 2012. Annex C illustrates institu-
tional change in the area of anti-corruption in Serbia can be characterised
as gradual and layered, while most legal changes were externally driven
by Serbia’s EU accession process. Lastly, Annex D offers a timeline of the
debate over the Money in Cyprus Scandal over the past decade.
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CHAPTER 2
Yugoslavia from Kingdom to Socialist

Federation: Political Order and Political
Corruption
In order to understand the current anti-corruption debate, it is

important to have insight into how the concept of corruption has devel-
oped in Serbia’s recent history. This chapter offers an overview of the
modern history of Yugoslavia and Serbia, but, rather than giving a
detailed account of political and economic systems, the chapter focuses
on concepts relevant to how corruption is understood, including those
of the state, interest, power and property.
The Second World War was followed by Yugoslavia’s socialist period
and the workers’ self-management system. Yugoslav socialism was
based on direct democracy, both in the economy through democ-
racy in the workplace, known as workers’ self-management, and in the
political sphere through the delegate system of representation, that
is self-governance. In the early 1990s, with the disintegration of the
Socialist Federation, this system was abolished and replaced by parlia-
mentary democracy and the free market economy in all parts of the for-
mer common state of Yugoslavia through a process widely referred to as
the post-communist transition to democracy. What is specific for Serbia,
compared to other parts of former Yugoslavia, is that the first decade of
the transitional process developed under circumstances of international
isolation of the country during the rule of Slobodan Milošević.
This chapter aims at identifying the roots of the concept of corruption
in the time previous to Milošević’s rule, that is, during self-management
socialism. However, the process of tracing the origin of contemporary

https://doi.org/10.1007/978-3-319-90101-5_2
24 M. ZURNIĆ
debate inevitably leads further back into the past. Therefore, the chap-
ter will briefly discuss corruption and anti-corruption institutions in the
period prior to socialism, that is to say, under the Kingdom of Yugoslavia
(1918–1945). This will illustrate the swift changes in the social and eco-
nomic order in the modern history of Yugoslavia and the impact of these
changes on understanding of the concept of corruption.
The Kingdom of Yugoslavia

Before the Second World War, Serbia was part of the Kingdom of
Yugoslavia. This was a common state of Serbs, Croats, Slovenes and
other nations liberated from the Ottoman and Austro-Hungarian
Empires in the nineteenth century. The Kingdom was established as a
constitutional monarchy in 1918 and ruled by the Serbian Karadjordjević
Dynasty. Academic literature, relevant for the topic of corruption,
focuses mainly on two topics—the type of political rule during this
period and the type of institutional organisation in the Kingdom (Djokić
2003; Antonić 2002; Koštunica 1991). The first group of academic writ-
ing highlights the relevance of the ideological conflicts and nationalist
tensions in the Kingdom, as well as the emergence of a Yugoslav identity.
The political infighting, deriving from problems of nationality, generated
political instability, including physical conflicts and assassinations of pub-
lic figures.
The Kingdom of Yugoslavia underwent a period of rule by out-
right dictatorship declared by King Aleksandar Karadjordjević in 1929
as a response to the nationalist infighting. The dictatorship lasted until
1934 when King Aleksandar Karadjordjević was assassinated in France
by Croatian and Bulgarian political opponents. The monarchy had ene-
mies among the communists too. The communist party of Yugoslavia
was founded in 1919 and was an underground movement. It consid-
ered the Kingdom an intrinsically unjust and conservative state. During
the Second World War, the Kingdom of Yugoslavia collapsed. The
Yugoslav communists took part in the war against the Nazi army and
their local collaborators and, as winners, established a communist state of
Yugoslavia in 1945.
The second group of academic writing concerning the period of
the Kingdom of Yugoslavia focuses on its institutional organisation.
They do agree that democratic principles were not fully respected in
2 YUGOSLAVIA FROM KINGDOM TO SOCIALIST FEDERATION … 25
the Kingdom of Yugoslavia. However, in their view, the concept of the

legal state did exist and was an important part of the legal and politi-
cal culture (Koštunica 1991: 40). Moreover, these authors argue that
the Constitution of the Kingdom of Yugoslavia (1921) was comparable
to the most advanced constitutions of the liberal-democratic European
states at that time. According to Koštunica (Koštunica 1991: 46), the
Yugoslav monarchy was successful in harmonising individual rights with
social rights and this, in Koštunica’s view, was not the case in the com-
munist Yugoslavia that followed.
The literature on corruption in the Kingdom of Yugoslavia suggests
that political corruption and scandals were widespread and harshly crit-
icised in public debate (Kulundžić 1968; Šuvaković 2011; Bulatović
and Korać 2006). The best known corruption scandals were those
relating to bribery of high-ranking politicians and civil servants when
making contracts with French investors in public construction work,
the lumber industry, the arms industry and others. Moreover, accord-
ing to Šuvaković (2011), the parliamentary majority for adopting the
Constitution in 1921 was secured by bribing several members of parlia-
ment. The same author mentions the case of bribing high-ranking civil
servants in the French education system in order to secure funding for
Serbian students in France.
The available archival material and research in this area suggest that
corruption under the Yugoslav Monarchy was not sporadic or caused
only by the lack of ethics of some individuals. The entire state, as
Šuvaković (2011) points out, functioned through informal deals; state
institutions were used for private or political interests, and there was no
genuine political will to hinder corruption. According to this author,
corruption scandals were often used for political infighting and the anal-
ysis of the corruption mechanisms suggests that the Yugoslav Monarchy
was a captured state:
… the circle of prominent state officials and political individuals involved

in corruption deals was wide: from King Alexander as the chief of the state,
through prime ministers, ministers, generals, high-ranking officers to the
lowest clerks. When the corruption affairs would appear, these were reg-
ularly managed by the king himself and the ruling clique, with the goal
of eliminating unwanted political opponents from the political match.
(Šuvaković 2011: 68)
26 M. ZURNIĆ
State Socialism in Yugoslavia

The liberation of Yugoslavia from the Nazi forces was conducted by
the Yugoslav communists, who acted independently and relied far less
on the Soviet Red Army than the anti-Fascist movements in other East
European countries. The struggle with the fascist forces and afterwards
with the pre-existing state, the Kingdom of Yugoslavia, was an authen-
tic revolutionary process and a source of legitimacy for the post-war
Yugoslav communists and their leader Josip Broz Tito.
Following the Second World War, the new state of Yugoslavia was
organised as a communist federation with state socialism. In the case
of Serbia, this implied a planned socialist economy coordinated by a
Planning Ministry which designed and implemented an ambitious five-
year development plan. The nationalisation of the means of production
in the industrial sector and the collectivisation of land in the context
of agrarian reform were managed by the state administration and in
Čavoški 1983). Good relations with the Soviet Union and other com-
line with the instructions of the Communist Party (Lampe 2003: 190;
munist countries in Eastern Europe ended in 1948, owing to the ideo-

logical split with Stalin.1 Yugoslav communists were expelled from the
Communist Information Bureau (Cominform) and Yugoslavia aban-
doned the Soviet type of socialism. The multiple changes included halt-
ing the nationalisation policy and abandoning the first five-year plan
before it was fully accomplished.
As for corruption and informal activities, they were rife, especially in
the period immediately after the war. The main area of corruption and
illegal enrichment was the trade in food, hygiene products, coal and
wood for heating, and other provisions for supplying the general pop-
ulation. In 1945 came the law curbing unauthorised speculation and
economic sabotage. Involvement in corrupt practices and illegal enrich-
ment were considered acts against the people and socialist society and
were, therefore, severely punished. This law stipulated punishments that
ranged from fines to imprisonment with forced labour and confiscation
of property, and even execution by shooting. The communist authorities
enforced anti-corruption policies in order to prevent illegal enrichment
and to protect the interests of the working class. Thus, the fight against
corruption did not conceal its ideological dimension and was aimed at
eliminating practices and customs inherited from the previous capitalist
period.
The Yugoslav Road to Socialism

The workers’ self-management system was established in Yugoslavia
in the 1950s, after the Soviet type of socialism was abandoned and
lasted until the late 1980s. The ideological assumptions of the workers’
self-management system are discernible in current anti-corruption debate
in Serbia. Several decades after this political and economic system had
ceased to exist, and its legacy remained present in Serbian society, both
in institutional form and in public discourse. The following section will
offer an insight into understanding of corruption during the socialist
period in Yugoslavia and Serbia by analysing the concepts of power, state,
interest and property, and the way in which these concepts were formal-
ised in an institutional framework and used in public debate.
The Workers’ Self-Management System

The exclusion of the Yugoslav communists from the Communist
Information Bureau (Cominform) in 1948 significantly changed their
position in international politics, since political and economic cooper-
ation with the Soviet Union and other communist countries in Eastern
Europe was substantially reduced. On the national level, the Yugoslav
leadership started searching for a solution to the economic problems in
the country and to the nationalist tensions inherited from the Kingdom,
which culminated during the Second World War. After abandoning state
socialism, the Yugoslav leadership created a distinct socialist system
named “workers’ self-management” or “the Yugoslav path to social-
ism”. The system had its theoretical foundation in Marxist–Leninist
literature, and its organisational roots can be traced back to the Paris
Commune.2
In Soviet-type communism, the state and its administration played a
crucial role in organising and managing politics and the economy. On
the other hand, in parliamentary democracies, elected representatives
enjoy legitimacy and are in a legal position to make decisions on behalf
of their constituency. The self-management system, however, was con-
sidered a third road—substantially different both from representative
democracy with a capitalist economy and from the Soviet type of social-
ism based on state property and a planned economy. Jović explains it this
way:
28 M. ZURNIĆ
These two Others (the inter-war bourgeois Yugoslavia and the Soviet type
of socialism) became the two landmarks against which the Yugoslav mir-
ror-image was to be created. The new Yugoslavia became constructed as
an antipode to its own past and to the other model that claimed to be the
blueprint of socialism. (Jović 2003: 165)
Yugoslav socialism was based on the assumption that social unity in the
political and economic spheres was necessary for the progress of the
whole of society. Different and opposite interests, according to this view,
ought to be aligned and coordinated and should not remain in conflict.
The alignment of interests should be arranged directly between the polit-
ical and economic actors, without any external mediator, that is the state
institutions. Moreover, the goal of Yugoslav socialism was to achieve “a
stateless form of social order” through the process of withering away
from the state (Jović 2009). The way to achieve this goal was to apply
the socialisation of property and decentralisation of political and eco-
nomic decision-making processes. Socialisation [podruštvljavanje] was
the process of changing ownership rights from state or private ownership
to collective ownership. Socialisation and decentralisation of institutions
and economy entailed employees deciding on the organisation of their
work, without interference from the state authorities. These processes
(socialisation and decentralisation) were first applied to the economic
sphere, that is to say, to the means of production in the industrial sec-
tor and to the system of decision-making in the political sphere. They
were later expanded to include public services, with the goal of avoiding
bureaucratisation of the system.
Decision-making processes in politics and economy were organised on
three levels and involved high degree of participation. In the workplace,
employees formed their workers’ councils through the process of direct
democracy. The workers’ councils coordinated the work of the economic
entity with the help of area specialists and company managers. Secondly,
workers’ councils were involved in higher-level decision-making in the
state. Through the so-called delegate system, workers’ councils would
enter the People’s Assembly and decide about political and economic
issues at the level of their region or of the state. Lastly, the Communist
Party—or the League of Communists, as it was named in Yugoslavia—
had a significant influence on decision-making and was in a way the high-
est level of the decision-making process. In line with Marxist–Leninist
assumptions, the Party was the vanguard of society and had the final say
concerning any political or economic issues.
The goal of the Yugoslav self-management system was to provide a

novel and unique approach to human organisation, eliminating eco-
nomic and social inequalities, reducing alienation and increasing motiva-
tion of the workers. Indeed, the system of self-management allowed for
significant growth and development of the country. The improvement in
living standards and in education, healthcare, social security and work-
ers’ rights was significant. According to some sources, Yugoslavia had an
industrial and GDP growth rate comparable to other developing nations
with capitalist economies (Bonin and Putterman 1987: 103). The work-
ers’ self-management system was applied in several socialist countries of
Eastern Europe, including Hungary and Poland, and was implemented
for a while in France and Algeria. Contemporary examples include fac-
tories in Venezuela and Argentina, as well as the Employee Stock
Ownership Plan (ESOP) in the USA. However, it is important to men-
tion that only in Yugoslavia was the self-management system applied as
a long-term political project over the entire country, and not just imple-
mented in particular enterprises within the capitalist economy.
The Withering Away of the State

Yugoslav leaders considered that the state should not have the dominant
role in organising social and economic activity in Yugoslavia. According
to their view, based on Marxist–Leninist theory, socialist Yugoslavia was a
transitional form of state organisation. The Yugoslav state was supposed
to wither away and produce a state-free classless society. However, the
immediate goal was not to eliminate the state, as it played an important
role with its mechanisms of social regulation. At the early stage of the
ongoing “socialisation” of institutions, Yugoslav society was not able
to take over all the functions of the state. Predrag Vranicki (1979: 236)
summarises this idea in the following way: “However much the state may
be of the first importance to the working class in the initial phase of the
revolution, it is so only in the form of its withering away”. The state,
therefore, is relevant as long as it is an instrument of liberation of social-
ist forces, that is, as long as it is withering away (through the process of
socialisation).
In the context of Yugoslav self-management, the state institutions and
the presence of the system were perceived as threatening and “external”
to the relation between man and society. The ideal was to enable man to
control and change the system, which is possible only if man is outside
the system and above it. Therefore, Yugoslav literature from the socialist
30 M. ZURNIĆ
period identifies the presence of state institutions in social, political and

economic activity as one of the greatest threats to the improvement of
socialist relations. At the same time, the institutions were considered
necessary for the immediate implementation of public policies, since
social relations under socialism were not yet ready to take over. Another
insightful illustration of this position is offered by Jovan Djordjević in his
work on Yugoslav constitutional law:
In the broadest theoretical and historical sense, the socialist ‘answer to the
riddle’ called man … is not in the system (not even in the ‘best’ and ‘most
perfect’ socialist system), but in the withering away of any system, any
political and external construction (and any abstraction related to man).
(Djordjević 1978: 142)
This ideological position was reflected in the Constitution of Socialist

Yugoslavia from 1963 and 1974 (Lapenna 1972). According to Jovan
Djordjević (Djordjević 1978: 141), the Constitution of Socialist
Yugoslavia prioritised the relation between man and society, as opposed
to the “etatist-individualist constitutions” of the bourgeois democra-
cies, which instead define the relation between state authorities and cit-
izens as individuals. However, the contradiction between the real needs
for a functioning state, which, at the same time, was ideally expected to
wither away, suggests a discrepancy between social reality and ideological
assumptions about the concept of state in socialist Yugoslavia.
Unity of Power
In the post-war Yugoslavia, the Yugoslav communists declared dictator-
ship of the working class. The guiding principle of this type of rule is to
satisfy the immediate and future economic interests of the working class.
The economic interests include, among others, the abolition of class dif-
ferences. Therefore, according to Marxist theory, the dictatorship of the
proletariat is just a transient form of society in transition towards a class-
less society. The Yugoslav communists considered that there was no dif-
ference between state and society, or, to put it better, that there should
not be any difference between them. State and society, according to
this view, should function in unity and harmony. Based on the assump-
tion that political power was a direct outcome of the people’s will, the
Yugoslav leadership considered that there was no need for the protection
of citizens from the state. Moreover, the process of socialisation of state

institutions was expected to reduce the state’s influence in social and
political life and to result in the withering away of the state.
The political system in Yugoslavia, as in other communist countries,
was not based on the principle of trias politica, i.e. there was no sepa-
ration between the legislative, executive and judicial branches of power.
On the contrary, political power was concentrated in the People’s
Assembly [Narodna skupština], which was considered the immediate
and supreme representation of the people’s will. Therefore, the People’s
Assembly, which possessed both legislative and executive powers, enjoyed
legitimacy to make decisions and to act upon them. As there was no divi-
sion of power (between the legislative, executive and judicial branches),
political engagement of judges was not banned. Furthermore, political
affiliation of judges was advantageous, and it was often the case that act-
ing judges were members of the League of Communists. Consequently,
the judiciary was also exposed to and shaped by ideological and political
influences.
Moreover, the People’s Assembly bridged the political and economic
spheres by incorporating labour’s representatives as active members
through the aforementioned delegate system. The merging of the politi-
cal and economic spheres was named in Yugoslav literature as “social and
political symbiosis of democratism” (Djordjević 1978: 318). Owing to
such an organisational structure and to the nature of power, it is not pos-
sible to discuss the issue of the conflict of interests in socialist Yugoslavia,
or at least not in the same way as this issue is understood in capitalist par-
liamentary democracies.
Čavoški (1991), argues that the organisation of the state did not provide
One of the harshest critics of the Yugoslav socialist system, Kosta
the basic conditions for upholding the rule of law. Firstly, on account of
the direct influence of the League of Communists on political and eco-
nomic developments, Yugoslavia could not function as a constitutional
of law. Secondly, Čavoški argues, the rule of law was hindered by the lack
state [Ger. Rechtsstaat], which is a prerequisite for the exercise of the rule
of trias politica and by the power concentrated in the institution of the

People’s Assembly. Lastly, the critics argue that the influence of the League
of Communists was the supreme level of decision-making and could not
be constrained legally in order to defend civil rights and freedom.
32 M. ZURNIĆ
Coordination of Interests
In order to understand the notion of interests in socialist Yugoslavia, it is
important to understand the ideological assumption that, in a truly dem-
ocratic society, political and economic interests should not and cannot be
met separately. It was assumed that the political stance of an individual
was conditioned by that person’s class affiliation. Moreover, a political
party as an organisation was considered the means of representing and
defending the interests of a specific class. Thus, the one-party system,
according to this view, reflected social unity, that is the common polit-
ical orientation of all members of society and their common interests.
Likewise, the existence of a multi-party system reflected the existence of
different social classes which was, in itself, proof of material inequality
and lack of democracy in the economic sphere. Yugoslav communists
argued that capitalist states with multi-party political systems were falsely
democratic societies, as their political pluralism was nothing more than
the reflection of underlying economic inequalities in those societies.
Far from not separating political and economic interests, communist
ideology promotes the unity of individual and collective interests. The
Programme of the League of Communists explains the link between per-
sonal and class interests and the way these are expected to improve in
Yugoslav self-management democracy:
The liberated worker becomes an independent creator and manager in his

own material and political interest, as well as in the interest of society. He
does not view society through his wage, as being something determined
by forces external to the production process. His wage depends primarily
on his own commitment and on the success of the whole productive oper-
ation. Therefore, he will increasingly see his personal income as a result of
the overall progress of socialist society and its collective needs. (Program
SKJ 1980: 158)
However, the Yugoslav self-management system did not deny the vari-
ety of interests which were not related to class. The Yugoslav leadership
considered that it was possible to reconcile or bridge non-class differ-
ences. Edvard Kardelj, one of the leading ideologists of the Yugoslav
self-management system, introduced the notion of democratic plural-
ism of self-management interests [demokratski pluralizam samoupravnih
interesa] (Mirčev 1983; Mirić 1982; Bibič 1981). These interests were
coordinated through self-management contracts which involved direct
alignment of interests between members of society. There are two

important aspects to these legal acts. Firstly, they were aimed at coor-
dinating the interests of the worker-self-managers when managing their
enterprises. Secondly, these contracts were expected to become increas-
ingly extra-legal documents in order to avoid any form of administrative
coercion or intervention from the state in the area of labour relations.
That is to say, contracts that regulated labour relations enabled enter-
prises and organisations to start collaboration directly and without any
mediation by the state. Thus, the economic actors could decide, based
on their interests and independently from the state authorities, who they
would work with and align their interests with.
This legal procedure was part of the wider notion of “classless law”
(Dimitrijević 1974). As Yugoslav socialism aimed at evolving into a classless
society, any form of fixed legal system would be contradictory to that goal.
Therefore, the process of socialisation, that is de-etatisation, was applied to
the legal system as well in the early 1950s. It entailed working people and
citizens coordinating and aligning their interests directly and in relation to
the interest of society as a whole. The alignment of interests was supposed
to take place through direct contact and in concrete situations and was
not supposed to depend on any set of legal norms pre-defined by the state
authorities. The final goal of the socialisation of the legal system was that
labour contracts should emerge from reality and practice, not from apply-
ing institutional norms equally to all real situations. This tendency in legal
practice was named self-management normative practice, as opposed to the
tradition of the constitutional state, that is Rechtsstaat.
The self-management labour contracts were aimed at facilitating the
influence of the workers on their work environment and in their daily
life. However, during the period of socialism, there was increasing con-
cern regarding the possible abuse of the labour contracts. For example,
Momčilo Dimitrijević, in his 1974 academic article, argued that it was
necessary to “prevent the use of self-management contracts and social
compacts for the benefit of certain economic organisations and commu-
nities of working people regardless of the results of their work, and to
preclude imposing techno-bureaucratic and centralistic solutions in the
name of ‘higher’ goals and interests” (Dimitrijević 1974: 109).
It is important to mention that Yugoslav socialism assumed that
“the new socialist man”, who developed within the new socialist real-
ity and actively created it, would overcome the need to prioritise his
private interests, as it would become evident that the common interest
34 M. ZURNIĆ
of society as a whole included his personal interests too. This change

did not involve only education, but the raising of class consciousness
of labour. As Predrag Vranicki pointed out, the main goal of Yugoslav
self-management socialism was to facilitate the “realization of the histori-
cal right of the working class and the working man to overcome all those
institutions which have exercised the power of thought and have ruled
in his stead, and often against him; to gradually bring about a society in
which management will cease to exist as a political function by becoming
management of people, and will become universal for society by manag-
ing things” (Vranicki 1979: 245).
Collective Property
In line with Marxist theory, Yugoslav socialism abolished individual
ownership of property, since it was considered a tool for exploitation
and domination, and it generated alienation of labour from society.
However, the aim was not to abolish property as such, but to make it
belong to society, that is to “socialise” it, as a step in the transforma-
tion of Yugoslavia into a classless society. From the legal point of view,
the concept of collective ownership rights in Yugoslavia [društvena svo-
jina] did not involve particular or individual ownership rights. Individual
employees were not allowed to sell or inherit the capital goods of their
enterprise, but they had the right to use the capital and distribute the
income resulting from their economic activity (Gams 1982; Lukić 1964;
Djordjević 1971; Pusić 1988).
Furthermore, collectively owned property allowed for free associ-
ation of work in self-management enterprises. The above-mentioned
labour compacts were designed to facilitate labour relations in the
self-management system. The 1963 Constitution stated that collective
ownership rights over the means of production were aimed at allowing
everyone, and under the same conditions, to engage in economic activ-
ities (Djordjević 1978). It is important to mention that Yugoslav social-
ism promoted the reward principle of “remuneration according to work
performed” as the main allocation principle in the self-management
enterprises. Since work performed was the only way of apportioning
ownership of the products of labour and since the means of production
were collectively owned and available to everyone under the same condi-
tions, the Yugoslav communist leaders believed that, in the self-manage-
ment system, exploitation of labour was abolished.
Collective property was a permanent feature of Yugoslav self-manage-

ment from when the system was established in the early 1950s until it
was abolished in the early 1990s. In Serbia, the 1990 Constitution rec-
ognised collective property as equal to private and state-owned property.
Only in the early 2000s, at the time of the mass privatisation policy, was
collective property legally defined as the form of property that ought to
be transformed into privately owned property, as Chapter 3 will discuss
in more detail. Criticism concerning collective property at the time of
socialism and later went in two directions. Firstly, social property was
perceived as the main obstacle to class differentiation, which was consid-
ered by some critics as necessary for economic development. Moreover,
the promoters of private property considered that collective property was
an obstacle for the working class to identifying and articulating real inter-
ests and to actually defending them in trade unions and workers’ organ-
isations. Secondly, it was considered that common property was unable
to guarantee individual rights and unable to ensure property protection.
Therefore, social property during socialism and later was increasingly
considered the major obstacle to the establishment of democracy of the
Western type (Vuković 1996a, b).
Another highly relevant feature of the Yugoslav self-management
socialist economy was the use of the market as an allocation mecha-
nism instead of centralised planning of the allocation of resources as in
the Soviet type of socialism (Le Grand and Estrin 1989). It was assumed
that market mechanisms enabled the free exchange of goods and ser-
vices between economic actors, avoiding the involvement of the state. It
was also considered that the market was the most efficient mechanism
for coordinating the decentralised economic decision-making that the
Yugoslav economy aimed to achieve. Critics from the leftist perspective
argued that the market and increasing economic liberalisation over time
led Yugoslav society away from socialist values (Flaherty 2009). On the
other hand, liberal critics argued that it was the collective property that
was an obstacle to market mechanisms being functional as they could
work only with private property (Flaherty 2009). Regardless of the dif-
ferent views on the functionality of the market in the Yugoslav social-
ist economy, it should be pointed out that Yugoslavia, more than other
socialist states in Eastern Europe, had had experience of market princi-
ples before capitalism was established in the early 1990s.
36 M. ZURNIĆ
Challenges and Contradictions of Yugoslav Self-Management

Critical views on Yugoslav self-management socialism came from several
directions, but they mainly argued that the system had several inher-
ent contradictions. Firstly, there was the role of the Communist Party
and its influence in the political, social and economic spheres. The Party
had significant influence on workers’ councils and trade unions too,
even though the role of these organisations was to convey and defend
the interests of working people in the workplace. Secondly, criticism was
directed against the increasing reliance of the Yugoslav economy on mar-
ket mechanisms which resulted in growing unemployment, inflation and
macroeconomic instability. The problems in the economy were increas-
ingly compensated for by further marketisation, which generated more
inequalities in terms of income, etc. Other problems were shortages,
inflation and high foreign debts, and structural unemployment. Another
critical view, however, identified collective property as the cause of dis-
tortion of allocative functions of the system, which consequently affected
its efficiency.3
The principle of joint work and the delegate system did not yield
the expected results, as they did not further the process of socialisa-
tion of institutions and relations, but contributed to their etatisation.
Furthermore, establishing pluralism of self-management interests did not
change political and economic relations in practice, and critics demanded
political pluralism and democratisation (Marjanović and Simeunović
1990). Ideological contradictions of self-management included the con-
cept of the withering away of the state. As was commented in the pre-
vious section, the processes of de-etatisation, that is the “socialisation”
of state institutions, of the legal system and of the means of production,
were in contradiction to the real need of society for institutions as media-
tors and facilitators of social and economic life.
Over the decades of self-management socialism in Yugoslavia, the
labour force had not achieved a high enough level of education and
political engagement to take over the ideology that had been introduced
top-down. Therefore, it is difficult to talk about the dictatorship of the
working class, as the labour force was increasingly more fragmented,
less politically engaged, was easily influenced by the managerial elite in
the decision-making process in the workplace and was often unaware of
the institutional and legal channels for action. On the other hand, the
managerial staff increasingly strengthened their position of power in the
self-management enterprises. In theory, the managers were answerable to
the workers’ councils, and their task was to coordinate the produc-
tion process with the workers. In reality, the managers had close rela-
tions with the state bureaucracy and Party structures. Thus, the effective
influence on the company’s work went in a top-down direction. This
tendency resulted, among other things, in a striking pay gap and a dem-
ocratic deficit in decision-making in the workplace (Novaković 2007,
2008; Lazić 1987, 1994; Farkas 1975; Obradović 1972). Consequently,
these developments generated social stratification and class differences.
It is important to note that Yugoslav self-management was not a sys-
tem with predictable stages of development and lacking an internal
dynamic. On the contrary, from the time the system was introduced until
its abolition in the late 1980s, the Yugoslav leadership implemented sev-
eral economic reforms aimed at improving the system and adapting it
to both local needs and the international context. Some contemporary
researchers argue that, with time, the Yugoslav self-management system
had become little more than a gradual restoration of capitalism (Musić
2014; Vratuša 2012). They argue that, in the context of increasing mar-
ketisation, the self-managed enterprises became autonomous economic
actors oriented mainly towards advancing their own interest through the
market. As a consequence, in place of solidary with other members of
their class, workers tended to identify their interests with the company
they worked for and with those of the company’s management (Musić
2014; Novaković 2007, 2008).
In the late 1980s, a new generation of political leaders came to
power in Yugoslavia—familiar with the international environment and
frequently educated abroad, they were ready and able to undertake
reforms in order to address the shortcomings of the system and grow-
ing economic inequalities. Slobodan Milošević stood out among the
leadership of the new generation in Serbia as, on several occasions, he
expressed interest in the grievances of various social groups. According
to Musić (2013, 2014), Milošević’s speech in 1987 to the striking work-
ers self-managers of the Rakovica factory in Belgrade was one of the cru-
cial turning points in his political career. He gained the workers’ trust by
promising to address their economic problems promptly and adequately.
Furthermore, since the late 1980s, Milošević was openly supportive of
Serbs living in Kosovo—the autonomous province within Serbia—and
attentive of their complaints concerning the oppressive Kosovo govern-
ment, then mainly composed of ethnic Albanians. By showing interest
and apparently trying to address these burning issues, Milošević gained
38 M. ZURNIĆ
popularity and wide support in Serbia. As Chapter 3 will show, once in

power and during the dissolution of Yugoslavia, Milošević addressed the
growing economic inequalities and ethnic tensions in Serbia by centralis-
ing government authority—for example, by abolishing the autonomy of
the two Serbian provinces, Kosovo and Vojvodina—and by introducing
state capitalism.
Corruption in Socialist Yugoslavia

As was explained in the previous sections, the institutional design and
normative understanding of power, state, property and interests in social-
ist Yugoslavia was based on Marxist–Leninist theory. Therefore, it is diffi-
cult to discuss the concept of corruption in the way it is understood and
defined in capitalist parliamentary democracies. The aim of this section,
however, is to identify the tendencies and practices which were consid-
ered most corrosive to Yugoslav socialist society and which were relevant
topics in public debate and in designing public policies.
At the normative level, the Yugoslav self-management system iden-
tified structural inequality as the major threat to socialist values and a
generator of social injustice. More specifically, it was the form of ine-
quality resulting from economic, political and other privileges and based
on exploitation and appropriation of others’ work. Yugoslav communist
leaders considered that structural conditions for economic and other
social activities had to be equal for all members of society. For example,
it was considered that collectively owned property and free association
of work enabled all members of society an equal starting position in eco-
nomic activities. On the contrary, private ownership of the means of pro-
duction was the main obstacle to social justice. Furthermore, according
to Marxism, political pluralism necessarily implies economic pluralism
and, consequently, many forms of inequality. Therefore, it was only the
interests of the working class that were promoted as a rule, while plural-
ism applied only to non-class interests. This was the way to secure social
unity and avoid atomisation of society, which was considered a threat to
socialist relations.
Furthermore, there was a tendency to reduce the involvement of the
state in all spheres of social life in order to prevent bureaucratisation of
the system. The process of socialisation of state institutions was aimed at
avoiding a binary division between state and society and, consequently,
at eliminating the risk of conflict between private and public interests.
Thus, it is considered that further strengthening of the institutional and

legal framework in all areas, including anti-corruption measures, would
not be as efficient in curbing corruption as is assumed in the capitalist
parliamentary democracies. Lastly, it is difficult to discuss corruption
within the same framework as corruption in parliamentary democracies
owing to the different institutional design and the lack of division of
power. The People’s Assembly, which was based on unity of power, was
considered a legitimate legislative and executive organ combined in a sin-
gle institution and was by no means considered a generator of political
corruption.
The normative understanding of corruption, however, existed in
parallel with real life, where informal practices were widespread. Petty
corruption was rife in socialist Yugoslavia. It mainly involved bribery,
nepotism and misuse of funds in the health system, education and other
sectors. These practices affected collective property, which was often
appropriated, destroyed or misused. Collective property in Yugoslavia
was legally protected by the Yugoslav socialist Constitution, laws and
regulations. The Constitution of socialist Yugoslavia defined key ele-
ments for preventing corruption, including transparency in the work of
state institutions and accountability. The Constitution defined several
forms of responsibility which, apart from the legal kind, included social,
political, functional, professional and moral responsibility. However, in
reality, the nuanced differentiation of such responsibility had no true
meaning, as responsibility for being involved in corruption amounted to
legal responsibility. Control mechanisms proved to be inefficient in curb-
ing corruption and in fully protecting collective property from misuse.
Thus, it is not surprising that street-level corruption—bribery, connec-
tions, nepotism and other informal practices—became symbolic of the
Yugoslav self-management system.
As a consequence of the decentralisation of the economy in
Yugoslavia, the managerial staff of socialist companies had wide auton-
omy in decision-making. From the normative perspective, they were
answerable to their employees for their companies. However, as the cor-
ruption scandals described hereafter suggest, the managerial staff under
socialism were closely related to the Party and coordinated their business
in line with the demands of the political authorities. This enabled social-
ist managers to secure their position in the system and to strengthen
their influence in society. As will be explained in the forthcoming chap-
ters, a large number of socialist managers successfully adapted to the new
40 M. ZURNIĆ
business environment during the 1990s and to Milošević’s politics, as

well as to the post-Milošević era of mass privatisation and increased mar-
ketisation of the economy in Serbia. Former socialist managers proved to
have the relevant experience, financial power and political connections to
develop into the capitalist business elite.
According to the interviewees and the archive material used in this
research, it can be argued that different economic interests did indeed
exist, and in certain situations, they were not aligned and harmonised
with the collective interests of society. What makes corruption in social-
ist Yugoslavia specific is the way the conflict of interests was institution-
alised and resolved. Corruption scandals under socialism were mainly
managed by top-level Party members belonging to the relevant author-
ities and high-profile corruption scandals rarely emerged in the media.
Issues related to corruption were discussed by the relevant Party organs.
The discussions were documented in the reports and notes of meetings,
which are publicly available as archival material. This suggests a high level
of transparency of the Party and state institutions. However, the docu-
ments had very limited impact and rarely reached a wider public. Media
coverage of political corruption was limited too. It increased significantly
during the final decade of the socialist period in the 1980s.
Among the most debated corruption scandals was certainly the one
involving the company Agrokomerc in Bosnia. The scandal emerged in
late 1987, when the local press published that this large food-processing
company had issued unbacked promissory notes worth approximately
400 million US dollars, affecting a large number of Yugoslav banks and
enterprises. In line with Article 114 of the Yugoslav Criminal Code, the
general manager of the company, Fikret Abdić, was accused of com-
mitting a counter-revolutionary act that harmed the socialist self-man-
agement system of Yugoslavia. The scandal was discussed at the highest
level of the Party in Bosnia, since several high-ranking politicians were
also involved in the case. In the media, the scandal was referred to as
Agrogate, owing to its complexity and its wide impact on the local econ-
omy and politics. In public debate, the Agrokomerc scandal is often
interpreted, within the wider context of the former Yugoslav state, as
a precursor to the conflict in Bosnia and the dissolution of Yugoslavia.
Literature and media reports on this scandal have recently been more
(Andjelić 2003; Baker 2015; Burg and Shoup 2000; Čuvalo 2010; Donia
frequent owing to the 30th anniversary of the emergence of the scandal
and Fine 1994; Keil 2013).

Other stories about high-level corruption involved cases of informal

commission fees, which managers of Yugoslav enterprises used to charge
their foreign partners when arranging business contracts abroad. These
informal practices were common in negotiations and business arrange-
ments with Asian or African countries, such as Algeria, Libya, Iraq and
others, mainly in the sectors of trade and construction.
It is important to mention the institution which, in socialist
Yugoslavia, was highly relevant to the control of financial transactions
and, therefore, to the prevention of misappropriation and corruption.
That institution was named the Social Accounting Service [Služba društ-
venog knjigovodstva SDK]. As stipulated by the relevant legislation, the
SDK played the role of public accountant, registrar and controller of the
use of public funds. In practical terms, the SDK constituted an interme-
diate level of control in financial transfers between individual enterprises
and the tax administration. The SDK’s mandate was to check all financial
transfers in the country, including taxation, payment of salaries and wel-
fare benefits. It was established in 1962 and organised at local, regional
and federal levels. From the legal point of view, the institution was inde-
pendent and autonomous. This form of institutional control prevented
financial misappropriation or public budget deficit due to lack of pay-
ments. Thus, it ensured that the public services, such as education, the
police, the military and so forth, had secured public funding. Moreover,
it contributed to the protection of workers’ rights as it guaranteed that
social benefits (health insurance, pensions, etc.) were paid. The SDK
changed its name several times, but its functions and its position in the
institutional setting remained unchanged during the period of socialism.
After the dissolution of Yugoslavia, the SDK was transformed differently
in the different republics. In the case of Serbia, it ceased to exist in 2003
and the debate on its alleged redundancy is still ongoing.
In summary, some of the topics of the current anti-corruption debate in

Serbia can be traced back to the country’s recent history. The abrupt
changes in the social and economic order have shaped how concepts key
to understanding corruption—including the state, power, property and
interest—were embodied in the institutional framework and discussed in
public debate over the past century. The Yugoslav communist leadership
followed the Soviet-type socialism until 1948, when, owing to a political
split with Stalin, Yugoslavia abandoned the Soviet model and developed its
42 M. ZURNIĆ
own “road to socialism”. This political and economic system was based on
common property, that is ownership of the means of production did not
belong to the state or specific individuals, but to society as a whole, that is
to say to those who used the property for production. In line with Yugoslav
understanding of Marxism–Leninism, this type of ownership rights ensured
equal access to the means of production for all members of society and thus
prevented the emergence of economic and social inequalities. The notion of
political power implied unity of power, instead of the division of power into
three branches—legislative, executive and judicial. The People’s Assembly,
the institution that was considered to enjoy the highest level of legitimacy,
embodied unity of power, as it held both legislative and executive pow-
ers and included representatives from both political and economic spheres
(these interests—political and economic—being considered inseparable).
The state was conceptualised as unity of society and state institutions, in
contrast to the division between state and civil society in capitalist parlia-
mentary democracies. Moreover, the state was expected to wither away and
to be replaced by direct coordination of interests between the members of
society without the mediation of state institutions. The process of causing
the state structure to wither away was considered to be the most effective
antidote to the otherwise inevitable dominance of state institutions and the
bureaucratisation of society. However, the Yugoslav communists considered
that the state was necessary until socialist relations in society were suffi-
ciently developed to take over the role of the state institutions.
In this context, it is difficult to discuss the issue of corruption in terms
of conflict between private and public interests, as corruption is under-
stood in Serbia today. This certainly does not imply that, during the
socialist period, Yugoslavia was free from cases of embezzlement, fraud,
theft or other informal practices aimed at satisfying individual interests
and ambitions to the detriment of society. On the contrary, such practices
were widespread and the public was generally aware of them. However,
corruption scandals rarely emerged in the media and cases of informal
practices at high levels in economic and political institutions were gener-
ally discussed and resolved by the relevant Party organs. It is important to
mention that real economic inequalities were present in Yugoslav society
and, on an ideological level, were often explained as being logical in that
they reflected individual differences between members of society. What
was considered to be the major threat to the self-management economic
system and to socialist values in Yugoslavia—that is, the equivalent to the
threat of corruption today—were tendencies having the potential to cause
structural inequality and, consequently, the stratification of the society.
Notes
1. The Yugoslav-Soviet split emerged in 1948 due to the attempt of the
Yugoslav and Bulgarian communists to create Balkan Federation by merg-
ing the Balkan states—Yugoslavia, Albania, Greece, Bulgaria and Romania.
This attempt was perceived by the Soviet communists and their leader
Stalin as a nationalistic and independist act, contrary to the communist
principle of internationalism.
2. Literature on the Yugoslav self-management system available in English
includes the following publications: Horvat (1971, 1982), Woodward
(1995), Kavčič (1990), Taylor et al. (1987), Lebowitz (2010, 2012),
Unkovski-Korica (2014).
3. For full review of criticism of the self-management, see Horvat (1971,
1982), Woodward (1995), Sekelj (1990), Supek (1970, 1979).
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CHAPTER 3
Milošević’s Rule and Corruption
Dissolution of the Socialist Federal Republic of Yugoslavia (SFRY)

started in the early 1990s when several regions gained international rec-
ognition as independent states—Slovenia in 1991, Croatia and Bosnia in
1992, Macedonia in 1993. Serbia and Montenegro, however, remained
in a common state—the Federal Republic of Yugoslavia (FRY)—which
was founded in 1992 with the aim of being the legal successor to the
previous Yugoslav state, the socialist federation.
The dissolution of Yugoslavia was followed by armed conflicts in
Slovenia, Croatia and Bosnia and Herzegovina. In May 1992, the
UN Security Council imposed economic sanctions on the FRY for its
involvement in the armed conflicts in Bosnia and Croatia. The sanc-
tions, which included embargoes on trade, travel and transportation,
were tightened in 1993 but lifted in October 1996 after the Dayton
agreement was signed (1995), ensuring peace in Bosnia. However,
the USA and other countries maintained the outer wall of sanctions,
which blocked the FRY’s membership of international institutions.
In mid-1998, when the conflict in Kosovo escalated, the USA and
EU again imposed bans on foreign investments and on official transac-
tions by FRY entities.
Economic and political changes developed simultaneously in all coun-
tries of former socialist Yugoslavia. However, the nature and dynamics
of those processes varied across the former Yugoslav space, owing to

https://doi.org/10.1007/978-3-319-90101-5_3
48 M. ZURNIĆ
the specific sociopolitical circumstances and historical background of

its regions. In Serbia, those processes took place in the context of eco-
nomic stagnation and international isolation, which resulted, among
other things, in new forms of corruption and a specific understanding of
informal practices.
It is important to mention that the Communist Party of Yugoslavia,
named the League of Communists (LC), was dissolved in the early
1990s.1 In Serbia, the leader of the League of Communists was
Slobodan Milošević. In July 1990, the League of Communists of
Serbia merged with other political organisations from the socialist era,
such as the Socialist Alliance of Working People, to form a new politi-
cal party—the Socialist Party of Serbia (SPS). Milošević was the founder
and the first leader of the Socialists. In many respects, the Socialist Party
maintained continuity with the League of Communists, including its
socialist values and principles, as well as its personnel, organisational
infrastructure and strong support from the electorate. The Socialist Party
played a crucial role in Serbian politics during the 1990s as it was the
leading coalition partner in Serbian governments from 1990 to 2000.
After a decade of active involvement in Serbian politics, Slobodan
Milošević was ousted from the position of President of the FRY: in
September 2000, he lost the presidential elections, which were followed
by mass street demonstrations across Serbia owing to the rigged electoral
process. Soon after his arrest in 2001, Milošević was extradited to the
International Criminal Tribunal (ICTY) in The Hague and prosecuted
for war crimes. He died in 2006 at the ICTY, before the final court deci-
sion was made. Despite the fact that the socialists were removed from
top positions in the country in 2000, the SPS remained active in Serbian
politics. They were a coalition partner in several Serbian governments
and in 2017 became part of the currently ruling coalition formed by the
national conservative Serbian Progressive Party (SNS).
This chapter will look into how the concepts of state, power, interest
and property were formulated in the public discourse during Milošević’s
rule and incorporated in the institutional framework, including public
policy and legislation. Therefore, the chapter will offer an insight into
the constituent elements of the notion of corruption, as well as back-
ground information useful for analysing current discussion on corruption
in Serbia.
3 MILOŠEVIĆ’S RULE AND CORRUPTION 49
Federal Republic of Yugoslavia: Continuity

and Legitimacy
The transition from the political monism of the socialist era to a mul-
ti-party system in Serbia, which took place in early 1990s, was burdened
with democratic deficit in domestic politics. The opposition to Slobodan
Milošević argued that this issue called into question the legality and legit-
imacy of the emerging Yugoslav state. Notwithstanding, the political
establishment of Serbia and Montenegro proceeded with their state- and
institution-building. The Serbian authorities considered that the tran-
sitional processes in the country should be conducted differently com-
pared to other post-communist countries in Eastern Europe, owing to
the specific political and economic context, due mainly to the immediate
threat of war and Serbia’s economic isolation.
It is important to note the process of transition to multi-party polit-
ical system in Serbia involved the adoption of two highly relevant legal
instruments—the Electoral Law and a new Constitution. The order in
which these legal instruments were drafted and implemented had a
long-term impact on Serbia’s transition to democracy. The political
establishment considered that the people’s will, formalised in a referen-
dum, was the main source of legitimacy for a process of political plural-
isation (Radojević 2004: 24). In July 1990, a referendum was held in
still socialist Serbia on adopting a new Constitution before the first mul-
ti-party elections. The Constitution was given priority by more than 90%
of the registered voters. Consequently, the new Constitution, which set
the foundations of the democratic order in Serbia, was—paradoxically—
drafted and adopted by the Parliament set up during the one-party
system. Soon afterwards, the same Parliament—composed of represent-
atives of the only political party in Serbia, the League of Communists,
which was then transformed into Milošević’s Socialist Party—adopted
the Electoral Law which regulated the first multi-party elections in Serbia
for almost fifty years (December 1990).
Throughout Milošević’s rule in the 1990s, this issue remained the
major point of conflict between his ruling Socialist Party and the oppo-
sition. This conflict undermined the political legitimacy of the emerg-
ing democratic system in Serbia (Goati 1994). The opposition parties
argued that Milošević and the Socialist Party drafted and adopted
the Constitution and the Electoral Law in a way that secured them
50 M. ZURNIĆ
political influence and advantage compared to other political actors. The

opposition to Milošević, therefore, continually demanded a new consti-
tution and the right for all political actors—opposition parties, national
minorities and any other interested groups—to be able to take part in its
drafting (Čavoški 1991a; Nikolić 1997; Radojević 2004). Moreover, the
opposition argued that the vast public support given in the referendum
was used by the establishment to compensate for the lack of procedural
legitimacy in the adoption of the new Constitution.
Another relevant point is that FRY, the common state of Serbia and
Montenegro, was not an internationally recognised state. According to
Slobodan Samardžić, the FRY authorities had never requested inter-
national recognition as required by the European Community for
the newly formed states in Eastern Europe (Samardžić 1998: 75).
Milošević’s establishment did not apply for recognition of Yugoslavia’s
statehood at the international level, according to Samardžić, as they con-
sidered international legal standards less relevant to their ability to gov-
ern than the legitimacy of their rule as granted by popular support in
the country. The topic of the lack of international recognition of the
new Yugoslav state, as well as the abovementioned democratic deficit in
domestic politics, often arose in public debate in the 1990s.
Constitutional Arrangements
The legal framework of the newly created FRY was complex, as three
constitutional acts existed in parallel—the Constitution of the FRY, the
Constitution of Serbia and the Constitution of Montenegro. The Federal
Constitution, adopted in April 1992, granted equality to the two admin-
istrative units—Serbia and Montenegro. In reality, however, Serbia had
more influence on political decision-making at the federal level, as it had
a significant advantage over Montenegro in terms of number of inhab-
itants, size of territory, level of economic development and so forth
(Samardžić 1998: 77). The Constitution of Serbia was adopted earlier, in
1990, and it was never adapted to comply with the Constitution of the
Federation (1992).
As previously explained, the transition to parliamentary democracy
in Serbia did not start as an inclusive process. The rules of the upcom-
ing democracy were decided upon by the previous communist estab-
lishment (when it was still the only political actor in power). However,
the lack of democratic procedure in the process of drafting and passing
the new Constitution of Serbia (1990) was not the only object of the
opposition’s criticism. That criticism, in public and academic debate,
was also directed at the content and the implementation of the Serbian
Constitution.
As regards the content, the first post-communist Constitution of
Serbia marks a shift towards an understanding of constitutionalism based
on democratic principles, including the rule of law, sovereignty of citi-
zens, and protection of the nation, national minorities and social justice.
The Constitution defines the principle of the division of power. Three
forms of property—collective, private and state property—were intro-
duced as constitutional categories and made legally equal. In terms of
the territorial organisation of Serbia, the 1990 Constitution diminished
the powers of its provinces—the region of Vojvodina in the north and
of Kosovo in the south—which resulted in more centralised governance.
What was problematic about the Constitution was that it established a
mixed parliamentary-presidential system, which was criticised for poten-
tially enabling a regime of personal power to emerge in countries with a
weak civil society, such as post-communist countries (Radojević 2004).
The newly introduced semi-presidential system involved the president
being practically irremovable (Čavoški 1995). Thus, the opposition to
Milošević often referred to the Constitution of Serbia as an anti-constitu-
tional legal act.
As for implementation of the Constitution, the opposition claimed
that on many occasions the authorities either only adhered to the
Constitution selectively or failed to implement it altogether.2 According
to Samardžić, the two elites in power in Serbia and Montenegro did
not exercise their equal rights in decision-making as guaranteed by the
Constitution. Instead, they would coordinate political decisions infor-
mally and as they found it convenient, which Samardžić (1998: 83)
calls the system of “contractual federalism” [ugovorni federalizam].
Moreover, Samardžić explains that this practice was part of the commu-
strict adherence to legal norms when managing public affairs. Čavoški

nist legacy, as in those times similar ad hoc arrangements used to replace
(1995) also highlights the continuity of the Constitution with the com-
munist era as, he points out, the Constitution enabled one political party
to monopolise power, making it impossible for a constitutional state
(Rechtsstaat in German) to emerge and consolidate. In theory, imple-
mentation of the Constitution and its content were supposed to be
held in check by the judiciary. However, the governments in the 1990s
52 M. ZURNIĆ
exercised strong political influence over the judiciary, so that this branch
of power was not independent in its work (Lazarević 2001).
Thus, the Constitution of Serbia was not an efficient legal instrument
for limiting the power of state institutions. Samardžić summarises it in
the following way:
In a situation like this, the Constitution [of Serbia] cannot guarantee one
single value of constitutionalism in the modern sense–the rule of law, divi-
sion of power, independent judiciary, protection of freedom and rights–not
even in limited respects such as those concerning positive constitutional
normativisation of social and political relations. (Samardžić 1998: 81)
Lastly, the critics argued that the Constitution of Serbia did not establish
a favourable legal and political environment for further democratic trans-
formation in Serbia. In their view, Serbia needed a proper constitutional
transition, based on a different type of legitimacy (other than the will of
the people expressed in a referendum) and involving a thorough recon-
struction of the entire legal system (Radojević 2004: 26). Despite these
continual demands, the 1990 Constitution of Serbia was not changed
during Milošević’s rule. Moreover, it remained valid until 2006, six years
after the overthrow of Milošević.
Power and Politics Under Milošević’s Leadership

The period of Milošević’s rule was characterised by widespread clien-
telism and an increasingly blurred distinction between state structures
and Milošević’s Socialist Party in power. The nature of Milošević’s pol-
itics has been widely debated during his rule and since.3 For example,
Vladimir Goati (2000) classifies Milošević’s rule as pseudo-democratic,
following Larry Diamond’s typology (2002). Moreover, Slobodan
Antonić explains that Milošević’s rule had authoritarian features which,
however, never developed into a totalitarian regime or a dictatorship.
Following the Linz and Stepan classification of post-communist regimes,
Antonić (2002) specifies two stages in Milošević’s rule.
The period between 1987 and 1996 Antonić characterises as caesarism.
During this stage, the basic democratic institutions were in place, such as
the Constitution, the multi-party system, elections and so forth. However,
the authorities did not respect democratic principles in exercising power
and making political decisions. Therefore, Antonić argues that the
democratic institutions served only as a facade for the unchecked personal

rule of the Socialist Party leader, Slobodan Milošević. The caesarist type
of rule (1987–1996) escalated into a sultanist mode of rule (1997–2000).
The main triggers, according to Antonić, were, on the one hand, the esca-
lation of conflicts in Kosovo with the local Albanian population and, on
the other hand, stricter implementation of the international embargo on
Yugoslavia. During the sultanist stage, political oppression by the state
authorities increased in order to silence popular discontent.
Interests and Conflicts
The conceptualisation of interest in public discourse during Milošević´s
time is one of the crucial elements for understanding the current
anti-corruption debate in Serbia. The literature on Serbian politics
stresses the relevance of the ideological shift in Milošević’s rule. Initially,
the ideological background of Milošević’s politics, and of the Socialist
Party that he led, was clearly class oriented. This is not surprising as
the SPS was a reformed version of the former League of Communists.
However, at a certain point, there was a significant shift in Milošević’s
politics: from representing class interests and labour, to the straightfor-
ward promotion of national interest and the defence of the Serbian peo-
ple living in Serbia and in the region. The change was evident both at
the level of rhetoric and in the policy area relating to the countries of
former Yugoslavia.
Thus, there are different interpretations of Milošević’s ideological
shift, but researchers generally agree that Milošević and his co-workers
used this turnaround strategically in order to satisfy their personal ambi-
tions and political interests (Čavoški 1991b; Antonić 2002). At the level
of governance, and regardless of the ideological shift, Milošević’s party
continued exercising unity of power and firmly controlling the economic
and social structures in the same way as the Communist Party had done
during communism (Lazić 1994b).
legitimacy in the country. On the contrary, according to Kosta Čavoški,

The authors agree that the ideological shift did not harm Milošević’s
it enabled Milošević and his associates to widen their electoral appeal and
sonality. Čavoški, who was a harsh critic of Milošević’s rule, summarised

remain in power thanks to his political ambitions and authoritarian per-
the conceptualisation of interest in official discourse and public policy

during the 1990s in the following way:
54 M. ZURNIĆ
Needless to say, by the power of the working class, Milošević always meant
the power of his own political party. He identified the interest of his politi-
cal orientation, formalised through his party, with the interest of one class.
In this way he achieved continuity with the previous ideology and gained
the support of the wider public, especially in times of deprivation and isola-
tion. (Čavoški 1991b: 13)
The re-defining of the concept of public interest by identifying it with

the national interest brought about a discursive rift between two main
groups of political actors at that time, often named by the mainstream
media as “patriots” and “traitors”. The “patriots” were mainly members
of the political elite in power and the voters who perceived their national
interest as their major concern. The “patriots” would justify their policies
as being in the interest of the whole nation and as an act of the people’s
will. The liberal opposition accused the patriots of abuse of power, wide-
spread corruption, conflict of interest and many other illegal activities.
In the academic literature, the patriots are referred to as the etatist and
regime elite, characterised by their tendency to rely on authoritarian rule,
voluntarism, isolationism and clientelism.
On the other hand, the term “traitors” was often used in public dis-
course to label the opposition parties and civil society organisations.
These organisations were presented in the mainstream media as traitors
to the national interest and to traditional Serbian values, since they pro-
moted Western values, liberalism and individualism. The traitors were
also accused of benefitting from alleged foreign financial support for
their political activities and for conspiring against Milošević. This binary
ideological division remained present in political life in Serbia long after
Milošević’s rule ended. It persists in current public debate as well and
illustrates two conflicting and mutually exclusive positions in the concep-
tualisation of interests (Russel-Omaljev 2016).
It is relevant to note that under the Milošević regime, the opposi-
tion argued that Serbian nationalism had gained momentum owing
to the wide support Milošević and his establishment enjoyed from the
working class. The workers self-managers were often presented by the
opposition either as stubborn supporters of communist ideology or as
hard-core nationalists with deeply rooted inclinations, which had been
suppressed under communism. Similarly, Milošević’s rule was interpreted
from this perspective either as an anachronism—as Milošević was suppos-
edly the only politician in Eastern Europe who failed to accept the fall
of the Berlin wall—or as an opportunistic politician with authoritarian

tendencies. In line with this view, Milošević’s ideological shift and its
impact on the working class in Serbia were often illustrated by a saying:
people would come to a trade union meeting as workers and leave for
home as Serbs.
The underrepresentation of leftist perspectives in politics during the
1990s was evident. It can be explained, among other things, by the
fact that Milošević’s Socialist Party drew much of its legitimacy from
its socialist orientation, promoting a fictional image of itself as the last
bulwark against capitalism in Eastern Europe. However, recent research
from the left-leaning authors suggests that Milošević winning over the
working class did not happen suddenly and unexpectedly.4 According
to Goran Musić (2014), it is misguided to argue that Milošević gained
control over the “unconscious masses” of workers over night, or that
he aroused nationalistic urges in the working class. On the contrary,
Musić points out that the workers were no more prone to nationalism
than other social groups. What is more, most workers did not consider
national and ethnic tensions to be a major problem in socialist Yugoslavia
and, after its demise, in Serbia.
However, workers were unable to effectively articulate their inter-
ests and defend their rights because of their long-term marginalisation
in society. As Ana Dević puts it, their position was marked by a “per-
vasive sense of social and political powerlessness (institutional alienation)”
(Dević 2016: 21). During Milošević’s rule, members of the intellectual
elite as well as artists, journalists and anti-communist activists were far
more prominent and influential promoters of the nationalist agenda than
were the working class (Dragović-Soso 2002; Jović 2003). Moreover,
Musić argues that the managerial elites promoted competition between
the regional/national economies within socialist Yugoslavia and transmit-
ted their nationalist perceptions to the regional economies and to their
enterprises and workers.
As Musić argues, Milošević’s agenda was to promote the interests
of the managerial elite in Serbia, which had developed significantly, in
terms of size and influence on politics, long before Milošević’s time. In
the late 1980s, when Milošević appeared on the Serbian political scene,
neoliberalism was emerging and taking shape in the global economy.
Thus, as Musić emphasises, Milošević should not be seen as a stubborn
communist but—with his agenda to dismantle the self-management sys-
tem and integrate Serbia into the global economy—as a harbinger of
56 M. ZURNIĆ
neoliberalism in Serbia. Soon after Milošević consolidated his grip on

power, it became evident that he was not going to fulfil the workers’
expectations or to restore the values and principles of self-management
socialism. Notwithstanding, Musić points out that Milošević created an
image of a political leader who was willing to talk to the powerless and
appear ready to act to ease their grievances.
Property Rights and Social Justice

Since the early 1990s, the main economic concern in Yugoslavia related
to ownership rights. The three types of property—collective, state and
private—were granted equality by the Constitution of Serbia (1990). As
regards collective property, the legal framework concerning privatisa-
tion stipulated that the legal owners were to decide whether to privatise
their property or not. Thus, privatisation was not mandatory and had no
scheduled timeframe.
Public opinion polls from that time show partial support for privatisa-
tion. While entrepreneurs were the biggest advocates of private property,
no group of interviewees opposed private property as such. However, the
majority of respondents supported equality of the three forms of prop-
erty.5 Public debate concerning ownership rights during Milošević’s rule
was mainly focused on how to ensure that the privatisation process was
conducted legally and most efficiently, and was just and fair to all mem-
bers of society.
Debate on Privatisation
In public debate concerning privatisation, the two most distinguished
voices were those against and those in favour of privatisation. From the
opponents’ perspective, changing ownership rights over the means of
production had an immediate impact on the issue of economic equal-
ity and social justice. Therefore, opponents of privatisation—represented
mainly by Milošević’s establishment and supporters of the Socialist
Party—presented the process of privatisation in public discourse as the
start of long-term inequality and erosion of the invaluable socialist leg-
acy. According to them, this legacy still existed in Serbia under their
rule, and it included full and steady employment, social security and the
workers’ right to take part in the management of the collectively owned
enterprises.
In his speech in 1995, Mihailo Marković, a member of the Serbian

Academy of Science and Arts and a high official in Milošević’s Socialist
Party, referred to the mass privatisation that was taking place across
Eastern Europe in the following way:
At a crucial moment in its recent history, Eastern Europe made a wrong

choice and ran into the blind alley of a historically outdated 19th century
liberalism. The people soon saw the terrible mistake and gave up this sort
of transition. But immense damage had already been done. Further devel-
opment of this part of the world is uncertain. Serbia took a different path
and implemented reforms which led to democratic socialism. (quoted from
Goati 2000: 10)
Moreover, Miloš Aleksić argued that the privatisation of collectively

owned property was essentially wrong, contradictory and absurd, as it
implied that the workers would give up their rights for the benefit of
the social group that was once deprived of the same rights by the same
working class (Aleksić 1998). That is to say that, according to Aleksić,
by accepting privatisation, labour would be acting against its own inter-
est and, through the process of privatisation, would be creating its class
enemy.
Opponents of privatisation argued that, owing to the specific circum-
stances in Serbia and Montenegro, privatisation could not be conducted
as a just and fair process. They stressed the fact that Serbia had no cap-
ital market, which was necessary for privatisation to take place. What is
more, there was no possibility of receiving foreign investments owing to
the UN sanctions imposed on the country. However, advocates of priva-
tisation considered that privatisation in itself had transformative potential
and could shift economic activity towards economic progress and social
development.
Arguments in Favour of Privatisation

The liberal elite argued that collective property was a construct of com-
munist ideology. Private property, however, was understood from their
perspective as a natural phenomenon, the right to own, dispose of and
inherit property being a natural right of man. Furthermore, privately
owned means of production, according to this view, ensure transparent
and responsible management in business, improve competitiveness in the
58 M. ZURNIĆ
market and motivate workers to develop their skills and career, which
contribute to the overall development of the economy (Vuković 1996b).
Apart from yielding profit for the national budget, private companies
lower public spending, which makes the national economy more com-
petitive at the international level.
Furthermore, the liberal elite argued that, in a fully capitalist econ-
omy, workers would be in a better position to articulate their interests
and defend them in trade unions, as labour would have equal rights in
the social dialogue along with the government and the business commu-
nity. The privatisation of the means of production in Serbia, they argued,
would enable stratification of the society to occur, this being a precon-
dition for the establishment of an efficient free market economy and a
functional parliamentary democracy.
In public discourse, the liberal elite presented privatisation as a
well-developed, predictable and infallible process. They supported their
argument with evidence coming from other post-communist states of
Eastern Europe which were undergoing transitional processes and were
considered in the 1990s as success stories, for example Poland, the
Czech Republic and Slovenia.
According to advocates of privatisation (Vuković 1996a, b), the delay
in privatisation was a straightforward case of instrumentalisation of pub-
lic policy by Milošević and the etatist elite to the detriment of society
as a whole. According to this view, Milošević and his government were
managing the economy to meet their personal and political interests.
They supported collective property and labour’s rights only discursively
in order to legitimise their personal enrichment. Moreover, Milošević’s
opponents argued that privatisation would create a business community
in Serbia which would soon become economically strong and politically
independent enough to threaten Milošević’s monopolistic-etatist way of
running the economy. This would eventually put an end to Milošević’s
authoritarian rule (Čavoški 1991b).
As for the citizens’ views on privatisation, Srećko Mihailović’s research
conducted in 1991 reveals that 51% of interviewees were in favour of pri-
vate property, 27% of them preferred to have an economy based on col-
lectively owned property and 22% valued both types of property equally
(Mihailović 2010). It would be wrong to think, however, that discussion
of privatisation in Serbia emerged only in the 1990s under Milošević. As
the following section will show, privatisation was legally regulated and
implemented under the workers’ self-management system, since it was
considered a possible solution to the ongoing economic crisis.
Waves of Privatisation
The change in ownership rights in Serbia developed in four phases. The
first one took place in Yugoslavia during socialism as a part of the eco-
nomic reforms when the Federal Constitution was amended to introduce
private ownership.6 Privatisation of collectively owned enterprises was
promoted by the government through certain incentives. Even though
the implementation was not mandatory, this innovation is supportive of
the argument that the restoration of capitalist was ongoing during the
self-management socialism. The privatisation process coincided with the
dissolution of socialist Yugoslavia and the policy was soon abandoned in
all Yugoslav regions, owing to armed conflicts and economic stagnation.
After the demise of the common state, privatisation started in Serbia
for a second time under Milošević’s rule.7 According to certain sources
(Antonić 2002; Vuković 1996b), in the period between 1991 and 1993
in Serbia, 18% of collectively owned enterprises were privatised. This
stage of privatisation coincided with the emergence of hyperinflation in
the Serbian economy.8 The privatisation process developed fast as hyper-
inflation worked in favour of the buyers. However, when prices were
stabilised, the government adopted the Law on Revalorisation (1994).
The law obliged buyers in the privatisation processes to pay the real price
of the privatised property, instead of its nominal value. The law was ret-
roactive, and in cases where the owners of the privatised property did
not comply with the law, the government would take over their property
and consider it state property. Consequently, the Law on Revalorisation
slowed down privatisation and transformed many privatised compa-
nies into state-owned ones. According to the available sources, until the
law was implemented approximately 20% of companies were privatised.
After the implementation of the law, only 2% remained private (Antonić
2002). By 1997, privatisation was almost abandoned.
The third wave took place in 1997 when a new law on privatisation
was adopted. As previously, it was not mandatory and the dominant
model was voucher privatisation, where the shares in an enterprise were
bought out by the employees or other citizens of Serbia. The process of
privatisation was slow, and the number of privatised companies was lim-
ited, approximately 500 enterprises engaging in it.
In parallel with privatisation, the government was implementing
administrative reforms which resulted in a more centralised form of gov-
ernance: collectively owned property and land—which had previously
been managed by local government and had been considered collective
property—were transformed into state property (Antonić 2002: 372).
60 M. ZURNIĆ
As a consequence of this change in competencies and in ownership

rights, most of the economy was managed by the authorities in Belgrade,
including the energy sector, industry, the national postal service, the rail-
ways, the media, mines, forests and other natural resources.9
These two processes, which ran in parallel—reversed privatisation in
the economy and the centralisation of state competencies—significantly
changed the structure of the Serbian economy. The percentage of pri-
vate and collective property in the economy was significantly reduced,
while the majority of the means of production was in the public sector
and under state control. This put the party in power, that is, Milošević’s
Socialist Party, which was the main proponent of both these policies, in a
strong position.
In such an economic and legal context, the institutional design ena-
bled the incumbent political elite to appoint their personal supporters as
managers of state-owned enterprises. The system institutionalised and
facilitated clientelism and informal practices. The collectively owned
enterprises were run by managers who had gained their managerial expe-
rience in the self-management system and who easily adapted to the
mixed economic system of Milošević’s time. Moreover, in the enterprises
with collective ownership, the managers were not motivated to support
privatisation, since they could rely on the help of the political elite in
power and run the collective enterprise as if it were their private com-
pany. On the other hand, the employees were not motivated to urge for
privatisation of their enterprises as they feared unemployment.
The fourth wave of implementation of the privatisation policy took
place immediately after the overthrow of Milošević in 2000. It was ini-
tiated by the first post-Milošević coalition government known as the
Democratic Opposition of Serbia (DOS). Since then, privatisation has
been continued, and it is still going on under the current government in
2018. The nature and impact of this wave will be discussed in the forth-
coming chapters of this book.
Informality, Illegality and Survival Strategies

During the UN embargo, Serbia became an autarchic economy with
approximately 50–70% of the population living below the poverty line
(Mrkšić 1994). The increasing impoverishment of the general popula-
tion during the 1990s affected mainly unqualified and qualified labour:
industrial production and commercial activity fell owing to international

isolation and market shrinkage resulting from the dissolution of the com-
mon Yugoslav state.
Engaging in the informal economy was one of the survival strategies
[strategije preživljavanja] (Lazić 1994c; Mrkšić 1994) for Serbian citi-
zens. In 1993, according to Danilo Mrkšić, almost half of the working
population was engaged in economic activities in the grey area, including
smuggling and reselling petrol, gas, food and medicines from neighbour-
ing Hungary and Romania. According to the same source, the unem-
ployed who were actively engaged in the grey economy lived in better
material conditions than qualified and unqualified workers with full-time
employment in state-owned and collectively owned factories (Vujović
1994), which shows the lucrative aspect of the informal economy in
Serbia at the time.
Mrkšić (1994: 28) elaborates on the structural, economic and soci-
opolitical reasons that generated this high level of involvement in the
informal economy. The structural reasons include high unemployment
and the inability of the state to provide basic consumer goods for the
population. As for impacts, the informal sector affected the national
economy on several levels, including a fall in state budget revenues and
a decrease in the competitiveness of the private sector. Moreover, the
informal economy included illegal activities, such as human trafficking
and breaching workers’ rights—both affecting public health and secu-
rity—and illegal trafficking in drugs, weapons, etc.
Interestingly, in his research from 1994, Mrkšić points out some pos-
itive effects of the informal economy during Milošević’s rule. According
to the author, the informal sector in Serbia tended to stabilise economic
trends—though only in the short run—and compensate for the signif-
icant underperformance of the formal economy. Moreover, informal
activities improved the standard of living of the most deprived sector
of the population and decreased—or at least did not increase—exist-
ing social differences. Through smuggling channels at the border with
neighbouring countries, many Serbian citizens compensated for the
shortages of food, medicines and petrol.
Moreover, Mrkšić points out that the informal economy in Serbia was
not as chaotic and lacking in structure as might be expected, given the cir-
cumstances. According to him, the more deprived population engaged in
smuggling and reselling oil, food, cigarettes and other goods. On the other
62 M. ZURNIĆ
hand, skilled managers of the state- and collectively owned enterprises or

private businesses tended to engage in more lucrative informal activities,
such as failing to declare profit, avoiding taxes, fixing contracts, etc.
While engaging in informal economy was the survival strategy for
many, for certain social groups it represented the strategy of enrich-
ment. Literature on social stratification, dating from the 1990s, stresses
that a section of the population, who were business oriented and had
close ties with the executive government, were becoming increasingly
rich and gaining influence on economic policies. According to Mladen
Lazić (1994b, 2000), that community included members of differ-
ent social groups, mainly from the echelon of self-management manag-
ers and political leaders or their relatives and trusted friends. They were
interested in maintaining the status quo, as they were high functioning
and adapted to the established ways of doing things in both the eco-
nomic and the political sphere, or they were skilfully treading a fine line
between the two. As Lazić puts it, the emerging business community in
Serbia was more a lumpenbourgeoisie than a driver of modernisation
(Lazić 1994a, b).
Corruption in Serbia During Milošević’s Rule

There were various points of the institutional set-up that Milošević’s
critics understood as sources of corruption and conflict of interest.
According to Antonić’s research (2002: 374), there were three ways in
which the business community could be directly involved in politics.
Firstly, there were ministers who were at the same time managers of large
state companies which enjoyed a monopolistic position in the economy.
Such companies were mainly in the energy sector, agriculture and other
areas of industry and trade. In the government from 1994 to 1998,
there were nine such positions of minister-managers, who were in charge
of running large and important state companies while at the same time
occupying the function of minister.
Another group within the business community was, according to
Antonić, close to the state structures and enjoyed privileges. These were
Serbian businessmen who owned holdings and corporations in the bank-
ing sector, agriculture and foreign trade and also participated in minis-
terial bodies known as coordination teams. According to the available
sources and archival material, the government had twenty-two directors
of private companies who were at the same time actively involved in the
governmental coordination teams. Through their close relations with

state officials, these businessmen were able to secure privileged positions
for their companies, such as contracts with the government or access to
favourable credit lines from the banks run by the state. Lastly, there were
members of the business elite who were not formally involved in state
institutions, but had informal connections with the politicians in power.
The businessmen from this group did not have any impact on poli-
cy-making, but benefitted financially from their political contacts.
These three groups of businessmen used their privileged position and
political contacts to benefit from the process of privatisation. According
to Slobodan Vuković (1996b), the most common mechanisms of corrup-
tion were cases where a collectively owned enterprise was mismanaged
and brought to bankruptcy with the aim of lowering its value before
the enterprise was privatised by the same manager. Another method of
misallocation of public funds was when an inefficient collectively owned
enterprise was granted bank loans which it later could not repay. The
loans were secured through political connections as the banking system
was fully under state control. According to Vuković, corruption during
privatisation was widespread, since there was no control exerted by the
workers-managers, or the state, or the public. Moreover, the mainstream
media according to Vuković did not report on all cases of corruption
owing to pressure from the authorities. As will be shown in the forth-
coming chapters, a significant part of the business elite that worked with
and for Milošević’s regime is still present in the Serbian economy today.
Anti-corruption Institutions
When discussing anti-corruption institutions in Serbia prior to 2000,
it is necessary to bear in mind the specific political and economic con-
text from 1989 to 2000, and the nature of corruption during this time.
Due to the relative poverty of Serbia and the country’s international iso-
lation, informal mechanisms of distribution and governance were more
functional and more stable than formal ones (Edmunds 2010). There
simply were no specialised anti-corruption institutions, public policies
nor education in the field of anti-corruption. The scope of legislation
and institutions dealing with the problem of corruption was very lim-
ited. Therefore, this legal vacuum enabled clientelism, patronage and
other corrupt practices, as well as the active involvement of civil serv-
ants in organised crime (Sorensen 2003) and the criminalisation of state
64 M. ZURNIĆ
institutions (Thomas 2000). Besides the absence of anti-corruption insti-

tutions, there was a lack of enforcement of existing anti-corruption leg-
islation, such as an Electoral Law, as well as legislation concerning the
freedom of the press or conflict of interests.
The adoption of the Constitution of Serbia in 1990 and the law on
enterprises in 1996 introduced changes regulating corporate crime.
These legal acts defined the three forms of property—collectively owned,
state and private property—as equal. Consequently, all three types of
property were equally protected by the Criminal Code. Moreover, there
were three Criminal Codes in Federal Yugoslavia during Milošević’s
rule—one at the federal level and two at the level of the constitutive
units, Serbia and Montenegro (Jelačić 1996). The Codes at the regional
level identified corrupt practices as giving and taking bribes, influence
peddling and forgery of an official identity document in order to cover
up the act of corruption (Pjanović 2001; Perović 2001). Moreover,
the Criminal Codes stipulated that a broader definition of corruption
included a wide range of practices, such as misappropriation, embez-
zlement and other practices damaging any economic entity (Stojanović
2011; Maričić 2001). These acts were punishable regardless of the type
of ownership rights of the enterprise. Thus, from the legal point of view,
corrupt practices were regulated equally in all three sectors of the econ-
omy—the business community, the public sector and the collectively
owned entities. It was, however, the implementation of the aforemen-
tioned legislation that Milošević’s opponents criticised.
Furthermore, certain constitutional provisions—such as those with
an unclear definition of conflict of interests and a broad understanding
of the concept of MP immunity—enabled prominent politicians, such as
Slobodan Milošević and cabinet ministers in 1990s governments, to hold
multiple public offices. During that time, corrupt practices were often
related to crime, as political and financial elites widely cooperated with
criminal circles. Therefore, opposition parties during the 1990s saw the
Constitution as underpinning Milošević’s authoritarian rule.
Another institution was important in the prevention of corruption.
The Social Accounting Service [Služba društvenog knjigovodstva SDK],
the institution that controlled financial flows in the national economy,
had been an independent organ since its establishment in 1962. In 1995,
the SDK in Serbia lost its legal independence as it was placed under the
jurisdiction of the National Bank. Despite the fact that the SDK was
under state control, this institution maintained the same competencies
during the 1990s—to control financial transactions within the national

economy. As will be explained in more detail later on, the institution
ceased to exist in 2003, after the end of Milošević’s regime, when the
new authorities considered the SDK redundant and unnecessary for the
functioning of the financial sector in Serbia.
Civil rights were legally guaranteed by the Constitution, but the insti-
tution of an ombudsman did not exist. Apart from the lack of relevant
legislation and political will to tackle the problem of corruption, there
was a significant lack of public debate on the subject. There were no dis-
cussions concerning the definition, conceptualisation or measurement of
corruption in the form that they exist now. Until 2001, when the local
office of Transparency International was established, there were no pub-
lic opinion polls specifically relating to corruption or citizen satisfaction
surveys on government activities in this field. It is reasonable to argue
that under the governments of the 1990s, the issue of corruption was
not a priority in institutional formation.
Debate on Political Corruption

Owing to the widespread informal practices and the widening gap
between the normative and real aspects of the economy (the legal frame-
work and its implementation), the issue of corruption was often debated
in public and academic discussions in Serbia. There were two strikingly
different views on what was understood as corruption.
On the one hand, corruption was identified in almost all state policies,
since the basic assumption of this view was that Milošević’s undemocratic
rule itself was the source of corruption. That is to say, the democratic
principles—such as the rule of law and the separation of the branches of
power—were only formally stated in the Serbian Constitution and rarely
respected. It is not surprising, Milošević’s opponents argued that there
was no initiative to curb corruption. On the contrary, the government
relied on corruption and illegal practices to compensate for the ineffi-
ciency of the economy and of the illegitimate regime.
On the other hand, in the view of Milošević’s supporters, the informal
practices were explained and justified by the unfavourable circumstances
affecting the country. Firstly, widespread corruption was interpreted
within the context of the dissolution of socialist Yugoslavia, due to which
Serbia had lost a significant part of its market, while economic activity and
employment increasingly plummeted. Secondly, the process of privati-
sation and the change of ownership rights were seen as being the main
66 M. ZURNIĆ
source of corruption, since, in the given political and economic environ-

ment, the privatisation process could not possibly respect the values and
principles of social justice. On the contrary, they argued, privatisation by
its very nature represented a form of corruption and generated injustice.
Lastly, the international isolation of the country was identified as a major
source of corruption and criminalisation in society (Bošković 2000).
The empirical research conducted at the time (Lazić 1994b) suggests
that there was no political force or social actor that was ready, powerful
enough and willing to challenge the status quo and influence the course
of developments. Among the potential reasons for this, researchers iden-
tify the authoritarian nature of the regime, which prevented and pun-
ished any intention of organised resistance. They also highlight the lack
of consensus in society concerning the direction which potential change
ought to take.
It is of essential importance that there is no fundamental consensus in

Serbia and Montenegro concerning the concept of state or the concept of
values on which society and the political community should be based–and
these are elementary prerequisites of a democratic order. (Sekelj 1998: 150)
Milošević’s rule, however, ended in October 2000 owing to public dis-

content over rigged presidential elections. In contrast to the aforemen-
tioned research from the 1990s, the most recent studies suggest that
the change of Milošević’s regime was imminent. The main driver for
change, according to Mladen Lazić, was the managerial elite, partly
recruited from the communist nomenclature and partly created during
the war and under the international isolation, through lucrative but not
always legal economic activities (Lazić 2016: 14). At that moment when
the managerial elite consolidated their economic power and gained sig-
nificant influence over the political sphere, their primary interest was to
secure this position and make it permanent and legal. The managerial
elite could gain full control over public resources only through the intro-
duction of private property as the only type of property and abolishment
of forms such as collectively owned and mixed-ownership (where owner-
ship is shared by the workers and the state). To achieve this goal, as Lazić
argues, it was necessary to establish a free market liberal economy and
integrate it into the global economy. Thus, in the late 1990s, Serbia’s
managerial elite outgrew Milošević’s system of state capitalism and was
ready to do away with it (Lazić 2011, 2016).
Thus, from the perspective of the economic processes underlying

Milošević’s nationalist rhetoric, the Milošević regime does not make a
clear break with Yugoslav socialism nor does it keep continuity with the
socialist idea in abstract terms. As recent research shows (Musić 2014),
the continuous liberalisation of the Yugoslav socialist economy resulted
in Milošević’s state capitalism and, after he was ousted from power in
2000, privatisation led to a more liberal form of capitalism in Serbia.
To summarise, the transition to democracy and a free market economy

in Serbia started in the specific environment of an autarkic economic
system (due to the international isolation) and under political rule of an
authoritarian nature. Serbia established institutions which fulfilled dem-
ocratic requirements. However, when exercising power, the authorities
often neglected the democratic institutions and principle. For example,
the division of power was defined by the Constitution, but this provision
was not always respected. Moreover, political influence was strong in the
sphere of the economy, as high-ranking officials could be appointed as
managers of enterprises under state and collective ownership. In an eco-
nomic environment where the state was the main employer, the business
community was in very close contact with the political elite in power. The
business community which arose at the time was diverse in structure.
Apart from new businesses, which emerged and flourished in the newly
created context of economic crisis, there were also businessmen with rich
managerial experience dating back to the time of communism.
In public and academic debate, one of the most contested issues was
that of privatisation. From the legal point of view, the three types of
property rights—collective, state and private—were equal. Despite sev-
eral waves of privatisation, the public sector remained dominant and the
role of the state in the economy did not change. Private property and
collective property, however, were reduced and marginalised. Milošević’s
opponents argued that the government intentionally obstructed the
process of transfer of ownership rights in the country. According to
the opposition, as long as privatisation was postponed and delayed,
Milošević’s Socialist Party in power could have control over the national
economy and manage it in order to fulfil their political ambitions.
Corruption, bribery, smuggling, unlawful trade and other informal
practices were widespread in Serbia. High levels of deprivation and pov-
erty influenced the public understanding of morality and legality to the
68 M. ZURNIĆ
extent that such practices were widely accepted and were considered
strategies for survival. Notwithstanding, corruption was a highly debated
issue. It is possible to single out two strikingly opposing views on cor-
ruption, inter alia, which emerged in public discussion. On the one hand,
Milošević’s establishment argued that the economic stagnation caused by
the UN embargo was major generator of informal practices. Otherwise,
in their view, under normal conditions the exercise of power would have
been much more democratic, rendering the national economy more
dynamic and the process of privatisation feasible. On the other hand,
Milošević’s opponents saw corruption in the way that state institutions
were designed and the way they functioned. That is to say, the opposi-
tion considered Milošević’s authoritarian rule and nationalist ideology as
forms of corruption in themselves and as sources of many other forms of
corruption. Therefore, in their view, corruption was actually a constitu-
ent element of Milošević’s system and a foundation on which the regime
was built. Establishing the rule of law and a functional free market econ-
omy would, they argued, eradicate corruption and, consequently, put an
end to Milošević’s rule.
Notes
1. The Communist Party was founded in the Kingdom of Yugoslavia in
1919 and was active in opposition. After the Second World War, renamed
the League of Communists of Yugoslavia (1952), it was the only party
in socialist Yugoslavia until 1990. After its dissolution, the six regional
branches were transformed into new parties with socialist and social dem-
ocratic orientation. In Serbia, the League of Communists was succeeded
by the Socialist Party of Serbia, Social Democratic Party (Croatia), Social
Democratic Party (Bosnia and Herzegovina), Social Democratic Union
(Macedonia) and Democratic Party of Socialists (Montenegro).
2. Samardžić gives an example of the breach of the Federal Constitution by
the Serbian government in its customs policy, foreign policy, judiciary,
security issues and other (Samardžić 1998: 83). More on illegal accumu-
lation of mandates and governmental functions in the 1990s Serbian poli-
tics: Vučetić (1996).
(1993, 2002), Čavoški (1991b), Goati (1989, 1995, 2000), Sekelj (1995),
3. The academic literature on this topic available in Serbian includes Antonić
Djilas (1993, 1997), Pavlović (2001).

4. For current debates in the post-Yugoslav left, see also Štiks (2015), Musić
(2014), Mladenović and Timotijević (2008).
5. For academic literature on public opinion during Milošević’s rule, see

Mihailović (1997, 2000) and Gredelj (1994, 2000).
6. Relevant legislation was adopted in order to regulate the process of privati-
sation and investments of foreign capital. More precisely, in 1988, amand-
mants were made to the 1974 Constitution and a new Law on Enterprises
was adopted. These legal acts introduced the categories of private and
mixed property, and the one of foreign direct investments. These changes
also enabled the privatisation of enterprises by the employees and other
citizens.
7. The second wave of privatisation was mainly regulated by the Law on
Conditions and Procedure for Transformation of Social Property into
Other Forms of Property (1991), Official Gazette of Serbia, 49/1991.
8. According to Mladjan Dinkić’s book, The Economy of Destruction (2000),
during the period of inflation in Serbia (October 1993–January 1994), the
Yugoslav dinar was redenominated three times, which resulted in elimina-
tion of 16 nods of the largest banknote. According to the same source, in
November 1993, the inflation exceeded 20.000% and in December 1993,
the money supply (M1) amounted to barely 17 million Deutsche Marks.
9. This area was regulated by the following set of laws: Law on Property of
the Republic of Serbia (Official Gazette 53/1995), Law on Construction
Land (Official Gazette 44/1995), Law on Arable Land (Official Gazette
26.3.1991), Law on Transformation of Collective Property in Agriculture
into Other Forms of Property (Official Gazette 49/1992).
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CHAPTER 4
Confronting Corruption in Post-Milošević

Serbia: Discourse and Institutions
Following the general elections in September 2000, Milošević’s

establishment was ousted from power and a new government formed
by the Democratic Opposition of Serbia (DOS).1 DOS announced eco-
nomic improvements, democratic changes and the restoration of dignity
to the people of Serbia after a decade of autocracy and deprivation and
the country’s isolation from the international community. Moreover, the
new establishment set the goal of eradicating political corruption and
putting an end to the nationalism-driven politics of the previous regime.
In line with their promises, the new establishment soon began the pro-
cesses of political and economic transformation, starting with an inten-
sive privatisation policy.
Furthermore, the DOS authorities brought the issue of corruption
to the forefront of political life in Serbia. Corruption was generally per-
ceived as being widespread and entrenched: the legacy of Milošević’s
rule. Moreover, corruption was interpreted in public debate as the main
obstacle to further democratic development and the country’s economic
recovery. The DOS’s Political Programme (2000)—not legally binding,
but of great symbolic importance—was the first document in post-
Milošević to openly address the issue of corruption and set the frame for
the post-2000 anti-corruption discourse. The Programme best illustrates
the new authorities’ resolute determination to fight corruption systemat-
ically and without compromise:

https://doi.org/10.1007/978-3-319-90101-5_4
76 M. ZURNIĆ
As citizens of Serbia and candidates for Parliament, we would like to let

the public know that our intention, once we enter Parliament, is to with-
draw the privileges of state officials, end the authorities’ discriminatory
attitudes towards citizens and fundamentally change the current unsuccess-
ful state policy. We will carry out radical changes, starting with ourselves.
By signing this document, we commit ourselves to regaining citizens’ trust
in institutions, to rooting out corruption in governing bodies and public
institutions and to being united in commencing thorough reforms aimed
at returning Serbia to its position as an equal among European countries.
(Programme for Democratic Serbia 2000)
Successful implementation of these political and economic reforms

required, among other things, significant changes to the existing institu-
tional setting. The reformist euphoria of the newly established elite resulted
in the early 2000s being labelled as the reformist honeymoon of Serbian pol-
itics (Dallara 2014: 82). As for the fight against corruption, the govern-
ment adopted the same approach, based on comprehensive institutional
reform. The idea behind this approach was that for an anti-corruption pol-
icy to be efficient it is necessary to create an adequate and responsive insti-
tutional setting as well as a favourable social environment.
As this chapter shows, more than fifty anti-corruption institutions
were established between 2000 and 2012. In what follows, the most rel-
evant anti-corruption institutions will be discussed in order to illustrate
the context in which the corruption scandals analysed later in the book
emerged and developed. Moreover, this chapter sets the ground for anal-
ysis of corruption scandals in Serbia and their role in this intensive pro-
cess of institutional formation. More precisely, despite the rich literature
explaining corruption scandals as a significant factor in triggering insti-
tutional change, this chapter shows that most anti-corruption laws and
institutions in post-2000 Serbia were externally driven and mainly facil-
itated by the process of Serbia’s accession to the European Union and
reintegration into international institutions. Lastly, the chapter shows
that it was through an intensive process of institutional formation that
the notion of corruption—based on the distinction between the public
and private spheres—was transferred into the national legal framework.
The chapter starts with a brief explanation of the link between dis-
course and the institutions within which discourse emerges and develops.
This is followed by a brief discussion of existing studies of corruption
scandals— as one of the forms that anti-corruption discourse takes—
and their dynamic relation with institutions. The aim of this discussion
4 CONFRONTING CORRUPTION IN POST-MILOŠEVIĆ SERBIA … 77
is twofold: to identify the limitations of existing research on this topic

and to suggest a tentative typology of scandal based on empirical evi-
dence from the Serbian case. The chapter then outlines the anti-cor-
ruption institutional framework and identifies the stages of institutional
development in Serbia. The institutional changes are categorised as inter-
nal or external according to their origin and driver. The external impe-
tus for change is explained in relation to Serbia’s integration in regional,
EU and international initiatives and organisations. In order to present
the research findings in a clear and concise way, the chapter offers two
annexes: Annex B contains a list of the anti-corruption laws, bodies and
agencies established between 2000 and 2012, with brief information
concerning the mandate and the origin of these institutions; Annex C
offers a timeline illustrating the gradual change of the anti-corruption
institutional setting over time.
Institutional Change in Post-2000 Serbia and the Impact

of the Anti-corruption Discourse
The Political Context in the Early 2000s: The Democrats in Power

After the overthrow of Milošević in October 2000, political corruption
became one of the most prominent topics in public debate in Serbia.
Discussions of incidences of corruption were fairly new in nature, involving
intensive media reporting, public accusations, expressions of public discon-
tent such as demonstrations and so forth. On the other hand, as this chap-
ter shows, the newly established authorities’ approach to anti-corruption
involved intensive change to the institutional framework in this area.
Furthermore, the notion of corruption in public debate had blurred
boundaries in the early 2000s and was often applied to a wide variety
of non-democratic practices which had taken place under the previous
Milošević government. Thus, in public life in the early post-Milošević
period, corruption was often conceptualised in the context of the viola-
tion of human rights during the wars in the Balkan region or linked to
the activities of organised crime groups and money laundering under the
previous regime. By the end of the first post-Milošević government’s term
of office, however, the term corruption was increasingly being used to
describe the lack of rule of law and the violation of universal rights under
the incumbent DOS government. Lastly, the topic of corruption became
prominent in public debate owing to the intensive privatisation process
78 M. ZURNIĆ
which, along with the other transitional processes, was heavily influencing
the conceptualisation of individual, state and national interests.
At the institutional level, two innovations are highly relevant to the
way in which the anti-corruption discourse and policies were articulated.
Firstly, the National Anti-Corruption Council, established in October
2001, was the first public institution in post-Milošević Serbia to deal
exclusively with the issue of corruption. The Council, established as a
domestic initiative of then Prime Minister Zoran Djindjić, was an advi-
sory body to the government with a mandate to suggest anti-corruption
measures and follow through their implementation. Secondly, the Law
on Lustration was passed in June/July 2003, as the DOS government
considered that opening up security service files was a necessary precon-
dition for the identification of persons who had violated human rights
and therefore for successful lustration. Even though a law on secret
police files has never been adopted, and the Law on Lustration has not
been applied in a single case, these changes to the anti-corruption insti-
tutional and legal setting influenced the way corruption was understood
and presented in public discourse in the early 2000s.
Furthermore, it is important to note that several events in Serbian
politics in the early 2000s influenced how corruption was understood
in public debate. Firstly, in March 2001 former President of the Federal
Republic of Yugoslavia (FRY) Slobodan Milošević was arrested by the
Serbian authorities on suspicion of corruption, abuse of power and
embezzlement. Owing to a lack of evidence, the initial investigation into
Milošević’s case made little progress. In June 2001, Milošević was extra-
dited to the International Criminal Tribunal (ICTY) in The Hague to
stand trial on charges of war crimes. Moreover, Prime Minister Zoran
Djindjić was assassinated in March 2003 when he was preparing to take
important steps to confront organised crime groups in Serbia. It is sym-
bolic and saddening that the prime minister was assassinated in front of a
government building as he was about to attend a meeting with members
of the Anti-Corruption Council.
Anti-corruption Discourse and Institutions

More than half of high-profile corruption scandals in post-2000 Serbia
have not been investigated or prosecuted by state institutions. Despite
the ever-increasing number of anti-corruption laws, campaigns and ini-
tiatives, corruption scandals are marginalised by state institutions and
remain unresolved for an extended period of time. Moreover, due to this

lack of an adequate institutional response, alleged incidences of political
corruption are mainly discussed outside state institutions, that is to say
in debates in open public fora. In these discussions, members of soci-
ety articulate their ideas and interests, share their concerns and attempt
to influence formal institutions. From this perspective, it is interesting
to observe the dynamic interaction between the growth of the anti-cor-
ruption institutional setting in post-2000 Serbia and the increase in the
number of corruption scandals. In order to gain better insight into this
interaction, it is necessary to understand institutions as an environment
in which political actors think, speak and act. As discourse does not
emerge and function in a vacuum, it is also important to emphasise the
relevance of the wider social, political and historical context.
The starting assumption in this analysis is that debates about funda-
mentally important issues in a society have the potential to significantly
influence the institutional setting in relevant areas (Schmidt 2008, 2010,
2011a; Schmidt and Radaelli 2004). As Guy Peters points out, public
debates are formed from ideas that are constantly in search of structure
while being communicated by the actors in the debates (Peters 2012).
According to Peters, it is necessary for actors in debates who have diverse
and opposing views to find common ground; identifying a common
denominator thus increases the transformative potential of discourse and
increases the possibility that the existing policy can be changed. However,
this is not to assume that discourse is the only dimension of political life,
but that discourse should be taken into account, together with structural
constraints, in the analysis of politics. Moreover, it should be emphasised
that ideas and communication inside and outside institutions are not suf-
ficient for institutional change to take place. While debates can be inten-
sive and frequent, they can remain only what they are—debates (Peters
2012). For this reason, it is necessary to explain why some discourses fail
and others succeed in producing institutional change or why certain dis-
courses have failed in some countries while being successful in others.
Political Scandals: A Theoretical Framework

It is important to note that scandals—as one form that discourse takes—
have not always been a topic of research in their own right. Many diverse
scholarly studies of scandals have appeared more recently, for several rea-
sons including the development of modern technologies which enable
80 M. ZURNIĆ
fast and accessible communication, the increasing influence of the media

on politics and the changing understanding of the public and private
spheres in political culture. One more reason for this tendency is the
large number of high-profile political scandals that have occurred since
the mid-1970s in many consolidated democracies, such as the USA,
the UK, Germany and France. Meanwhile, as a result of transitional pro-
cesses, opportunities for corruption have increased in East European
countries since the late 1980s.
The first theoretical framework to be applied to the analysis of scandal
was Durkheim’s explanation of social integration, which argues that trans-
gressions of norms are an intrinsic part of social life and that scandals are
necessary for the maintenance of social order. In line with this assumption,
Markovits and Silverstain explain that “the ritual of scandal and punish-
ment provides social system with a means for self-legitimation and purifica-
tion” (Markovits and Silverstain 1988: 2). These authors add an important
element to Durkheim’s theory: “the central role of power in the construc-
tion of social reality, public morality and the conscience collective” (1988:
4, emphasis in the original). This theoretical novelty enabled the political
aspects of scandals to be analysed through a sociological approach.
From the perspective of Durkheim’s explanation of social integration,
political scandals were mainly interpreted as a consequence of political pro-
cesses and a symptom of the deeper structural problems of the system. The
terms scandal and corruption were often used interchangeably (Doig 1984;
Noonan 1987), as scandals were discussed as an illustration of political cor-
ruption rather than being explored as political events per se. Scandals were
generally considered to be negative political events, but were useful in two
ways. Firstly, scandals offered more insight into the hidden, complex pat-
terns of political corruption. Moodie (1988: 243–244) pointed out that
“[i]n the study of politics, as of the human body, a pathology is one route
to understanding how things work”. Secondly, political scandals suppos-
edly forced the authorities to undertake reforms, which further strength-
ened the liberal-democratic principles and made political systems resistant
to such transgressions in future. Markovits and Silverstein (1988: 9) argued
that “ … if political scandals did not exist, liberal democracies would have
to invent them”. Some researchers support this functionalist argument
today, arguing that scandals can be understood as a sign of healthy liberal
democracy (Rose-Ackerman 1999; Blach-Ørsten 2011).
In the 1990s, as political scandals surfaced more frequently than pre-
viously in Western democracies, new perspectives on political scandals
emerged in academic research. For example, researchers increasingly
challenged the view that scandals improve the institutional setting and
strengthen democratic values and norms. Later research further devel-
oped the dysfunctional theory of scandals. The outcome of the major
Tangentopoli political scandal, which surfaced in Italy in the 1990s,
gave Della Porta and Vannucci (1999) a reason to support this view.
Moreover, Vannucci (2009) argues that dismantling corrupt networks
of high-ranking officials in Italian politics and the judiciary had a short-
term impact on curbing corrupt practices. As the police investigation
focused only on the implicated actors, instead of on dismantling the
social and institutional networks which enabled corrupt practices, the
scandal had only a short-term anti-corruption impact. Moreover, the
Tangentopoli case raised the “scandalisation threshold” and eventually
reduced public interest in the problem of corruption (Vannucci 2009:
240). These findings strongly oppose the functionalist assumption and
suggest that corruption scandals may even strengthen existing patterns of
corrupt exchanges, as they eliminate weak links from the network.
As for the literature on corruption in Central and Eastern Europe,
research projects by Diana Schmidt (2007), Michael Bryane (2004) and
Arvind K. Jain (2001) offer insightful information, identifying several
under-explored areas. According to these authors, the literature, includ-
ing analysis of corruption scandals, lacks research from discourse-analyt-
ical approaches. Moreover, studies of corruption in this part of Europe
need an innovative approach which acknowledges the geostrategic dif-
ferences of and within the region. This new approach would ideally take
into account the influence of supranational and international actors in
defining and understanding corruption at the nation-state level and the
role these actors have in assessing the efficiency of national anti-corrup-
tion policies (Schmidt 2007: 223–224). Lastly, the corruption literature
lacks an analytical approach to past and ongoing transformational pro-
cesses in CEE, such as economic and political reform, the emergence of
civil society and so forth, in relation to the conceptualisation of corrup-
tion and the design of anti-corruption policies (Schmidt 2007: 223).
This suggests a lack of theoretical and empirical studies which high-
light the specific context of transitional countries for which EU member-
ship is a prospect and a prime political influence. The Serbian context is
further characterised by the legacy of the armed conflicts in the Balkan
region in the form of a slow economic recovery and ongoing territo-
rial disputes. Therefore, the notion of the corruption scandal and its
influence on institutions, in countries which are neither fully fledged
democracies nor totalitarian regimes, requires a different approach from
82 M. ZURNIĆ
that developed in the literature. The following section elaborates on cor-

ruption scandals as they emerge in the Serbian context with the aim of
presenting specific conceptual tools for further investigation of scandals
in transitioning countries. The tentative typology of corruption scandals
that is briefly presented in the following section takes the level of institu-
tional response as the crucial factor in how scandals are conceptualised
and how their role in the political sphere is explored.
Scandals and Institutional Response in Serbia

In post-2000 Serbia, corruption scandals have been widely perceived as
being endless and pointless stories which present an abundance of mis-
leading information in public space aimed at distracting public attention
from more relevant issues. As perceived by the general public in Serbia,
scandals provide no solution to the problem they present. The follow-
ing metaphor, articulated by political analyst Ljubodrag Stojadinović in
2003, best illustrates how scandals were understood in the early post-Mi-
lošević years: “The seeds of scandals have been planted in Serbia, but
only weeds grow. Except for the disgrace surrounding us, no other result
is achieved” (Brkić 2013).
However, analysis of media coverage on corruption in Serbia offers
some interesting and counter-intuitive insights, revealing that public dis-
course on corruption in Serbia is somewhat more complex than the afore-
mentioned observation suggests. More precisely, in public debates about
corruption in Serbia, two terms for the concept of a corruption scandal are
used: afera and mafija. Before explaining these terms in more detail, it is
important to note that the term skandal is rarely used in the Serbian lan-
guage in the context of corruption. This term usually refers to a shocking
event which contradicts cultural norms, often involving abuse and violence,
such as accusations of paedophilia against Serbian Orthodox Church clergy.
The term afera [from Fr. l’affaire: business, matter] refers to an
account of a corruption incident in the spheres of business or politics.
An afera can be defined as the discovery of illegal or unjustified spend-
ing of public money, where high-ranking state officials and politicians
are alleged to be involved but are never scrutinised or prosecuted; once
the case is revealed to the public, the media follows the story for a while
then abandons it until it is opened up once more. The majority of inter-
viewees consulted for this research perceived the launching of aferas and
their later reopening as planned events, with goals other than fighting
corruption.
The fact that afera cases are seldom investigated by the police, with
the prosecution of alleged perpetrators being even rarer, gives rise to
mistrust of the country’s judicial system and doubts regarding the polit-
ical will of elites to combat this kind of corruption. What is more, these
events add to the perception that all politicians are corrupt, because they
seemingly have no interest in pushing for investigations or prosecutions.
This might suggest that most politicians are either directly involved in
the scandal or are protecting others from being exposed.
The fact that an afera lacks a conclusion in a court of law, with its
key protagonists left unpunished, makes the reopening of the case pos-
sible. Reopening means that the scandal is brought back into public dis-
course, its investigation is presented as a priority for the political elite,
and it is intensively covered by the media. Each time the public debates
the case, hopes are raised that those involved in the scandal will be ade-
quately punished. For instance, the afera concerning the privatisation of
the Sartid metallurgy factory, discussed in Chapter 6, has been reopened
more than four times since it emerged, and a final court decision on its
legality is still lacking.
Another concept, labelled mafija [Serbian for mafia], is used in public
discourse in Serbia for a specific type of corruption scandal. An important
aspect of such cases is that, following investigation, the implicated parties
are prosecuted by state institutions, unlike in cases labelled afera. Although
mafija cases appear very similar to what is known in fully fledged democ-
racies as corruption scandals, what differentiates them is that they imply
a high level of mistrust on the part of the public that the judgements
reached by the courts of law will be just and impartial. In public debate,
those accused in mafija cases are usually considered to be “chosen by state
institutions”. In other words, the accused are scapegoats—individuals
directly involved in the corrupt practice, such as employees, lower-ranking
civil servants or managers—while the high-ranking politicians who alleg-
edly masterminded the corrupt scheme are never prosecuted.
Mafija-type corruption scandals strengthen the widespread perception
among the public that investigations and prosecutions do not address the
core problem. Moreover, they are often interpreted as proof that court
decisions are not impartial, which decreases the already low level of trust
in state institutions. What is more, the fact that corruption cases result in
final court decisions implies that it is less likely, or even impossible, that
such cases will be reopened; as such, it is not realistic to expect that the
“true culprits” will be ever punished.
84 M. ZURNIĆ
It is important to mention that the concepts afera and mafija are

not used consistently in public discourse. In some cases, a strict differ-
entiation between the terms can be misleading, since at the moment an
emerging scandal is named in public debate as either an afera or a mafija
it is difficult to predict with certainty whether the case will be prosecuted
or not. The dual aspect of the conceptualisation of corruption scandals
based on institutional response requires further theoretical and empirical
investigation. The findings in this book can, therefore, serve as a starting
point for future research.
Tracing the Impact of Scandals on the Anti-corruption Institutional

Framework
The forthcoming chapters explore the practices identified in public
debates as corruption and the ideas put forward as appropriate anti-cor-
ruption policies. The main voices in the debate will be identified and
associated with specific political actors; in Berman’s words, “ideas do not
have any impact by themselves, as disembodied entities floating around
in a polity” (Berman 1998: 21). However, as discourse theory suggests,
actors do not necessarily need positions of power in state institutions
to successfully bring about change. Instead, they are empowered by
the strength of their arguments and the convincing communication of
their ideas (Schmidt 2011b: 59; Peters 2012). Therefore, the voices in
the debate identified here will be assessed with respect to the coherency
and consistency of their ideas. The relevance of these ideas will also be
explored, as well as the timing and viability of policy solutions. Ideas will
also be assessed according to their appropriateness in terms of national
values, tradition and culture (Schmidt 2008; Mehta 2010). Moreover,
the analysis explores whether actors reach consensus on relevant issues, as
this can increase the transformative potential of their discourses (Peters
2012: 158). The focus is therefore also on discursive strategies such as
advocacy coalition (Sabatier and Jenkis-Smith 1993) which actors in
debates employ with the aim of creating common ground.
Once the ideas and their communication have been examined, anal-
ysis will shift in the forthcoming chapters to the anti-corruption insti-
tutions established following the emergence of a scandal. The aim is to
explore whether those institutional changes address the practices iden-
tified in debates as corruption. If the newly established institutions
reflect the policy solutions put forward in the debate, there is a reason
to believe that the discourse(s) contributed to institutional change.
Conversely, when the establishment of new institutions cannot be

explained as a result of public discourse, an alternative explanation is
identified. The findings suggest that rival explanations had an important
influence on the formation of anti-corruption institutions in Serbia, such
as Serbia’s EU accession process and global market integration processes.
Before the impact of individual scandals is analysed in the forthcom-
ing chapters, the next section will offer a brief overview of the anti-cor-
ruption institutional setting in Serbia between 2000 and 2012. This
overview, which offers background information on the nature and origin
of institutional change, is a first step in establishing possible causal links
between anti-corruption discourse and institutional change. In order
to clarify how impact and possible causality is traced, it is necessary to
define what constitutes the influence of scandals and institutional change.
Thus, it is expected that the scandals under investigation would exert a
direct effect on the institutional setting, while indirect and complex mod-
els of impact are not analysed. As for institutional change, it is expected
to be a long-term measure at the state level which sanctions practices
perceived as corruption. Lastly, the change should be introduced in the
sector(s) where the scandal emerged.
The limitations of this kind of examination of the causal mechanism
between anti-corruption discourse and anti-corruption institutions lie
in the fact that most of the selected corruption scandals have not been
prosecuted or a final court decision has not been reached (aferas). This
suggests that the units of analysis cannot be clearly defined in time, and
cannot be separated, as these open-ended corruption stories have accu-
mulated over a decade. Moreover, it is difficult to identify a period of
time in which institutional change is expected to happen. This is especially
relevant for scandals which emerged during the fourth post-Milošević
government, whose mandate ended in May 2012, as the impact of dis-
course was observed over a shorter period than for the other case studies.
Anti-corruption Institutional Arrangements

in Post-2000 Serbia
The institutional reforms undertaken by the post-2000 governments

were mainly aimed at strengthening the rule of law and making the judi-
cial system more predictable. The improved institutional and legal setting
was expected to increase trust in state institutions and political actors and
ensure support from the wider public for the ongoing democratisation
86 M. ZURNIĆ
process. Furthermore, the desire of the post-2000 establishment to rein-

tegrate the nation into the international community after a decade of iso-
lation involved, among other things, Serbia joining many international
anti-corruption initiatives and conventions. Consequently, anti-cor-
ruption institutions in Serbia significantly increased in number over the
post-2000 period. The overview of institutional changes in the area of
anti-corruption that will be presented in this section aims to explore the
nature of these changes and identify their pattern. Serbia’s anti-corrup-
tion institutional framework will be analysed according to the order of
priority stated in the Constitution of Serbia (Article 194): national laws
are ranked below ratified international treaties, which are in turn ranked
below the Constitution.
The New Constitution of Serbia

As mentioned in Chapter 3, the first post-communist Constitution of
Serbia, adopted in 1990, remained in force until 2006. The post-2000
authorities failed to adopt a new Constitution until six years after taking
power in part due to a lack of consensus over how to institutionalise dis-
continuity with the Milošević regime. Several shortcomings of the new
2006 Constitution triggered harsh criticism after it was adopted. For
example, the Venice Commission stated that the new Constitution “has
all the hallmarks of an over-hasty draft” and “another aspect of the hasty
drafting of the text is the lack of opportunity for its public discussion
which raises questions of the legitimacy of the Constitution from the
perspective of the general public” (Venice Commission 2007: 22).
Ratko Marković, Professor at the University of Belgrade’s School
of Law and a member of the team that drafted the previous 1990
Constitution, argues in his Critical Review (2006) that the 2006
Constitution brought no substantial changes and should not be called
“new”. Marković goes further, arguing that the Constitution was an
“election tool” for the government to win elections by distancing itself
from the 1990 Milošević Constitution and by ensuring the territorial
integrity of the state in legal terms regarding the possibility of Kosovo
declaring independence.
The Constitution, dating from 2006 and currently in force, regulates
the issue of corruption in three ways. Firstly, it contains provisions ensur-
ing general democratic principles—such as the separation of executive,
legislative and judicial powers and the principle of the rule of law and
constitutionality—which are a precondition for the success of the fight

against corruption. Secondly, it includes provisions and norms which
explicitly address corrupt practices, such as those referring to the pro-
hibition of conflicts of interest and the incompatibility of public offices,
the immunity of state officials and the right to access information from
government bodies and institutions. Lastly, there are norms which ena-
bled further institutional changes in the field of anti-corruption and pro-
visions stipulating the establishing of a State Audit Institution (SAI) and
Ombudsman.
The shortcomings of the new Constitution include its vague and
sometimes contradictory wording and some very broad legal norms. For
example, as Marković points out, the definition of conflict of interest
lacks precision, as “what is meant by ‘state’ and what is meant by ‘pub-
lic’ office remains unexplained in the Constitution” (Marković 2006: 9).
Moreover, Marković (2006) criticises inconsistencies in the provisions
relating to property reforms and their potential consequences for the pri-
vatisation process.2
International Anti-corruption Conventions and Agreements

Serbia has ratified various international conventions and regional ini-
tiatives relevant to the fight against corruption, including the United
Nations Convention against Transnational Organised Crime and its
Additional Protocols in 2001 and the United Nations Convention
against Corruption (UNCAC) in 2005. While Serbia is not a signatory
of the OECD Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions (1997), Serbian criminal
legislation is to a great extent aligned with the Convention’s provisions,
as confirmed by Council of Europe experts during the PACO Project
implemented in 2005–2007 (Nenadić 2008). Moreover, Serbia has
been involved in the evaluation process within the OECD Support for
Improvement in Governance and Management project (SIGMA), jointly
initiated by the OECD and the EU.3
As a member of the Council of Europe and a signatory to the CoE
conventions against corruption, Serbia is committed to complying with
European and other international standards for the prevention and con-
trol of crime, as well as to enhancing technical cooperation aimed at
building capacity to implement the relevant standards. Within this frame-
work, the CoE has developed several monitoring mechanisms, and Serbia
88 M. ZURNIĆ
takes part in the Criminal and Civil Conventions on Corruption as well

as the initiatives of the Group of States against Corruption (GRECO),
the Program Against Corruption and Organised Crime in South-Eastern
Europe (PACO), the Council of Europe OCTOPUS programme, The
South East European Co-operation Process (SEECP), the Committee
of Experts on the Evaluation of Anti-Money Laundering Measures and
the Financing of Terrorism (MONEYVAL), and the Regional Anti-
Corruption Initiative (RAI).
Some criticism has been expressed in Serbia about the implementa-
tion of international conventions in the country. For instance, Nemanja
Nenadić argued that the Serbian authorities had no clear vision of which
national institutions would need adjustment and how long legal reforms
would take if an international convention were to be signed (Nenadić
2008: 37). Moreover, Nenadić argues that there was a lack of mecha-
nisms to ensure that legal and institutional changes were implemented
within a defined time period.
Consequently, the lack of both systematic adaptation to international
and European standards and a clear vision of the purpose of this pro-
cess—both prior to signature and afterwards—diminished the effective-
ness of the fight against corruption and opened up new opportunities for
wrongdoing in politics (Nenadić 2011). By wrongdoing, Nenadić refers
to the use of international commitments taken on by the authorities
for political gain in public debates. For example, according to Nenadić,
alignment with international conventions is used selectively as an excuse
for accelerating or postponing the adoption of certain laws at the
national level, as in the case of the delayed incorporation into national
legislation of the right of victims of corruption to adequate compensa-
tion, pursuant to the CoE Civil Convention on Corruption.
EU Accession and Anti-corruption Institutions

The process of accession to the European Union is another major influ-
ence on the transition process in Serbia. According to the Copenhagen
Criteria (European Council 1993), the accession country is obliged to
establish a stable political system and a functioning market economy and
harmonise its legislation with the EU’s acquis communitaire. Since the
accession of Bulgaria and Romania to the EU in 2007, which was bur-
dened with problems concerning corruption and organised crime, the
European Commission has paid special attention to this issue in further
EU enlargement in the Balkans. The accession process now involves
more developed instruments for institution-building, policy trans-

fer and regular assessment of progress in the area of anti-corruption.
This includes institutional reforms in line with EU standards, financed
through the Instrument for Pre-accession Assistance (IPA) and the appli-
cation of conditionality at all stages of negotiations (Council of Europe
2007).
Serbia started negotiations for the EU Stabilisation and Association
Agreement (SAA) in November 2005. Since then, the European
Commission has issued annual Progress Reports for Serbia as an integral
part of the EU’s external policy and as part of a comprehensive anti-cor-
ruption strategy regarding potential candidate, candidate and acces-
sion countries.4 The reports are the result of the process of monitoring
Serbia’s compliance with the community acquis according to the 1993
Copenhagen Criteria. In February 2008, the European Council issued
its Decision on a European Partnership with Serbia, making the fight
against corruption a priority in the EU accession process. As a response,
Serbia adopted a large number of anti-corruption laws aimed at strength-
ening the capacity of state institutions to deal with the problem of cor-
ruption. However, the European Commission’s annual progress reports
(European Commission 2005–2012) have raised concerns that the main
challenge faced by Serbia is not the adoption of anti-corruption legisla-
tion but its implementation.
In 2011, the European Commission issued its Opinion on Serbia’s
Application for Membership.5 This document gave an overall positive
assessment of the legal and institutional anti-corruption framework in
Serbia and also highlighted areas still vulnerable to corruption, such as
public procurement, privatisation, spatial planning and construction per-
mits. Special attention was paid to the need to enhance the investigative
capacities and coordination of law enforcement bodies. At the end of the
study period, in March 2012, the EC granted Serbia candidate country
status, and in January 2014 membership negotiations began.
The latest developments regarding Serbia’s accession to the EU
include the opening of the EU acquis chapters in 2015. The chapters
most relevant to the fight against corruption—Chapter 23: Judiciary and
Fundamental Rights and Chapter 24: Justice, Freedom and Security—
were opened in July 2016. According to the European Commission’s
assessment, considerable efforts will be needed to harmonise national
legislation with the EU acquis in this area.
90 M. ZURNIĆ
National Anti-corruption Legislation and Institutions

Three institutional changes are identified as turning points in the devel-
opment of the overall institutional framework for anti-corruption legis-
lation in post-2000 Serbia. The first such change was the establishment
of the National Anti-Corruption Council (2001), the first institution in
Serbia with a mandate to deal exclusively with the issue of corruption.
Secondly, in 2005 Parliament adopted the National Anti-Corruption
Strategy, which announced a more systematic approach to institutional
changes in the area of anti-corruption. The third important change took
place in 2010, when the National Anti-Corruption Agency (ACA) began
to operate. This chronology suggests that three main phases of the devel-
opment of the institutional anti-corruption framework can be identified
during the 2000–2012 study period (see Annex B for more detail on the
timeframe of the research). As the following sections outline, the three
phases are each characterised by institutions of specific type and organi-
sation: preventative anti-corruption institutions from 2001 to 2005, law
enforcement agencies from 2005 to 2010 and the centralised organisa-
tion of anti-corruption institutions from 2010 to 2012.
Preventative Institutions: 2001–2005

In terms of institutional development, the deep commitment of the first
post-Milošević government to the fight against corruption resulted in
the establishment of the National Anti-Corruption Council as early as
October 2001. The Council, the first independent government anti-cor-
ruption body in Serbia, had a mission to advise the government on pre-
ventive measures and sanctions to fight corruption and supervise their
implementation (Ćorić Erić and Makić 2009; Trivunović et al. 2007).
The Council was one of the first anti-corruption institutions founded in
the early 2000s on the initiative of the domestic authorities. According
to journalist Miša Brkić, one of the first members of the Council, the
initiative to establish the institution came from the political leaders of the
DOS government.6
The Council’s activities were burdened with difficulties from the
very beginning due to the lack of financial and political support from
the government. However, the Council was highly visible in pub-
lic debate around cases of corruption in privatisation. As the following
chapters show, the Council was actively involved in the fight against
corruption, conducting research and issuing reports on individual cases
of controversial privatisation processes. However, the National Anti-

Corruption Council is established as an expert advisory body to the gov-
ernment and as such has no authority to take legally binding measures.
In parallel with the establishment of the Council, several laws were
adopted to address the urgent problems of corruption and organ-
ised crime. As mentioned earlier, most changes in the early 2000s were
locally driven, being initiated and established by the Serbian authorities.
For example, in June 2001, the first post-Milošević DOS government
adopted the Law on One-off Taxation of Excess Revenue and Excess
Property Acquired Using Special Privileges Between 1 January 1989 and
1 June 2001. This law, which levied a tax on capital acquired illegally
during the 1990s, was abolished in June 2002 after a short and unsuc-
cessful implementation. The impact and relevance of this law on political
developments will be discussed in more detail in Chapter 5. However, it
is important to mention that the law was criticised for its alleged revolu-
tionary political character and for the huge discretionary powers granted
to the authorities to ensure its implementation (Prokopijević 2002).
Moreover, the law was described as retroactive, as it covered the previous
twelve years and therefore clashed with other laws.
Another institutional change initiated by the domestic political elite
to deal with the issue of corruption related to Milošević’s regime was the
establishment of the Commission for the Investigation of Malfeasance
from 1989 to 2000. The Commission was founded in January 2001 with
a mandate to investigate the illegal financial transactions of the Milošević
regime. The head of the Commission, Vuk Obradović, was forced to
resign only two months after assuming his mandate due to media alle-
gations of sexual harassment. In June 2002, the Commission’s Secretary,
Slobodan Lalović, resigned due to the Commission’s inefficiency. Thus,
the Commission ceased to be active in fighting corruption soon after its
establishment. Furthermore, a set of anti-corruption laws dealing with
problems related to the intensive economic and political transformation
were adopted in the early 2000s. These laws dealt with privatisation, the
election of members of Parliament, conflicts of interest, the financing of
political parties and free access to information.7
The Law on Prevention of Conflict of Interest in the Discharge of
Public Office, adopted in 2004, was the first piece of Serbian legislation
exclusively dedicated to this issue. The law defines conflicts of interest
and stipulates the priority of public interest over private. It also regu-
lates conflicts between public interests, or the accumulation of offices,
92 M. ZURNIĆ
and stipulates which offices are incompatible. The law envisages the
establishment of the Republican Board, with a mandate to maintain a
Register of Property for public officials. Public officials are obliged to
declare situations in which conflicts of interest could potentially occur
before taking a new position.
Previously, the problem of conflicts of interest was regulated by pro-
visions in the laws dealing with particular sectors, such as the laws on
public administration, local governance, elections and the judiciary.
Following the adoption of the abovementioned law, several other laws
partially regulating this sphere were introduced.8 The overlapping leg-
islation had previously caused confusion, and these overlaps very often
resulted in priority being given to the old rules and regulations (Beljanski
2006). The adoption of this law can be characterised as being exter-
nally driven, as it was drafted in line with UNCAC requirements. The
law received a positive evaluation from GRECO, and its implementation
was monitored by the European Commission during the stabilisation and
accession process.
Furthermore, the Criminal Code of the Republic of Serbia was
adopted in 2005. To ensure alignment with the relevant international
conventions, the code underwent several changes, including criminali-
sation of bribery of foreign public officials. The Criminal Code has cer-
tain shortcomings (Nenadić 2009: 96). It stipulates that both sides in
the act of bribery are subject to prosecution (criminal charges), regard-
less of who initiated the act. Only under certain circumstances can the
party offering a bribe be exempt from legal punishment, which does not
include exemption from responsibility for the act of bribery. This might
be an obstacle in the fight against corruption, since none of the parties
involved is motivated to report the case of corruption.
The Law on the Protection of Competition (2005) was the first law
regulating the problem of market competition in Serbia. According to
Marković-Bajalović (2009: 79), the first anti-monopoly law was adopted
relatively late (2005) considering the dynamic market transforma-
tion and the need for such legislation. Specific market structures were
already consolidated by the time the law and Commission were estab-
lished, and it was not realistic to expect that institutional improvement
would make any significant changes in practice. For instance, a large
number of privatisations were carried out without any legislation or
body to regulate monopolisation and protect competition in the market.
Consequently, the privatisation process resulted in a dominant position

for some entities, especially in the food, tobacco and sugar industries
(Marković-Bajalović 2009).
The law stipulates the creation of a Commission for the Protection
of Competition as an independent body in charge of implementation of
the law. However, the Commission received very limited support from
the government in the early years of its mandate, and for a while it also
lacked both the financial means to function properly and operational
and functional independence (Marković-Bajalović 2009). The later ver-
sion of the anti-monopoly law from 2009 gives the Commission more
scope, including the right to impose sanctions and run investigations.
According to civil servants from the Ministry of Justice interviewed for
this research, both laws were drafted in line with GRECO recommenda-
tions and EU legislation.
Law Enforcement Agencies: 2005–2010

The second phase in the development of anti-corruption institutions
was marked by the start of negotiations over the EU Stabilisation and
Association Agreement, which, among other things, implied intensive
harmonisation of national legislation with the EU acquis. Moreover, the
authorities took a more systematic approach to the reform of anti-cor-
ruption institutions, focused on coordinating the existing institutions.
For example, this period saw the adoption of the first National Anti-
Corruption Strategy (2005).
The main goal of the National Anti-Corruption Strategy (2005) was
to coordinate the work of government bodies by implementing educa-
tion programmes about anti-corruption efforts, preventive measures and
the sanctioning of corruption. The Strategy sets the main goals of the
Action Plan (the creation of an anti-corruption culture and the reduc-
tion of corruption practices); identifies the sectors in the institutional
system that are especially vulnerable to corruption (the political system,
the judiciary, the police, public administration and local government,
public finances, the economy, civil society and the media); and suggests
solutions and measures for improvement. The Strategy was aligned with
international standards, CoE Conventions and GRECO initiatives and
was drafted by a team of experts appointed by the Ministry of Justice
in cooperation with the CoE and the local mission of Organisation for
Security and Co-operation in Europe (OSCE).
94 M. ZURNIĆ
Moreover, the 2008 adoption of the Law on the ACA was an impor-
tant institutional change, as the law offered a legal definition of corrup-
tion. In Article 2, the law defines corruption as a relation, in the public
or private sector, based on an abuse of office or social status and influence,
with the aim of acquiring personal benefits for oneself or for another. The
law also introduces provisions relating to the prevention of conflicts of
interest for those holding public office at all levels of government and in
all three branches of power, including public enterprises and public insti-
tutions (Ćorić Erić and Makić 2009). Moreover, the Law on the ACA
defines the concept of public officials and then stipulates their liabilities,
including their obligation to disclose their property and income at the
beginning and end of their term of office, as well as during their term
of office in cases of significant change to the structure or value of their
property. The law also establishes the National Anti-Corruption Agency
as an independent body responsible to Parliament. The Agency became
functional in 2010, and its work will be discussed in the next section,
which deals with the third phase of the development of anti-corruption
institutions.
Among other anti-corruption legislation adopted during the sec-
ond phase is the Law on the Seizure and Confiscation of Proceeds from
Crime, adopted in 2008. This law established a new state authority—
The Directorate for the Management of Seized Assets—managed by
the Ministry of Justice and the Interior Ministry. According to inter-
views conducted with civil servants at the Ministry of Justice, these
legal changes were aimed at harmonising national legislation with the
Criminal Law Convention on Corruption and with two United Nations
legal instruments—UNCAC and the Convention against Transnational
Organized Crime and its Protocols.
Another set of laws and other acts relevant to corruption and organ-
ised crime was adopted in 2008, including the Law on the Liability of
Legal Entities for Criminal Offences (thus meeting one of GRECO’s
recommendations) and the National Strategy for the Prevention of
Money Laundering and the Financing of Terrorism. The most relevant
of these for anti-corruption is the Law on the Prevention of Money
Laundering and the Financing of Terrorism. This law established the
Administration for the Prevention of Money Laundering, which is
obliged to report on every monetary transaction greater than 15,000
Euros.
With the aim of strengthening the rule of law and building an inde-
pendent, transparent, responsible and efficient judiciary, the government
adopted the National Strategy on the Reform of the Judiciary. In rela-
tion to this, several laws were adopted during 2008, such as the Law on
the High Judicial Council, the Law on the State Prosecutorial Council
and the Law on Judges. Several more laws with significant anti-cor-
ruption potential were adopted, including the Law on Accounting and
Auditing, adopted in 2006, which introduced a new system of auditing
and increased the number of auditors. In 2008, a new Law on Public
Procurement replaced the law from 2002. These laws were drafted in
accordance with the Criminal Law Convention on Corruption, the
UNCAC and the OECD Convention on Combating Bribery of Foreign
Public Officials in International Business Transactions.
The National Anti-corruption Agency: 2010–2012

The third phase of institutional development in the area of anti-corrup-
tion started in 2010, when the ACA began operation. The competences
of the Agency are broad, including a mandate to initiate changes to leg-
islation and draft anti-corruption laws. The Agency is also responsible for
coordinating international cooperation in the fight against corruption
and implementing integrity plans for all governmental bodies. Although
the Agency is not an investigative body, it has a mandate to investigate
the validity of information and data relating to cases of corruption.
Lastly, the ACA has a mandate to act upon the requests of individual
citizens and on reports of corruption, as well as to protect the personal
details and anonymity of whistleblowers. The wide range of competences
granted to the Agency raises concerns about the technical capacity and
the extent of financial support necessary to ensure the sustainability of
such an institution.9
The Law on the Establishment of the ACA was prepared in accord-
ance with international standards, especially with UNCAC Article 6
and specific GRECO recommendations, which stipulated the creation
of such a body. Moreover, the external drive for establishing the ACA
was highly relevant, as the EU Plan for Visa Liberalization explicitly
required the establishment of the Agency.10 By complying with this
requirement, the Serbian authorities enabled their citizens to travel
and stay in the majority of EU countries for up to three months with-
out a visa.
96 M. ZURNIĆ
At the end of the time period covered by this analysis, a large part
of the anti-corruption legislation had been adopted and independ-
ent bodies for its implementation had been put in place. However,
the aims set out in the National Strategy (2005) indicate that at the
end of the previous decade there were still areas vulnerable to corrup-
tion which lacked adequate legislation. For example, the protection of
whistleblowers was partially regulated by the Law on Free Access to
Information of Public Importance, the Law on the ACA and the Law
on Civil Servants. However, this legislation mostly protected whistle-
blowers employed in the public sector. It was thus necessary to adopt
a law that would fully guarantee the protection of whistleblowers.
Adoption of the Law on Lobbying, which would ban lobbying through
promises of gifts and other benefits to a person approached by a lobby-
ist, was still pending.11
It was also necessary to adopt a law regulating media ownership. The
EU Parliament confirmed that there was concern about property rights
in the media and the structure of private entities buying or establishing
media outlets. The Resolution on the European Integration Process of
Serbia (2011) noted that the Government of Serbia was attempting to
control the work of the media and was tolerating the concentration of
ownership and a lack of transparency in the media sphere. According
to the National Anti-Corruption Council’s Report on Pressure and
Control over the Media in Serbia (AC Council 2011), a large number
of Serbia’s media outlets had been founded using capital of unknown
origin.
In 2012, at the end of the third phase of the development of
anti-corruption institutions, the Serbian authorities had plans for a
new strategic framework for the fight against corruption. The Ministry
of Justice, in cooperation with the National ACA, formed a Working
Group to draft the National Anti-Corruption Strategy for 2012–2016.
According to civil servants from the Ministry of Justice interviewed
for this research, a new Strategy was necessary because the majority
of activities envisaged by the existing strategy had been implemented.
However, the then incumbent fourth coalition government lost
the May 2012 general election, and the National Anti-Corruption
Strategy for the following period (2012–2016) was designed and
implemented by its successors, the centre-right Serbian Progressive
Party.
The Key Characteristics of Anti-corruption

Institutions in Serbia
In order to identify the main features of Serbia’s anti-corruption insti-
tutional setting, it is important to understand how institutional arrange-
ments in this area appear in the international sphere. According to
comparative research and the experiences of practitioners, several mod-
els of anti-corruption institutional frameworks can be identified; in many
cases, these models are combined (OECD 2008).
Central to the first model, as found in France, Slovenia, Macedonia
and Albania, for example, are preventive, policy development and coor-
dination bodies with responsibility for monitoring the work of state
institutions, such as boards for the prevention of conflicts of interest,
ombudsmen, audit offices and so forth. In addition, government bodies
in this anti-corruption institutional arrangement include a wide range of
institutions, both political, such as political parties in power and in oppo-
sition, and legislative, such as public services that develop, adopt and
implement constitutional, statutory and regulatory rules. Moreover, this
model of anti-corruption institutional organisation often includes judicial
and civil society institutions which are active in increasing transparency,
such as the media or the academic community (Langseth 2006: 22). In
Serbia, as the previous section suggests, this model of institutional organ-
isation characterises the early post-2000 period (2001–2005).
The second model of anti-corruption institutional arrangements is
based on institutions with a specialised mandate for detecting and inves-
tigating corruption as reinforcement units within existing anti-corrup-
tion units. This approach may also ensure a high level of institutional
specialisation and expertise in the fight against corruption. In such cases,
the challenges are related to the coordination of anti-corruption activi-
ties due to the absence of a central, specialised Agency (OECD 2008).
Bulgaria and South Africa have opted for this model for the anti-corrup-
tion institutional setting. In Serbia, this model of institutional organisa-
tion was dominant during the second phase, between 2005 and 2010.
The third model is based on an independent ACA, which is usu-
ally established in countries where corruption is perceived as systemic
and widespread and where existing institutions cannot contribute sig-
nificantly to the fight against corruption as they either lack capacity or
struggle with corruption within their own structures. There are five key
98 M. ZURNIĆ
functions in the mandate of a special anti-corruption body: prevention,

investigation, prosecution, education and the coordination of anti-cor-
ruption activities. An increasing number of anti-corruption agencies have
been set up in Europe over the past decade, including in Latvia (2000),
Lithuania (2001), Romania (2002) and Poland (2006). Serbia opted for
this model in the third phase of institutional formation (2010–2012),
with the ACA becoming functional in 2010.
Academic research on the efficiency of ACAs indicates that suc-
cess stories are very few in number. Such exceptions include the Hong
Kong Independent Commission Against Corruption, Singapore’s
Corrupt Practices Investigations Bureau, Botswana’s Directorate for
Economic Crime and Corruption and New South Wales’s Independent
Commission Against Corruption (Camerer 2001; Charron 2008; Tomić
2018). According to De Speville (2008), the reasons for the failure of
ACAs are numerous, including weak political will, a lack of resources,
political interference, failure to understand the nature of corruption in
the local context, minimal community involvement, selectivity in investi-
gations, the Agency itself becoming corrupt and so forth.
The three aforementioned anti-corruption institutional arrangements
are not universally applicable models or ready-made solutions which can
guarantee the effectiveness of the fight against corruption. Moreover,
studies about anti-corruption institution-building in post-communist
countries indicate that best practice from other regions has been consid-
ered useful but has been very difficult to implement due to differences
in economic, social and cultural contexts (Tomić 2018). Therefore, as
the literature suggests, the establishment of anti-corruption institutions
is most successful if it is based on analysis of the specific needs and priori-
ties of the specific country (Anusiewicz 2003). Moreover, in many coun-
tries these models are combined or change over time.
The anti-corruption institutions implemented in Serbia over the
twelve-year study period (2000–2012) have the characteristics of all
three types of institutional organisation. What makes the institutional
design in Serbia specific is that new anti-corruption institutions were
established while existing ones continued to work, resulting in institu-
tional layering. Thus, the three models followed one another, but insti-
tutions with different functions continued their activities in parallel.
There were very few cases of anti-corruption bodies being abolished or
phased out, while there were also cases of institutional overlap in terms
of mandates and goals. It is difficult, therefore, to clearly define when

the institutions of each model became dominant. However, the three
changes presented here as benchmarks are useful for understanding
the phases of the process of institutional change—the National Anti-
Corruption Council in 2001, the National Anti-Corruption Strategy in
2005 and the ACA in 2010.
The mechanism of change in Serbia’s anti-corruption institutional
organisation, as Annex C illustrates, can be identified as being layered
(Mahoney and Thelen 2010; Thelen 2004). According to Mahoney
and Thelen, layering can be an effective type of change, as it does not
involve efforts to directly change previous institutions, unlike some other
types of change such as institutional change by displacement or conver-
sion. Institutional layering in the case of Serbia is characteristic, as policy
solutions are “borrowed” from international and EU legal practice and
transplanted to the local context, resulting in a specific hybrid type of
anti-corruption institutional setting.
Regarding the origin of institutional change, the observed anti-cor-
ruption institutions can be divided into two groups: those involv-
ing internally driven change and those which were externally driven.
This means that some institutional change took place on the initi-
ative of national elites, especially in the early years of the post-Mi-
lošević government. Such changes include the Law on the Election of
Members of Parliament (2000) and the establishment of the State Anti-
Corruption Council (2001). International anti-corruption conventions
and agreements were also mainly signed on national initiatives, such
as the UNCAC in 2003, the CoE conventions and the EU anti-cor-
ruption legal instruments. Local initiative was also important in estab-
lishing cooperation with the European Bank for Reconstruction and
Development (EBRD), the European Agency for Reconstruction (EAR),
the World Bank (WB), the Organisation for Economic Co-operation and
Development (OECD), and other international organisations involved in
the process of institutional change.
Externally driven institutional change began in 2003 when Serbia
joined the CoE Group of States against Corruption (GRECO). This ini-
tiative is dedicated to adapting national legislation in the area of pub-
lic administration to international standards, including the prevention
of conflicts of interest, the regulation of the declaration of assets and
income and the strengthening of ethical principles and the rule of con-
duct. Externally driven institutional change became even more intensive
100 M. ZURNIĆ
when Serbia began the EU accession process in 2005. The country

became involved in harmonisation of its anti-corruption legislation with
EU norms, and priority was given to the areas of the rule of law, market
competition, public procurement, justice and the fight against corrup-
tion related to organised crime.
As for the functions of anti-corruption institutions, significant pro-
gress has been achieved in the field of the prevention of corruption by
improving the legal framework to meet EU standards. However, there
has been little improvement in the area of the investigation and pros-
ecution of corruption cases, as noted in the European Commission’s
2010 Progress Report. Most anti-corruption laws established independ-
ent bodies in specific sectors to monitor the implementation of the law.
However, in a large number of cases the work of these independent bod-
ies was delayed.
As noted in Chapter 3, the fight against corruption was not among the
government’s priorities during Milošević’s rule. However, after the DOS
came to power in October 2000, the process of institutional formation
in the area of anti-corruption became very intensive. Based on analysis
of anti-corruption institutions in Serbia, it is possible to argue that over
fifty institutions—including pieces of legislation, agencies and bodies—
were introduced over a twelve-year period (2000–2012). As Annex B
shows, anti-corruption legislation in Serbia increased significantly over
this period—from only a few provisions on preventing conflicts of inter-
est in 2000 to the well-developed legal and institutional anti-corruption
framework which was positively assessed in the European Commission’s
Opinion on Serbia’s membership in 2011. Based on the research find-
ings, it can be argued that the anti-corruption institutional framework
was not created and designed in order to prevent the reoccurrence of
the corrupt practices involved in the high-profile corruption scandals dis-
cussed in public debate. The main argument in support of this claim is
that the institutional formation has been mainly externally driven since
the early years of the DOS government. This tendency in anti-corrup-
tion institutional change was noticeable after Serbia joined GRECO in
2003 and signed the UN Convention against Corruption. It became
even more prominent after the country committed to the EU accession
process in 2005. Externally driven institutional change is mainly aimed
at adapting national anti-corruption legislation to international and
European standards. The areas in focus are reform of the judicial sys-
tem, regulation of the financing of political parties, regulation of pub-
lic procurement, the professionalisation of public administration and so
forth. Furthermore, changes to anti-corruption institutions in Serbia
can be characterised as gradual and taking the form of layering. Thus, as
newly established institutions became operational, old bodies were rarely
abolished. This tendency resulted in the accumulation of anti-corrup-
tion institutions, in several cases with overlapping institutional mandates.
Moreover, some legal experts argue that over the decade studied here
more work was done in the area of institutional and legal formation than
in other aspects of the fight against corruption, such as the consistent
implementation of laws or financial and political support for independ-
ent anti-corruption institutions (Nenadić 2009). Newly established insti-
tutions played an important role in consolidating a notion of corruption
based on the distinction between public and private spheres, as conceptu-
alised in the EU legal framework and internationally. However, the pro-
cess of institutional change mainly involved a top-down transfer of laws
and policies, while the initiative came mainly from members of the polit-
ical elite in power and less frequently and sporadically from local actors.
Notes
1. Material from this chapter first appeared in Zurnić, M. (2014).
Researching Corruption Scandals in Serbia: New Approaches and
Challenges. Sociological Review 48(2), 183–207; and in Zurnić, M.
(2018). Anti-corruption Institutional Framework in Serbia. New Europe
College Yearbook, Europe Next to Europe Programme 2015–2016;
2016–2017.
2. For example, Marković writes: “Private property is openly favoured,
although ostensibly ‘all types of property shall have equal legal protec-
tion’ (Article 86, paragraph 2). Thus the economic system of Serbia is
also based, inter alia, on ‘equality of private and other types of property’
(Article 82, paragraph 1) and public property will disappear unidirec-
tionally, by being ‘appropriated in a manner and under the terms stipu-
lated by the Law (Article 86, paragraph 3)” (Marković 2006: 46). For
the debate on the 2006 Constitution, see Podunavac (2011), Pavjančić
(2011), Vučić (2011).
3. Assessment reports on Serbia are available at www.oecd.org/document
/34/0,3746,en_33638100_34612958_35858722_1_1_1_1,00.html,
accessed 10 April 2018.
102 M. ZURNIĆ
4. More information concerning the EU’s anti-corruption policy is available

in: European Commission (2003) Communication from the Commission
to the Council, the European Parliament and the European Economic
and Social Committee—on a comprehensive EU policy against corrup-
tion; and European Commission (2003) Ten principles for improving the
fight against corruption in acceding, candidate and other third countries.
5. Communication from the Commission of the European Parliament
and the Council. Commission Opinion on Serbia’s Application for
Membership of the European Union. Available at http://ec.europa.eu/
enlargement/pdf/key_documents/2011/package/sr_analytical_rap-
port_2011_en.pdf, accessed 10 April 2018.
6. According to Brkić, it was Prime Minister Zoran Djindjić and Minister of
Finance Božidar Djelić who initiated the establishment of the National
Anti-Corruption Council by gathering “the most prominent individuals
with undeniable moral authority in Serbian society”, including Brkić him-
self (Brkić 2013: 19).
7. These changes include the Law on the Election of Members of Parliament
(2005), the Law on Privatisation (2005), the Law on the Privatisation
Agency (2004), the Law on Public Procurement (2005),the Law on
Public Information (2004), the Law on Financing Political Parties (2003),
the Law on Free Access to Information (2004), the Law on the Protector
of Citizens (2005) and the Law on the State Audit Institution (2005).
8. For instance, the Company Law, the Law on Civil Servants, the Law
on Public Agencies, the Law on Contested Procedure, the Law on
Bankruptcy, the Law on Parliament and the Anti-monopoly Law.
9. Besides the aforementioned responsibilities, the Agency’s mandate is to
monitor and coordinate state bodies in the fight against corruption; to
resolve conflicts of interest; to maintain a register of the assets of pub-
lic officials; to perform functions related to the Law on the Financing of
Political Parties; to provide opinions and instructions for implementation
of the law; to propose amendments and new regulations related to the
fight against corruption; to introduce and implement educational pro-
grammes related to corruption; to act on reports of corruption; to organ-
ise research, collect and analyse statistics and inform the public about the
state of corruption; and to undertake international cooperation in the
field of the fight against corruption. Further information is available on
the ACA’s website: www.acas.rs, accessed 10 April 2018.
10. “The EU Plan for visa liberalization with the Republic of Serbia (Road
Map), Block 3: Public order and security, Preventing and fighting organ-
ized crime, terrorism and corruption: Implement the legal regulations on
the prevention and fight against corruption, including the creation of an
independent anti-corruption agency”. More information is available on the
website of the Ministry of Foreign Affairs of Serbia: http://www.mfa.gov.

rs/en/foreign-policy/eu/republic-of-serbia-eu, accessed 10 April 2018.
11. The Law on the Protection of Whistleblowers was adopted in 2014 with a
new version being adopted in 2015. The Law on Lobbying, envisaged in
two National Anti-Corruption Strategies (2005, 2013), has not yet been
adopted (2018).
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CHAPTER 5
Money Laundering and Privatisation:

The Money in Cyprus Scandal
and the Privatisation of Jugoremedija
This chapter focuses on two corruption scandals which surfaced in public

discourse in Serbia in the early 2000s.1 The Money in Cyprus Scandal
was related to the repatriation of state funds that had been informally
transferred abroad during Slobodan Milošević’s rule in the 1990s.
The state-run investigation of this case started in 2000 when the first
post-Milošević government, the Democratic Opposition of Serbia coali-
tion (DOS), came to power. The story gained the character of a scandal
in 2001, when the investigation was abruptly cancelled for reasons which
were not communicated to the public. Those responsible for cancelling
the investigation have never been investigated or prosecuted. The other
scandal analysed here is related to the privatisation of the pharmaceutical
company Jugoremedija. Besides legal irregularities, the process was criti-
cised in public debate for denying the factory’s worker-shareholders the
right to take part in the company’s privatisation.
The chapter argues that the two scandals significantly influenced
the notion of corruption in public discourse by introducing new ele-
ments, such as the right of all social actors to participate in transitional
reforms and the protection of individual economic rights. Moreover, the
anti-corruption debate stressed the relevance of the separation of the
public and private spheres in understanding the issue of corruption, and
this strict separation was increasingly consolidated through an ongoing
privatisation process. The chapter will first outline political developments

https://doi.org/10.1007/978-3-319-90101-5_5
108 M. ZURNIĆ
in the early 2000s, when the allegedly corrupt practices concerning the
repatriation of money from Cyprus and the privatisation of Jugoremedija
took place. Then, the chapter will offer an overview of the two scandals
and present them as corrupt practices, as topics in public debates and as a
potential cause of change to public policy.
The Overthrow of Milošević, the Democratic Opposition

of Serbia and the Anti-corruption Debate: Historical
Background
The Fifth of October Revolution: Political Change or Continuity?
The political developments that brought about the overthrow of
Milošević took place on 5 October 2000. This political change took
the form of organised pressure put on the incumbent president of
Yugoslavia, Slobodan Milošević, to acknowledge the results of the pres-
idential election and hand over power to the opposition candidate,
Vojislav Koštunica, who had won 50% of votes to Milošević’s 37%.
These developments are often presented in public discourse as a historic
moment of change in Serbian politics and a radical shift from authoritar-
ian rule to a democratic society.
Moreover, the presidential elections were closely followed by parlia-
mentary elections. The pro-European political elites, known as the DOS,
won the elections and ousted Milošević’s establishment from power. The
DOS coalition, led by Prime Minister Zoran Djindjić, symbolically began
its mandate by promising an uncompromising fight against corruption.
In early October 2000, the government announced that specific meas-
ures would be taken to address issues related to corruption in Serbia.
DOS’s goals included the adoption of laws relating to the economy, local
government, the judiciary, the Electoral Law and so forth.2 Moreover,
DOS planned to implement radical economic reforms through a rapid
privatisation process and large investment in infrastructure. Lastly, an
important goal of the new political elite was to reintegrate Serbia into
the international institutions from which it had been excluded during
Milošević’s rule and the UN embargo.3
As noted, the post-Milošević political elite and the media tend to
present the political change of the Fifth of October as a revolution-
ary event. However, debate on this topic among the Serbian academic
5 MONEY LAUNDERING AND PRIVATISATION: THE MONEY … 109
community shows a lack of agreement (Spasić and Subotić 2001). From

one perspective, the Fifth of October was undoubtedly a revolutionary
change which put an end to the autocracy of Slobodan Milošević and
his family. It also established a democratic political system, an open soci-
ety and the protection of human rights, as well as a shift to a free market
economy. According to this view, Serbia’s October Revolution introduced
the idea of private property as the dominant form of property, through a
process of intensive privatisation (Stojanović 2001; Goati 2001).
On the other hand, some academics argue that the street protests
against Milošević did not result in any new institutions being estab-
lished, or those of the previous regime being dismantled, to qualify the
change as a revolution—as happened in Serbia in the 1940s with the
establishment of communist rule, or in Russia in 1917 after the October
Revolution. On the contrary, the protesters were actually defending
some already-existing institutions and demanding their reinforcement,
such as stricter implementation of the Electoral Law. Pavlović and
Antonić (2007), for example, argue that Milošević’s rule was a hybrid
regime characterised by constant instability and a tendency to change.
Thus, the change of October 2000 was a moment of dense history
when political leaders and the public had significant influence on politi-
cal developments. Similarly, Pavićević and Spasić (2001) suggest that the
political change of October 2000 resulted from a cumulative process of
social learning, when the realisation that individual life perspectives are
intrinsically linked to the sociopolitical context became widely accepted
by members of Serbian society.
Lastly, from an institutional perspective, Pavlović and Antonić (2007)
put forward the thesis that the political change of 2000 did not bring
about discontinuity with Milošević’s rule. On the contrary, as they
argue, several institutions and practices established during the 1990s
remained in place until 2003, such as control over the media, the dom-
inant position of the executive branch of power over the legislative, an
unreformed judiciary and so forth. Thus, according to Pavlović and
Antonić, a more adequate distinction is between the period before and
after 2003, as the first peaceful handover of power took place follow-
ing the parliamentary elections that year. This argument challenges the
tendency of many politicians and the media in Serbia to present 2000
as the year zero of contemporary Serbian politics, though the debate
remains open.
110 M. ZURNIĆ
The Post-2000 Political and Economic Context

The first post-Milošević government, formed by the DOS coalition,
was faced with a difficult economic situation in the country. The armed
conflicts in the Balkan region, the international isolation of the Federal
Republic of Yugoslavia (FRY) and the NATO air strikes on its territory in
1999 had had a devastating effect on Serbia’s economy. The IMF made
the following assessment of economic conditions in Serbia in the early
2000s after the change of regime, illustrating the scope of the devasta-
tion facing the country:
Output, which has only partly recovered from the economic devas-
tation caused by the Kosovo war, stands at about 40% of its 1989 level.
Unemployment amounts to one half of the labour force.4 The country’s
infrastructure is in despair following years of inadequate investment and
the damage inflicted during the Kosovo war. About 900,000 refugees and
internally displaced persons live in FRY under difficult conditions. Serious
energy shortages are being somewhat alleviated with humanitarian assis-
tance. The macroeconomic situation is very fragile. And with declining
output, the ratio of external debt to GDP has risen to about 140 percent
in the absence of debt servicing. The outlook for 2000 is for a modest out-
put recovery and high inflation. (IMF 2001: 9)
The economic recovery of the Federal Republic of Yugoslavia started

when the country was readmitted to the UN (November 2000), and
cooperation with international financial institutions, including the
International Monetary Fund and the World Bank, was established.
Moreover, the EU and the USA provided substantial financial support
to the FRY’s devastated economy in the early 2000s after Milošević was
ousted from power, enabling the domestic authorities to stabilise the
energy supply and public utilities (Ostojić 2014).
The DOS coalition that won the 2000 parliamentary elections in
Serbia consisted of 18 political parties with various ideological orienta-
tions. The most important parties or “the two pillars of the coalition”
were the Democratic Party (DS) and the Democratic Party of Serbia
(DSS) (Vujadinović and Goati 2009). These parties belong to dif-
ferent ideological families: the DS is close to liberalism and is a mem-
ber of the Social-Democratic International, while the DSS, a member
of the European People’s Party, belongs to the conservative family.5
The parties defeated in the 2000 elections, including the Socialist Party
of Serbia (SPS), the Serbian Radical Party (SRS) and the Party of Serbian
Unity (SSJ), remained active in political life as opposition parties. For
example, the SPS, led by Milošević until his death in 2006, supported
the minority government in 2004 and since 2008 has been part of all
coalition governments.
The differences between the two pillar parties, the DS and the DSS,
became visible shortly after DOS assumed power. The rift within the coa-
lition was mainly caused by the two sides’ different views on two issues.
Firstly, the DSS questioned the legality of the extradition of former FRY
President Slobodan Milošević to the International Criminal Tribunal
for the Former Yugoslavia (ICTY) in June 2001 (Ostojić 2014: 58–68).
Secondly, the DS and the DSS disagreed on which model of privatisation
would be more efficient in Serbia’s political and social context. The DS
was more inclined to a pragmatic decision-making model in this respect
and to fast economic changes, while the DSS insisted on a gradual transi-
tional process which would balance economic changes with the country’s
political transformation to a fully fledged democracy. In August 2001,
the DSS left the government owing to conflicts with the DS concerning
Slobodan Milošević’s extradition to the ICTY. DS leader Zoran Djindjić
continued to lead the government. His assassination in March 2003
increased political instability, and in November 2003, the government
lost the support of some other coalition members. The government was
thus disbanded, and new elections were called for 28 December 2003.
As for the attitudes of citizens, a striking difference can be noted
between the initial period of the DOS government and the end of its
mandate. According to Zagorka Golubović’s research, enthusiasm and
optimism were the dominant feelings among citizens regarding the gov-
ernment’s reformist agenda (Golubović 2007). Moreover, an opinion
poll from December 2000 shows that enthusiasm was widespread in soci-
ety. For example, 73% of citizens interviewed stated that positive energy
was one of the two strongest emotions they felt; for 41%, it was belief
in change; 23% felt hope and optimism; while 11% felt worry and fear
(Mihailović 2010: 21). By the end of DOS’s mandate, however, doubts
concerning the character of the reforms had emerged, and interviewees
stated that society was going backwards and that the situation increas-
ingly resembled the past. The public’s dominant impression was one of
social degradation (Golubović 2007: 71).
112 M. ZURNIĆ
The Money in Cyprus Scandal
Money Laundering and the Cyprus Connection

One of the first scandals to occur after the political changes of 2000
was related to illegal transfers of funds from Serbia to Cyprus under the
Milošević regime. During the 1990s, formal channels for money transfer
were replaced by informal and illegal ones, owing to the international
sanctions imposed on the FRY during the armed conflicts in the Balkan
region. The National Bank of Yugoslavia and the then ruling SPS, led by
Milošević, established contacts with banks in Cyprus, Switzerland, Russia
and other countries and opened branches of state-owned banks and off-
shore companies in those countries. The money was allegedly carried
out of Serbia in cash, deposited in banks abroad and transferred from
there legally to bank accounts in over 50 countries. The money origi-
nated from the confiscated savings of citizens and from the illegal trade
in oil, cigarettes and so forth which was largely supported by the FRY
authorities during the 1990s. The exact amount of money has never
been reported by state authorities, but it has been estimated in the media
that $11.5 billion was transferred illegally from the FRY to the Republic
of Cyprus between 1992 and 2000 (Insajder 2007; G.J. Spasić: Izneto
11 milijardi maraka, Glas javnosti: 2006 June 5: n.p.). By comparison,
this is approximately equal to Serbia’s GDP in 2001, according to the
International Monetary Fund.6
The first post-2000 government presented the investigation of
Milošević’s financial transfers to Cyprus as a matter of high importance.
The new President of Yugoslavia, Vojislav Koštunica,7 made this opti-
mistic and enthusiastic statement on 6 October 2000, one day after the
overthrow of Milošević:
[W]hen the new Serbia comes, … the stealing will cease, there will be
no poverty, no theft; the law will rule, not thieves; the people’s money
won’t be taken out of the country; it will stay here, and more of it will
come from our compatriots in the diaspora.8 (Koštunica se obratio
Beogradjanima, Politika: 2000 October 6: 1)
Koštunica’s encouraging words referred to the corruption and crimi-

nal affairs of Milošević’s regime and seemed to announce a new era in
modern Serbian politics. According to the then Governor of the Bank
of Serbia Mladjan Dinkić, the investigation of the money from Cyprus
was expected to bring justice to society and punish those who “betrayed
citizens’ trust and took advantage of their life savings” (Insajder 2007).
The post-2000 elites often expressed their belief that recovering the
money from Cyprus would help the devastated Serbian economy, enable
a smoother transition process and meet citizens’ expectations. In addi-
tion to the moral and financial reasons for pursuing the case, this was
also an opportunity for the new political elite to prove their readiness
to fight corruption and organised crime—which would distinguish them
markedly from the previous regime. As for citizens’ attitudes, an opin-
ion poll from December 2000 shows that they had high expectations of
the new reformist government. Citizens identified the following issues
as being among their two main priorities for reform. Economic develop-
ment was chosen by 59%, a better standard of living by 57%, and tackling
crime and corruption by 49%, while 33% preferred to address social issues
and 25% stated that strengthening democracy should be among the gov-
ernment’s priorities (Mihailović 2010: 21). The same survey shows that
60% of citizens interviewed expressed a belief that the government would
keep its promises. Only 13% did not believe that promises would be kept,
while 27% had no opinion (Mihailović 2010: 21).
Lastly, part of the money transferred to Cyprus was used by the
Serbian authorities for military expenditure, as uncovered by ICTY inves-
tigations as part of the indictment against Slobodan Milošević (Ostojić
2014; Boas 2007).9 The complexity of these financial schemes is best
illustrated by ICTY investigator Morten Torkildsen in the concluding
remarks of his report:
In my career, I have never encountered or heard of an offshore finance

structure this large and intricate. I consider that to conduct an overall and
comprehensive analysis of what happened to all of the funds that were
deposited or transferred into the bank accounts of the eight Cypriot com-
panies would almost be impossible and would be an extremely resource
intensive exercise. (Torkildsen 2002)
Investigations of the Money Transfers

The post-Milošević authorities attempted several times to investigate the
controversial money transfers to Cyprus; however, all attempts to inves-
tigate the case failed. For example, in January 2001, the government
established the State Commission for the Investigation of Malfeasance
with a mandate to investigate illegal financial transactions that had taken
114 M. ZURNIĆ
place between 1989 and 2001. Among the Commission’s members was
Mladjan Dinkić, Governor of the National Bank of Serbia, who was in
charge of providing the government with the evidence and documenta-
tion necessary to recover the money deposited in Cyprus.10 However,
the Governor halted the investigation soon after it started and ceased
informing the Serbian public about the case. Among the most intrigu-
ing explanations provided in the media was that the Governor had ben-
efitted in some way from the investigation being cancelled. Moreover,
in June 2002, Slobodan Lalović, the Secretary of the Commission for
the Investigation of Malfeasance, resigned due to the inefficiency of the
Commission and the investigation was abandoned.
Another party to the investigation was Forensic Investigative Associates
(FIA), a London-based company hired by the National Bank of Yugoslavia
in February 2001 to help with the investigation. Six months later, the
contract was terminated because the National Bank of Serbia was not sat-
isfied with the progress FIA had made on the case. Furthermore, Velimir
Ilić, one of the political leaders in the ruling coalition, also offered to help
in the investigation. In April 2001, Ilić made an unsuccessful attempt to
recover the money through his personal contacts in Cyprus.11 Besides
the state-run investigation, there have been several more attempts to
recover the money. For instance, Predrag Djordjević, a Serbian business-
man based in Cyprus, conducted private research into the matter, gath-
ering relevant information about illegal financial transfers, although his
investigation yielded limited results. Djordjević was critical of the investi-
gation conducted by the state authorities, and he filed a complaint against
the Governor and his co-workers for abuse of office. Djordjević argued
that several offshore companies in Cyprus involved in laundering Serbian
money had remained active after the Governor had identified them, pos-
sibly indicating that the Governor himself had an interest in them not
ceasing operation. In parallel with this, Vladan Batić, Minister of Justice
between 2001 and 2004, contacted banks in Switzerland in order to
trace the money transfers. Minister Batić was allegedly offered the dossier
on the case by Carla del Ponte, Chief Prosecutor for War Crimes at the
ICTY, from which he learnt of six bank accounts in Switzerland belong-
ing to Milošević’s relatives and friends. However, the Serbian Prosecutor’s
Office did not provide the Swiss bank with the relevant documentation
and did not initiate an investigation within three months, as Swiss legisla-
tion required. The bank accounts were thus unfrozen, and the money was
legally withdrawn by the account holders.
Among the key figures in the money-laundering scheme, according

to media reports in Serbia, was Cypriot lawyer and politician Tassos
Papadopoulos, who became President of Cyprus in 2003. According to
the Serbian authorities, this circumstance made the investigation more
difficult, as the Cypriot authorities were not motivated to cooperate fully.
According to Dinkić, the Cypriot authorities were not genuinely inter-
ested in cooperation when he visited them in 2001:
… they obviously let us search for something that wasn’t there anymore,
and they knew it wasn’t there. They let us search for a needle in a haystack,
so to speak, but the needle wasn’t there, it was in some other haystacks in
some other country. (Insajder 2007)
The last time the problem of the money in Cyprus was officially
addressed by state officials was in March 2006, during Serbian
President Boris Tadić’s official visit to his Cypriot counterpart Tassos
Papadopoulos (Akar 2006; Charalambos 2006; Predsednik Kipra zna,
FoNet: 2006 March 5: n.p.). The presidents exchanged views on the
case and agreed that despite all efforts, the illegal banking transfers could
not be traced. The media on both sides reported critically on the meet-
ing: “Papadopoulos’ statements were false and Tadić’s nebulous” (Kipar
zataškava istragu, Glas javnosti: 2006 March 31: n.p.).
The Legal Approach to the Money in Cyprus

As the investigation of the money in Cyprus lost momentum, public
debate about the scandal became increasingly less intensive and enthu-
siastic. After several unsuccessful attempts to recover the money, the
Serbian authorities changed their approach to the problem, introducing
a tax on capital acquired illegally during the 1990s with the Law on One-
off Taxation of Excess Revenue and Excess Property Acquired Using Special
Privileges between January 1 1989 and June 1 2001 (2001). The law
was criticised in the media for its allegedly inconsistent implementation,
and its selective application was understood in public discourse as being
the result of informal connections between the post-Milošević authori-
ties and the business community created during Milošević’s rule. From
the financial point of view, the law did not achieve the expected results,
in part because the wealth owned by Serbian businessmen was mainly
registered abroad and was therefore not subject to taxation by Serbian
116 M. ZURNIĆ
legislation (Prokopijević 2002: 50). In June 2002, the Law on Excess

Revenue was annulled, enabling the business community, including busi-
nessmen who had acquired their wealth during the 1990s, to continue
their business activities without being investigated by the post-Milošević
authorities.
Despite the fact that the investigation of informal financial transfers
was cancelled and the money was not recovered from Cyprus, in 2006
the Serbian judiciary investigated several high-ranking civil servants who
had allegedly been involved in transferring the money during the 1990s.
Those prosecuted included Mihalj Kertes, who had been director of the
Federal Customs Bureau for most of the 1990s, and Borka Vučić, man-
ager of Serbian state-owned bank Beobanka, which was allegedly involved
in transferring state funds during the 1990s.12 In 2007, Mihalj Kertes
was sentenced to eight years in prison for abuse of office and embezzle-
ment related to the money transfers to Cyprus. No charges were brought
against Borka Vučić, as she obtained legal immunity in January 2007
on becoming a Member of Parliament for the SPS, led by Slobodan
Milošević’s successor Ivica Dačić.
The Rise of the Anti-corruption Movement

In parallel with attempts by various state and non-state actors to inves-
tigate the money transfers to Cyprus, an intensive public debate devel-
oped concerning the case (Annex D). It is important to note that at the
time the post-Milošević authorities began treating corruption as an issue
of high relevance for Serbian politics and the scandal of the money in
Cyprus arose, corruption was also an increasingly debated topic at the
international level. As this chapter will show, the global anti-corruption
discourse framed and significantly influenced the anti-corruption debate
in Serbia. Furthermore, it can be argued that the global anti-corruption
discourse enabled a change to the theory within which the concept of
corruption had previously been conceptualised in Serbia (Connolly
1983).
Some macro-level analyses show that discourse can enhance the
reproduction of behavioural patterns in order to discursively produce or
prevent change (Alatas 1990; Krastev 2004). Moreover, from this per-
spective, discourse is viewed as a structural element which has a signifi-
cant impact on social relations of production. For example, Ivan Krastev
argues that the global anti-corruption discourse that emerged in the early
2000s secures the domination of global capital over politics and thus
serves the interests of the international business elite by limiting the role
of the state (Krastev 2004).
The global anti-corruption discourse focuses on the notion of good
governance. The good governance doctrine assumes that elements such
as the rule of law, transparency, responsiveness, consensus, participa-
tion, equity, inclusiveness, effectiveness, efficiency and accountability
successfully prevent corruption and increase the level of positive social
trust. As illicit and inappropriate use of public expenditure is explained
within this framework as being the result of bad governance, improving
governance—that is improving the above elements—is considered to be
an indirect was of fighting corruption in the public policy sphere. The
good governance doctrine has been promoted by many international
institutions, organisations and governments. For example, on 5 October
2000, the US Congress passed the International Anticorruption and
Good Governance Act (Public Law: 106–309). According to the US
Department of State, the Act was adopted in order “to ensure that
United States assistance programs promote good governance by assisting
other countries to combat corruption throughout society and to improve
transparency and accountability at all levels of government and through-
out the private sector”.13
Thus, the global anti-corruption discourse was reflected in various
ways in the anti-corruption debate in Serbia. Firstly, the general public
increasingly identified corruption as an obstacle to the country’s fur-
ther democratisation and economic development. The fight against
corruption and crime was among Serbian citizens’ main concerns after
Milošević was ousted from power, and the public had high expecta-
tions for the reforms promised by the new authorities.14 In December
2000, nearly half of citizens interviewed identified crime and corrup-
tion as being among the top two areas requiring government interven-
tion (Mihailović 2010: 21). Secondly, the global discourse on corruption
influenced the process of legally codifying corruption, which was car-
ried out through a programme of intensive institutional change and the
introduction of a large number of anti-corruption laws. Lastly, the very
notion of corruption was re-defined in post-2000 Serbia in line with
the global anti-corruption discourse. As this chapter will show, the pro-
tection of citizens’ individual economic interests and the strict separa-
tion between the public and private spheres in politics became the core
elements of the notion of corruption, in contrast to the specific type of
118 M. ZURNIĆ
state capitalism seen under Milošević, which emphasised the collective/

national interest and failed to respect the separation of the public and
private spheres.
Debate on the Money in Cyprus

A multitude of voices have surfaced in public debate over the investi-
gation of the money transfers to Cyprus. Based on the available media
material and the in-depth interviews conducted with actors in the
debate, this rich variety of views on the investigation can be distilled
down to the three most visible and articulate ones. These voices, and the
notions of corruption they convey, are not mutually exclusive. Moreover,
the number of actors who promote each view has varied over time, as
has the opinion of each actor. It is thus difficult to make a clear and strict
distinction between these discourses, and it would be even more difficult
and unproductive to ignore the less visible discourses—that is, to disre-
gard the residue of the analysed material. However, it is unavoidable to
do this to some extent; as such a diversity of views cannot be incorpo-
rated in this analytical framework.
Each of the identified discourses is promoted by a group of actors
who have several characteristics in common. Firstly, they share the same
conceptualisation of corruption; secondly, they are active in the same
type of institutions or organisations; thirdly, they have the same type
and extent of access to the policy-making process concerning the fight
against corruption, as well as in other areas. Finally, each group of actors
communicates its discourse in a different way, using a different type of
media communications. For example, one of the discourses is advocated
by representatives of state-level institutions, such as the government or
the prime minister’s or president’s cabinet; they often hold a veto in
decision-making processes concerning corruption scandals; and their
views are largely communicated in the digital and printed media.
Anti-corruption Discourse After Milošević and the Concept

of Individual Economic Rights
As Chapter 3 argues, according to the elite discourse of the Milošević
establishment in the 1990s, the notion of political corruption implied
a betrayal of national interests or a failure to protect state sovereignty
rather than the use of public money for private gain or a lack of trans-
parency in political decision-making. The Money in Cyprus Scandal
was the moment when the meaning of corruption in public discourse

significantly changed. The new concept implied that politicians in power
had a responsibility to protect and promote the economic and political
rights of individual citizens. Moreover, the core element of this under-
standing, introduced into public discourse when the DOS government
came to power in 2000, was a clear distinction between the public and
private spheres. Furthermore, in the post-2000 public debate, this
new understanding of political corruption was discursively applied to
the events of the 1990s, thus successfully de-legitimising the Milošević
regime. Before discussing this in more detail, it is worth mentioning that
the literature offers similar cases of discourse promoting actors’ ideas and
thus effectively contributing to their legitimisation and identity forma-
tion. For example, an insightful study published in the early 1990s by
Carolyn L. Hsu suggests that the Chinese government strengthened its
legitimacy after the Tiananmen Square protests in 1989 by “offering an
alternative political narrative [of corruption] which ties political legiti-
macy to economic stability and growth” (Hsu 2001: 26). According to
Hsu, the new anti-corruption discourse in China was based on ideas of
legal rationality and the rule of law which—despite its contradictions
with the dominant communist ideology—was very effective in mobilising
the urban population and co-opting members of dissident groups.
Analysis of media reports on the Money in Cyprus Scandal suggests
that it was the political elite in power which pioneered the conceptual
change in the anti-corruption discourse. The concept of corruption, as
understood by these actors, was based on three main elements. Firstly,
corruption was identified as an abuse of power by the Milošević regime,
which enabled the illegal transfer and embezzlement of state funds.
This form of corruption harmed citizens’ individual rights and threat-
ened their economic security. As political establishment actors argued,
returning the money from Cyprus was a way of doing justice in eco-
nomic and symbolic terms. Moreover, it was argued that the overthrow
of Milošević, together with the prosecution of those responsible for the
financial transfers to Cyprus, would eradicate corruption in Serbia. The
2007 trial of Mihalj Kertes, who was in charge of the Customs Bureau
during the 1990s, confirmed the arguments put forward by the incum-
bent political elite.
The second argument supporting accusations of corruption from
this perspective is related to the political accountability of members of
Milošević’s regime. According to this view, the money from Cyprus was
120 M. ZURNIĆ
used during the 1990s to finance the politics of nationalism and support
armed conflicts in the region. Members of Milošević’s establishment,
often dubbed fake patriots by the mainstream media after 2000, allegedly
used patriotic rhetoric as a screen for corrupt practices and connections
with organised criminal groups. Thus, the post-Milošević establishment
argued that the widespread corrupt practices under Milošević’s rule were
conceptually linked to the concept of national interests. Therefore, crit-
icism of Milošević’s regime was based on the argument that many state
policies of the time identified state interests with national interests. Post-
2000 elites argued that Milošević’s leadership committed war crimes,
atrocities and destruction in both neighbouring countries and in Serbia
in the name of national and state interests defined in this way.
Lastly, the actors who promoted this view of corruption argued that
Milošević’s regime did not enjoy legitimacy for most of its term of office.
According to this view, Milošević’s authoritarian rule was perpetuated
through non-transparent decision-making and frequent election-rigging,
which was also identified as a form of corruption by the post-2000 elites
in power. Moreover, as this discourse argues, political pluralism was
introduced to Serbia in a non-democratic way, and the Constitution did
not act as a legal instrument that secured conditions for democratic pol-
itics. Lastly, this discourse also identifies corruption in the way Milošević
implemented the privatisation policy, as noted in Chapter 3, as he alleg-
edly blocked transitional processes in his own personal interest and for
the benefit of his establishment.
This understanding of the issue of corruption promoted by the
post-Milošević elite in power failed to contribute substantially to the
fight against corruption for the following reasons. Firstly, the business
elite’s closeness to the previous leadership meant that it was not possible
from this perspective to clearly untangle their responsibility for the finan-
cial transfers from that of state officials and high-ranking civil servants.
As a result, the financial resources of the businessmen who supported
Milošević’s regime and who benefitted from the informal money trans-
fers to Cyprus remained intact, as did their mechanisms of influence on
political decision-making.
Another shortcoming of this view is that it failed to provide coherent
and convincing reasons for the cancellation of the investigation of money
transfers to Cyprus. That is to say, Mladjan Dinkić, who was Governor
of the National Bank in the early 2000s, never provided a comprehen-
sive explanation to the public of why the investigation was cancelled or
why the organisers of the money-laundering scheme were not brought

to court. The official position of the Serbian authorities became even less
clear to the public when some state officials stated on visiting Cyprus
in 2006 that the investigation was no longer among the state’s priori-
ties.15 This time, the state’s approach to the act of corruption was, in
Connolly’s words (1983: 31), “To leave the criteria, the point, and the
theory within which the concept is embedded intact, but then to treat
the whole complex as an anachronistic system irrelevant to the modern
age”. The inability to communicate the investigation’s failure to the pub-
lic, as well as the inconsistent approach to defining corruption, signifi-
cantly limited the transformative power of the discourse voiced by the
post-Milošević political elite in power. However, the overall frame of the
Money in Cyprus Scandal had great transformative power in terms of
creating new collective memories (Schmidt 2011: 20) in post-Milošević
Serbia. Similar to Vivian Schmidt’s argument about post-war Germany,
the new political elite in Serbia aimed to take the country “out of the
troubled past being into an economically prosperous doing” (Schmidt
2011: 23).
The Turn in the Anti-corruption Debate After 2006: Corruption or Act

of Patriotism?
Another voice in the debate over the financial transfers to Cyprus became
more visible in public discourse after 2006, when the judiciary started
investigating and prosecuting state officials from the Milošević regime.
The most relevant actors in this discourse were members of Milošević’s
Socialist Party of Serbia, including the aforementioned Mihalj Kertes and
Borka Vučić. These actors interpreted the financial transfers as a patriotic
act, claiming that when the money was transferred from Cyprus back to
Serbia during the years of isolation and sanctions, it was used to secure
food and other necessities (Patriotski pristup, NIN: 2001 March 22:
n.p.; Bio sam svetac, Glas javnosti: 2007 September 6: n.p.). Moreover,
these actors criticised the post-Milošević elites for interpreting corrup-
tion in relation to national identity and national interests and for misrep-
resenting the previous regime as corrupt nationalists who were defeated
by their own greed and ambition. For example, Mihalj Kertes argued
that state interests reflected the interests of all Yugoslavs, regardless of
their ethnic origin, and denied that nationalism and discrimination were
the leading ideology under the previous regime. Moreover, the actors
122 M. ZURNIĆ
in this discourse argued that misinterpretation was a form of corruption

in itself. That is to say, the post-2000 elite in power allegedly used this
misleading interpretation of state policies under Milošević’s rule to legit-
imise their position in power, which was allegedly facilitated by Western
powers. From this perspective, the post-2000 elite in power were often
called traitors, owing to alleged Western influence over their political
decision-making.
Furthermore, members of the Milošević establishment argued that
during the armed conflict in the Balkans, ensuring the state’s sover-
eignty and the physical safety of citizens was prioritised over the pro-
tection of individual citizens’ economic interests. According to this
view, the modern understanding of corruption—based on the notion of
conflict between public and private interests— is not applicable to situ-
ations characterised by a conflict between units of sovereignty—that is
the immediate threat of war. The following statement, made in court by
Mihalj Kertes, summarises the main arguments against the post-2000
establishment and their investigation of the money transfers to Cyprus:
I’m not guilty and I do not admit the crime I am accused of. I was only
implementing a policy that kept the state of Serbia functioning. … This
trial is politically motivated. The prosecutor did not mention that it was a
time of embargo, when nothing in this country could work normally. I’m
not ashamed of what I did back then, on the contrary I’m proud of it. …
This is a trial of a regime that was struggling to protect its borders and
which dared to oppose the architects of the new world order, who tried to
change Serbia’s borders. I am the only living representative of that regime,
and this is the only reason I am here. My trial is at the same time a trial of
the dead Milošević. (Bio sam svetac, Glas javnosti: 2007 September 6: n.p.)
The weakness of this point of view, mainly promoted by members of

Milošević’s establishment, arises from the fact that the actors in this
discourse failed to offer a convincing account of the devastating con-
sequences of their governance during the 1990s. The explanation
that the notion of state interests was based on the interests of peo-
ple in Yugoslavia as demos, not ethnos, was not persuasive enough in
post-2000 Serbia. The process of investigating and prosecuting war
crimes, conducted by the ICTY and the Serbian judiciary, strongly con-
firmed the opposing argument that the political leadership in Serbia
had a nationalist-oriented agenda during the 1990s. Furthermore, this
patriotic discourse failed to articulate, or communicate effectively, the

idea that the investigation of the money transfers to Cyprus should also
include the individual businessmen who benefited from this scheme.
In 2007, the most prominent advocate of this discourse, Mihalj
Kertes, was sentenced to eight years in prison for abuse of office and
embezzlement relating to the money transfers to Cyprus. After Kertes’s
trial was completed, this discourse disappeared from public debate.
However, many corruption scandals that emerged afterwards, such that
around the privatisation of the Jugoremedija factory, which will be ana-
lysed in the following section, show that capital of unknown origin or
related to offshore companies in Cyprus was often invested in privatisa-
tions in Serbia.
Political Integrity and Corruption: Critique from the Good

Governance Perspective
The scandal concerning the money transfers to Cyprus became more
complex in late 2001, immediately after the investigation was aban-
doned, with the surfacing of another highly articulated and well-pro-
moted voice in the debate, which emerged and developed in parallel
with the two discussed above. Actors taking this perspective thought that
the fight against corruption should be based on support for democratic
procedures, strengthened institutions and governance and enhanced
personal and institutional integrity. This position, mainly advocated by
anti-corruption practitioners and experts, argued that several aspects of
the investigation of the money transfers could be identified as incidences
of corruption. Firstly, the post-Milošević establishment was criticised for
its lack of responsiveness and efficiency in conducting the investigation
and for abandoning an issue of common interest, allegedly for political
gain. This discourse highlighted a lack of transparency in conducting the
inquiry as Governor Dinkić failed to inform the government regularly
of the investigation’s progress. Moreover, the actors in this discourse
argued that the fact that the enquiry was cancelled in secret and without
public debate was a form of corruption.
Secondly, this discourse understood the decision to abandon the
investigation, allegedly made under the influence of the business elite,
as a form of political corruption. Furthermore, this discourse argued that
in order to avoid conflicts with the financial elite and criminal groups
124 M. ZURNIĆ
formed under Milošević’s rule, the state authorities replaced the inves-
tigation of the transfers to Cyprus with the Law on Excess Revenue.
Moreover, the actors in this discourse argued that state anti-corruption
policy must not be based on taxation, insisting instead that the origin
of capital be investigated and illegally acquired goods confiscated.16
However, this policy change did not take place, and suspicions were
raised that the funds from Cyprus were invested in the national economy
through the privatisation process.17
It is important to note that the actors who took this view did not
question the idea of corruption based on a strict division between public
and private. Instead, these actors accused the post-2000 governments of
not applying the definition of corruption to their own political conduct.
For example, it was argued that the attempt by state authorities to inves-
tigate the money in Cyprus was not genuine and that Governor Dinkić
allegedly benefitted politically from the investigation being sabotaged.
Moreover, this discourse insisted that the Law on Excess Revenue was
an instrument used by the political elite in power to co-opt the business
elite, as the law enabled “Milošević’s businessmen” to buy their freedom
by paying a one-off tax.
This position was taken by a wide range of actors and was mainly for-
malised through the activities of the National Anti-Corruption Council.
The most prominent advocate of this discourse in the early 2000s was
Verica Barać, President of the National Anti-Corruption Council, who
summarised the main arguments of this critical position thus:
… as for Dinkić abandoning that business [investigation of the money in

Cyprus], I see it as a crucial moment for his later successful career. … If
he had uncovered the case, he would probably never have become either
Governor or Minister. He realised it himself, for sure, and decided to take
the side of the stronger. He gave up, so to speak. Our authorities aban-
doned all the promises they made in 2000 anyway. All their promises. They
realised that it’s more convenient to make a pact with tycoons who actu-
ally have power and money and control the intelligence services and many
other power centres, so they [the Serbian authorities] considered it more
profitable to join them than to undertake complicated and difficult reforms
which could endanger their position in power … (Trivić 2011)
This voice in the debate had great transformative potential. It was based
on the understanding of corruption advocated by the post-Milošević estab-
lishment, which was linked to the wider discourse of modernisation—with
democratisation and free market economy as its main elements—and the

global discourse on good governance. However, the actors promoting
these ideas, including the National Anti-Corruption Council and part of
the media, were not powerful veto players in the policy-making process
and therefore could not make a significant impact on institutions. The
National Anti-Corruption Council, as an advisory body, did not have the
institutional capacity or the mandate to conduct investigations of individual
cases of corruption. However, the active involvement of the National Anti-
Corruption Council in the discussion enabled the highly relevant topic of
political corruption under the incumbent and previous governments to be
opened up to public discussion.
Institutional Response to the Scandal of the Money in Cyprus

The anti-corruption debate that developed during investigations into
the financial transfers to Cyprus and following the investigation’s can-
cellation contributed to several ad hoc institutional changes, including
the Law on Excess Revenue and the Commission for the Investigation
of Malfeasance. However, these were abandoned or abolished with-
out achieving the expected results. Moreover, the public debate failed
to result in any long-term institutional changes aimed at preventing
informal financial transfers. Furthermore, the scandal about the money
in Cyprus had no significant impact on the activities and structure
of the political parties involved. The SPS, once led by Milošević and
directly involved in the financial transfers to Cyprus, remained active in
political life and has been part of all ruling coalitions since 2008. The
DS, one of the actors involved in investigating the case, led the ruling
coalition between 2008 and 2012. Nor did the scandal have any sig-
nificant impact on the careers of the politicians involved in the scandal.
For example, the Governor of the National Bank of Serbia, Mladjan
Dinkić, who conducted the investigation of the Cyprus scandal,
remained active in politics until 2013. He served as Minister of Finance
(2004–2006), Minister of Economy and Regional Development
(2007–2011), Deputy Prime Minister (2008–2011) and Minister
of Finance and Economy (2012–2013). Furthermore, Ivan Mrkić,
a high-ranking Yugoslav diplomat in Cyprus from 1993 until 1999,
served as Minister of Foreign Affairs (2012–2014). It is interesting to
consider that the current government is led by the national conserva-
tive Serbian Progressive Party (SNS), whose leaders were highly posi-
tioned in the government during the Milošević regime. In July 2012, at
126 M. ZURNIĆ
the beginning of their term, the SNS government announced thorough

political reforms, which their predecessors had allegedly failed to imple-
ment on assuming power: “We will start the reforms that citizens have
long been waiting for. The SNS [Serbian Progressive Party] will make
the Sixth of October happen again” (Isailović 2012: 6). However, no
improvement in the investigation of the money transfers to Cyprus has
been reported since.
The Jugoremedija Privatisation Scandal
Privatisation in the Early 2000s: Legal Framework and Enforcement

As noted above, the DOS government insisted on systematic priva-
tisation, considering it a necessary condition for the country’s democ-
ratisation and economic recovery. The new authorities considered an
economic system based on three types of property— state, collective and
private—to be the legacy of Milošević’s rule and the main obstacle to
the country’s development. In the early 2000s, the Law on Privatisation
adopted by the Milošević government in 1997 was still in force. This law
stipulated firstly that privatisation was voluntary—that it was up to the
lawful owners of property to decide whether or not to start the process.
Secondly, the law foresaw several models of privatisation, although the
preferred method involved the use of vouchers, with a company being
bought out by its employees and other citizens. However, it was often
debated in public whether the laws adopted under Milošević’s rule were
legitimate, and so whether the post-2000 state authorities had to respect
them. The new political elite considered legislation adopted in the 1990s
to have been drafted and adopted with the aim of serving Milošević’s
Socialist Party and the business elite closely linked to it. Moreover, it was
often argued that such legislation was adopted through non-democratic
procedures and that it was in part to blame for the economic devastation,
as it had not been drafted with the aim of protecting the public inter-
est. Therefore, the new authorities explained occasional disregard for the
laws and regulations passed under Milošević as being a more pragmatic
and democratic approach to the transitional processes than would be the
case if legislation harmful to the public interest were respected. In this
political context, soon after privatisation of the pharmaceutical company
Jugoremedija was initiated, it developed into a high-profile corruption
scandal.
The Privatisation of Jugoremedija

Privatisation of the Jugoremedija pharmaceutical factory, a mixed capital
enterprise, with ownership shared between the state and an employees’
collective, began in September 2002 when the state’s shares (41.93%)
were sold by the State Agency for Privatisation to Jaka 80, a company
based in the Former Yugoslav Republic of Macedonia (FYROM). The
remaining shares were in the ownership of worker-shareholders.
Before discussing the controversies around the Jugoremedija privatisa-
tion, it is important to note that the Social Accounting Service (SDK)
ceased to exist at around the same time that the scandal emerged. As
noted in Chapters 2 and 3, the SDK was established in 1963 as an inde-
pendent regulatory body with a mandate to control and supervise all
financial transfers in the state. The post-Milošević government consid-
ered this institution a superfluous and dysfunctional relic of the past. The
institution ceased to exist in 2003, and its property was privatised; hence,
mediation of financial transactions was transferred to the banking sec-
tor. However, the banking sector, which was also privatised in the early
2000s, had no legal obligation to take over the SDK’s full mandate and
no financial interest in doing so. Abolishing the SDK proved less effective
than the authorities proclaimed. On the contrary, a lack of state supervi-
sion over financial transfers in the domestic economy led to a wide range
of illegal practices emerging during the privatisation programme.
The Jugoremedija scandal surfaced in September 2002 with media
reports of alleged irregularities in the tender procedure. Moreover, the
National Anti-Corruption Council detailed the case in their official Report
on Jugoremedija (2004). Among other things, the Council’s Report indi-
cated that the state authorities were responsible for the irregularities and
suggested that the capital involved in the Jugoremedija privatisation was
related to the illegal financial transfers to Cyprus that had taken place
during the 1990s. According to the Report (2004), Jaka 80 was founded
by Demeno Trade Ltd, which was registered in Cyprus as a management
company. One of the three owners of Demeno Trade Ltd. was Tassos
Papadopoulos, who had allegedly been involved in illegal banking transfers
under the Milošević government. An organised group of Jugoremedija’s
worker-shareholders, led by their colleague Zdravko Deurić, engaged in a
legal case against the new co-owner from Macedonia. As a result, a court
decision was made in 2006 which terminated the contracts with the for-
eign investor for Jugoremedija’s privatisation.18
128 M. ZURNIĆ
Thus, the initial phase of privatisation was marked by the struggle of

the worker-shareholders and the National Anti-Corruption Council to
prove the illegality of the process. However, the second phase was char-
acterised by a consolidation of the worker-shareholders’ management of
the factory. The new management, led by former strike leader Zdravko
Deurić, had to face a number of difficulties, as previous owner Jaka 80
had left the company with financial problems. The shareholders were
disunited owing to their differing views on how the factory should be
managed. The media’s interest in Jugoremedija’s problems diminished
significantly (Zlatić 2004), while institutional support for improving the
factory’s productivity was lacking. The government showed little interest
in the management of Jugoremedija, even though 41.93% of the facto-
ry’s shares were once more owned by the state. Moreover, the factory’s
new management was challenged by state policies in the health sector,
which largely prioritised the acquisition of pharmaceuticals produced by
foreign companies over domestic products.
Despite these problems, the worker-shareholders proved effective and
resourceful managers, improving productivity and becoming an active
political organisation. The Jugoremedija worker-shareholders achieved
significant progress in managing the factory: paying back debts, invest-
ing approximately 11 million euros in modernising the production pro-
cess and meeting European standards for good production practices.
Moreover, they invested in the construction of a new pharmaceutical
factory, Penpharm, in order to expand Jugoremedija’s capacities. Their
early years of work were referred to in the media as 2000 days of suc-
cess. Furthermore, in 2008 Jugoremedija’s worker-shareholders founded
a political party, the Political Movement for Equality, which won 5.5% of
the vote in the local elections and several seats on Zrenjanin town coun-
cil. The party had its own representatives on the Inquiry Committee,
established by the local government and tasked with investigating the
Jugoremedija privatisation.
The story of the Jugoremedija privatisation saw further developments
after 2010. This stage of the scandal was marked by the involvement of
state institutions, including the Ministry of Finance, in managing the fac-
tory. Accusations of corruption against the worker-shareholders’ man-
agement were made with increasing frequency in the media. In August
2012, the acting general manager of Jugoremedija, former strike leader
Zdravko Deurić, was arrested on allegations of abuse of office and
embezzlement of 600,000 euros. The factory was declared bankrupt in
2016, and the privatisation process is currently under investigation as

one of twenty-four cases of corruption which the European Parliament
highlighted to the Serbian authorities in March 2012 as worthy of
investigation.19
Public Debate on the Privatisation of Jugoremedija

The mass privatisation policy strongly influenced the meaning of cor-
ruption in public debate after 2000. Close analysis of the available
media coverage reveals that the two most prominent topics related to
the anti-corruption discourse are privatisation and the desirability of
a development strategy for the Serbian economy. More specifically, the
Jugoremedija privatisation scandal illustrates the clash of ideological posi-
tions between several social groups and their various conflicting views on
what counts as corruption in a privatisation process. However, on several
occasions, these positions proved flexible rather than fixed and mutually
exclusive.
The first voice in this debate, which supported the ongoing process of
rapid privatisation, was articulated by that part of the political elite that
was in power alongside members of the financial elite. The second view
of the Jugoremedija privatisation was mainly developed by that part of
the political elite that supported a gradual transitional process, together
with the National Anti-Corruption Council and a group of intellectuals
in Serbia and abroad. The third position was formulated through the
speeches and activities of Jugoremedija’s worker-shareholders, as well as
activist groups that opposed the systematic implementation of privatisa-
tion, such as the Freedom Fight Movement.
Corruption-Free Privatisation Process

One of the most visible voices in the debate over the Jugoremedija priva-
tisation was mainly formalised through state policies and the statements
of high-ranking civil servants. This mainstream discourse in the debate
did not address the concept of corruption explicitly; its central point was
actually a well-articulated and effectively communicated understanding
of privatisation. That is to say, this discourse advocated the fast privati-
sation model and legitimised pragmatic decision-making in this area in
order to mark a clear separation from the models of production inher-
ited from the communist past. According to this view, the privatisation
legislation inherited from the Milošević regime and the socialist era was
130 M. ZURNIĆ
occasionally an obstacle to achieving an effective and fast privatisation of

state and public property. In order to achieve the goal set at the begin-
ning of their mandate—to privatise all state and collectively owned com-
panies by the end of 2009—the advocates of this pragmatic approach to
transition considered breaking some of the laws introduced under the
Milošević regime to be legitimate political behaviour.
From the perspective of this mainstream elite discourse, the cluster
concept of desirable economic development included the notion of a
transition to a free market economy. Therefore, events like the workers’
strikes at Jugoremedija or the involvement of civil groups in the debate
concerning the factory’s privatisation were interpreted by the actors in
this discourse as obstacles to progress and the development of society
as a whole. In their public statements, the actors in this discourse often
represented Jugoremedija’s workers and worker-shareholders as lazy,
unskilled people, accustomed to doing nothing during Milošević’s rule
and under socialism, who should get used to the fact that they now had
a boss.20 It is important to note that the actors in this discourse were
institutional veto players in the implementation and coordination of the
Jugoremedija privatisation. Moreover, they had privileged access to the
conventional media, which was one of the most effective ways of com-
municating their arguments and views about privatisation and influenc-
ing public debate.
The Rule of Law and Privatisation

The second voice in the debate identified corruption in informal con-
nections between state officials and businessmen who had acquired their
wealth through criminal activities during the previous Milošević govern-
ment. Moreover, as no investigation of the state officials involved in the
Jugoremedija privatisation has been conducted, this discourse underlines
the importance of respect for the rule of law as the core of a success-
ful fight against corruption. Therefore, according to this understanding
of the Jugoremedija privatisation, the rule of law had priority over prag-
matic decision-making. The actors who took this view insisted that priva-
tisation should be conducted according to the existing laws in order to
ensure that democratisation of the political system would not lag behind
economic development.
The conceptualisation of corruption according to this discourse is
marked by two main elements. The first is the formal accountability of
the civil servants involved in the Jugoremedija privatisation. Their alleged
involvement in illegal activities around the privatisation was identified as

corruption, as was their informal influence on the judiciary. The second
element is the government’s lack of political will to address the problem
of illegally acquired capital being invested in the privatisation process. In
other words, allegations of corruption referred to the authorities’ failure
to tackle money laundering through privatisation.
Furthermore, the National Anti-Corruption Council, one of the most
outspoken actors in this discourse, underlined the lack of institutional
protection for worker-shareholders in the Jugoremedija privatisation in
its 2004 Report. The Council explained the position of worker-share-
holders in the privatisation process in the following way:
In the absence of a clear position on the principles on which a privatisation

process should be based, the government sacrifices minor-shareholders by
subjecting them to a process which is affected to the extreme by irrespon-
sible conduct and corruption and by treating them as if they did not own
any shares. (Report on Jugoremedija 2004: 6)
The Jugoremedija privatisation scandal was important as it eventually

contributed to the empowerment of minor-shareholders and the even-
tual institutional protection of their rights. This was achieved through
the Law on Economic Entities, adopted in 2004, which was one of the
first attempts to regulate the rights of minor-shareholders in Serbia. It is
reasonable to claim that the Jugoremedija privatisation scandal, together
with other scandals involving minor-shareholders’ rights, accelerated the
adoption of this law.
This discourse was well coordinated between the National Anti-
corruption Council, the critical media, civil society groups and politi-
cians opposed to the rapid privatisation model. The engagement of this
inclusive coalition significantly raised the visibility of the controversial
Jugoremedija privatisation and increased the potential for pressure to
be exerted on the authorities. However, the actors in this discourse had
limited influence on privatisation and anti-corruption policy-making.
Therefore, the influence of the discourse on institutional change and for-
mation in these areas was limited and indirect.
Privatisation as an Inclusive and Voluntary Process

Another critical understanding of the Jugoremedija privatisation was
mainly advocated by Jugoremedija’s worker-shareholders, who asserted
132 M. ZURNIĆ
their right to take an active part in the factory’s privatisation. In their

view, privatisation is a process which introduces and legitimises social
divisions and therefore cannot contribute to more equitable and sustain-
able economic development. Although the actors in this discourse admit-
ted that privatisation was unavoidable in post-2000 Serbia as part of the
overall process of transition, they argued for a diversity of models of
privatisation in order to take account of each economic entity’s specific
conditions. This discourse thus advocated an approach to the privati-
sation of state and social property which aimed to achieve more inclu-
sive and sustainable economic development. In other words, companies
should be privatised only if private ownership would improve the com-
pany’s efficiency and management. In cases where worker-shareholder
management had proved efficient, as with Jugoremedija, this discourse
argued that the state authorities should not insist on privatisation. Thus,
according to the worker-shareholders, the idea of privatisation as a vol-
untary process was supported during Milošević’s rule and under social-
ism for good reason. This approach to privatisation was a rational and
adequate policy and, the discourse argued, was by no means an abuse of
power. The discourse went further in criticising the post-2000 establish-
ment for using privatisation to accommodate their financial and political
interests, with a long-term negative impact on the public good. Thus,
the worker-shareholders’ discourse criticised the privatisation process
for being politically driven by the establishment in order to de-legiti-
mise the socialist legacy of collective property. Therefore, according to
Jugoremedija’s worker-shareholders, a successful and meaningful fight
against corruption should involve a change to the dominant understand-
ing of privatisation in order to influence its dynamics and outcomes.
The actors in this discourse strongly advocated organised and coor-
dinated resistance from worker-shareholders and supported workers’
legal struggles in other cases of irregular and illegal privatisations in
Serbia. When Jugoremedija’s worker-shareholders regained and consoli-
dated their control over the factory, they started supporting sharehold-
ers and workers across Serbia financially and organisationally in order to
encourage them to get involved in the privatisation of their own facto-
ries. For example, Jugoremedija employees established workers’ networks
for horizontal cooperation as an alternative to the existing trade union
structures, whose leaders were considered to have been co-opted by the
political elite and instrumentalised in political infighting. Horizontal
cooperation was aimed at supporting the struggle of workers throughout
Serbia in their attempts to intervene in the illegal privatisation of their

companies and defend their own interests (Srećković 2011).21
Moreover, a large number of intellectuals and activists from the for-
mer Yugoslav republics, Western Europe and the USA showed interest
in the arguments of this discourse. For instance, Noam Chomsky and
Naomi Klein supported the worker-shareholders’ attempts to regain
their ownership rights, as did the Global Balkans activists group.22 These
individuals and groups were active in supporting the workers’ strikes,
in informing the public about their activities, in organising public dis-
cussions, in filming and screening workers’ strikes, and so forth. These
alternative ways of informing the public about developments in the
Jugoremedija privatisation were very important, as the Serbian print and
electronic media largely reported Jugoremedija from the perspective of
the mainstream elite discourse.
During the first post-Milošević DOS government, the Jugoremedija
scandal increased awareness in Serbia of the negative side of privatisation.
As the following chapters will show, privatisation became increasingly
criticised in public discourse in Serbia and generated corruption scandals.
Owing to the 2008 economic crisis and ever-increasing unemployment
levels, the voices in the debate inclined towards the position of the work-
er-shareholders and the view that insisted on the principles of the rule of
law and transparency in privatisation.
The Jugoremedija Scandal and the Impact on Institutions

The Jugoremedija privatisation scandal led to certain ad hoc institutional
changes. In 2004, a court decision stipulated that the Prosecutor’s Office
should take legal action ex officio in the Jugoremedija case, while in 2005
two Jugoremedija managers were charged with abuse of office. However,
other actors involved in the privatisation process, such as state officials
and offshore companies in Cyprus, have not been investigated. In 2007,
the privatisation contract which had been signed between Jugoremedija
and Jaka 80 was terminated following a court decision. In 2008, the
Jugoremedija worker-shareholders founded the Political Movement for
Equality, which became active in local administration initiatives con-
cerned with investigating the Jugoremedija privatisation. In 2012, the
Rosa Luxemburg Foundation brought the issue of the Jugoremedija pri-
vatisation before the European Parliament (EP), as a result of which
the EP issued a Resolution in March 2012 suggesting that the Serbian
134 M. ZURNIĆ
government start investigating twenty-four cases of privatisation, includ-

ing Jugoremedija. It is possible that the Jugoremedija privatisation scan-
dal, together with other scandals involving minor-shareholders’ rights,
accelerated the adoption of the Law on Economic Entities, which insti-
tutionally protected the rights of minor-shareholders. The investigation
of the Jugoremedija case is still ongoing, and the influence of the scandal
might be clearer once the final court decision is made.
To summarise, one of the most widely reported scandals in post-2000

Serbia—the repatriation of money from Cyprus—emerged in public
discourse at the time of Milošević’s overthrow in October 2000. The
debate over the informal financial transfers with Cyprus carried out by
Milošević’s establishment significantly changed the meaning of politi-
cal corruption in public debate in Serbia. In the 1990s, public discourse
implied that politicians were responsible for protecting the nation, so
corruption was understood to mean betrayal of the national interest or
failure to protect state sovereignty rather than the use of public money
for private gain or a lack of transparency in political decision-making.
The new concept, introduced after Milošević was ousted from power in
2000, was based on a clear public/private distinction and implied that
politicians in power had a responsibility to protect and promote the eco-
nomic and political rights of individual citizens. The new understand-
ing of corruption in Serbia was influenced by the global anti-corruption
discourse that emerged in the early 2000s, which explains corruption as
being largely the result of bad governance. Therefore, this framework
considers good governance principles—promoting the rule of law, trans-
parency, inclusiveness and others—as prevention of corruption.
The new definition of corruption was discursively applied to the events
of the 1990s, which successfully delegitimised the Milošević regime.
The dynamics of this scandal significantly changed when the new elite in
power failed to communicate the results of the investigation. This failure
challenged their legitimacy as promoters of democracy and European val-
ues. Moreover, the inefficient investigation of the money in Cyprus was
increasingly interpreted in public discourse as proof that the change of
government in the revolution on 5 October 2000 and the overthrow of
Milošević would not bring significant overall change. The change in the
understanding of corruption during the first post-2000 government was
introduced exclusively at the level of discourse, without being explicitly
acknowledged in the existing legal or institutional frameworks.
The second scandal, concerning the privatisation of pharmaceuti-

cal company Jugoremedija, focused on the distributive conflicts which
emerged from the abrupt economic and political changes in Serbia. The
scandal surfaced as a reaction to the irregular privatisation process, but
also revealed the deeply rooted problems of Serbian society, such as the
right of all social actors to participate in economic reforms.
Analysis of the money in Cyprus and Jugoremedija scandals indi-
cates that the anti-corruption discourse had low transformative poten-
tial in Serbia in the early 2000s. Both scandals have been present in the
anti-corruption discourse since they surfaced in the early 2000s, but
neither has produced long-term institutional changes at the state level
in the area of anti-corruption. There have been a number of institu-
tional changes relating to the Jugoremedija privatisation scandal since it
emerged, from the first court decisions in favour of the shareholders and
workers in 2004 to the European Parliament’s 2012 Resolution suggest-
ing that the Serbian government start investigating the Jugoremedija pri-
vatisation. However, institutional changes have been slow and sporadic.
What is important about the Jugoremedija scandal is that it triggered
wide-ranging debates about the dynamics and nature of the transitional
process in Serbia.
Notes
1. Material from this chapter first appeared in Zurnić, M. (2013). Anti-
corruption Discourse and Institutional Change in Serbia: The Money in
Cyprus Scandal. Philosophy and Society, 24(1), 119–134, and in Zurnić,
M. (2014). Political Scandal and Anti-corruption Debates in Serbia.
In P. C. van Duyne et al. (Eds.), Corruption, Greed and Crime Money
(pp. 93–120). Nijmegen: Wolf Legal.
2. The measures included: an urgent change to the Constitution; the devel-
opment of an appropriate approach to relations with the UN Security
Council in order to secure Serbia’s territorial integrity and sovereignty
regarding its southern province of Kosovo; the adoption of a Law on
Conflicts of Interest; the opening of secret police files containing infor-
mation about citizens; checks on the property of high-ranking state offi-
cials; the establishment of an independent audit institution; and so forth
(Sekelj 2001).
3. As was noted in Chapter 4, in May 1992 the UN Security Council
imposed economic sanctions (embargoes on trade, travel and transpor-
tation) on the Federal Republic of Yugoslavia for its involvement in the
136 M. ZURNIĆ
armed conflicts in Bosnia and Croatia. The embargo was tightened in

1993 but lifted in October 1996 after the Dayton agreement was signed
(1995), ensuring peace in Bosnia. However, the USA and other coun-
tries maintained the outer wall of sanctions, which blocked the FRY’s
membership of international institutions until the FRY began cooperating
with the Hague war crimes tribunal and addressed concerns about human
rights in Kosovo. In mid-1998, when the conflicts in Kosovo escalated,
the USA and EU imposed bans on foreign investments and official trans-
actions by FRY entities. Moreover, the EU cancelled the trade prefer-
ences that it had earlier granted the FRY.
4. Unemployment figures include workers on involuntary leave. As lay-
offs of redundant workers were effectively forbidden, total employment
declined by less than 10% between 1991 and 2000 [Endnote in the
quoted text] (IMF 2001: 9).
5. The division into ideological families is based on the type of social rift
from which parties are created, their affiliation to supranational federa-
tions and their ideological-political orientation (Vujadinović and Goati
2009: 284).
6. More information is available on the websites of the Serbia Investment
and Export Promotion State Agency (SIEPA) www.siepa.gov.rs and the
International Monetary Fund www.imf.org, accessed 10 April 2018.
7. Vojislav Koštunica was President of Yugoslavia from 2000 to 2003 and
Prime Minister of Serbia from 2004 to 2008.
8. Daily newspaper Politika, 6 October 2000, p. 1.
9. For more information about the investigation of these transfers as part of
Milošević’s trial, see the ICTY archive available at www.icty.org/case/slo-
bodan_Milošević/4, accessed 10 April 2018.
10. As a young academic at the University of Belgrade, Faculty of Economics,
Mladjan Dinkić conducted research on the topic of the state-run mon-
ey-laundering scheme. In his book Economy of Destruction (2000), he
described the mechanisms of the financial transactions that Milošević’s
regime established with Cyprus.
11. This attempt was cancelled because Ilić’s contacts in Cyprus allegedly
asked for $10 million to recover what was left of the documentation
that the Cypriot lawyer Papadopoulos and his co-workers had previously
destroyed. The Serbian government and the Governor did not accept the
offer. Ilić and the Governor accused each other of benefiting financially
from the investigation. Ilić publicly accused the governor of monopo-
lising the investigation and sabotaging it for personal and political gain
(Insajder 2007).
12. Mihalj Kertes was director of the FRY Federal Customs Bureau from
1993 to 2000. As a person with Milošević’s trust, he provided logistical
and financial support for various undercover operations by the Serbian

regime. During the 2000s, Kertes was convicted, tried or acted as a wit-
ness in several trials. Borka Vučić was head of the state-owned Beogradska
Banka and was considered important in the maintenance of the regime.
She was referred to in the media as Milošević’s personal banker. She was
a member of the SPS, and when elected to Parliament in 2007 served as
the acting President of the National Assembly of the Republic of Serbia.
13. Quote from the US Department of State website: www.state.gov/j/inl/
rls/rpt/c6696.htm, accessed 10 April 2018.
14. Survey results show that citizens expected reforms to be fast and efficient.
13% of interviewees had little patience for the changes to come, while
24% considered that the DOS government should not remain in power if
their work did not yield the expected results soon. However, the major-
ity of interviewees (44%) stated that DOS should be given more time to
solve the accumulated problems that had been generated before their
time, while 13% were ready to wait longer because they believed that the
changes would come eventually (Mihailović 2010: 21).
15. On several occasions the Serbian authorities stated that investigation of
the money-laundering scheme with Cyprus was not their priority. For
example, Minister of Justice Vladan Batić said: “We are focused now on
the future; we’re not interested in Milošević’s money anymore” Financial
Mirror, 16 October 2001. Another politician, Velimir Ilić, said: “We
focus now on developing the country; the issue [of the money in Cyprus]
is not on our agenda anymore” Cyprus Mail, 22 February 2002.
16. See interview with Verica Barać, President of the National
Anti-Corruption Council from 2003 to 2012. www.slobodnaevropa.org/
content/Barać_sminkanje_Miloševićevog_rezima/9497627.html,
17. Statements by political leaders and anti-corruption practitioners on this
matter include the following: Mladjan Dinkić, Governor of the National
Bank of Yugoslavia 2001–2003: “After 5 October, when privatisation
started, those who adopted the Law on Privatisation never wanted to
check the origin of the investments or introduce any kind of company
ratings; instead, the idea was to let the money in because this is a poor
country, the more money we get, the better for us and for the state. A
privatisation like this attracts dodgy funds. I don’t know if these funds are
legal or not, no one can tell” (Insajder 2007).
Božidar Djelić, Minister of Finance 2001–2004: “I can ascertain that a
number of privatisation processes have been carried out with funds from
Cyprus, Panama, Luxembourg, the Virgin Islands and so on. As a respon-
sible person I can’t say that my words are the evidence, but all of us know
very well that money is being recycled this way” (Insajder 2007).
138 M. ZURNIĆ
18. The irregularities of the privatisation process involved the following. The

investor, Jaka 80, had started to manage the factory without acquiring a
bank guarantee, which according to the Council’s Report could not take
place without the consent of the relevant state authorities. Secondly, the
new owner, Jaka 80, failed to comply with the purchasing contract. Instead
of investing in the privatised factory, Jaka 80 converted its debts into shares.
The result of the conversion was that Jaka 80 became the owner of 61.02%
of shares in the company and therefore Jugoremedija’s majority shareholder.
Lastly, the Report stated that an Interpol notice had been issued for Jaka
80’s owner, Jovica Stefanović-Nini, at the time the privatisation contract
was signed with Jugoremedija. Jaka 80 appealed to the court requesting
legal termination of the privatisation contract, arguing that the privatisation
process was not legal. Moreover, they argued that its illegal aspects, such as
the takeover of the factory without a bank guarantee and the conversion of
Jugoremedija’s debts into shares, were enabled by the State Share Fund.
19. European Parliament resolution of 29 March 2012 on the European
integration process of Serbia (2011/2886(RSP)): “19. Calls on the
Serbian authorities to review immediately the controversial privati-
sation and sale of 24 companies, as the European Commission has
expressed serious doubts concerning their legality, including those of
‘Sartid’, ‘Jugoremedija’, ‘Mobtel’, ‘C market’ and ATP Vojvodina”.
The Resolution is available at http://www.europarl.europa.eu/sides/
getDoc.do?type=TA&reference=P7-TA-2012???-0114&language=
EN&ring=B7-2012-0188, accessed 10 April 2018.
20. From an interview with an activist belonging to the Freedom Fighter
Movements conducted on 20 October 2012.
21. Jugoremedija showed solidarity with workers at pharmaceutical factory
Srbolek, construction company Trudbenik gradnja, publishing house
Prosveta, food industry companies C Market, Vršački vinogradi, BEK, and
Ravanica, the Institute for Veterinary Medicine, marble quarry Venčac
and car and railway companies Zastava Elektro and Šinvoz, among others
(Srećković 2011).
22. More information is available at www.freedomfight.net/pages/globalbal-
kan.htm, accessed 10 April 2018.
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CHAPTER 6
State, Interest and Political Corruption: The

Bankruptcy of Sartid and the Privatisation
of C Market
This chapter analyses two high-profile corruption scandals—one

concerning the privatisation of C Market and the other the bankruptcy
of Sartid—and explores the anti-corruption debate around the privatisa-
tion of the metallurgy and food industries, both strategically important
sectors of the Serbian economy. The scandals are illustrative of the ways
in which the notion of corruption was understood during the Koštunica
governments’ terms of office (2004–2007, 2007–2008), which were
characterised by the effects of the global economic crisis and territorial
issues caused by declarations of independence by Montenegro (2006)
and Kosovo (2008). The two scandals are notable for their delayed
effect in the media, that is to say the controversial privatisations as prac-
tices did not coincide in time with the surfacing of scandals about them.
Moreover, both cases have an international dimension, as several foreign
companies and diplomats in Serbia were involved in the debate. Lastly,
both cases are still reported in the media as open-ended stories about cor-
ruption and referred to as aferas (scandals for which the final court deci-
sion is as yet unknown). It is important to note that the two corruption
scandals analysed in this chapter developed in parallel with the scandals
analysed in Chapter 5 concerning money in Cyprus and the privatisation
of Jugoremedija. The chapter will first outline the political developments
and public debates of the time the scandals emerged. The scandals will
then be analysed in two sections which each focus on the formal-legal
aspects of the privatisations and the controversies that gave rise to the

https://doi.org/10.1007/978-3-319-90101-5_6
144 M. ZURNIĆ
corruption scandals. These two sections explore the notion of corrup-

tion as presented in public debate and the potential impact of the debate
on the anti-corruption institutional setting. The findings, summarised in
the concluding part, suggest that the notion of corruption in these scan-
dals was based on the meaning of state interest and the multiple ways in
which the actors in the public debate interpreted it. Moreover, the chap-
ter shows that it is not possible to trace any impact the discussions had on
the anti-corruption legal framework.
Political Context
The second post-Milošević Serbian government was formed in March
2004 following early parliamentary elections. The government consisted
of four parties with an economic and national conservative political ori-
entation1 and was led by Vojislav Koštunica, who had previously served
as Slobodan Milošević’s successor as President of Yugoslavia (2000–
2003). Koštunica’s term as prime minister was characterised by turbu-
lent developments in national politics and foreign relations. Following
Montenegro’s declaration of independence in June 2006, the State
Union of Serbia and Montenegro ceased to exist. The new Constitution,
adopted in November 2006, defined Serbia as an independent state with
Kosovo as an integral part with autonomous status. Koštunica’s time in
office ended in March 2008 due to the emerging political crisis.
In February 2008, Kosovo declared independence and obtained par-
tial international recognition. Serbia, however, considers Kosovo to be
an integral part of its sovereign territory, governed by the UN pursu-
ant to the Security Council Resolution of 1999. At the time Kosovo
declared independence, Serbia had the opportunity to sign a Stabilisation
and Association Agreement (SAA) with the European Union. The
issue of the state’s territorial integrity in relation with the EU acces-
sion process caused a deep rift between the political parties in the gov-
ernment. On the one hand, the Democratic Party of Serbia (DSS) and
New Serbia (NS) opposed the signing of the Agreement, as it did not
apply to Serbia’s territory as a whole—that is, it did not include Kosovo.
Moreover, the parties argued that the European Union might put addi-
tional pressure on Serbia to recognise Kosovo as an independent state
as a requirement within the EU accession process. On the other hand,
the Democratic Party (DS) and G17+ insisted on signing the SAA, argu-
ing that the territorial dispute over Kosovo should be addressed within
6 STATE, INTEREST AND POLITICAL CORRUPTION … 145
another political agenda. The government collapsed due to this p olitical

crisis and parliamentary elections were called in March 2008. In late
April 2008, the government signed the Stabilisation and Association
Agreement with the European Union.
The international political relations of Koštunica’s governments
were marked by two important processes: the EU accession process and
cooperation with the International Criminal Tribunal for the Former
Yugoslavia (ICTY). As elaborated in Chapter 4, the EU accession process
started in October 2005 and involved a number of institutional changes
regarding the harmonisation of local legislation with the EU acquis. In
addition, in order to make further progress in EU negotiations Serbia
had to cooperate fully with the ICTY by extraditing war crimes suspect
who were Serbian citizens. The European Commission’s Progress Report
for 2007 recognised overall improvement in the Serbian authorities’
cooperation over European integration issues (EC 2007: 8). However,
cooperation with the ICTY as a requirement for EU accession remained
a controversial topic in domestic politics (Ostojić 2014).
The process of EU accession was focused from the outset on the fight
against corruption, as corruption was recognised as a major obstacle
to Serbia’s transition to democracy. Special attention was paid to these
issues because the unsuccessful fight against corruption had had a neg-
ative impact on EU accession for Bulgaria and Romania. Koštunica’s
governments thus adopted laws regulating areas vulnerable to corruption,
such as public administration and organisations susceptible to money
laundering. In addition, national strategies were adopted for the fight
against corruption and organised crime. The UN Convention against
Corruption was signed, as well as the Council of Europe’s Civil Law
Convention on Corruption. According to Transparency International’s
Corruption Perception Index (TI CPI), the public perception of corrup-
tion improved during Koštunica’s governments.2
However, the above is contradicted by the European Commission’s
Progress Report for 2007, which concluded that
limited progress has been made in the fight against corruption. Corruption
is widespread and remains a serious problem in Serbia. Most of the neces-
sary legislative measures against corruption are in place. … A more system-
atic approach to fighting corruption, including proper financial control,
transparent public procurement procedures and parliamentary oversight is
needed. (EC 2007: 11)
146 M. ZURNIĆ
Moreover, the SIGMA Assessment Report (2011) explains why Serbia’s

anti-corruption policy in the early 2000s can be characterised as having
generally failed: “The government’s anti-corruption activities have for
the most part been geared towards passing laws–generally of poor qual-
ity and consequently difficult to implement–which have led to ineffective
practical work by government bodies” (SIGMA 2011: 78).
Public Debate on Corruption and Governance

Media reports indicate that public debate during Koštunica’s term of
office largely reflected the government’s priorities as outlined in the
prime minister’s May 2004 speech.3 These priorities included the pro-
tection of national interests with regard to the territorial dispute over
Kosovo, progress in the European integration process and coopera-
tion with the ICTY. Another important and widely discussed topic was
Serbian national identity and its protection, mainly in connection with
the Serb population living in now independent Montenegro and in
enclaves in Kosovo. Lastly, public debate focused on the potentially neg-
ative impact of EU conditionality policy on Serbian national interests and
national identity, as will be illustrated in this chapter.
Surveys from this period show that the wider public was highly crit-
ical of the political establishment and their governance. For example,
in a June 2007 survey, two-thirds of interviewees stated that they were
dissatisfied with way democracy worked in Serbia, with the outcomes of
privatisation and with the overall situation in society (Stojiljković 2007:
57). However, more than a half of interviewees agreed that despite all
the shortcomings of democracy—such as sometimes slow decision-mak-
ing or prolonged debates—it was a better system than other forms of
governance. Citizens’ attitudes to the topic of Kosovo and state sov-
ereignty revealed widespread feelings of powerlessness. For example,
research conducted in 2008, before Kosovo declared independence later
that year, shows that while 45% of respondents said that they “wanted”
Kosovo to remain part of Serbia, only 15% believed that the Serbian
authorities would be capable of realising this goal (Mojsilović 2010:
171). The majority said that, despite their expectations, Kosovo would
eventually be independent of Serbia. Moreover, political parties were per-
ceived by respondents as being generators of high expectations regard-
ing Kosovo among the Serbian public, while at the same time offering
no specific policy that would lead to such expectations being met.
As for Serbia’s accession to the European Union, surveys show no signifi-

cant fluctuation. Between 2002 and 2010, EU accession was consistently
supported by over half of Serbian citizens.4
The Bankruptcy of Sartid

Sartid was one of the biggest metallurgical factories in Serbia, estab-
lished in 1913 in the Kingdom of Serbia.5 In socialist Yugoslavia,
Sartid was usually praised as an industrial giant and the locomotive of
the self-management economy. During Milošević’s rule in the 1990s,
Sartid remained active, but levels of production were significantly lower
than previously due to the country’s international isolation. As noted
in Chapter 3, state economic policy under Milošević’s rule was to sup-
port companies like Sartid at any cost in order to avoid redundancies
and possible civil unrest. However, the DOS government (2000–2004)
viewed Sartid as a stumbling block for Serbia’s economy, as an unprof-
itable company with an excessive number of employees, obsolete equip-
ment and a non-competitive product line. Moreover, the government
experienced difficulties when attempting to secure loans from foreign
banks for Sartid or sell it on the global market. Therefore, the DOS gov-
ernment intended to either privatise Sartid in order to improve the fac-
tory’s production or make a strategic partnership with foreign investors
(Antonić 2006).
When the American company US Steel showed interest in investing in
Sartid in 2002, the government also took a keen interest in the offer,
as their priority was to implement rapid economic reforms through mass
privatisation. The Serbian authorities did not consider the first invest-
ment of American capital in Sartid in 2002 to be privatisation, but
referred to it as an investment that would improve Sartid’s production
and increase its chance of being successfully privatised in future.6 Despite
these efforts and foreign investment, Sartid was declared bankrupt at the
end of 2002. Soon afterwards, in March 2003, Sartid and its six com-
panies were taken over by US Steel for five years at a price of approxi-
mately USD 21.3 million. The Serbian authorities again did not call the
arrangement privatisation, but deemed it a takeover agreement which did
not involve Sartid’s new owner paying off the company’s debts.
The Sartid scandal, which emerged under the first Koštunica govern-
ment (2004–2007), brought to the foreground several issues regard-
ing the transformation of property rights over the factory. Among the
148 M. ZURNIĆ
main controversies was the government’s decision to declare Sartid

bankrupt, as this meant that the company’s value was allegedly reduced
in the process of its takeover by US Steel. Moreover, according to
media reports, members of the Serbian government and American
diplomats in Belgrade were involved as mediators in this business
arrangement (Antonić 2006). William Montgomery, the American
ambassador to Belgrade from 2001 to 2004, was allegedly a good pro-
moter of American economic interests in Serbia. Moreover, the media
reported that the incumbent government was greatly indebted to
Montgomery for his political engagement in Serbia, as he reportedly
defended Serbian interests successfully in the early 2000s in negotiations
with the Albanian minority in Southern Serbia, thus preventing further
territorial disputes. In January 2012, US Steel sold the factory to the
Serbian government for a symbolic price of 1 USD, and between 2012
and 2016, the Serbian authorities managed its work. In 2016, the fac-
tory was acquired by Hesteel Group, and it is currently managed by this
Chinese company.
Controversies Concerning the Bankruptcy of Sartid

The takeover of Sartid, which took place under the DOS govern-
ment (2000–2004), emerged in the media as a corruption scandal
under the first Koštunica government (2004–2007). It is interesting
in this respect to refer to the research in “scandalogy” conducted by
Kerby and Chiari in 2002. These authors define a specific type of polit-
ical scandal involving misconduct which is revealed in the media only
after the political actors responsible for the transgressions have left their
positions (Kerby and Chiari 2002). The authors focus on politicians’
reactions to the scandal, which can potentially damage their reputation
despite them not being involved in it. The study identifies two “exit
strategies” that politicians rely on to avoid a loss of reputation and sym-
bolic capital. Politicians either discursively shift responsibility back to
their predecessors or they show a high level of commitment to imple-
menting an official investigation of the scandal. If institutional proce-
dures are the preferred “exit strategy”, politicians tend to establish
commissions and task groups which, as Kerby and Chiary show in their
study, are no more than strategies to reduce political cost and avoid
criticism, as they “effectively insulate, and later kill, the scandal” (Kerby
and Chiari 2002: 412).
The scandal of Sartid’s bankruptcy opened up a heated debate at

many levels and involved a large number of actors, from the state author-
ities and Sartid’s employees to the local media, international diplomats
and financial experts. The following aspects of the process were consid-
ered controversial in public discourse. Firstly, the question of transpar-
ency in the process of Sartid’s takeover by US Steel was raised, as was
the unequal treatment of other competitors. Sartid’s management gave
priority to the American buyer (AC Council Report on Sartid 2004),
despite German company LNM Holding placing its bid before US Steel.
Secondly, Sartid’s employees requested an investigation of individual
responsibility for the allegedly very low price agreed for the factory in
the contract.7 Moreover, the public demanded an explanation of why
Sartid was sold through a direct settlement with the investor rather than
in an open tender-based competition.8 As the media reported, a kickback
was included in the six million dollars allocated by US Steel for trans-
action costs, and some members of the Serbian government allegedly
benefitted financially from acting as mediators in this arrangement. As
several international actors were involved in the Sartid bankruptcy scan-
dal, this story can be categorised as an international scandal (Basinger
and Rottinghaus 2012).9
Lastly, Sartid was in debt to the Consortium of European Banks, con-
sisting of German, Austrian and Italian banks. In 1997, the Consortium
had lent around USD 76 million to Sartid and now wanted the loans
repaid. However, the contract signed with American investor US Steel
did not include repayment of the loan. Serbian officials stated on several
occasions that they were not responsible for the Milošević government’s
debts. Moreover, they criticised the European Consortium for support-
ing Milošević’s authoritarian regime by lending it money despite the
UN sanctions.10 However, the Consortium used all available legal and
diplomatic means to protect their financial interests and express discon-
tent with the privileged position of US Steel in the Sartid privatisation
(Beham, Zašto baš Amerikanci?, NIN: 2003 July 17: n.p.). Eventually,
Sartid’s debts to the Consortium were allegedly paid off by the Serbian
authorities through semi-formal diplomatic channels (Simić, Afera Sartid,
Svedok: 2004 December 14: n.p.).
The Koštunica government took the initiative to investigate the take-
over of Sartid. In March 2004, special police units for fighting organised
crime (UBPOK) started investigating the case. Several state officials were
interrogated on suspicion of abuse of office, but the court did not reach
150 M. ZURNIĆ
a final decision. Even though the State Anti-Corruption Council pushed

for a thorough investigation of the case, the state authorities did not take
further action. In 2007, the government announced a new investigation
into Sartid’s bankruptcy. However, neither investigation was brought to
a conclusion. There is no information available concerning the specific
reasons that the Sartid bankruptcy case was abandoned, but it is possible
that the complexity of the case and the involvement of foreign actors had
an influence on the decision of the post-2000 governments not to inten-
sify the investigation. The Sartid bankruptcy was mentioned in March
2012, when the EP suggested that the Serbian authorities should inves-
tigate the case. It should be expected that the investigation currently
being conducted by the Serbian authorities in 2018 will offer more
insight into the case, which will then enable a more adequate evaluation
of the political conduct.
Public Debate Over the Sartid Bankruptcy

The bankruptcy of Sartid was widely debated in the business, political
and diplomatic communities. When the cooperation contract with US
Steel was signed under the DOS government, the domestic media did
not report on it as a corruption scandal. What is more, in 2002, Zoran
Djindjić, the first post-Milošević prime minister, called the day the con-
tract was signed “the most important day for Sartid, for the town of
Smederevo and for the whole country” (Živković, Sartid dobio partnera,
Politika: 2002 March 9: n.p.). Two years later, when Sartid was declared
bankrupt and taken over by US Steel, the National Anti-Corruption
Council’s Report referred to it as an obvious case of grand corruption
(AC Council Report on Sartid 2004: 1). This was reflected in the media,
which in contrast to reports in 2003, no longer discussed the case as a
story pushed under the carpet or the way politics is done in Serbia, but as
a fully fledged corruption scandal. In 2006, one member of the National
Anti-Corruption Council called Sartid “the biggest scandal in privati-
sation so far in our country” (Antonić, Dogovori su sklapani iza scene,
Politika: 2006 August 13: n.p.).11
It is important to note two criteria that determine whether a story
is a scandal: the extent of media coverage and public reaction to the
reported misconduct; the type of transgression and the accuracy of the
story are less important (Entman 2012; Adut 2008; Nyhan 2009; Nyhan
and Tofias 2008). In Rober Entman’s words: “No public indignation,
no scandal” (Entman 2012: 5). Moreover, as Entman’s study confirms

of some political scandals in the USA, government bodies and political
parties have more influence than the media or investigative journalists
on whether misconduct becomes a scandal. Therefore, the author dis-
tinguishes between scandals and potential scandals: they involve similar
transgressions, but do not receive equal media attention.
In line with this, the Sartid bankruptcy emerged as a scandal in 2004
when it was negatively reported and debated in the media, although the
bankruptcy actually occurred two years earlier. Moreover, the inconsist-
ency in media reporting about Sartid’s bankruptcy can be explained by
the lack of transparency surrounding the case and the strong influence
of the political elite on the domestic media’s editorial policy (Antonić
2006). Moreover, the lack of evidence-based policies was compensated
by ideological justifications of political decisions and economic policies.
In addition, the lack of convincing explanations for the sudden bank-
ruptcy and the controversial change in ownership of the factory raised
public suspicions that abuses of power and personal or political gain were
involved.
Different Views on the Sartid Scandal

Several voices can be identified in the public debate over the Sartid
bankruptcy. The first is that of the government that initiated the investi-
gation, which directed allegations of corruption at the previous govern-
ment for alleged use of the privatisation process for political and personal
gain. However, as investigation of the bankruptcy was halted without
explanation, the public doubted that the incumbent government was
genuinely committed to fighting corruption. Moreover, some critical
media speculated that the government had abandoned the investigation
for political gain.
Politicians and civil servants associated with the DOS government,
which arranged Sartid’s takeover by an American investor, viewed the
bankruptcy from a different perspective, largely denying having any
involvement in the privatisation process. This discourse emerged in the
media when the scandal arose at the beginning of the Koštunica govern-
ment’s term of office in 2004.
Another view on the Sartid bankruptcy, which is critical of both gov-
ernments involved in the case, was mainly formalised in the statements
and reports of the National Anti-Corruption Council. This discourse
152 M. ZURNIĆ
insisted that a thorough investigation take place and argued that the pri-
vatisation of this large factory should be discussed by Serbian society as
a whole. This view stressed that the Sartid privatisation should be com-
pleted through a transparent and inclusive process, since collective and
state property was recognised as public good. This understanding of
corruption became dominant after the incumbent government failed to
explain the reasons for abandoning the investigation of the bankruptcy,
and this critical discourse is present in the anti-corruption discourse
today.
Elite Discourse and Public Opinion on State, Interests and Corruption

The different understandings that actors in the debate around the Sartid
scandal had about what constitutes corruption are related to how they
understand the notion of state interest and the role of the state in politi-
cal and social life. Actors demonstrated strikingly different approaches to
the notion of state interest. The discourse promoted by members of the
DOS government, who allegedly benefitted from Sartid’s bankruptcy,
advocated the idea of Serbia as a reformed and progressive society, lib-
erated from negative associations and moral responsibility for the armed
conflicts in the region. This discourse thus argued that the country’s real
interest was in economic development, integration into international
organisations and cooperation with the international diplomatic commu-
nity. These activities were assumed to be the basis for strengthening the
national economy and further democratisation, as economic progress was
expected to bring political stability and enable a smoother transition to a
more open and democratic society.
On the other hand, the actors who had initiated the investigation of
Sartid’s bankruptcy considered sovereignty and territorial integrity to be
crucial components of the concept of the state, and therefore of the con-
cept of state interest. This discourse promoted the idea of the state as a
nation state, in line with its actors’ ideological orientation of Christian
democracy and national conservatism. This discourse was therefore crit-
ical of the tendency to make the Serbian economy dependent on US
investment, especially as the US government was in favour of Kosovo’s
pending independence. Furthermore, this discourse was critical of coop-
eration with the EU in ways which directly threatened the state’s sov-
ereignty and national identity. For example, signing the SAA without
including the territory of Kosovo as part of Serbia in the agreement was
considered to be against the national interest as defined in this discourse.

In the same vein, the actors in this discourse claimed that cooperation
with the ICTY over the extradition of citizens suspected of war crimes
contradicted cultural norms and the national interest. These political
views had consequences for the economy, as EU financial support for
reforms was blocked for two years in line with EU conditionality policy.
Lastly, one voice in the debate identified state interests with the
strengthening of the rule of law and the predictability of justice.
According to this discourse, these goals are best achieved by reforming
state institutions, professionalising administration, promoting democratic
political culture and holding the political leadership to account for its
conduct. Only when this is achieved, this discourse implied, is it possible
to achieve economic development free of corruption and the influence of
organised crime. Moreover, according to this third discourse, the fight
against corruption required wide support from the community and mass
mobilisation over issues of common interest, such as the privatisation
process and economic reform. This discourse argued that privatisation
must not be left in the hands of a small group of politicians and business-
men who distort economic policies into controversial non-transparent
privatisation deals. Therefore, this third discourse suggests that transpar-
ency is an important tool for checking the formal and political accounta-
bility of the elites entrusted with the reform process.
It was noted in Chapter 5 that the discourse advocating the rule of
law in the Jugoremedija case supported the right of Jugoremedija’s
employees to participate in the privatisation of their company. In the
case of Sartid’s bankruptcy, which had wider implications and long-term
effects on society, this discourse insisted on the right of all citizens to be
informed about the privatisation process (AC Council Report on Sartid
2004: 1). According to this discourse, citizens have the right to partic-
ipate in decision-making about issues that concern them, especially the
privatisation of companies they had created and owned under social-
ism and had later managed as worker-shareholders during Milošević’s
rule. Moreover, this discourse argued that their lives would not only be
impacted by the privatisation of their own companies. Rather, the out-
come of all privatisation processes should be their concern, since it would
affect the future of their families and society as a whole.
This discourse is best articulated in the National Anti-Corruption
Council’s Report on Sartid (2004), which called for new elements to
be introduced into the notion of corruption, explicitly referring to the
154 M. ZURNIĆ
United Nations Convention against Corruption (UNCAC) (AC Council

Report on Sartid 2004: 1). The Report justifies changing the notion of
corruption in the following way:
According to modern concepts of corruption, the benefits may not always

be in material form, because abuse of office can be committed in order
to gain political advantage. It is possible that our politicians have given a
privileged position to a company from the most powerful country today
in order to gain political advantage. However, this has harmed the interest
of the citizens who entrusted them with power. (AC Council Report on
Sartid 2004: 5)
Lastly, the actors in this discourse argue that the arbitrary interpreta-
tion of laws and their selective enforcement should be considered a cor-
rupt practice if it damages the public good and benefits decision-makers
and investors (AC Council Report on Sartid 2004: 4). The Report also
comments that such incidences of political corruption occur when basic
democratic principles like the division of power, an independent and effi-
cient judiciary, professional public administration and so forth are not
respected. Therefore, this discourse strongly recommends measures to
strengthen good governance principles as an efficient way to prevent cor-
ruption (AC Council Report on Sartid 2004: 8).
Public Perceptions of the Political Change and Governance

The influence of the aforementioned elite discourses on public opin-
ion about issues of the state, governance, interest and corruption was
partly reflected in surveys carried out at the time. For example, in June
2007, when asked about the type of state that was desirable, two-thirds
of interviewees were in favour of a socially responsible welfare state
(Stojiljković 2007: 57) involving a high degree of state intervention to
support the unemployed, the elderly and other deprived sections of the
population, as well as to ensure that education and healthcare services
were available to all. The same survey shows that approximately 20%
opposed this view. These results are in line with the findings of another
research project from that period, which shows that the majority of citi-
zens identified the prospect of EU membership for Serbia with the abil-
ity to get a job, study or obtain permanent residency in an EU country
(Miščević 2010: 197).
Moreover, research from June 2007 shows that 38% of citizens were
generally satisfied with the transitional reforms, 34% were dissatisfied,
and 28% had no opinion (Stojiljković 2007: 37). Citizens displayed
increasing doubt about the democratic character of transition and artic-
ulated their concerns in various ways. Firstly, they stated that Serbian
democracy was underpinned by no fundamental principles, such as
respect for the rule of law. Furthermore, the legislation adopted under
Milošević was not systematically changed and newly adopted laws were
often not respected by the state authorities (Golubović 2007: 70). What
is more, this research shows that citizens believed that new laws were
drafted in the interest of the financial elite or, as they put it, laws were
“tailored to the needs of the new rich and local tycoons” (Golubović
2007: 70). Lastly, the author emphasises an increase in electoral absti-
nence and explains it as being largely an expression of disappointment
with the unfulfilled promises of the post-2000 authorities (Golubović
2007).
Golubović’s research thus illustrates citizens’ changing perceptions of
Milošević’s removal from power on 5 October 2000 (Golubović 2007).
Citizens’ attitudes were notably positive immediately after the change
took place, but they became increasingly negative during the term of the
Koštunica governments (Golubović 2007: 67). More specifically, in 2006
respondents often pointed out in interviews that society was “sliding
back to the past” and that the positive results of the democratic reforms
that had been achieved in the early 2000s were vanishing (Golubović
2007: 67).
The Impact of the Public Debate Around Sartid

As for the impact of the Sartid scandal on the anti-corruption institu-
tional setting, the two critical discourses—one engaged in by those who
initiated the investigation of the controversial bankruptcy and the other
stressing the importance of the rule of law principle for the fight against
corruption— played an important role as they raised the visibility of the
scandal in the public domain. On the one hand, the discourse of the
incumbent elite was the first to present the takeover of Sartid as a scan-
dal in public debate. This discourse brought the case to public attention
during the 2003 electoral campaign and discussed the case extensively in
the first year of the Koštunica government.
156 M. ZURNIĆ
On the other hand, the rule of law-oriented discourse contributed to

the scandal being rearticulated as a form of corruption from a legal point
of view and brought the institutional context closer. For instance, sus-
picions of corruption were defined as the irregular assessment of assets,
giving a privileged position to one competitor or the arbitrary applica-
tion of the law to the detriment of the public good, and so forth. As
has been noted, this discourse suggested institutional changes that would
make such contestable irregularities subject to legal prosecution. Even
though these institutional changes did not occur, at least not as a direct
outcome of this critical discourse, it can be argued that the two critical
discourses took the scandal out of the media sphere and brought it closer
to the realm of state institutions. This discourse played the same role in
the Jugoremedija scandal. However, the impact of the rule of law dis-
course on institutions or policy implementation in the Sartid case was
even less successful in producing long-term institutional change than in
the Jugoremedija case.
The C Market Privatisation Scandal

As noted above, the political context in which the scandals analysed here
emerged had two specific features. Firstly, state sovereignty and territorial
integrity were threatened by the dissolution of the State Union of Serbia
and Montenegro, while secondly, security and the fragile peace-build-
ing process were additionally threatened by sporadic ethnic conflicts in
Kosovo and the volatile situation and potential for violence during nego-
tiations over Montenegro’s independence. In this political context, the
issue of national and state interest was stated as a government priority.
In parallel with these developments, Serbia started its pre-accession pro-
cess for EU membership, which required full cooperation with the ICTY.
The EU relied on the conditionality principle in order to ensure compli-
ance with the requirements for accession, which put additional pressure
on the Serbian authorities. For instance, Serbia’s accession to the EU was
halted between November 2007 and November 2009, as war crimes sus-
pects were not being extradited to the ICTY (Ostojić 2014). Moreover,
some coalition parties interpreted the signing of the Stabilisation and
Association Agreement (SAA) with the EU as compensation for losing
Kosovo.
The literature on peacekeeping and corruption suggests that political
elites in unstable political systems and post-conflict communities define
their priorities differently than those in consolidated systems. Philp

points out that: “corruption is not always the worst that can happen.
[It] is relatively trivial in its costs compared with living with the realities
of ethnic violence, starvation, or the breakdown of peace into renewed
armed conflict” (Philp 2008: 318). The case of Serbia confirms this argu-
ment, since the attitude of the incumbent elite towards the problem of
corruption changed as problems over the integrity and sovereignty of the
state became predominant.
The Controversies of the Privatisation Process

C Market was a large grocery business, founded in 1991 as a company in
collective ownership. Following a voucher privatisation conducted under
the Milošević government, C Market became a joint-stock company. In
2002, the Ministry of Economy initiated the privatisation of the 23%
of C Market that was still state-owned. Thirty per cent of this part of
the shares was distributed to citizens, while the other 70% was allocated
to the state’s Share Fund (70%) for further trade. When the privatisa-
tion process was initiated, several interested buyers placed bids. Firstly,
Slobodan Radulović, the director of C Market, placed his bid through
his private company Primer C. Then Milan Beko, a businessman and for-
mer Minister for Privatisation in Milošević’s government, placed his bid
through his company Laderna. The third bidder was Delta Holding, C
Market’s rival in the grocery industry. Delta’s owner, Miroslav Mišković,
who had also been active in business under the Milošević regime, had
already participated in the privatisation of three domestic grocery
companies.
C Market’s worker-shareholders were also interested in selling their
shares on the stock market, and as they considered Delta to be the best
bidder, they decided to sell their shares to this company. In addition to
the three Serbian companies, several foreign investors were interested in
C Market, including Slovenian company Mercator and London-based
Ashmore Investment Management Ltd. Both companies faced obstacles to
participation in the privatisation of C Market, and by the end of 2005
both had decided to withdraw their bids. Local buyers continued to
compete over C Market, and the media largely reported on personal con-
flicts and animosities among the competitors.
The most intriguing event occurred in 2007 when Slobodan Radulović,
the director of C Market, informed the National Anti-Corruption Council
158 M. ZURNIĆ
that the privatisation of this company was fixed.12 He wrote an official let-
ter stating that the three domestic companies had signed a Memorandum
of Understanding in August 2005.13 This Memorandum proved a highly
controversial document for several reasons. Firstly, it was signed at the ini-
tiative of then Prime Minister Vojislav Koštunica. Secondly, the introduc-
tion to the document explicitly states that it was signed in the interest of
national economic development and the efficient operation of the national
market as a whole, particularly the financial market. Lastly, it sets out a dis-
tribution of C Market’s shares among the domestic bidders only. The pub-
lication of the Memorandum was a turning point in the development of
the C Market privatisation scandal, triggering heated public debate about
the notion of corruption and the understanding of state interest in the
context of economic development.
Interpretation of the C Market Privatisation

It is important to note that two documents had a significant influence on
public debate concerning the C Market privatisation. The first was the
aforementioned Memorandum—signed by the three Serbian companies
in 2005 on the initiative of the then prime minister and made public in
2007. This document raised important questions concerning corruption.
In the text of the Memorandum, the concept of national interest was
expanded to include protection of the national economy and financial
market. Moreover, the Memorandum envisaged that the national econ-
omy be protected by fixing the price of C Market’s shares and allowing
Serbian companies to distribute state-owned capital between them, out-
side the stock exchange. Both elements contradicted the idea of develop-
ing a free and competitive market, open to foreign direct investment.
The controversial privatisation of C Market was coordinated by the
highest-ranking government officials. The fact that the Memorandum
was signed in confidence and coordinated by a small group of actors,
businessmen, politicians and mediators became the main issue in public
debate. The media interpreted this as proof that privatisation in Serbia
was a non-transparent process, conducted exclusively by the financial and
political elites and aimed at meeting their political and financial inter-
ests. The media increasingly blamed corruption on rich businessmen, or
oligarchs, with the power to influence politicians, interfere in the draft-
ing of laws, push for their adoption in Parliament and block the work of
judicial authorities when it suited their interests.
Debate was mainly focused on whether the C Market privatisation

could be considered corruption. On the one hand, Serbian legislation
did not deem price-fixing and influencing market dynamics to be ille-
gal, so the core idea of the Memorandum could not be characterised as
corruption from the legal-formal perspective. On the other hand, the
fact that it was signed behind closed doors and kept out of public view
indicates that those who participated in the agreement were aware of
its illegitimacy and were trying to avoid public disapproval. The media
referred to the C Market privatisation as an incidence of corruption, but
it was not clear what criteria were being applied, or what elements were
included in the notion of corruption.
Another document that strongly influenced the understanding of
corruption in the public debate about C Market was the Report on C
Market, issued by the National Anti-Corruption Council in 2007. As an
advisory governmental body, the Council did not have a mandate to ini-
tiate an investigation into the case, but it used the opportunity to clearly
state its views on the nature and origins of corruption in Serbia. The
Report emphasised that widespread corruption in Serbia and increasing
social inequality originated from informal dealings between politicians
and businessmen. The argument was based on a widespread narrative
about oligarchs: “ … politicians who show interest in business operations
almost always expect material benefit for themselves or their political par-
ties” (AC Council Report on C Market 2007: 1). However, the Report
did not specify which aspects of the links between politics and business
were to be understood as corruption.
Furthermore, since these practices were not illegal according to
Serbian law, the Report suggested that the government introduce insti-
tutional changes in order to sanction them, as is the case in European
Union member states. The recommendation for institutional change was
articulated in the following way:
The Council is of the opinion that the Anti-Monopoly Law should be

thoroughly revised and harmonised with the legislation applicable in EU
member states, especially in areas relating to individual responsibility. (AC
Council Report 2007: 3)
Lastly, the Council recommended that the government establish the

political responsibility of actors involved in such business operations.
According to the Report, the signing of the Memorandum proved that
160 M. ZURNIĆ
political conduct in Serbia “deviates from European codes of conduct

aimed at protecting market competition” (AC Council Report on C
Market 2007).
It is important to note that citizens’ satisfaction with the outcome
of privatisation was significantly lower during the Koštunica govern-
ments (2004–2007, 2007–2008) than in the early 2000s or under
Milošević’s rule. The ever-increasing number of controversial privatisa-
tions and the many cases awaiting an institutional response contributed
to such attitudes. Opinion polls show that a significant number of citi-
zens—whether or not they were shareholders of companies undergoing
privatisation—considered privatisation to be a process that impacted on
society as a whole. This is because most companies undergoing privati-
sation had been founded under socialism and were considered collective
property, that is to say they represented the common good. For example,
research by Zoran Stojiljković in June 2007, which specifically explored
citizens’ dissatisfaction with privatisation, found that 64% of interview-
ees had a negative opinion about privatisation in Serbia, either because
they considered it badly implemented (33%) or because they considered
privatisation as such “mere theft” (31%); 15% had a positive opinion of
the outcome of privatisation, while 21% gave no answer (Stojiljković
2007: 36). Party affiliation was a significant factor, as 89% of those who
assessed the results of privatisation negatively were supporters or mem-
bers of parties removed from power in 2000 (the Socialist Party and the
Serbian Radical Party).
Different Views on the Scandal

After the Memorandum became public in 2007, the story was increas-
ingly referred to as the C Market afera, implying a mediated corruption
scandal that was never expected to be investigated by state author-
ities due to the involvement of high-ranking state officials. The media
reported various motives for this controversial privatisation arrangement.
Some reports suggested that the motive was straightforwardly stated in
the Memorandum—to protect national interests by preventing foreign
capital from entering the domestic market. Another explanation was that
the businessmen who were given a privileged position in the C Market
privatisation had given financial support to the incumbent government’s
political agenda, which included preventing Kosovo’s declaration of
independence and strengthening the influence of pro-Serbian political
parties in the newly independent Montenegro (Radulović 2011). Other

sources argued that the prime minister and his cabinet had benefitted
financially from C Market’s privatisation in return for helping to coordi-
nate the Memorandum agreement (Koštunici pare, Miškoviću C Market?
B92: 2011 March 22).
Two understandings of corruption stand out from the variety of
voices in the public debate over the C Market privatisation as the most
prominent and consistent over time. The first is formalised through
statements from the Koštunica governments (2004–2007, 2007–2008).
From this perspective, corruption was identified as a threat to state inter-
ests, which were mainly understood in relation to the nation state. Thus,
the irregular privatisation of C Market was justified as a way of protecting
the national economy and financial market. When a controversial doc-
ument concerning the C Market privatisation, the Memorandum, was
published, the arguments of this discourse were criticised in the media
for promoting protectionism and non-transparent privatisations.
The second voice in the debate was largely formalised in the state-
ments and activities of the National Anti-Corruption Council. The actors
in this discourse understood corruption as including the irregularities in
the C Market privatisation, such as fixing the share price and favouring
domestic companies. As these actions are not illegal according to Serbian
legislation, the actors in this discourse called for these practices to be
codified and promoted European norms for economic activities.
These opposing views on the concept of corruption confirm the afore-
mentioned conflicting understandings of the notion of national and
state interest. The discourse advocated by incumbent politicians identi-
fied the state’s interest as being to strengthen the nation state and the
national economy at the price of breaching the free market principle.
However, advocates of the opposing discourse considered Serbia’s best
interests to lie in developing a liberal democracy with its national market
integrated into the global economy. The actors in the latter discourse,
mainly the National Anti-Corruption Council and its president Verica
Barać, communicated their views to the EU authorities and coordinated
the Council’s activities in order to raise the visibility of this controver-
sial privatisation. This resulted in the European Parliament’s Resolution
in March 2012 suggesting that the Serbian government further investi-
gate this and several other privatisations. The Serbian authorities’ inves-
tigation into the C Market privatisation lasted several years. In October
2014, Slobodan Radulović, the company’s former director and one of
162 M. ZURNIĆ
those involved in the investigation, died. The investigation into the case
ended owing to a lack of legal grounds for the initiation of criminal
proceedings.
The C Market Scandal and Anti-Corruption Institutions

During the Koštunica government’s term of office, new anti-corruption
legislation was adopted in the areas of money laundering, the financing
of political parties, the liability of legal entities for criminal offences and
so forth. As noted in Chapter 4, new laws were also introduced to regu-
late and reform the judiciary and prosecution. The most relevant change
was the adoption of the Law on the Anti-Corruption Agency in 2008.
It is difficult to argue that there is a direct causal link between the C
Market corruption scandal and the institutional changes that followed.
However, it is highly likely that the large number of corruption scandals
that occurred under the Koštunica governments, which the EU author-
ities also noticed (EC 2007: 11), indicated the areas which needed to
be prioritised in the implementation of reforms. A more plausible expla-
nation for the numerous institutional changes made at this time in the
anti-corruption field and other areas is that they resulted from the EU
accession process. The priorities of the EU accession process included
the strengthening of “democratic institutions, public administration
reform, rule of law, reform of the judiciary, fight against corruption”
(EC 2007: 5). Besides this, Serbia has been actively involved in the
Group of States against Corruption (GRECO) programme since 2003.
One of the most important institutional changes was the adoption of the
Law on the Anti-Corruption Agency in 2008, which was recommended
by the GRECO initiative and was required by the EU Plan for visa
liberalisation.
In closing, it may be said that the Koštunica governments’ terms of office

(2004–2007, 2007–2008) were marked by several important devel-
opments in national politics. These include the EU accession process,
which started in 2005, the dissolution of the State Union of Serbia and
Montenegro in 2006 and the declaration of independence by the Southern
Serbian Province of Kosovo in 2008. In addition to these issues of territo-
rial integrity, state sovereignty and national identity, the problem of corrup-
tion was high on the government’s list of priorities. The two high-profile
corruption scandals that emerged in this period—over the privatisations of

Sartid and C Market—suggest that corruption was largely understood in
public debate as being related to the notion of state interest. Furthermore,
the concepts of corruption and state interest were articulated in various
ways by the actors in each debate, as the idea underlying these concepts
concerns the overarching conceptualisation of the state. It is important to
stress that conceptions of the state were deeply contested in Serbia at the
time, in part due to the aforementioned problems of peace-building and
state sovereignty. The Sartid and C Market scandals are useful in gain-
ing better insight into the grey area between politics and business and the
nature of their mutual informal influence in the privatisation process. The
public debate mainly revolved around the legality of these political-busi-
ness connections and their impact on the public good. Both during and
after Milošević’s time, it was not unusual for political elites to use popu-
list and nationalist rhetoric to provide their political action with legitimacy.
However, the debates over the Sartid and C Market scandals suggest that
the protection of state interests through protectionist economic policies
was not just populist rhetoric, but was the government’s main priority.
While the Sartid scandal illustrates the informal links between the previ-
ous government and foreign investors, the C Market scandal suggests that
the same type of informal influence existed between the incumbent gov-
ernment and local businessmen. In the case of the C Market privatisation,
there are no legal grounds for criminal proceedings owing to the death of
the person who triggered the scandal by publishing incriminating infor-
mation about the privatisation process, while investigation of the Sartid
bankruptcy is still ongoing. Like the previous chapter, this chapter leads to
the conclusion that the corruption scandals analysed here have significantly
influenced the conceptualisation of corruption in public discourse but have
had very limited influence on the institutional setting.
Notes
1.
The President of Serbia was Boris Tadić, leader of the opposition
Democratic Party (DS), while the prime minister was Vojislav Koštunica
of the Democratic Party of Serbia (DSS). The government was composed
of the Democratic Party of Serbia (DSS), G17 Plus (G17+), New Serbia
(NS) and the Serbian Renewal Movement (SPO). Parliamentary sup-
port was provided by the Socialist Party of Serbia (SPS), led by Slobodan
Milošević until his death at The Hague Tribunal in 2006. Koštunica led
164 M. ZURNIĆ
two coalition governments (2004–2007, 2007–2008), the second one

being a transitional government in charge of technical issues until the
fourth post-Milošević coalition was formed in July 2008.
2. The TI CPI gave Serbia a score of 2.7 in 2004, 2.8 in 2005, 3.0 in 2006,
and 3.4 in 2007 and 2008 (on a scale from 10 “very clean” to 0 “highly
corrupt”). More information at www.transparentnost.org.rs, accessed 10
April 2018.
3. The prime minister’s inaugural speech is available in Serbian at www.srbija.
gov.rs/vesti/vest.php?id=4775, accessed 10 April 2018.
4. A survey from September 2006 shows that almost 70% of interview-
ees supported Serbia’s future membership of the EU, while 12.3% were
strongly against it and 17.8% had no opinion (Miščević 2010: 197).
According to data from the Serbian Ministry for European Integration,
citizens’ support for EU accession did not change significantly after
2000, although the post-2000 enthusiasm had diminished by the end of
the decade (Miščević 2010: 199).
5. Sartid is an acronym for Serbian Shareholders’ Ironwork Industrial
Society.
6. In 2002, Sartid and US Steel signed a Memorandum of Understanding
and a Contract on Technical and Business Cooperation. Media coverage on
this topic includes: Ju-Es stil, Politika: 2002 April 17, n.p.; Popović, Juriš
na Istok, NIN: 2002 April 17, n.p.
7. The Institute of Economics in Belgrade assessed Sartid’s value at USD
57.6 million. It was sold to US Steel for USD 21.3 million. It is impor-
tant to note that while the Institute’s assessment is highly informative, it
has no legal force.
8. Two laws regulated the privatisation of bankrupt companies. The Law on
Bankruptcy stipulated direct settlement, while the Law on Privatisation
said that a tender should take place. Officials could use their discre-
tion over which law to apply. Suspicions were raised that the authorities
chose the model of privatisation that was more suitable for the American
investor.
9. According to Basinger and Rottinghaus’s classification, an international
scandal involves the violation of national laws due to involvement in
the politics of another state, such as the case of the Nicaraguan Contras
under the Reagan administration.
10. According to Antonić’s study on Sartid (2006), international sanctions
were not in force when the loan was taken out. The author argues that
the new democratic government used this argument as an excuse not to
repay international creditors for Sartid’s loan.
11. For more details on media reporting around the Sartid bankruptcy, see
the National Anti-Corruption Council’s Report on Sartid (2004) and
the media coverage noted in the Bibliography section as: Stevanović,

Novi tender, Danas: 2003 June 26, n.p.; Beham Poslednja opomena,
NIN: 2003 June 26, n.p.; Dumić, Ko je doneo odluku? Politika: 2003
September 26, n.p.; Skandal koji se zataškava, NIN: 2003 October 23,
n.p.; Lj. C. Zaplet Sartid, Politika: 2003 June 28, n.p.; Sartid za smešnu
cenu, Focus: 2003 July 17, n.p.; Mihajlović, Vladi sumnjiva prodaja
smederevskog Sartida, Glas javnosti: 2004 June 3, n.p.
12. In parallel with the C Market scandal, another major corruption scandal
surfaced in 2006. The case was known as the Bankruptcy Mafia and was
related to a group of high-ranking state officials, judges and managers
who were arrested on suspicion of abuse of office in several privatisations.
They had allegedly made a number of state-owned companies bankrupt
in order to privatise them at a lower price and then share the profit with
the buyers. One of the main suspects was Slobodan Radulović. He left
the country and the investigation continued with Radulović in absentia.
The two scandals proved to be related, and as the investigation into the
Bankruptcy Mafia scandal progressed, more interesting details about the
C Market privatisation were revealed.
13. The Memorandum of Understanding is available in Serbian at https://
reportingproject.net, accessed 10 April 2018.
Bibliography
Adut, A. (2008). On Scandal: Moral Disturbances in Society, Politics and Art.
New York: Cambridge University Press.
Anti-Corruption Council. (2007). Report on C Market. Available at http://
www.antikorupcija-savet.gov.rs. Accessed April 10 2018.
Antonić, S. (2006). Elita, gradjanstvo, slaba država: Srbija posle 2000 [Elite,
Citizens, Weak State: Serbia Since 2000]. Belgrade: Službeni glasnik.
Basinger, S. J., & Rottinghaus, B. (2012). Skeletons in White House Closets.
Political Science Quarterly, 127(2), 213–239.
European Commission. (2007, November 6). Serbia 2007 Progress Report, SEC
(2007), 1435, COM (2007), 663 final, Brussels.
Srbiji [Civic Engagement and Abstention in the Post-October Serbia]. In Z.
Kerby, M., & Chiari, R. J. (2002). ‘Policy Scandal’: A Spanish Case. Government
and Opposition, 37(3), 409–425.
166 M. ZURNIĆ

Mihailović, M. Ružica, T. Jakobi, et al. (Eds.), Kako gradjani Srbije vide tran-
Ebert Stiftung.
Miščević, T. (2010). Tranzicija i evropeizacija Srbije–isto ili različito? [Transition
and Europeanisation in Serbia–Same or Different?]. In S. Mihailović,
M. Ružica, T. Jakobi, et al. (Eds.), Kako gradjani Srbije vide tranziciju.
Istraživanje javnog mnenja tranzicije (pp. 193–202). Belgrade: Friedrich
Ebert Stiftung.
Mojsilović, M. (2010). Percepcija problema Kosova i Metohije [Perceptions of
the Problem of Kosovo and Metohija]. In S. Mihailović, M. Ružica, T. Jakobi,
et al. (Eds.), Kako gradjani Srbije vide tranziciju. Istraživanje javnog mnenja
tranzicije (pp. 167–189). Belgrade: Friedrich Ebert Stiftung.
Nyhan, B. (2009). Strategic Outrage: The Politics of Presidential Scandal. http://
dukespace.lib.duke.edu/dspace/handle/10161/1229. Accessed 10 April
2018.
Nyhan, B., Tofias, M. (2008, August 28–31). Passing the Bucks: The
Congressional Contribution Network 1985–2006. Paper Prepared for the
Annual Meeting of the American Political Science Association, Boston, MA.
Report on Sartid. (2004). Anti-Corruption Council. Available at http://www.
antikorupcija-savet.gov.rs. Accessed 10 April 2018.
SIGMA Assessment Report (2011). Available at www.oecd.org. Accessed 10 April
2018.
Stojiljković, Z. (2007). Gradjani Srbije i demokratija–izmedju nezadovoljstva i
nepoverenja i uslovne i oročene podrške [Citizens of Serbia and Democracy–
Between Dissatisfaction and Distrust, and Conditional and Limited Support.
In Z. Lutovac (Ed.), Birači i apsitnenti u Srbiji (pp. 9–61). Belgrade:
Friedrich Ebert Stiftung, Faculty of Political Science, Institute of Social
Sciences.
Newspaper Articles
Antonić, S. (2006, August 13). Dogovori su sklapani iza scene [Deals Were
Made Behind the Scenes]. Politika, n.p.
Beham, M. (2003, July 17). Zašto baš Amerikanci? [Why Americans?]. NIN, n.p.
Beham, M. (2003, June 26). Poslednja opomena [Last Warning]. NIN, n.p.
Dumić, B. (2003, September 26). Ko je doneo odluku? [Who Decided?].
Politika, n.p.
Ju-Es stil proširuje saradnju sa Sartidom [US Steel Expands Cooperation with
Sartid] (2002, April 17). Politika, n.p.
Koštunici pare, Miškoviću C Market? [Money to Koštunica, C Market to
Mišković?]. (2011, March 22). B92. Available at www.b92.net/biz/vesti/
srbija.php?yyyy=2011&mm=03&dd=22&nav_id=501059. Accessed 10
April 2018.
Lj. C. (2003, June 28). Zaplet Sartid [Sartid Complications]. Politika, n.p.
Mihajlović, Z. (2004, June 3). Vladi sumnjiva prodaja smederevskog Sartida
[Government’s Suspicions About Sartid]. Glas javnosti, n.p.
Philp, M. (2008). Peacebuilding and Corruption. International Peacekeeping,
15(3), 310–327.
Popović, Lj. (2002, April 17). Juriš na Istok [To the East]. NIN, n.p.
Radulović, S. (2011, March 24). Harač: 8.000.000 evra za DSS, 5.000.000
evra za Srbe u CG. E-novine [Tax: 8.000.000. euro for DSS, 5.000.000
eur for Serbs in Montenegro]. Available at https://www.vesti.rs/Miroslav-
Mi%C5%A1kovi%C4%87/Harac-8-000-000-za-DSS-5-000-000-za-Srbe-
u-CG.html. Accessed 10 April 2018.
Sartid za smešnu cenu [Sartid Sold for a Ridiculously Low Price]. (2003, July
17). Focus, n.p. [translated from German by I. Stanojević].
Simić, S. (2004, December 14). Afera Sartid [Sartid Scandal]. Svedok, n.p.
Skandal koji se zataškava [Scandal Pushed Under the Carpet]. (2003, October
23). NIN, n.p.
Stevanović, V. (2003, June 26). Novi tender ili odluka arbitražnog suda u Beču
[Tender Again or Vienna Arbitral Centre]. Danas, n.p.
Živković, M. (2002, March 9). Sartid dobio partnera [Partner for Sartid].
Politika, n.p.
CHAPTER 7
Institution-Building and Institutional
Corruption: The Port of Belgrade
Privatisation and Swine Flu Scandals
This chapter explores two high-profile corruption scandals—over the

privatisation of Port of Belgrade and the government’s purchase of
swine flu vaccines—which surfaced between 2008 and 2012 during the
Cvetković government’s term of office.1 The chapter argues that the
notions of power and abuse of power were at the core of the notion of cor-
ruption as understood in the debates in this period. Moreover, analysis
of the debates around the scandals shows that the use of anti-corruption
initiatives, policies and debates for private or political gain was perceived
as a form of corruption. No direct impact of the debates on the institu-
tional framework has been identified. The chapter first offers a brief over-
view of the political and economic developments of the period to set the
context in which the debates on corruption developed. The two scandals
are then presented first from a formal-legal perspective and then as they
were interpreted by various groups of actors in the public debate.
The Fight Against Corruption and EU Candidacy
A New Pro-European Government and a Shift in the Anti-corruption

Debate
The term of office of the fourth post-2000 government (2008–2012),
led by Prime Minister Mirko Cvetković, was significantly marked by the
global economic crisis.2 The government’s programme stated that its

https://doi.org/10.1007/978-3-319-90101-5_7
170 M. ZURNIĆ
priorities were the European integration process and the fight against
organised crime and corruption. Serbia made significant progress in the
European integration process during this government’s term of office.
Two prominent war crime fugitives were arrested and extradited to
The Hague Tribunal—Ratko Mladić, a former general in the Bosnian
Serb Army in May 2011, and Goran Hadžić, former president of the
Republic of Serbian Krajina in July 2011. This was a key requirement for
EU integration to progress (Ostojić 2014), and in March 2012, Serbia
was granted EU candidate status. As for the government’s second pri-
ority, the fight against corruption, the legislative framework was signif-
icantly improved, in part by establishing the Anti-Corruption Agency
(2010). However, the annual Progress Reports issued by the European
Commission (EC) from 2008 to 2012 note that corruption, organised
crime and money laundering represented a constant challenge to the rule
of law. In its reports, the EC stressed that improvements to the institu-
tional anti-corruption framework were not yielding practical results, as
the number of final convictions in high-profile corruption cases remained
low (EC 2010: 11). According to the reports, the sectors most vulnera-
ble to corruption included public procurement and privatisation proce-
dures, as well as major budgetary expenditure. The political elite’s lack
of commitment to the fight against corruption was also repeatedly men-
tioned in the EC’s reports (EC 2011).
Several explanations of the causes and mechanisms of corruption
came to the fore in media reports. On the one hand, informal connec-
tions between the financial and political elites—that is to say the lack of
a clear separation between the state and the market—were still consid-
ered to be a prime source of corruption. In line with that assumption,
the actors in the anti-corruption debate stressed that corruption was
intrinsically linked to the process of exercising power. National laws were
allegedly designed and adopted in order to benefit powerful economic
actors and secure financial support for political parties and their activities.
According to this view, success in the fight against corruption was only
possible under pressure from the European Union authorities.
The anti-corruption discourse under the 2008–2012 government is
notable for the involvement of an actor which had not previously been
visible in public debate. For the first time since 2000, members of the
financial elite became actively involved in public debates about corrup-
tion, commenting critically on the views of corruption mentioned above,
which implied that successful businessmen could be seen as a threat to
7 INSTITUTION-BUILDING AND INSTITUTIONAL CORRUPTION … 171
Serbia’s economic development. Instead, according to these actors,

businessmen had to deal with myths and prejudice disseminated in the
media to excuse the government’s lack of competence and efficiency. As
this chapter will show, members of the financial elite were active partici-
pants, highly motivated to present their view of what constituted corrup-
tion to the public.
There was also speculation about the Serbian media’s involvement
in corruption. Discussion of this issue covered three important topics:
the structure of media ownership, the financing of the media by crim-
inal sources and the media’s freedom to report society’s problems,
including corruption. The National Anti-Corruption Council raised con-
cerns about the lack of transparency in media ownership in its Report
on Pressure and Control over the Media in Serbia (2011). This social and
political environment is reflected in public debates about the two scan-
dals analysed in this chapter—the privatisation of Port of Belgrade and
the purchase of flu vaccines.3
Public Opinion on State and Foreign Policy in a Changed Political

Context
Public debates in this period were mainly focused on the same issues
that emerged under previous governments and which were discussed
in earlier chapters. The problem of economic development was a major
concern for the public, while Serbia’s state sovereignty in regard to
the province of Kosovo was also highly relevant. Public opinion about
corruption during this period was influenced by a number of scandals
involving the incumbent government, as well as scandals that had sur-
faced over the previous decade. There was a tendency in public debates
to view corruption scandals as a network of developments which con-
nected the same actors, primarily members of the political and financial
elites. An opinion poll conducted by the United Nations Development
Programme (UNDP 2012) between 2009 and 2012 shows how citizens
perceived corruption levels.4 In 2012, the government’s final year of
office, approximately 90% of citizens believed that corruption was com-
mon practice in Serbia. Moreover, a majority of respondents considered
that a corrupt government was desirable for large companies, as it would
protect their interests. The survey further reveals that political parties,
the health care system, the government and the judiciary were perceived
by respondents to be among the most corrupt institutions. According to
172 M. ZURNIĆ
respondents, bribes were most frequently offered to physicians, police

officers and civil servants, although only 14% had experienced corruption
directly.
It is important to note that a number of surveys conducted during
this period indicate citizens’ ambivalence over the state’s role in society.
For example, findings from 2010 show that interviewees were divided
into three equal groups concerning the level of state intervention that
was desirable in the areas of employment, social policy and culture. As
many respondents were in favour of intervention as were opposed to it,
while one-third had no opinion or disagreed with both (Ružica 2010:
31). According to the author, these findings reflect a growing contradic-
tion in citizens’ articulation of the notion of interests, with the following
implications:
State intervention, understood in this way–particularly if it affects the

life chances, social mobility and living standards of citizens–is a constant
source of disagreement, controversy and opposition. Various group and
collective interests represent serious challenges to the public finances and
public policies, and opinion formers use them as the basis for action, back-
ing them up with ideological simplifications, stereotypes and simplistic
expressions and slogans. (Ružica 2010: 31)
Similar ambivalence or contradictions can be observed in citizens’

replies to questions about their support for Serbia’s EU accession. A
2010 survey shows that a majority of interviewees supported the pro-
cess, mainly motivated by the possibility of securing employment in EU
countries (Miščević 2010: 199). Although EU accession was supported
by more than half of interviewees (62%), citizens’ image of the EU was
not entirely positive in all its aspects. That is to say, only 27% said that
Serbia’s membership of the EU would help improve the country’s overall
situation, only 17% believed that EU membership would contribute to
the peace-building process, and 14% considered the EU project to be an
unrealistic utopian dream (Miščević 2010: 199). When asked who would
benefit most from Serbia eventually joining the EU, the largest num-
ber of citizens identified the state (21%). Next came the owners of large
companies (18%), then political parties (17%), while 14% said it would be
Serbian citizens. 30% considered that nobody would benefit from Serbia’s
EU membership, while the rest did not know the answer (Miščević
2010: 200).
Serbia’s accession to the EU was a more contestable issue when dis-

cussed in the context of the territorial dispute over Kosovo. The same
research from 2010 shows that when citizens were faced with a choice
between Serbia being a member of the EU and Kosovo being a part of
Serbia, they preferred the latter. More specifically, 47% preferred Kosovo
be part of Serbia, 24% chose EU membership and 29% did not know the
answer (Miščević 2010: 200). Lastly, it is illustrative that in 2012 over
70% of respondents responded negatively when asked whether Serbia was
going in right direction (UNDP 2012).
It should be pointed out that the number of don’t know answers in
opinion polls and surveys increased steadily over the post-2000 period.
Under the Cvetković government (2008–2012), this often amounted
to a third of responses, even—or especially—when questions were about
hotly debated political and economic issues. Researchers offer various
explanations for this tendency. For example, some attribute it to the pub-
lic’s lack of political competence or their lack of ability to understand
transitional processes and articulate opinions about them (Stojiljković
2007). Another explanation has been found in a lack of in-depth knowl-
edge about the EU accession process and the often misleading informa-
tion disseminated by the media (Miščević 2010). The tendency has also
been explained as a response to the perceived lack of correspondence
between the rhetoric of the political elite and the public policies actually
implemented (Mojsilović 2010) or as an act of political disengagement
due to the economic problems and increasing unemployment (Miščević
2010).
However, it is possible to take a different view of the growing num-
bers of supposedly undecided citizens who provide no answer to such
highly relevant questions. Rather than seeing this section of society as
uninterested or incapable of making sense of the political reality around
them, it is more insightful to see them as the source of an alternative
understanding of reality. More specifically, their don’t know answers
may conceal specific opinions and views that questionnaires fail to tease
out, leading to the omission of these views from further analyses. Thus,
the increasing number of don’t know answers provided to surveys con-
ducted in Serbia might indicate the limitations of the positivist approach
to researching social phenomena in the ever-changing environment of
a transitional society, rather than merely political disengagement caused
by the factors discussed in the previous paragraph. In line with this
174 M. ZURNIĆ
observation, the research presented here includes the don’t know answers
in analysis and avoids the imposition of any pre-defined categories in
analysis of media reports. As noted in Chapter 4, the research aims to
include in the analysis as wide a range of voices and positions as possible
from the perspective of discourse. More specifically, the research focuses
on public debates, explores how these debates emerge, develop and
influence the dynamics of the political community and accepts that actors
can take part in debates by either joining existing discourses or articulat-
ing their own position.
The following sections focus on two corruption scandals: one around
the Port of Belgrade privatisation and the other regarding the purchase of
the swine flu vaccine. They illustrate the complexity of the anti-corrup-
tion debate in Serbia at time, which involved a multitude of voices and
conflicting views on what constitutes an act of corruption and what an
adequate state policy would be to curb it.
The Port of Belgrade Privatisation Scandal

Port of Belgrade is a river transportation company, located at the con-
fluence of the Danube and Sava rivers near Belgrade city centre. The
port was first privatised in 1997 when some of its shares were distrib-
uted to its workers, with the rest remaining in state ownership. In 2005,
all the state-owned and most of the privately owned shares were bought
by Luxembourg-based company Worldfin.5 Three years later, the media
reported that the majority owners of Worldfin were Serbian businessmen
Milan Beko and Miroslav Mišković. At the time this information became
public, the two businessmen were allegedly involved in several controver-
sial privatisations, including that of grocery chain C Market, as discussed
in Chapter 6.
The Port of Belgrade privatisation had several controversial aspects.
Suspicions were raised in the media that the tender procedure had
involved certain irregularities. The media also reported that the political
and financial elites had allegedly coordinated the privatisation to protect
their interests. According to media reports, this informal coordination
took place under the DOS and Koštunica governments. At first, these
irregularities were not considered corruption in formal-legal terms, as
the allegations reported in the media were mainly based on suspicions
and doubts rather than concrete evidence. However, in 2012 the Port of
Belgrade privatisation was brought to the courts as one of twenty-four

cases of corruption in privatisation that the European Parliament sug-
gested the Serbian government to investigate (EP 2012).
It is important to note that information about the case was acquired
from several sources during research for this book, including media
coverage of the case, television debates and interviews. Sources of hard
evidence, such as judicial archives, were unavailable or were difficult to
access. Moreover, the Port of Belgrade privatisation is still considered a
highly sensitive issue in Serbia, as high-ranking politicians and influential
businessmen are involved in the trial.
Controversies Over the Tender Procedure

The controversies that provided the background of the anti-corruption
debates concern the tender procedure and urban-planning policy. The
main concern over the tender procedure was that the Port’s shares were
allegedly sold to Worldfin at a significantly lower price than the poten-
tial price if a different model of privatisation, such as a public auction,
had been applied.6 In 2010, Port of Belgrade’s worker-shareholders filed
a complaint arguing that the State Agency for Privatisation and the bid-
der Worldfin had coordinated to conceal relevant information in order
to influence the worker-shareholders’ decision. In December 2012, the
court decided against the worker-shareholders.
The other controversy over the tender procedure was around the ori-
gin of the capital invested in the privatisation. Worldfin, the new owner
of Port of Belgrade, was a newly established offshore company based in
Luxembourg.7 Suspicions were raised in the media that Worldfin may
have been a part of a larger money laundering scheme. This allegation
was not supported by any concrete evidence, but it opened up impor-
tant debates among the general public. For instance, discussions ques-
tioned the extent to which the taxation system in Serbia was designed
and implemented in order to protect the public good and asked whether
Serbia had adequate legislation to curb illegal financial operations and
money laundering. Moreover, as the number of companies being priva-
tised was significantly larger than the number of companies buying them,
the problem of the concentration of capital and the monopolistic posi-
tion of investors was raised in public.
176 M. ZURNIĆ
Controversies Around Urban Planning

Another aspect of the privatisation that was the subject of debate was
related to the fact that Belgrade’s Master Plan was changed shortly after
the Port of Belgrade privatisation was complete. The amended plan envis-
aged the port’s removal to another location and the conversion of its
land from an industrial area to a commercial and residential area. The
media speculated that this change had been introduced by the Koštunica
government to meet the interests of the new owners of Port of Belgrade,
Milan Beko and Miroslav Mišković. This complex situation gave rise to
opposing interpretations of the urban-planning laws. On the one hand,
Port of Belgrade defended its alleged right to remain in the same loca-
tion and change its business activity in line with the updated urban-plan-
ning policy. On the other hand, concerns were raised that the port’s new
owner might make large profits from developing, constructing and man-
aging the future residential area instead of continuing its business in the
transport industry.
It is important to understand the Port of Belgrade privatisation in the
wider context of the construction industry. The Law on Privatisation
(2001) did not regulate the use of land on which privatised companies
were located. Therefore, in a large number of cases investors did not
buy public and state-owned companies in order to invest in them and
improve their productivity. Instead, some investors would stop produc-
tion in the privatised company and benefit from renting or using the land
on which the company was located. Some anti-corruption experts argued
that this shortcoming in the legal framework meant that the privatisation
process served as a method for big companies to acquire public or state-
owned land without paying the commercial price for it (Anti-Corruption
Council: Report on the Concentration of Ownership in the Company Port
of Belgrade 2008).
Lastly, the pending policy on restitution added to the problems of
regulation in the construction industry. Before Serbia could become an
EU member, the state was required to compensate the original own-
ers of land confiscated under the communist regime. Since the Law
on Property Restitution and Compensation was adopted in 2011, the
authorities have been criticised for failing to coordinate the processes of
restitution and privatisation. For instance, the Anti-Corruption Council
argues that the privatisation process is not implemented in a way that
means that income generated from selling a company covers the costs
of restitution. Rather, compensation incurs additional costs to the public
budget.
Debate on the Port of Belgrade Privatisation

Public debate over the Port of Belgrade privatisation has changed over
the past decade; the dynamics of the debate and the number of actors
involved continue to vary. One point of view, articulated largely by pol-
iticians and officials at the local and state level, argued that the contro-
versies over the Port of Belgrade privatisation resulted from wrongdoing
by the previous government. According to this view, the parties in power
had secured finance through informal connections with influential
businessmen since the start of the programme of intense privatisation
(Insajder 2011). In return, large domestic businesses obtained privileges
in the privatisation process. According to the actors in this discourse, this
informal link between politics and the economy resulted in a monopolis-
tic position for some domestic companies.
Thus, the core argument of this discourse was that the origin of polit-
ical corruption lay in the political empowerment of oligarchs. However,
advocates of this perspective, that the source of corruption was largely
the incumbent political elite, identified only the informal practices of
their predecessors as corruption, while the irregularities and controver-
sies which took place during their own time in power were not consid-
ered to be so. Once more, the political actors in Serbia confirmed Kerby
and Chiari’s research findings on policy scandals. These authors argue
that shifting responsibility onto one’s predecessor is a successful strat-
egy for avoiding the harmful effects of scandals that emerge before one’s
own time in power and reduces further involvement in debate on the
case (Kerby and Chiari 2002).
Another point of view that was highly visible in the debate was advo-
cated largely by the National Anti-Corruption Council and pushed the
argument concerning the influence of the financial elite on politics fur-
ther forward. According to this view, the monopolistic position of some
companies interferes with market forces, reduces the efficiency of the
national economy and negatively affects Serbian citizens’ standards of liv-
ing. From the Council’s perspective, the Port of Belgrade privatisation is
defined in the following way:
178 M. ZURNIĆ
The ownership concentration that has emerged with Port of Belgrade is

an example of monopoly creation under the protection of a political fac-
tor and with the active participation of ‘runaway’ capital. (AC Council’s
Report on the Concentration of Ownership in the Company Port of Belgrade
2008: 2)
Furthermore, the Council’s Report highlights similarities between the

Port of Belgrade privatisation and several other controversial privatisations.
For instance, the same mechanisms were used during the privatisation of
C Market in order to secure a monopolistic position for large domestic
retail businesses in the national market. Some parallels were also made
with the informal money transfers to Cyprus, as similar offshore invest-
ment schemes could be observed in the Port of Belgrade privatisation (AC
Council Report on the Concentration of Ownership in the Company Port of
Belgrade 2008: 2). Thus, this discourse did not contradict the above-men-
tioned mainstream one, as both argued that corruption was generated by
informal connections between politics and business. However, the critical
discourse, which was mainly engaged in by anti-corruption practitioners
and the critical media, underlined that the Cvetković government, just like
its predecessor, failed to resist the influence of big capital.
Among the multitude of voices, one was particularly important for the
debate, as it was mainly advocated by Milan Beko, the businessman who
bought Port of Belgrade. Beko used the opportunity of an open debate,
Waiting for Capitalism: the role of big capital in the democratization of
Serbia, held in June 2011 in Belgrade, to express his views on corrup-
tion. Contrary to the mainstream political discourse, Beko argued that it
was not the financial elite but the political elite in power who occupied
and monopolised important national resources. He explains the origins
of corruption in the following way:
… in a disordered society with scarce resources, politics becomes the

most important financial resource. The political oligarchy monopolises
this resource and manages it without scruples. (Milan Beko: U Srbiji svi
izloženi reketu, Politika Online: 2011 June 15)
Moreover, Beko alleged that the state authorities were racketeering other
economic actors who were interested in using resources for their business
activities. It is not clear what the term racketeering implies in this con-
text, but Beko explicitly distinguishes it from corruption:
Racketeering and corruption go in different directions, even though they

involve more or less the same amount of money … Racketeering works in
a top-down direction, and that’s why it is a dangerous social phenomenon.
Everyone today is forced to pay some charges to racketeers … all social
groups are exposed to it. (Milan Beko: U Srbiji svi izloženi reketu, Politika
Online: 2011 June 15)
Milan Beko, the main promoter of this discourse, noted that the incum-
bent government was benefitting politically and financially from imposts
and contributions charged for the use of public resources. As an example
of a resource usurped by the state, Beko singled out the Port of Belgrade
privatisation. According to this view, the newly introduced laws regu-
lating the construction industry—including the Law on Planning and
Construction (2009), which regulated the conversion of so-called right
to use construction land into the right to own and stipulated taxes for the
conversion of land from industrial to construction zones and charges for
issuing construction permits—was a legalised form of state intervention-
ism, which Beko labelled racketeering.
Another important aspect of this discourse is the tendency to dele-
gitimise the efforts of other social actors in the fight against corruption,
identifying their work as a specific form of corruption. Beko alleged
that the ruling coalition benefited politically from presenting economic
interventionism as a successful anti-corruption policy. Moreover, accord-
ing to Beko, by representing the economics of regulation as a way of
curbing corruption, the state authorities misrepresented the concepts
of liberal economics and democracy, creating obstacles to national eco-
nomic development. Furthermore, Beko also accused other critical
voices, including the Anti-Corruption Council, of corruption, since
they allegedly benefited from inventing scandals. Beko argued that the
Anti-Corruption Agency, which was established in 2010, threatened
the Council’s mandate and the authority of its members (Državni organ
kao insajder, Večernje novosti: 2008 February 29: n.p.). Therefore, from
Beko’s point of view, the Council’s members created corruption discur-
sively in order to overcome an institutional crisis.
Understanding Corruption as an Abuse of Power

In discussions about the Port of Belgrade privatisation scandal, actors
had different understandings of what constitutes an efficient anti-cor-
ruption policy. The mainstream political discourse accused the previous
180 M. ZURNIĆ
government of limiting the further development of the free market in

Serbia by establishing informal links with the financial elite. On the other
hand, the discourse promoted by members of the financial elite accused
the incumbent government of limiting opportunities for investment and
economic development through the tax regime. Lastly, the critical dis-
course of the National Anti-Corruption Council argued that the port’s
controversial privatisation limited citizens’ right to information about
relevant economic developments, as well as their right to hold politi-
cians responsible for the controversial privatisation. The critical stance of
the Council was that the authorities were not genuinely committed to
the fight against corruption, but applied the concept of corruption selec-
tively and strategically in order to avoid conflict with powerful members
of the financial elite.
Thus, in the elite discourses, different practices are identified as abuses
of power, due to differences in their understandings of the notion of
power itself, which is at the core of this concept. As Connolly (1983)
points out, when we identify responsibility for the exercise of power,
we do not simply describe the role and position of an actor, but we are
“more like accusing him of something, which is then to be denied or
justified” (Connolly 1983: 97, emphasis in the original). In line with
Connolly’s argument, Serbian citizens also made accusations about the
exercise of power and the character of rule in post-2000 Serbia. In 2010,
for example, 23% of citizens stated that Serbia was ruled by criminals
(Mihailović 2010: 25). Moreover, 18% of respondents identified politi-
cal institutions such as the President, the Government, Parliament and
the Prime Minister as the main centres of political power in the country,
while the same number said the same of the owners of large companies
(Mihailović 2010: 25).8
This negative opinion of the type of rule is partly based on citizens’
dissatisfaction with the privatisation process. The same survey from 2010
shows that 71% of citizens interviewed had a negative opinion of privati-
sation, either because they identified it as “mere theft” (44%) or because
they considered it a necessary step that the authorities were implement-
ing badly (27%). Only 3% of citizens were satisfied with the outcome of
privatisation, while 26% did not know (Mihailović 2010: 25). A 2010
opinion poll showed an increase in negative attitudes, while in a similar
survey from 2007, discussed in Chapter 6, fewer citizens viewed privati-
sation as theft (31%), more had a positive opinion of the outcome of pri-
vatisation (15%), and fewer gave no answer (21%) (Stojiljković 2007: 36).
The Port of Belgrade Scandal and Anti-Corruption Institutions

The current government (2018) continues the investigation of this pri-
vatisation process, as one of the twenty-four cases recommended by the
European Parliament in its Resolution of March 2012. Several insti-
tutional changes can be linked to the Port of Belgrade scandal, as they
reflect the ideas about corruption and anti-corruption that were put for-
ward in public debates. For example, following the scandal, legislation
regulating the ownership of privatised state-owned land was adopted.
This issue was at the core of public debates over the Port of Belgrade
privatisation. However, the Cvetković government’s term of office was
characterised by a huge number of corruption scandals in the construc-
tion industry, and it is difficult to argue with certainty that it was the
Port of Belgrade scandal that influenced institutional change rather than
other scandals in the same area.
As for institutional change in the area of anti-corruption, exter-
nal factors like the EU accession process and compliance with interna-
tional anti-corruption conventions had a greater impact than the Port of
Belgrade scandal on institutional change. For example, one of the major
institutional changes in anti-corruption that followed the emergence of
the Port of Belgrade scandal was the establishment of the national Anti-
Corruption Agency (ACA). The Law on the Anti-Corruption Agency
(2008), which regulates the Agency’s work, was prepared in accord-
ance with international standards (UNCAC Article 6, and GRECO
recommendations). Moreover, the EU Plan for Visa Liberalization,
which Serbia complied with, explicitly required the establishment of an
anti-corruption agency.9
As noted in Chapter 4, externally driven AC institutional changes,
such as the above, became predominant after Serbia joined the Group
of States against Corruption (GRECO) in 2003 and ratified the United
Nations Convention on Anti-Corruption (UNCAC) in 2005. In 2005,
Serbia started negotiations with the European Union on a Stabilisation
and Association Agreement. This significantly increased the number of
externally driven AC institutions, as the EU accession process involves
harmonising national legislation with the Community’s Acquis. The
tendency towards externally driven institutional change in the anti-cor-
ruption area continued over the entire study period, as indicated in
Annex B.
182 M. ZURNIĆ
The Flu Vaccine Scandal

The global outbreak of the swine flu virus in 2009 caused the Serbian
Government to declare a flu pandemic in the country. The State Fund
for Health Insurance published a tender for three million vaccines, and
soon afterwards, the contract was signed with the only bidder, local
company Jugohemija.10 As it turned out, the impact of the outbreak on
public health was less severe than had been estimated. Less than a third
of the purchased vaccines were used; thus, the supply contract with
Jugohemija was terminated in January 2010. The scandal surfaced as the
media interpreted the government’s purchase of an excessive number
of vaccines as mismanagement of public funds and a threat to public
health.
Certain medical and ethical concerns were also raised about the flu
vaccine’s type and quality. The question was whether the vaccine had
been adequately tested and whether responsibility for any potential
harm it caused lay with the manufacturer or the final user. Moreover, the
media speculated that the state’s policy on dealing with the pandemic
may have been influenced by the World Health Organization (WHO)
and multinational pharmaceutical companies. Then, Minister of Health
Tomica Milosavljević was a member of the WHO’s Executive Board and
a representative of the European Region at the time the pandemic was
declared and the vaccines were purchased.
Moreover, the media reported that the tender procedure was not in
accordance with the national Law on Public Procurement. Since the pur-
chase of vaccines was only possible with authorisation from state health
care institutions, media reports on the case suggested that high-rank-
ing civil servants may have been involved in the controversial procure-
ment process. Suspicions were raised that the local intermediary in the
purchase of vaccines, the company Jugohemija, had obtained con-
fidential information and thus gained a privileged position in the pro-
curement of the vaccines. Soon afterwards, it was made public that the
majority owner of the local intermediary Jugohemija was the company
Delta Holding, belonging to businessman Miroslav Mišković. Mišković
was involved in several high-profile corruption scandals, including the
C Market privatisation analysed in the previous chapter. As he allegedly
had plenty of political influence, the media started reporting on the case
in a different light.
Corruption in the Health Care System

The controversial purchase of flu vaccines in Serbia represents one of
many cases of corruption in health care procurement. The majority of
scandals in the health care system are related to the embezzlement of
donations and charity funds, unequal access to health care, inadequate
control of medications on the market, etc. A large number of other scan-
dals have surfaced over recent decades, involving the deaths of patients,
both children and adults, due to inadequate medical treatment or neglect
of professional duty in private and state medical intuitions.11 What is
more, incumbent health care minister Tomica Milosavljević sought med-
ical treatment abroad in 2010, which was seen by many as a demonstra-
tion of his lack of trust in the national health care system (Lazić, Zašto
sam operisan u Nemačkoj. Vreme: 2010 May 6).
The flu vaccine scandal is noteworthy as it took place during a danger-
ous swine flu outbreak at a time when the Serbian economy was severely
affected by the financial crisis. In order to explain the significance of the
scandal, it is important to understand the wider discourse about corrup-
tion in health care. Therefore, the following section will give an overview
of the positions that have emerged in public debates about corruption in
health care.
Public Debates About Political Corruption in Health Care

From the early 2000s, public debate on corruption in the Serbian health
care system focused on the issue of bribery between patients and doc-
tors, which was identified as the core problem. As noted in Chapter 4,
many state anti-corruption laws and policies were put in place before and
during the Cvetković government’s term of office. These innovations
and reforms in the anti-corruption area dealt with the problem from the
perspective of the patron–client relationship, assuming that eliminating
structural incentives and increasing sanctions could reduce corruption.
From this perspective, bribery is highly relevant as it increases the per-
ceived level of corruption and decreases citizens’ trust in state health care
institutions. It was assumed that an additional source of income would
compensate for low pay in the public sector, so one of the government’s
anti-corruption measures was to enable medical staff employed in state
health centres to work in the private health sector. Other anti-corrup-
tion measures aimed at curbing bribery mainly took the form of arresting
184 M. ZURNIĆ
general practitioners and other medical staff for bribery and extortion
from patients. This understanding of corruption, mainly based on bribery,
has been widely accepted in public discourse and public policy. However,
it could not account for the high-profile corruption scandals.
An alternative understanding of corruption is also based on the
principal-agent model, but identifies corruption as coming from high-
er-level institutions. According to this discourse, the managerial level at
state health centres is responsible for irregularities in tender procedures,
embezzlement of funds and breaches of laws and regulations concern-
ing finances. Managers at state health institutions—who are appointed
by ministers—are seen to use their position to acquire financial support
for the political party they support. The State Anti-Corruption Agency
(ACA) used this approach to corruption as the basis for their Report
on the Forms, Causes and Risks of Corruption in the Healthcare System
(2012). For instance, the Report describes the controversial purchase
of flu vaccines as an example of corruption in the procurement process,
where the managerial staff involved in the case were responsible for the
misallocation of state funds (ACA Report 2012: 12–13).
The latest explanation of the causes and mechanisms of corruption in
health care developed mainly between 2008 and 2012. This view criti-
cises the above positions for focusing on less harmful forms of corrup-
tion. According to this view, corruption at the micro- or mezzo-level of
state institutions is only a reflection of more significant corrupt practices
that take place at the highest levels of institutions, where health policies
are designed and coordinated. There are two main aspects that make this
point of view strikingly different from the other two interpretations. The
first is its conceptualisation of corruption as the privatisation of health-
care services and the consequent unequal access to the system. Secondly,
this understanding of corruption has not been incorporated into state
policies, but only formalised in the statements and activities of grass-
roots actors, NGOs and individual journalists.12
The advocates of this critical discourse argue that corruption in the
Serbian health care system is generated by several sources. The first of
these sources is reform of the health care system, which started in 2002.
According to the actors in this discourse, as the reform has not been ade-
quately implemented and many projects have been abandoned, it repre-
sents a source of corruption in many areas, such as public procurement.
For instance, the health care reform envisaged the reconstruction of the
State Institute for Virology and Vaccines in Belgrade (Torlak). In the
past, the Institute was one of the main suppliers of flu and polio vaccines
in the region, and the project for its reconstruction was aimed at enhanc-
ing its capacities for pharmaceutical production and scientific research.
However, the reconstruction was abandoned, so according to this dis-
course, Serbia is therefore forced to import vaccines, which increases
costs in public health and creates numerous opportunities for corruption.
According to this view, the profit from the import of vaccines and blood
products benefits only the multinational pharmaceutical companies and
their local representatives.
According to this critical discourse, rather than strengthening the
capacities of the national health care system, improving human and tech-
nical resources, ensuring transparent financial flow and above all promot-
ing public health, the Ministry’s reforms have had the opposite outcome.
Furthermore, the post-2000 governments were reluctant to use, renew
and enhance the health care system’s productive capacities and infra-
structure, inherited from the time of Milošević’s rule and socialism.
Instead, it was argued, they increasingly rely on foreign medical expertise
and the products of international pharmaceutical companies.
Another source of corruption is the inadequate legal framework,
which is identified as a tool for institutionalising the incentives for cor-
rupt practices. Institutionalised corruption is achieved by granting discre-
tionary power to the managers of state health institutions and tolerating
non-transparent financial flows. The discourse explains that institution-
alised corruption is generated through the mechanism of the corrupt
coalition in the following way: political parties nominate their candi-
dates for the committees that steer state health centres; the members of
these steering committees then nominate the managers and directors of
health centres; finally, general practitioners at state health centres profit
from bribery and in return protect the corrupt coalition from being crit-
icised or exposed to the public. Thus, contrary to the assumption that
strengthening institutional capacities can curb corruption, the actors
in this discourse argue that strengthening institutional capacity in the
Serbian health care system only strengthens deeply embedded mecha-
nisms of corruption.13
According to this discourse, the source of systemic corruption is the
simulation of an anti-corruption policy by the state authorities. This
argument suggests that state anti-corruption policies are aimed at avoid-
ing conflicts with high-ranking politicians and influential businessmen.
The focus is thus intentionally shifted to corruption at the lower levels
186 M. ZURNIĆ
of health care institutions. According to this discourse, by tolerating the

institutionalisation of incentives for corruption and misdirecting public
attention towards the symptoms of corruption instead of addressing its
causes, state anti-corruption policy is more effective at protecting the
interests of the elites than protecting the public good.14
Lastly, empirical research suggests that citizens’ dissatisfaction with
health care was high during the Cvetković government’s term of office.
The UNDP Corruption Benchmarking Survey (2012), conducted in
five rounds between 2009 and 2012, shows that Serbian citizens saw the
national health care system as badly affected by corruption, ranking it
as the second most corrupt institution after political parties. More pre-
cisely, the number of citizens who considered the health care system to
be “significantly affected” or “extremely affected” by corruption varied
slightly between 2009 and 2012. The highest figure (78%) was recorded
in October 2009 and the lowest (70%) in 2010 (UNDP Serbia 2012).
Moreover, research shows that citizens agreed that the most important
reforms were those dealing with corruption, the judiciary, the health sys-
tem and education (Ružica 2010: 29). However, they were very critical
of the ongoing reforms, which they perceived as too slow for various rea-
sons: the difficult situation in domestic politics (43%), unfulfilled inter-
national obligations (17%) and the authorities’ lack of the competence
necessary to successfully implement reforms (13%) (Miščević 2010: 200).
Corruption and Healthcare Services

In the debate around the flu vaccine scandal, the notion of corruption
involves the basic understanding of how political power should regulate
access to the health care system. On the one hand, the political elite dis-
course and the state anti-corruption agencies advocated policies aimed
at liberalising the health care system, which led to the conversion of an
increasing number of health care centres into independent and self-fi-
nancing institutions, and thus the increasing commercialisation of health
care services. According to this view, the main obstacle to the successful
functioning of the system lies in conflict between the private and public
interests of medical staff and patients. Thus, two discourses—one pro-
moted by the political elite in power and the other advocated by the state
anti-corruption institutions and experts—understand the controversial
purchase of the flu vaccines through the patron–client notion of corrup-
tion, mainly formalised as the receipt and offering of bribes.
On the other hand, according to the critical discourse, this notion of

corruption and the anti-corruption policies that are based on it fail to
address deep-rooted problems in society. Moreover, this critical discourse
identifies both the intentional misleading of the public and the way lib-
eralisation of the health care system is implemented as corruption. More
precisely, this discourse argues that implementing anti-corruption poli-
cies is a political act, conducted by all post-Milošević governments and
aimed at masking the marketisation of the health care system and public
services and making marketisation easier to implement.
The Transformation of Serbia’s Healthcare System

Important changes to the anti-corruption institutional framework were
introduced between 2008 and 2012. However, it is difficult to argue
that the flu vaccine scandal produced those changes directly. As noted
above, the changes mainly resulted from the process of harmonising
national standards with EU regulations and compliance with GRECO’s
recommendations (Annex B).
Legislation in the health care sector, where the flu vaccine scan-
dal would be expected to have the most impact, has not changed sig-
nificantly since the scandal surfaced in the media. However, the scandal
may have contributed to the European Parliament issuing its Resolution
on the European Integration Process of Serbia in March 2012, which
stressed that corruption in the Serbian health sector was of particular
concern (EP 2012). Several sources confirm that changes in the health
care sector, often described as slow and insufficient, were introduced
under the influence of European or international authorities (Simić et al.
2012: 125; Ecorys 2010: 10). For example, the EC’s Report for Serbia
in 2012 underlined that further improvements were needed in the area
of patients’ rights (EC 2012: 60–61).
The corrupt practices concerning the purchase of flu vaccines
occurred in the area of public procurement. In December 2008, the first
Law on Public Procurement (2002) was replaced by a new law drafted in
accordance with EU directives 2004/18/EZ and 2004/17/EZ. Despite
this change, procurement remained highly vulnerable to corruption, and
the EC noted this problem in its Progress Reports on several occasions
(EC 2009: 36, 2012: 32). Corruption in public procurement became an
important topic in the May 2012 electoral campaign. The Progressive
Party, which won the election and currently (2018) leads a coalition
government, announced particularly innovative institutional changes in
188 M. ZURNIĆ
this area. In December 2012, a new Law on Public Procurement was

adopted, coming into force on 1 April 2013. The results of its imple-
mentation are still to be assessed.
As for the Swine Flu Scandal, the High Court in Belgrade brought
charges, in 2011, against four people for abuse of office and embezzle-
ment of state funds. The four arrested were the Director of the Health
Insurance Fund and three managers of the local distributors of pharma-
ceuticals involved in the procurement process. In December 2016, the
Court dropped charges against them due to the lack of evidence.
To conclude, the period from 2008 to 2012 can be said to have been
marked by the economic crisis and an unstable government led by the
Democratic Party. Public debates over corruption reveal a high level of
scepticism about the country’s democratisation process. Surveys show
increasing mistrust in state institutions and political parties, while 14% of
citizens stated that they had experienced corruption. The media under-
stood the large number of corruption scandals as involving the same
members of the political and financial elites. The concept of corruption
is contestable in that actors in the anti-corruption debates accused all the
other actors involved in the anti-corruption discourse of encouraging cor-
rupt practices and reinforcing corrupt mechanisms, both discursively and
by adopting inadequate legislation. Participants in the public debate over
privatisation tended to underline the similarities between different cases
of corruption and explain corruption as a well-coordinated network of
businessmen and politicians that was inaccessible to the public. Debates
took the form of a retrospective assessment of political developments in
order to confirm the conceptualisation of corruption as an institutional-
ised network. The corruption stories analysed in this chapter—the Port of
Belgrade privatisation scandal and the flu vaccine scandal—surfaced after
a decade-long string of corruption scandals in the health care and con-
struction sectors. The understanding of corruption seen in the debates
around the two cases is related to the notions of power and abuse of power
in connection with public policy design in the areas of construction,
health care and anti-corruption. For example, in the debate about the flu
vaccines, one voice identifies the marketisation of the national health care
system as corruption. According to this view, the outcome of the policy
was increasingly unequal access to public health care services. Moreover,
corruption is identified in this discourse in the abuse of a notion of cor-
ruption based on conflict between public and private interests—mainly
in the form of receiving and offering bribery—in order to implement the

marketisation of public services and thus reduce public expenditure. In
the Port of Belgrade privatisation scandal, however, critical voices iden-
tify corruption in state intervention in the construction sector through
taxation and regulation, with the pretext of defending the public inter-
est. According to this view, state interventionism distorts the market and
blocks economic development. At the same time, they argue, taxation
and regulation are misleadingly presented by the authorities as policies
with anti-corruption effects. This analysis of the scandals does not sug-
gest that they contributed to any long-term institutional change in the
anti-corruption area. The changes that did occur were mainly driven by
the process of Serbia’s accession to the European Union.
Notes
1. Material from this chapter first appeared in Zurnić, M. (2016). What
Does Corruption Mean in a Transition Country? Political Scandal of
the Port of Belgrade?. In P. C. van Duyne, et al. (Eds.) Narratives on
Organised Crime in Europe (pp. 21–60). Nijmegen: Wolf Legal.
2. The government was formed in July 2008 by two pro-European
social-democratic coalitions: For a European Serbia, led by the
Democratic Party (DS), and a coalition consisting of the Socialist Party
of Serbia (SPS), the Party of United Pensioners of Serbia (PUPS) and
United Serbia (US). In March 2011, the economic crisis led to the gov-
ernment being reduced from twenty-four ministries to seventeen, and it
was dissolved following parliamentary elections in July 2012.
3. It is important to note that relevant data sources were not available, which
limited the scope and depth of the analysis to some extent. Those who
could be expected to be familiar with developments in the two corrup-
tion scandals, such as lawyers, judges and high-ranking civil servants at
ministries, were not willing to be interviewed. Civil servants at the judici-
ary, for instance, were reluctant to participate in this research as the two
scandals were under investigation.
4. UNDP and Media Gallup (2012), Ispitivanje javnog mnenja o korupciji u
Srbiji. Percepcija korupcije na nivou domaćinstva [Public Opinion Survey
on Corruption in Serbia. Perceptions of Corruption at the Household
Level]. Opinion was measured once in 2009 and twice in each of the fol-
lowing years: 2010, 2011 and 2012.
5. For more information about Worldfin’s bid in this privatisation process, see
Report on the Concentration of Ownership in the Company Port of Belgrade,
issued by the National Anti-Corruption Council in February 2008.
190 M. ZURNIĆ
6. In 2005, the State Economic Institute was tasked with assessing the book
value of the company. The results suggested that the port’s capital was
worth more than three times the price offered by Worldfin at the ten-
der. Port of Belgrade’s worker-shareholders were informed about their
company’s assessed value, as were other relevant institutions, including
the Ministry of Economy, the Agency for Privatisation and the Securities
Commission. Both groups of owners, the worker-shareholders and the
state, decided to sell their shares to Worldfin.
7. According to the National Anti-Corruption Council’s Report on the
Concentration of Ownership in the Company Port of Belgrade (2008: 6),
Worldfin was registered shortly before the tender was published, as a com-
pany with no financial reports as yet, only its initial capital of €31,000.
8. Political parties were perceived as most powerful by 14%, the international
community by 12 and 15% of citizens did not know the answer to the
question.
9. “The EU Plan for visa liberalization with the Republic of Serbia (Road
Map), Block 3: Public order and security, Preventing and fighting organ-
ised crime, terrorism and corruption: Implement the legal regulations on
the prevention and fight against corruption, including the creation of an
independent anti-corruption agency” [emphasis added] Available on the
website of the Ministry of Foreign Affairs of Serbia www.mfa.gov.rs;
http://www.mfa.gov.rs/en/foreign-policy/eu/republic-of-serbia-eu,
10. More information about the Health Ministry’s activities concerning the
vaccination is available on the Ministry of Health’s official website www.
zdravlje.gov.rs, accessed 10 April 2018.
11. Corruption scandals in the national health care system include the follow-
ing cases. The 2004 Blood Transfusion Scandal involved two adults and a
newborn child being infected with HIV through the national blood sup-
ply. The Tetanus Scandal surfaced in 2007, when the media reported that
state and public health centres and pharmacies had been distributing fake
anti-tetanus serum, which actually contained water and was not registered
with the relevant state agency. In June 2010, a scandal emerged at the
Oncology Institute in Belgrade, when the Institute’s Director and three
doctors, together with four representatives of pharmaceutical companies,
were arrested on suspicion of conspiring to boost the sales of cancer drugs
and accepting and giving bribes worth roughly 1 million euros. The 2010
Waiting Lists Scandal shook the Oncology Institute of Vojvodina when
the media reported that patients from Bosnia and Montenegro were being
prioritised for cancer treatment. As the health centre’s priority was to
make a profit, international patients, who were charged more, were given
priority over patients who were residents of Serbia.
12. This discourse is mainly promoted by the NGOs Doctors against

Corruption and the Right to Health. More information about these
organisations is available at www.healthcareanticorruption.org/ and www.
pravonazdravlje.com/dokumenta.html, accessed 20 November 2017 and
10 April 2018.
13. For instance, according to the actors in this discourse, the legislation that
permits doctors in state institutions to take extra employment in the pri-
vate sector without it being considered a conflict of interest enables some
doctors to profit from directing patients from state to private health care
services. Furthermore, the law regulating waiting lists allows patients to
be prioritised for receiving medical treatment, on personal request and for
an additional charge. In cases like the 2010 Waiting Lists Scandal, for-
eign patients have been prioritised, as their international insurance covers
the additional charges, while Serbian residents could not get timely ther-
apy. Moreover, the Law on Healthcare (2005) and the Law on Health
Insurance (2005) stipulate that managers at state hospitals and health
centres can independently determine the price of non-standard services
at their institutions or can rent out facilities without conducting a public
tender. As a consequence, the actors in this critical discourse warn that
the scarce and expensive medical equipment at state health institutions is
being rented out in a non-transparent way.
14. This topic was discussed at the round table Balance Sheet: Ten years of
Serbian Healthcare Reform, organised by the NGO Doctors against
Corruption, which is available at www.webtv.rs, accessed 10 April 2018.
Bibliography
[Story About Transition and the Narrative of Our Endless Changes]. In
S. Mihailović, M. Ružica, T. Jakobi, et al. (Eds.), Kako gradjani Srbije vide
tranziciju. Istraživanje javnog mnenja tranzicije (pp. 9–28). Belgrade:
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Ružica, M. (2010). Država i/ili tržište–neoliberalizam i/ili socijaldemokratija.
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vide tranziciju. Istraživanje javnog mnenja tranzicije (pp. 30–46). Belgrade:
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Anti-Corruption Agency. (2012). ACA Report on Forms, Causes and Risks of
Corruption in Healthcare System. Available at http://www.acas.rs. Accessed
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Anti-Corruption Council. (2008). Report on the Concentration of Ownership in
the Company Port of Belgrade. Available at http://www.antikorupcija-savet.
gov.rs. Accessed 10 April 2018.
Anti-Corruption Council. (2011). Report on Pressure and Control Over the Media
in Serbia. Available at http://www.antikorupcija-savet.gov.rs. Accessed 10
April 2018.
EC 2009: European Commission. (2009, October 14). Serbia 2009 Progress
Report, SEC (2009), 1339, COM (2009) 533, Brussels.
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Report, SEC (2010), 13309, COM (2010) 660, Brussels.
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on Serbia’s Application for Membership of the European Union, SEC (2011),
668, COM(2011), 1208 final, Brussels.
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3rev1c1e.pdf. Accessed 10 April 2018.
UNDP. (2012, June). Serbia Corruption Benchmarking Survey, 5th Round.
Newspaper Articles and Internet Sources

Državni organ kao insajder, Klub malih akcionara Luke Beograd. (2008,
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Available at www.politika.rs/rubrike/Ekonomija/Milan-Beko-U-Srbiji-svi-
izlozeni-reketu.lt.html. Accessed 10 April 2018.
CHAPTER 8
Conclusions: Political Scandals and Political

Action
After the overthrow of Milošević in 2000, the coalition known as the

Democratic Opposition of Serbia (DOS) came into power, announc-
ing fundamental political and economic changes. The members of the
new political elite were determined to make a sharp ideological and pol-
icy break with Milošević’s rule, which they viewed as non-democratic
and nationalist. Moreover, they set out to conduct thorough economic
changes in order to transform the national economy, which was to a
large extent autarkic and based on clientelism and corruption, into a fully
fledged market economy integrated into global economic flows.
Among the goals set by the post-Milošević political establishment,
two issues had priority. One was the repatriation of funds that had been
informally transferred abroad by the Serbian authorities during the
1990s. More specifically, a money-laundering scheme had been estab-
lished by Milošević and his close co-workers with banks in Cyprus. The
financial scheme had served, during the decade-long international iso-
lation of Serbia, to compensate for the dysfunctionality of the national
economy. Moreover, the money had also been used to support the
Serbian population in the regional armed conflicts: this was investigated
by the International Criminal Tribunal for the former Yugoslavia (ICTY)
as part of the indictment of Slobodan Milošević. When the DOS coali-
tion came into power in 2000, they strongly emphasised in their pub-
lic statements the urgency of investigating this case and repatriating the
money from Cyprus.

https://doi.org/10.1007/978-3-319-90101-5_8
196 M. ZURNIĆ
Furthermore, the post-Milošević authorities declared the transforma-

tion of property rights as being their priority. The process of privatisation
was a matter of the utmost importance for the new government, as private
property was considered a precondition for other political and economic
transitional processes: private property was understood to be a guarantee
of transparent and responsible management in business, improving com-
petitiveness in the market and motivating workers to develop their skills.
Thus, it was believed that the privatisation of state- and collectively owned
property, the legacy of the communist period and of Milošević’s rule,
would contribute to the overall development of society.
The transformational processes in the political and economic spheres
which were conducted by several governments after 2000 had a signif-
icant impact on the public debate. This book investigates how, in this
context, the concept of corruption and the concepts of property, inter-
ests and state were understood in public debate. More specifically, it
focuses on particular incidents of political misconduct in order to identify
the main actors and the meaning of the aforementioned concepts.
The Notion of Corruption

Analysis of high-profile corruption scandals, which emerged over the
decade following the overthrow of Milošević (2000–2012), reveals the
trajectory of the concept of corruption in public discourse. As the book
shows, the notion of corruption has varied depending on the position
of the actors in the public debate. Moreover, the meaning of corrup-
tion depends on the elements and sub-concepts included in the notion
of corruption. However, these elements have also been subject to pub-
lic debate over the decade and still remain contested. Thus, public dis-
cussion of corruption has not yielded a consensus on what corruption
exactly means. Instead, it has raised a large number of questions and
instigated new debate.
The definition of corruption, as defined in the Law on the National
Anti-Corruption Agency (2008), is based on the conflict between the
public good and private interests and implies abuse of power for the pur-
pose of illicit gain. This generic definition of corruption is included in the
UN Convention against Corruption and was transferred to the national
level of anti-corruption policies through a large number of legal doc-
uments and anti-corruption initiatives. The book identifies the legal
instruments in which this definition is transferred to the national level.
8 CONCLUSIONS: POLITICAL SCANDALS AND POLITICAL ACTION 197
However, as this book has shown, the impact of the anti-corruption

debate has not triggered any long-term institutional changes.
As has also been shown, the clash of ideas concerning corruption
reflects a deep rift in Serbian society over other fundamentally important
issues. The meaning of corruption evolved over time in relation to the
high-profile political scandals which occurred during the period studied.
After the DOS coalition won the elections in October 2000, corrup-
tion was understood mainly as relating to the political misconduct of the
previous government, led by Milošević’s Socialist Party of Serbia (SPS).
This understanding was based on the argument that, during the previous
regime, the concepts of national and state interest had identical meaning,
that the previous political elite prioritised the majority Serb population
and negatively influenced the ethnic conflicts in the region.
The majority of the scandals studied, which emerged over the course of
the decade, were related to the process of privatisation. In 2002, when the
scandal of the privatisation of the Jugoremedija factory emerged, the issue
of corruption arose over privatisation and the change of ownership rights.
Corruption was identified in the fact that limited social groups were given
the opportunity to participate in the economic reforms; in particular, cor-
ruption was understood as limited access to ownership of companies among
worker-shareholders. The debate over the privatisation of Sartid and C
Market, which emerged around 2003, showed that the post-Milošević
political elites had opposing views on the concept of the free market and
the relevance of foreign investments in the economic development of the
country. As regards the privatisation of Sartid, corruption was identified in
the non-transparent privatisation process, which was coordinated between
the domestic political elite and foreign businessmen and diplomats.
At the end of the period studied, between 2008 and 2012, an accu-
mulation of corruption scandals coincided with prolonged and unfin-
ished reforms in many sectors, including construction and health care. In
the scandals emerging during this period—the Privatisation of the Port
of Belgrade and the Purchase of Swine Flu Vaccines—corruption was seen
in the lack of political will of the authorities to investigate alleged cases
of corruption. The concept of corruption appears to have incorporated
elements of power and the abuse of power, and issues of blame for the
deeply entrenched corruption in the country. Responsibility was estab-
lished from different perspectives and attributed to those actors who
were perceived to be in a position of power from which they could have
prevented and curbed corruption.
198 M. ZURNIĆ
Lastly, during the fourth government, a new form of corruption was

introduced to public debate in the form of institutionalised corruption:
this involves the adoption of anti-corruption legislation with potentially
corrupt provisions. At the end of the period studied, the concepts of cor-
ruption in public discussion were so diverse that every anti-corruption
measure was interpreted as an act of corruption by other discourses.
Thus, the debate on corruption was trapped in a vicious circle of blame
and counter-blame.
Voices in the Debate

Content analysis of media news items about the scandals selected indi-
cates that several discourses can be identified in relation to each scandal.
One group mainly involves members of incumbent political parties, who
largely oppose the view that the scandals involved a breach of law. This
group tends to be veto players in the process of policy-making in the
field of combating corruption and their views are often reported by the
mainstream media. Other critical discourses, however, share the view that
the scandals involved corruption, but their understanding of what cor-
ruption actually is and what adequate anti-corruption measures should
be sometimes differs significantly.
On the one hand, it is possible to identify a discourse that mainly
advocates the rule of law and compliance-based accountability of polit-
ical leaders. In all six selected cases, this discourse, represented mainly
by governmental anti-corruption bodies, strongly promoted the idea that
the abuse of anti-corruption discourse for political gain should be codi-
fied as corruption. On the other hand, there are discourses which tend to
deny the legitimacy of the official anti-corruption policies and advocate
radical change, such as the replacement of the existing institutions in pol-
itics and the economy with alternative forms of organisation, including
civil groups, workers’ associations and so forth.
In this book, the impact of anti-corruption discourse has been
assessed by analysing concepts of corruption in public debate and by
examining the discursive strategies employed by the actors to influ-
ence the national institutional and legal framework. As the analysis has
shown, no anti-corruption measures were identified as a response to the
anti-corruption debate. Moreover, even in cases where discourse coali-
tions were achieved (between the two critical discourses in the privati-
sation of Jugoremedija), the discourses did not produce any long-term
changes in the field of anti-corruption measures. This indicates that for-

mal institutions in Serbia may not be flexible and open to the ideas con-
veyed by anti-corruption discourse.
Formal institutions in Serbia, as the book has shown, were less open
to bottom-up input and policy solutions suggested by domestic actors.
Instead, long-term changes at state level were mainly externally driven.
Externally driven anti-corruption institutional changes became pre-
dominant after Serbia joined the Group of States against Corruption
(GRECO) in 2003 and ratified UNCAC (2005). In 2005, Serbia started
negotiations with the European Union on a Stabilisation and Association
Agreement. This significantly increased the number of externally driven
AC institutions, as the process of EU accession involves harmonisation
of national legislation with the Community acquis. For example, the
adoption of the Law on the Prevention of Conflicts of Interest (2004),
the Law on Financing Political Parties, the establishment of the Anti-
Corruption Institution (2008) and other changes outlined in Annex B
as externally driven belong to this group. Further research on the role
of external actors and their response to high-profile corruption scandals
may offer insightful information.
Corruption Scandals and Transition in Serbia

The book has demonstrated that corruption scandals in a society under-
going an intensive and specific process of post-communist transition
tend to take on a specific role in politics. Public discussions concerning
the scandals analysed in this book represent an inclusive debate on the
issues which could not be discussed within the institutional framework.
Moreover, the scandals involved controversies and topics of relevance
to society as a whole, but which were often discussed and coordinated
mainly among narrow circles of politicians, experts and government offi-
cials. For example, while discussing alleged cases of corruption, groups of
actors in public debate voiced their opinions on state and public interest,
or questioned the legality and dynamics of privatisation as such, or the
legitimacy of the authority dealing with the transitional processes.
Furthermore, the book has shown that corruption scandals have
specific features compared to the scandals covered in the existing liter-
ature. It has introduced a tentative categorisation of corruption scan-
dals based on institutional response to the alleged misconduct. More
specifically, the book argues that two forms of political scandal exist in
200 M. ZURNIĆ
public discourse in Serbia. One involves cases which have been under
investigation for a prolonged period of time and in which the final deci-
sion of the courts of justice is not expected soon (afera). The other form
of scandal (mafija) involves cases which have been investigated by the
state authorities, but in which only lower-ranking public officials have
been investigated or prosecuted, while politicians and high-ranking offi-
cials, who are allegedly involved in the case of corruption, have not been
investigated. Despite the obstacles, including the lack of archive material
and media news and the occasional inconsistency in naming corruption
stories in the media, further research should continue exploring this dual
conceptualisation of political scandals in public discourse. It is highly
relevant to the study of transition states where institutional response to
scandals is often selective and unpredictable.
An increasing number of corruption scandals are characteristic
of political life in other countries in the Western Balkans. It would be
interesting to explore the sociopolitical contexts of, for example, Bosnia
and Herzegovina, Montenegro and Macedonia, as they are also com-
mitted to the EU accession process and face similar challenges to those
confronting Serbia with regard to peacekeeping, institutional weakness,
state-building and nation-building processes. Further research in this
direction would shed more light on the role and impact of anti-corrup-
tion discourse in the post-communist transition countries.
Epilogue
This book has followed developments in Serbian politics between 2000
and the end of the fourth post-2000 government’s term of office in
2012. Following parliamentary elections in May 2012, a significant
reconfiguration of the political scene took place. The political actors who
formed the new government in 2012 had been politically active during
the 1990s, either as members of Milošević’s party or as his co-workers
and coalition partners. On the other hand, most of the parties that par-
ticipated in the 5 October Revolution in 2000, which ousted Milošević
from power, have been in opposition since 2012 or are no longer at the
forefront of the political scene. Four coalition governments have been
formed since 2012, the leading parties in which are the centre-right
Serbian Progressive Party (SNS) and the SPS, formerly led by Milošević.
The international context has also changed significantly since 2012,
and international developments have impacted on Serbian politics.
For example, the EU’s enlargement policy has changed, and member-
ship for Serbia, Bosnia and Herzegovina, Macedonia and Montenegro is
no longer among the EU’s priorities, as it was before 2012. Moreover,
the focus of European politics has shifted to the issue of mass migration
from Asia and Africa, which passes through Serbia on the Balkan route to
other European countries.
Nevertheless, the current political establishment in Serbia is as com-
mitted to the EU accession process as its predecessors. Continuous
efforts by all post-2000 governments resulted in Serbia starting EU
membership negotiations in January 2014, a process which involves
intensive harmonisation of national legislation with the aquis communi-
taire. Chapter 23 on Judiciary and Fundamental Rights and Chapter 24
on Justice, Freedom and Security—which both relate to the fight against
corruption—are of special concern for both parties. It is assumed that
harmonisation with EU legislation in this area will enable a successful
systemic fight against corruption once Serbia becomes a member state.
In the 2012 parliamentary election campaign, the victorious SNS used
rhetoric that heavily emphasised the fight against corruption, announcing
a thorough investigation of the corruption scandals that had surfaced dur-
ing their predecessors’ time in power. However, no progress in the inves-
tigation of the six high-profile corruption scandals studied in this book
has yet been reported, nor of the twenty-four controversial privatisations
which the European Parliament suggested in 2012 that the Serbian gov-
ernment investigate. What is more, the Serbian media continue to report
new corruption stories on a daily basis. The anti-corruption debate con-
tinues to contest the existing normative boundaries of the meaning of
corruption set by the dominant discourse of the political elite in power.
The main topics of debate concern how transitional reforms and state
strategies for economic development are conducted, as these are mainly
externally driven as part of the EU accession process and implemented in
a top-down manner, that is to say coordinated among members of the
political and financial elites. Moreover, the legitimacy of the incumbent
authorities is increasingly contested due to a variety of social issues arising
from state policies, most of all the implementation of austerity measures.
According to the literature on democratisation, public discontent
should diminish as capitalist relations are consolidated and social strat-
ification advances. However, more than three decades after democracy
and capitalism were established, Serbia is still experiencing an unstable
and fragile political environment, and a constantly contested political
202 M. ZURNIĆ
discourse has contributed to this instability. Civic discontent with state

policies has increased over time, generating new forms of political
engagement. A closer look at political developments since the end of
the study period suggests that the lack of consensus on what corruption
and the related concepts of state, interest, power and property mean
may have contributed to the emergence of civic activism in Serbia. As
the book has shown, the anti-corruption discourse was more successful
over the study period at exposing alleged cases of corruption and whis-
tle-blowing at perceived injustices than at bringing about long-term
institutional change. State institutions’ lack of response to alleged cases
of corruption over this extended period raises questions about the legiti-
macy not only of the political elite in power but also, and increasingly, of
the democratic system and capitalism itself (Matković and Ivković 2018).
The rise of activism in Serbia is certainly related to the global rise of
civic movements (Della Porta 2015, 2017). However, Serbian civic
engagement can be better understood in the regional context of other
Balkan countries (Horvat and Štiks 2014; Grubačić 2010). Civic activ-
ism is on the rise in other former Yugoslav countries, which like Serbia
are undergoing post-communist transition and are committed to the
EU accession process. The most successful such movement arose dur-
ing mass demonstrations in Bosnia and Herzegovina in 2013 and 2014,
in which citizens demanded economic reforms and raised the issue of
rampant corruption and inequality in the country. The protests resulted
in the establishment of the direct democracy citizen group Citizen
Plenums, which temporarily functioned as a mechanism for direct deci-
sion-making at the local level (Belayeva 2017). Moreover, in neighbour-
ing EU member countries like Croatia and Romania, civic movements
and collective resistance have become a common method of political
engagement in issues stemming from long-term political corruption
(Stubbs 2013; Zdunić 2017). Similarly, Serbia’s emerging civic activist
movement challenges the implementation of policies and laws which it
sees as lacking legitimacy and being against the public interest. Activist
movements in Serbia make visible issues of social injustice that the polit-
ical corruption of recent decades has facilitated, such as the erosion of
labour rights, increased unemployment due to controversial privatisa-
tions and de-industrialisation, evictions for mortgage arrears, discrimi-
nation in public procurement procedures and so forth. Moreover, civic
initiatives in Serbia use every opportunity to raise issues of political cor-
ruption in the areas of urban planning, the fair use of common resources,
environmental protection and sustainable development. Public discon-

tent may well increase if the state authorities fail to address grievances
over these issues. The emergence of political and social structures based
on cooperation and mutual aid which aim to facilitate a prompt response
to perceived injustices may change the nature and dynamics of social and
economic development in Serbia.
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Annexes
Annex A
Research Design and Fieldwork
This research is organised in the framework of six case studies. The unit
of analysis is the anti-corruption discourse from 2000 to 2012, observed
through six stories about political scandals. The study is based on qual-
itative analysis of media reports on the scandals and semi-structured
interviews with representatives of the political elite, public administra-
tion, the media, civil society and the academic community in Serbia.
The analysed scandals were selected in the following way. The archive
of Politika, Serbia’s leading daily broadsheet newspaper, was identified
as the most appropriate news media source. The Politika archive offers
reports on the largest number of relevant topics over the twelve-year
period. A quantitative criterion was applied to the archive material,
resulting in a shortlist of the twenty most frequently-mentioned stories
about corruption since 2000. The qualitative criteria that were applied to
the initial list of the most relevant scandals are listed below. The choice
of case studies was also discussed with interviewees.
• Case studies should relate to sectors that have had a signifi-

cant impact on the quality of life of Serbian citizens and on the
© The Editor(s) (if applicable) and The Author(s) 2019 205

https://doi.org/10.1007/978-3-319-90101-5
206 Annexes
development of society as a whole. Sectors matching this criterion

were: organised crime and security (the Money in Cyprus scan-
dal); the right to employment (the Jugoremedija scandal); health
(the Swine Flu vaccine scandal); and key branches of the econ-
omy undergoing privatisation, such as industry and metallurgy
(the Sartid privatisation), agriculture and the food market (the
C-Market privatisation) and construction and housing (the Port of
Belgrade privatisation).
• Case studies should involve different mechanisms by which corruption
arose: the repatriation of capital (the Money in Cyprus scandal); priva-
tisation by recapitalisation (the Jugoremedija privatisation); the buying
out of shares from small shareholders (the Port of Belgrade privatisa-
tion); state-supported monopolisation of a market (the C-Market pri-
vatisation); the use of foreign investment for political gain (the Sartid
privatisation); or the abuse of procurement legislation to the detri-
ment of patients (the Swine Flu vaccine scandal). This criterion ena-
bled analysis of the impact of various types of corrupt practices on the
conceptualisation of corruption and on policy change.
• Regarding the actors involved, the national and international con-
texts were to be equally represented. Three scandals were related
to the international context (the Money in Cyprus, Sartid and
Swine Flu vaccine scandals); whilst the domestic context was dom-
inant in the remaining three (the Jugoremedija, C-Market and Port
of Belgrade scandals). This criterion enabled differentiation of the
actors and policy ideas associated with the scandals, which might
indicate whether change was driven by internal or external influence.
• In order to ensure that the anti-corruption discourse was analysed
on the basis of developments spread equally over twelve years, two
scandals that occurred during each government’s term of office were
included as case studies, considering two Koštunica cabinets (2004—
2007 and the technical government 2007—2008) as one time-pe-
riod. Due to the limited timeframe and span of this research it was
not considered feasible to analyse more than two scandals per gov-
ernment. The Money in Cyprus and Jugoremedija scandals occurred
under the DOS government; the Sartid and C-Market scandals under
the Koštunica governments and the Port of Belgrade and Swine flu
vaccine scandals under the Cvetković government.
The research is based on qualitative analysis, with data collected

through semi-structured in-depth interviews, media searches for
reports on the scandals and analysis of documents such as domestic
Annexes 207
anti-corruptionlegislation, international anti-corruption conventions,

political party programmes and so forth. Fieldwork for this research was
conducted during 2011 and 2012 and included a search of Politika’s
media archive and 27 semi-structured interviews with six Serbian state
officials, one politician, five academics, seven journalists and eight mem-
bers of the NGO sector.
Information collected from media reports was categorised by the qual-
itative coding method. This process involves generating new categories
during the gathering of information rather than applying pre-defined and
fixed categories to the archive material. Categorisation was conducted
with the following objectives. Firstly it aimed to gather all material about
the scandals from different sources, keeping a direct link to the orig-
inal texts for further citation. Secondly, it aimed to identify topics and
debates related to the scandals, to define categories as they emerged from
the material, to establish their relationship with other ideas in the mate-
rial and to devise finer categories by merging or dividing existing ones
according to different dimensions in the data. Lastly, the qualitative cod-
ing was conducted with the aim of identifying the ideological assump-
tions held by the actors involved in the scandals and which underlay
media reporting about the cases. For instance, some actors argued for
individualism and economic liberalism, while others advocated communal
values; some actors had a pro-European attitude, while others were Euro-
sceptics, and so forth. Categorisation also helped to identify discursive
contradictions or turning points in actors’ public speeches and actions.
The main challenges faced during the research were the lack of reliable
media archives and the reluctance of some members of the elites to par-
ticipate in the research. The latter can be partially explained by the fact
that the political situation was tense after the May 2012 general election.
The findings suggest that the topic of corruption scandals, and the prob-
lem of corruption more generally, is a live issue, which is widely discussed
in public discourse. However, some actors showed significantly less
interest in stating their opinion, especially politicians, state officials and
businessmen who had been directly or indirectly involved in the scan-
dals studied here. Moreover, some of these scandals are currently under
investigation, or are related to other controversial cases which are still
being investigated. Therefore, civil servants in the judiciary, the police
and the Prosecutor’s office were reluctant to discuss the cases.
Annex B
See Table B.1.
Table B.1 Anti-corruption institutional framework in Serbia (2000–2012)
Adopted AC law Governmenta Aim of change Primary driver
Oct 2000 DOS Democratic Opposition of Serbia DOS Anti-corruption declared priority by the Internal
Programme new government
208 Annexes
Oct 2000 Law on Election of Members of DOS Preventing accumulation of mandates Internal
Parliament
Oct 2000 SEECP The South East European DOS Enhancing stability, trust and good neigh- Internal
Co-operation Process bourly relations through co-operation
Oct 2000 SPAI Stability Pact for South-Eastern DOS Enhancing security Internal
Europe Anti-Corruption Initiative (since
2007 RAI)
Dec 2000 United Nations Convention against DOS signed Re-integration in international institutions Internal
Transnational Organised Crime and and ratified (UN member Nov 2000)
Additional Protocols
2001– The Public Prosecutor and police forces DOS This cooperation was not institutionalised Internal
2003 worked in joint teams as a permanent structure
Jan 2001 Commission for the Investigation of DOS Mandated to conduct investigation illegal Internal
Malfeasance from 1989 to 2000 financial transfers during Milosevic govern-
ment; phased out in 2002
June 2001 Law on One-Occasion Taxation of Extra DOS Stipulates a tax on illegally-acquired Internal
Revenue and Extra Property Acquired capital during the 1990s; abolished in
by Using Special Privileges in Period June 2002, after a short an unsuccessful
January 1, 1989–June 1, 2001 implementation
June 2001 Law on Privatisation DOS Stipulates obligatory privatisation; Internal
insider model replaced by sale at pub-
lic tenders/auctions and transfer of
shares to employees/citizens. Changes:
38/01,18/03,45/05, 123/07, 123/07—
sep. law, 30/10—sep. law
(continued)
Table B.1 (continued)

June 2001 Law on the Privatisation Agency DOS To regulate the privatisation process. The Internal
Law changed: 38/01, 135/04, 30/10;
Oct 2001 State Anti-Corruption Council, estab- DOS In line with DOS programme in the 2000 Internal
lished by the Decision of the Parliament electoral campaign
Jan 2002 CoE CrLCC Council of Europe DOS ratified Internal
Criminal Convention on Corruption
July 2002 Law on Organization and Jurisdiction of DOS Establishes the Special Prosecutor’s Office Internal: an
Government Authorities in Suppression and the Special Court for Organised overall adminis-
of Organized Crime, Corruption and Crime. Changes: 42/02, 27/03, 39/03, tration reform was
Other Severe Criminal Offences 60/03—US, 67/03, 29/04, 58/04— planned by DOS
suppl. Law, 45/05 and 61/05, 116/08, but abandoned
72/09, 72/11 2011—separate Law and
101/2011—separate Law
July 2002 Law on Public Procurement First legislation in this area after sixty not confirmed
years. Changes: 43/03, 55/04, 101/05,
116/2008—sep. law, 124/2012-sep. Law
2003 Public Procurement Office Improvement of the existing legislation in External: GRECO
this area
Mar 2003 Law on Public Information DOS Regulates free speech, broadcasting, media External: GRECO,
production and distribution. Changes: EU
43/03, 61/05, 71/09, 89/10, 41/11
Apr 2003 GRECO Group of States against DOS Membership to CoE in April 2003 and Internal
Corruption joining GRECO initiative
May2003 Special Department for Fighting DOS This institution was a part of District not confirmed
Organised Crime was established Court in Belgrade
Annexes
July 2003 The Law on Financing Political Parties DOS Changes: 72/03, 75/03-corr., External GRECO,
60/09-decision, 97/08 EU
209
(continued)

Dec 2003 UNCAC United Nations Convention DOS signed UN membership since November 2000 Internal
against Corruption DSS ratified (ratified in Oct 2005)
210 Annexes
Apr 2004 Law on Prevention of Conflict of DSS Establishes the Board for Prevention of External
Interest in Discharge of Public Office Conflicts of Interest (which was taken over
by the ACA in 2010)
May 2004 Law on Registration of Economic DSS Regulates the rights of minor shareholders not confirmed
Entities in privatisation
Nov 2004 Law on Free Access to Information Establishes the Commissioner’s Office; External GRECO,
since 2010 the Commissioner’s decisions EU
are legally-binding, final and executive.
Changes: 120/04, 54/07, 104/09,
36/10
Nov 2004 Strategy of Public Administration External GRECO,
Reform EU
Dec 2004 Code of Conduct for councillors and Launched by NGO Standing Conference External GRECO,
officials at the level of local authority of Towns and Municipalities; adopted by EU
the majority of local administrations
Jan 2005 MONEYVAL Committee of Experts DSS External CoE
on the Evaluation of Anti-Money
Laundering Measures and the Financing
of Terrorism
Mar 2005 Law on the Protector of Citizens DSS Establishes Ombudsman’s Office; changes: External EU
79/05, 54/07
Apr 2005 CoE Civil Conventions on Corruption DSS signed As a member of GRECO, Serbia ratified not confirmed
and ratified CoE CrLCC in order to comply with the
CoE standards; (Jan 2008)
(continued)
May 2005 CoE Convention on Laundering, DSS signed External CoE
Search, Seizure and Confiscation of DS ratified
the Proceeds from Crime and on the (April 2009)
Financing of Terrorism
Sep 2005 Criminal Code of the Republic of Serbia DSS Drafted in line with international conven- External CoE, EU
tions. The Chapter Criminal Offences of
Corruption was removed in 2009
Sep2005 Law on the Protection of Competition DSS Establishes the Anti-Monopoly Agency External EU
Oct 2005 Negotiation process on ratifying the DSS The negotiation ended two years later, Internal
SAA started September 2007
Nov 2005 Law on Police DSS The Office for the Fight against Organised not confirmed
Crime (UBPOK) established in 2001
reintegrated into the police hierarchy and
renamed the Service for the Fight against
Organised Crime (SBPOK)
Nov 2005 The Audit Act DSS Establishes the State Audit Institution External EU
(SAI); supported by the European Agency
for Reconstruction (EAR); earlier attempts
supported by UNDP (2000)
Dec 2005 National Anti-corruption Strategy DSS Envisages an Action Plan and ACA; External GRECO
aligned with international standards and
CoE Conventions; drafted in cooperation
with the CoE and the local OSCE mission
Dec 2005 PACO CoE Programme for fighting DSS External CoE
corruption and organised crime
Annexes
(continued)
211
2006 (Anti-Corruption) Commission DSS Mandated to draft Action Plan for the Internal
Strategy and to monitor implementation
212 Annexes
of the Strategy and GRECO until ACA

established
May 2006 National Strategy on the Reform of DSS Strengthening the rule of law, independent External GRECO,
Judiciary and efficient judiciary EU
May 2006 Law on Accounting and Auditing DSS Introduces a new system of auditing; External EU
increased number of auditors
Sep 2006 Constitution DSS Several anti-corruption provisions, includ- External GRECO,
ing the right to free access to information EU
Jan 2008 Additional Protocol of CoE CrLCC DSS Pursuant to the CoE CrLCC not confirmed
Apr 2008 EU SAA Stabilisation and Association DS ratified The SAA envisages legal changes in: the Internal
Agreement (May 2012) protection of competition and control of
state subsidies, intellectual property rights,
public procurement, standardization and
consumer protection
2008 State Audit Institution Became operational. The first financial External EU
audit report was on the 2008 Budget,
submitted to the parliament in November
2009
Sep 2008 National Strategy for the Prevention of External:
Money Laundering and Financing of MONIVAL,
Terrorism EU, GRECO,
UNTranOrgCrim
Oct 2008 Law on Anti-Corruption Agency DS Defines corruption (Art 2), Establishes Externally
ACA driven UNCAC,
GRECO, EU
(continued)

Oct 2008 Law on the Liability of Legal Entities Externally driven
for Criminal Offences CoE CrLCC,
UNCAC, OECD
Convention
Oct 2008 Law on Seizure Confiscation of the Establishes a Directorate for the External (precon-
Proceeds from Crime Management of Seized and Confiscated dition for the EU
Assets within the Justice and the Interior visa liberalization)
Ministries
Dec 2008 Action Plan for the AC Strategy DS Envisaged by the National AC Strategy not confirmed
Mar 2009 The National Strategy for the Fight DS External
against Organised Crime MONIVAL
EU, GRECO,
UNTransOrgCrim
Mar 2009 Law on the Organisation and DS Amended in order to be applicable to External EU,
Jurisdiction of State Authorities in high-level corruption cases, involving the GRECO
Combating Org Crime, Corruption and highest state officials
Other Severe Criminal Offences
Aug 2009 Criminal Code of the Republic of Serbia DS Harmonising the Code with the CoE External UN, CoE
CrLCC, the UNCAC and the UN
Convention against Transnational Org
Crime and its Protocols
Sep 2009 Criminal Procedure Code (2001) DS Amended to include the procedural External EU,
protection of endangered witnesses and GRECO
the concept of a plea bargain agreement. A
new chapter was introduced on investiga-
Annexes
tions of organised crime and corruption

cases
213
(continued)

Oct 2010 Law on Budgetary System DS Harmonising national legislation with the External EU
EU norms in order to ensure transpar-
214 Annexes
ent use of EU pre-accession funding.

Changed: 54/09, 73/10, 101/10,
101/11, 93/12
June 2011 Working Group for drafting a new DS Working Group to draft a new National Internal
strategic framework for the fight against AC Strategy and Action Implementation
corruption for the period 2012 to 2016 Plan, as the existing AC Plans had been
implemented—organised by the Ministry
of Justice and the ACA
June 2011 Law on Financing Political Activities DS Drafted in line with the ten GRECO External GRECO
recommendations
OECD Convention on Combating Serbia is not a signatory, but its criminal legislation is aligned
Bribery of Foreign Public Officials with the OECD Convention as confirmed during PACO
(1997) Project 2005–2007; Serbia is involved in the OECD and the
EU evaluation project SIGMA.
a Coalition governments: DOS from October 2000 to March 2004; DSS from March 2004 to July 2008 (two cabinets); DS from July 2008 to July 2012
Annex C
See Fig. C.1.
2005 AC Strategy 2010 Anti-

2001 Anti-Corruption Corruption Agency
Council
2005 SBPOK police forces
2003 Special 2006 Commission for

2001 UBPOK police forces Prosecutor for Organ protection of market
Crime; Public competition; 2008 State Audit Institution;
Procurement Office; Commission for AC Directorate for the Management of
2004 Seized and Confiscated Assets 2012
2000 Commission
2002 Money 2007 Ombudsman
Access Info
Laundry Office
Anti-corruption legal provisions Preventive, policy development and coordination institutions Law enforcement agencies, departments, units Multi-purpose
ACA model
Fig. C.1 Institutional formation and change in the area of anti-corruption in Serbia (2000–2012)
Annexes
215
Annex D
See Fig. D.1.
Investigation of the financial transfers to Cyprus
216 Annexes
2000
6th of Oct 2000: “The laws will

rule, not the thieves!” 2012
Progressive Party: “We’ll make
2008 6th of October happen again.”
2001 2002 Kertes imprisoned:” This is a
Parallel investigations: political trial”.
2006 2007
“We found the
money.”
private agency FIA transfers with President of the
Cyprus were legal. Parliament of Serbia.
First Government 2000-2001 Second Government 2004-2008 Third Government 2008-20012 Current
2008 Governmen
2002
Presidents of Serbia and Cyprus
meet: the investigation is closed.
2001 Last follow- Money in Cyprus is not the 2007
up by the Governor Interview with the
The major obstacle to the investigation –
foreign actors.
Cancellation of the investigation
Fig. D.1 Timeline of debates—The Money in Cyprus scandal

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National Strategy on the Reform of Judiciary, Official Gazette RS 44/06.
The National Strategy for the Fight Against Organised Crime, Official Gazette
RS 23/09.
Internet Sources
www.acas.rs.
www.antikorupcija-savet.gov.rs.
http://arhiva.glas-javnosti.rs.
www.b92.net.
www.coe.int.
www.consilium.europa.eu.
http://demologos.ncl.ac.uk.
http://ec.europa.eu.
www.europarl.europa.eu.
w w w. e u r o p a r l . e u r o p a . e u / s i d e s / g e t D o c . d o ? t y p e = TA & r e f e r e n c e =
P7-TA-2012-0114&language=EN&ring=B7-2012-0188.
www.freedomfight.net.
www.freedomfight.net/pages/globalbalkan.htm.
www.healthcareanticorruption.org/.
www.icty.org.
www.icty.org/case/slobodan_Milošević/4.
www.imf.org.
www.kombeg.org.rs.
www.mfa.gov.rs.
http://www.mfa.gov.rs/en/foreign-policy/eu/republic-of-serbia-eu.
www.nadzor.org.rs.
www.oecd.org.
www.pravonazdravlje.com/dokumenta.html.
https://reportingproject.net.
www.republika.co.rs.
www.rjt.gov.rs.
www.siepa.gov.rs.
www.slobodnaevropa.org.
www.slobodnaevropa.org/content/Barać_sminkanje_Miloševićevog_
rezima/9497627.html.
www.srbija.gov.rs.
www.srbija.gov.rs/vesti/vest.php?id=4775.
www.srpskapolitika.com.
252 Bibliography
www.state.gov.
www.transparentnost.org.
www.transparentnost.org.rs.
www.vreme.rs.
www.vojvodina.com.
www.webtv.rs.
http://www.zdravlje.gov.rs/showpage.php?id=222.
Interview List
Anonymous Source, Assistant at Politika Archive, 15 May 2012.
Anonymous Source, Civil Servant, Ministry of Justice, 12 August 2012.
Anonymous Source, Civil Servant, Ministry of Justice, 27 October 2012.
Anonymous Source, Journalist, 20 October 2012.
Anonymous Source, NGO Freedom Fighters, 20 October 2012.
Antonić, Slobodan, Professor, Faculty of Sociology, University of Belgrade, 10
August 2012.
Babović, Ana, Member of the NGO Serbia in Motion; Former Head of the
Department at the Office of the Deputy Prime Minister for European
Integration and Development (2007–2012), 12 June 2011.
Barlovac, Bojana, Journalist at the Balkan Investigative Reporting Network
(BIRN), 3 August 2012.
Begović, Boris, Professor, Faculty of Law, University of Belgrade; Founder and
director of the NGO Centre for Liberal Democratic Studies, 20 August 2012.
Ćemalović, Uroš, Adviser for Law Harmonisation, Department for European
Čvorović, Miodrag, Producer of the investigative journalist serial on political cor-

Integration, Parliament, 2 June 2012.
ruption Insajder at TV B92, 3 August 2012.

Goati, Vladimir, President of the NGO Transparency International, 12 August
2012.
Janjić, Dušan, President of the NGO Forum for ethnic relations; political analyst,
22 August 2012.
Jevtović, Mirjana, journalist at TV B92, 25 August 2012.
Jovanović, Dragana, President of the NGO Doctors against Corruption; Former
Municipal Secretary of Health, Belgrade (13 October 2008–22 October
2009); Professor, Faculty of Medicine, University of Belgrade, 20 August
2012.
Karadjinović, Draško, Vice President of the NGO Doctors Against Corruption;
Doctor of Medicine, 20 August 2012.
Milivojević, Andjela, Journalist at the Centre for Investigative Journalism in
Serbia (CINS), 8 August 2012.
Bibliography 253
Milivojević, Snježana, Associate Professor, Faculty of Political Science, University

of Belgrade, 26 May 2012.
Minić, Zlatko, Journalist and Member of the Anti-Corruption Agency’s Board, 5
August 2012.
Ninić, Ivan, Member of the NGO Whistle, 20 August 2012.
Pašić, Jasmina, Journalist at TV B92, 3 August 2012.
Pešić, Vesna, Independent MP; Ambassador of FR Yugoslavia and the State
Union of Serbia and Montenegro to Mexico (2001–2005), 21 October 2012.
Radomirović, Vladimir, Editor in Chief at the NGO Whistle, 3 August, 2012.
Šabić, Rodoljub, Commissioner for Information of Public Importance and
Personal Data Protection, 10 August 2012.
Stojiljković, Zoran, Professor, Faculty of Political Science, University of Belgrade;
President of the Anti-Corruption Agency’s Board Since 2011, 23 August
2012.
Udovički, Kori, Assistant Secretary-General of United Nations, Director of the
Regional Bureau of UNDP for Europe and CIS and Assistant Administrator
of UNDP (1 February 2007–22 February 2012); Governor of the National
Bank of Serbia (22 July 2003–1 March 2004); Minister of Mining and Energy
(19 June 2002–22 July 2003), 26 October 2012.
Van Duyne, Petrus, Professor, Law School, Tilburg University; researcher in the
area of money laundry and corruption in Serbia, 21 October 2012.
Index
A discourse, 1, 3, 7, 8, 10, 11, 13–16,

Abuse 18, 75, 76, 78, 85, 116, 117,
office, 114, 116, 123, 128, 133, 119, 129, 134, 135, 152, 170,
149, 154, 188 188, 198–200, 202, 205, 206
power, 4, 54 Strategy, 89, 90, 93, 96, 99, 211
accession, 16, 18 Anti-Corruption Agency (ACA), 12,
Accountability, 12, 39, 117, 119, 130, 90, 94–99, 162, 170, 179, 181,
153, 198 184, 196, 212
formal, 130 Assassinated. See Assassination
legal, 12 Assassination, 24, 111
political, 119, 153, 198 Assembly, 28, 31, 39, 42
Acquis, 5, 89, 93, 145, 181, 199 authoritarian, 18, 52–54, 58, 66–68
Afera, 82–84
analysis, 8, 10, 13, 16, 25, 80, 206
Anti-corruption, 2–5, 10–12, 17–19, B
24, 26, 28, 41, 63, 64, 76–79, bankruptcy, 63
81, 84–87, 89–91, 93–101, 107, Barać, Verica, 124, 161
117, 123, 125, 129, 131, 135, body, 11, 80
143, 144, 146, 155, 162, 169, advisory, 78, 91, 125
170, 174–176, 178, 179, 181, governmental, 159
183, 185–189, 196, 198, 201, human, 80
207, 208, 212, 215. See also regulatory, 127
Council bribe. See bribes

https://doi.org/10.1007/978-3-319-90101-5
256 Index
bribery, 25, 39, 67 conceptualisation, 8, 12, 17, 53, 54, 84

bribes, 64, 172, 186 conflict, 4, 13, 15, 16, 28, 38, 40, 42,
budget, 41, 58, 61 47, 49, 54
business. See community discursive, 13, 15
business community, 58, 62, 64, 67 interests, 15, 31, 40, 62, 64, 87, 91,
92, 94, 97, 99, 100, 210
state, 23, 94
C consensus, 13, 15, 19, 66
campaign Constitution, 25, 30, 35, 39, 49–52,
anti-corruption, 78 56, 59, 64, 65, 67–69
electoral, 155, 187, 209 corruption, 2–6, 8, 10–13, 15–19,
Capital, 18, 34, 57, 69, 91, 96, 115, 23–27, 39–42, 48, 53, 54, 62–65,
117, 123, 124, 127, 131, 147, 68, 80–84, 112, 207
148, 158, 160, 175, 178, 206, fight against, 13, 26, 76, 87–90, 92,
208. See also property 95–98, 100, 101, 108, 117,
challenges, 13, 15 118, 120, 123, 130, 132, 145,
class 153, 155, 170, 179, 180, 201,
interest, 32, 38, 53 214
working, 26, 29, 30, 34–36, 38, 54, political, 5, 16–18, 25, 40, 77, 79,
55, 57 80, 118, 119, 123, 125, 134,
clientelism, 52, 54, 60 154, 177, 202
C Market, 10, 11, 18, 143, 157–163, Council, 4, 47
174, 178, 182, 197. See also Europe, 4, 87–89, 209
scandal National Anti-Corruption, 78, 90,
coalition, 48, 60 91, 96, 99, 124, 125, 127–129,
Commission, 5, 41, 86, 88, 89, 131, 150, 151, 153, 158, 159,
91–93, 98, 100, 113, 114, 125, 161, 171, 177, 180
145, 148, 187, 208, 202 court, 48, 83
Communist, 24, 26, 27, 30, 32, 42, Criminal Code, 40, 64, 92, 211, 213
43 crisis, 18, 58, 67
Information Bureau, 26, 27 Cyprus, 11, 18, 19, 107, 108,
Party. See League of Communist 112–116, 118–127, 133–135,
(LC) 143, 178, 195, 206, 216. See also
Communist Information Bureau scandal
(Cominform), 26, 27
community, 62, 66, 67, 75
concept, 4, 15, 18, 25, 30, 34, 36, 38, D
54, 66, 82, 83 debate, 2, 5, 10, 13, 15, 17–19,
corruption, 3–6, 15, 17, 18, 23, 24, 23–25, 27, 38, 40, 41, 50, 51,
38, 82, 116, 119, 129, 154, 53, 54, 56, 67, 83, 84
161, 163, 180, 188, 196–198 decision-making, 12, 18, 28, 31, 35,
formation, 1, 15 36, 39, 50, 51
Index 257
definition, 11, 19, 64 embezzlement, 42, 64

delegitimisation, 18 empowerment, 14, 131, 177
democracy, 4, 15, 23, 27, 28, 32, 35, EU membership candidate countries, 4
49, 50, 58, 67, 80 European Union, 4, 19
Democratic Opposition of Serbia accession process, 5, 9, 17–19, 81,
(DOS), 6, 60, 75, 100, 108 85, 89, 100, 144, 145, 162,
democratisation, 7, 36 173, 181, 200–202
development, 26, 29, 57, 58, 79 candidate country, 89
economic, 2, 3, 31, 35, 50, 117, 130, Progress Report, 5, 89, 100, 145
132, 152, 153, 158, 169, 171, evidence, 11, 58
179, 180, 189, 197, 201, 203
dictatorship, 24, 30, 36, 52
Dinkić, Mladjan, 112, 114, 115, 120, F
123–125 Federal Republic of Yugoslavia (FRY),
discourse, 2, 7–10, 12, 13, 15–17, 53, 47, 48, 50, 78, 110–112
76, 79, 84, 85, 107, 108, 116, Fifth of October Revolution, 6, 108
118–124, 129–134, 149, 151– framework, 16, 18, 39, 50, 56, 65, 80
156, 161, 163, 174, 177–180, FRY. See Federal Republic of
183–188, 196, 198, 202, 207 Yugoslavia (FRY)
dissolution, 18, 38, 40, 41, 47, 59, funds, 39, 41, 63
61, 65, 156, 162
dissolution of the Yugoslav Federation, 7
G
governance, 4, 51, 53, 59
E government, 7, 11, 12, 15, 18, 58–60,
Eastern Europe, 4, 7, 26, 27, 29, 35, 62, 65, 67, 68
49, 50, 55, 57, 58, 80 Governor, 112, 114, 120, 124, 125
economic liberalisation, 3, 35 Group of States against Corruption
economy, 4, 12, 23, 27, 28, 36, 39, (GRECO), 88, 92–95, 99, 100,
40, 58–60, 62–65, 67, 68 162, 181, 187, 199, 209, 212
autarkic, 67, 195
capitalist, 27, 29, 58
free market, 109, 125 H
global, 55, 66, 161 harmonisation, 93, 100, 145, 199,
grey, 61 201
informal, 61, 62 health care, 154, 197
liberal, 66
national, 58, 61, 64, 65, 67, 68,
124, 152, 158, 161, 177, 195 I
socialist/self-management, 7, 26, 35 ICTY. See International Criminal
elections, 48, 49, 52, 66 Tribunal for the Former
elite, 11, 12, 36, 40, 54, 57, 58, 60, Yugoslavia (ICTY)
63, 67, 83
258 Index
idea, 7, 8, 13, 29, 67, 76, 123, 124, K

132, 152, 158, 159, 163, 198 Kardelj, Edvard, 32
identity, 24, 64, 119, 121, 146, 152 Kertes, Mihalj, 116, 119, 121–123
independence, 18, 64 Koštunica, Vojislav, 3, 6, 24, 25, 108,
industry, 18, 25, 60, 62 112, 136, 143–149, 151, 155,
inequality, 32, 38, 42, 56 158, 160–162, 174, 176, 206
inflation, 36
influence, 11, 18, 28, 31, 33, 36, 37, 39,
50, 52, 62, 64, 66, 67, 80, 81, 151 L
informal practices, 6 labour, 26, 31, 33, 34, 36, 53, 57,
institutional framework, 10, 27, 41, 48 58, 60
integrity, 7, 12, 18 land, 26, 59
interest, 4, 7, 13, 17, 25, 26, 28, 30, law, 6, 11, 26, 30, 31, 33, 59, 64, 83,
32, 33, 35, 36, 38, 40, 42, 53, 112. See also legislation; rule
54, 58. See also conflict, state anti-corruption, 5, 77, 89, 95, 100
class, 32, 38, 53 anti-monopoly, 92, 93, 159
conflict of, 31, 40, 87, 91 electoral, 49, 64, 108, 109
coordination of, 32, 42 privatisation, 59, 91, 133
economic, 30, 32, 117, 122, 148 League of Communist (LC), 28, 31,
financial, 127, 149, 158 32, 48, 49, 53
national, 5, 17, 18, 53, 54, 78, 118, legality, 2, 49, 67, 83
120, 121, 134, 146, 153, 158, 160 legislation, 12, 18, 19, 41, 48, 64, 69, 207
pluralism, 32, 36, 38 legitimacy, 5, 26, 27, 31, 42, 49, 50,
political, 25, 32, 132 52, 53, 55
private, 4, 7, 15, 33, 122, 188, 196 liberalisation, 1, 67, 162, 187
public, 38, 42, 54, 81, 91, 126,
186, 189, 199, 202
state, 5, 13, 18, 120–122, 144, 152, M
153, 156, 158, 161, 163, 197 mafija, 82–84
International Criminal Tribunal for the market, 4, 18, 23, 35, 36, 57, 58, 61,
former Yugoslavia (ICTY), 5, 48, 65, 67, 68
111, 145, 195 means of production, 26, 28, 34, 36,
international isolation, 2, 23, 48, 49, 38, 42, 56–58, 60
54, 61, 66, 67, 75 media, 5, 6, 10–13, 40, 42, 54, 60,
intervention, 33 63, 80, 82, 83, 148, 206
investigation, 6, 11, 17, 81, 83, 84 Memorandum, 158–161
isolation, 2, 63, 66, 86, 121, 147, 195 Milošević, Slobodan, 2, 3, 5–7, 10,
17, 23, 37, 40, 47–69, 75, 77,
78, 82, 86, 91, 100, 108–114,
J 116–122, 124–127, 129, 130,
judiciary, 31, 51, 52, 68, 81 132, 134, 136, 137, 144, 147,
Jugoremedija, 10, 11, 17 149, 153, 155, 157, 160, 163,
justice, 38, 51, 56, 66 185, 195–197, 200
Index 259
minority, 111, 148 Serbian Progressive (SNS), 48, 125,

misallocation, 63 200, 201
misconduct, 6, 10–12, 148 Socialist Party of Serbia (SPS), 6,
Mišković, Miroslav, 157, 174, 176, 48, 111, 112, 116, 121, 125,
182 197, 200
money patriots, 54
Cyprus. See scandal, 10 Peace, 47, 157
illegal financial transfers, 127 Perception, 1, 4, 55, 83
laundering, 17, 18, 77, 88, 94, 115, corruption, 145
121, 131, 145, 162, 170, 175, Plan, 29
195, 210 Integrity, 95
Master, 176. See also
Urban-planning
N visa liberalisation, 162
national identity, 18 political corruption
national interest, 5, 18, 53, 54 political, 12, 16, 39, 75, 80
nepotism, 39 political will, 25, 83
network, 13 Port of Belgrade, 10, 11, 18, 169, 171,
174–179, 181, 188, 189, 197,
206. See also scandal
O position, 27, 30, 36, 38, 39, 41, 48,
off-shore, 175 58, 60, 62, 63, 148
oligarchs, 158, 159, 177 post-communist, 4, 23, 49, 51, 52, 58
opinion, 2, 56, 69 power, 5, 6, 17, 19, 23, 27, 30, 31,
organised crime, 17 34, 36, 38–42, 48, 50–54, 60,
overthrow, 52, 60, 112 63, 65, 67, 68, 80
ownership rights, 4, 6, 7, 28, 34, 42, Practices, 4, 6, 8, 15, 26, 38, 42,
56, 59, 64, 65, 67 63–65, 68, 81, 84, 85, 87, 100,
108, 109, 120, 127, 128, 159,
161, 180, 184, 185, 187, 188,
P 206
Parliament informal, 6, 39, 41, 42, 48, 60, 65,
European, 129, 133, 135, 161, 175, 67, 68, 177
181, 187, 201 non-democratic, 77
Party, 14, 16, 28, 32, 36, 37, 39, 40, price, 59
42, 49, 51, 53–55, 57, 60, 96, privatisation, 1, 3, 5, 7, 10–12, 14,
126, 128, 160, 184, 187, 207. See 17, 18, 35, 40, 56–60, 63, 65,
also League of Communist (LC) 67–69, 75, 77, 83, 87, 89, 90, 92,
Democratic (DS), 110, 125, 144, 107–109, 111, 120, 123, 124,
188 126–135, 143, 146, 147, 149–153,
Democratic Party of Serbia (DSS), 157–161, 163, 169, 170, 174–182,
110, 144 184, 188, 189, 196, 197, 199, 201,
financing, 91, 101, 162, 199, 209 202, 206, 208, 209
260 Index
proceedings, 162, 163 R

process, 2, 3, 5, 7, 16, 17, 23, 26, 28, Radulović, Slobodan, 157, 161
32, 36, 48, 50, 56–59, 66, 77, reforms, 4, 12, 57, 59, 80
86–89, 92, 93, 107, 108, 111, Report, 5, 10, 40, 63, 90, 92, 94,
113, 117, 118, 124–126, 128, 115, 127, 146, 148, 150, 151,
129, 131–133, 135, 146, 149, 160, 170, 174, 182, 201, 205–
151–153, 156–158, 160, 163, 207. See also European Union,
170, 172, 176, 180–182, 184, Progress Report
187, 188, 197, 199, 208 National Anti-Corruption Council,
procurement, 18 96, 150, 153
property, 6, 7, 17, 19, 23, 26–28, 34, Resolution, 96, 133, 135, 144, 161,
35, 38, 41, 48, 51, 56, 58, 59, 181, 187
64, 66, 87, 94, 109, 126, 127, resources, 35, 60
130, 132, 147, 152, 202. See also response, 6, 24, 84
ownership right responsibility, 39
collective, 35, 36, 39, 56–60, 67, revolution, 29
132, 160 right, 34, 50, 56, 57
right, 67, 96, 147, 196 human, 77, 78, 109
state-owned, 35 ownership, 4, 6, 7, 34, 42, 56, 60,
prosecution, 11 133, 197
protectionism, 161 property, 67, 96
public rule
administration, 92, 93, 99, 101, authoritarian, 64, 108, 120
145, 154, 162, 205 law, 12, 31, 51, 52, 65, 68, 77, 85,
debate, 1, 3, 5, 8–11, 13, 15, 19, 86, 95, 100, 117, 119, 130,
27, 41, 65, 75, 77–79, 82–84, 133, 134, 153, 155, 156, 162,
88, 90, 100, 107, 108, 115, 170, 198, 212
116, 118, 119, 123, 125, 129,
130, 134, 144, 146, 151, 155,
158, 159, 161, 163, 169–171, S
174, 177, 181, 183, 188, 196, SAA. See Stabilisation and Association
198, 199 Agreement (SAA)
discourse, 3, 6, 11, 17, 19, 27, 48, Sartid, 10, 11, 18, 83. See also scandal
53, 54, 56, 58, 78, 82–85, 107, scandal, 2, 3, 10, 17, 25, 39, 40, 42,
115, 119, 121, 133, 134, 184, 76, 80–85, 100, 107, 108, 112,
200 115–116, 118, 119, 121, 123,
good, 4, 7, 15, 132, 152, 154, 156, 125–127, 129, 131, 133–135,
163, 175, 186, 196 143, 144, 148, 150, 160, 162,
health, 61, 182, 185 169, 177, 181, 188, 196, 198,
interest, 54, 81, 91, 126, 189, 199, 202 199, 205–207, 216
opinion, 56, 65, 154, 171 corruption, 3, 5, 9–11, 13, 15, 25,
sector, 60 40, 42, 76, 78, 79, 81–85, 100,
Index 261
107, 118, 123, 126, 133, 143, socially owned property, 7, 57

148, 150, 160, 162, 163, 169, society
171, 174, 181, 182, 184, 188, civil, 42, 51, 54, 81, 93, 97, 131, 205
196, 197, 199–201, 207 sovereignty, 7, 17, 18, 51
flu vaccines, 10 spheres, 4, 18, 28, 31, 36, 38, 42, 80
Money in Cyprus, 10, 17, 107, 116, Stabilisation and Association
118, 119, 121, 125 Agreement (SAA), 93, 144, 145,
political, 3–6, 8, 15–17, 79, 80, 156, 181, 199, 212
148, 151, 197, 199, 205 State Anti-Corruption Council. See
Privatisation of C Market, 18, 158 Council
Privatisation of Jugoremedija, 17 strategies
Privatisation of Port of Belgrade, 171 discursive, 84, 198
Privatisation of Sartid, 197 enrichment, 62
scandalogy, 4 survival, 60–62
sector, 18, 26, 28, 60, 62, 65 strategy, 62
banking, 127 stratification, 14, 37, 42, 58, 62, 201
construction, 188, 189 strike, 10, 110, 130, 133
energy, 62
financial, 65
health, 128, 183, 187 T
informal, 61 tax, 41
media, 40, 128, 207 tender, 127, 174, 175, 182, 184
private, 61, 94, 117 threat, 38, 42, 49
public, 64, 67, 96, 183 traitors, 54, 122
self-governance, 23 transformation, 4, 17, 34, 52, 75
self-management, 12, 23, 27, 29, transition, 1, 2, 4, 6, 7, 14, 23, 30,
32–34, 36, 40, 42, 43, 58, 60, 62 49, 50, 52, 57, 67, 88, 113, 130,
Serbia, 4–8, 11, 13, 16–19, 23, 24, 132, 145, 152, 155, 199, 200,
26, 27, 35, 40–42, 47–54, 56–62, 202. See also process
64–69, 75, 82, 83, 112, 136 transitional processes, 2, 12, 15, 49,
Serbian Progressive Party, 48 58, 80
shareholder transparency, 39, 40
minor-shareholder, 13, 131, 134 trust, 3, 12, 83
shares, 59, 128, 132, 160
worker-shareholder, 107, 127–133,
153, 157, 175, 197 U
skandal, 82 United Nations Convention against
socialisation, 28, 29, 31, 33, 36, 38 Corruption (UNCAC), 4, 87, 92,
socialism, 23, 26–28, 30, 33–36, 94, 95, 99, 100, 145, 154, 181,
39–42, 57, 59 196, 199, 210
Socialist Party of Serbia (SPS), 48, 53, Urban-planning, 175, 176, 202
68 US Steel, 147–150
262 Index
V Y
Vaccines, 169, 171, 182–188. See also Yugoslavia, 6, 16, 23–32, 34, 36,
scandal 38–43, 47–50, 53, 56, 59, 64,
value, 52, 59, 63 65, 68, 112, 136
Vučić, Borka, 116, 121 Yugoslav self-management, 29, 32,
34–36, 38, 39, 43
W
War
crimes, 5, 48, 78, 114, 120, 122,
145, 153, 156, 170
Second World, 23, 24, 26, 27

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RU PT IO N A N D

More information about this series at

Political Corruption and Governance

Library of Congress Control Number: 2018942880

© The Editor(s) (if applicable) and The Author(s) 2019

Cover image: © ConstantinosZ

Printed on acid-free paper

This Palgrave Macmillan imprint is published by the registered company Springer

1 Introduction: Political Scandals and Transition in Serbia 1

2 Yugoslavia from Kingdom to Socialist Federation:

3 Milošević’s Rule and Corruption 47

4 Confronting Corruption in Post-Milošević Serbia:

5 Money Laundering and Privatisation: The Money in

6 State, Interest and Political Corruption: The

7 Institution-Building and Institutional Corruption: The

8 Conclusions: Political Scandals and Political Action 195

OECD Organisation for Economic Co-operation and Development

Fig. C.1 Institutional formation and change in the area

Introduction: Political Scandals

This book examines the politicisation of corruption in an Eastern

© The Author(s) 2019 1

which are revealed by the media and developed in the extra-institutional

corruption—which might be seen as a challenge to political stability and

Political Scandals and Corruption

involvement in corrupt practices by creating a perception in society that

After the accession of Bulgaria and Romania to the EU in 2007,

Corruption Scandals in Serbia

While political scandals in Serbia have attracted vast media atten-

Democratic Transition in Serbia

As in many other countries in Eastern Europe, transition in Serbia

Discourse and Institutions: Theoretical Background

institution—its members and the ideas associated with them—represent

possible to observe a specific moment in the constant fluctuation of

when analysing discourse, self-observation is as relevant as observation of

The Political Scandals Selected for Analysis

scandals are highly relevant to the anti-corruption discourse and have

The Multiplicity of the Anti-corruption Discourse

As has been noted, any attempt to categorise voices in public debate is

the main generators of corruption scandals. This group consists mainly

The Anti-corruption Debate and Political Dialogue

There is a widespread belief that the numerous scandals in Serbian pol-

achieved one important goal: they brought a political dialogue to a

It is reasonable to believe that civic activism in Serbia will become a

The Wider Relevance of the Book

literature on Europeanisation by offering a critical perspective of top-

Plan of the Book

but largely focuses on the socialist period. Chapter 3, Milošević’s Rule

based on a clear distinction between the public and private spheres. At

The final chapter, Conclusions: Political Scandals and Political Action,

Challenges of the ‘Transitional’ Legacy]. Belgrade: Čigoja štampa, Faculty of

Philosophy, Institute of Sociological Research.

Lazić, M. (2011). Čekajući kapitalizam. Nastanak novih klasnih odnosa u Srbiji

[Waiting for Capitalism. The Emergence of New Class Relations in Serbia].

Order]. Belgrade: Čigoja štampa, Faculty of Philosophy, Institute for Social

during Intensive Transformation]. Belgrade: Čigoja štampa, Institute of

Sociological Research, Faculty of Philology.

Schmidt, V. (2010). Reconciling Ideas and Institutions Through Discursive

Yugoslavia from Kingdom to Socialist

Fig. C.1 Institutional formation and change in the area

Political Scandals and Corruption

Corruption Scandals in Serbia

Democratic Transition in Serbia

Discourse and Institutions: Theoretical Background

The Political Scandals Selected for Analysis

The Multiplicity of the Anti-corruption Discourse

The Anti-corruption Debate and Political Dialogue

The Wider Relevance of the Book

Plan of the Book

Yugoslavia from Kingdom to Socialist

The Kingdom of Yugoslavia

State Socialism in Yugoslavia

The Yugoslav Road to Socialism

The Withering Away of the State

Challenges and Contradictions of Yugoslav Self-Management

Corruption in Socialist Yugoslavia

Milošević’s Rule and Corruption

Federal Republic of Yugoslavia: Continuity

Power and Politics Under Milošević’s Leadership

Property Rights and Social Justice

Arguments in Favour of Privatisation

Informality, Illegality and Survival Strategies

Corruption in Serbia During Milošević’s Rule

Debate on Political Corruption