Despite growing political interference and a substantial presence of money from questionable sources, some investors see Serbia – and especially its capital, Belgrade – as an exciting opportunity to create value. Combined with the fact that political interference and opaque transactions are distorting the real-estate market and creating further problems with the rule of law, a key obstacle to Serbia’s path towards EU membership, the country’s real estate market ostensibly offers a golden cage to foreign investors. In other words, opportunities about, but there is a risk associated with any change in political elite personality or priorities.
The energy sector in the Western Balkans has increasingly fallen under the influence of the local political elite, and external actors – particularly Russia. This environment has stifled the prospect of the sector evolving or diversifying away from fossil fuels; and embedded a culture of business built primarily on unfair market conditions and various nuanced forms of informal state capture.
Over the past four years, Serbia has scrapped visas for more than 20 countries. Despite attempts to describe it as an incentive for foreign investments or political rewards for supporting Serbia’s stance over the disputed independence of Kosovo, the true motives have remained almost completely opaque. Opposition officials have publicly warned that the scheme could, in fact, increase the risk of money laundering and illicit trade deals.
Although Serbia could be a natural agricultural powerhouse, its ability to realise significant profit from its agricultural sector has been stymied. Not only is the country feeling the impact of climate change, the rise of an illiberal autocratic government – and all the challenges that is bringing - has sustained a political environment that has suffocated agricultural reform through various forms of political interference and manipulation.
Recent changes to Serbia’s Law on Security and Intelligence Agency have given the director broad discretionary powers; similar powers have also been given to the Interior Minister. Notably the Director of the BIA and the Interior Minister are loyal apparatchiks of President Vucic. As a result of these legislative changes, there are indications that President Vucic is close to completing his creation of a de facto party-state. As autocratic rule grows in Serbia, the rule of law and freedom of speech continue to erode; with significant implications for democracy and political stability.
The appointment of Sinisa Mali to the post of Serbian Finance Minister in May has controversial undertones. An experienced political player with strong ties to the inner circle of President Vucic, there is little doubt that Mali will help Vucic remove any remaining barriers to securing systematic control over every part of the state’s administration. Already flagged by various international watchdogs and institutions as a jurisdiction with weak financial integrity and rule of law, and systemic corruption, this move may further undermine political stability.
Despite attempts by Brussels to push Serbia and Kosovo to find a mutually acceptable solution by the end of 2018, the two countries could not be further apart. Sporadic diplomatic incidents, low-level violence, the rise of aggressive nationalist rhetoric is putting a strain on negotiation. This analysis looks at a potential Grand Settlement, and the obstacles that are standing in its way.
Russia has built a relatively strong financial footprint in the Western Balkans, with investments particularly concentrated in a few sectors. As a further display of Russian ‘commercial diplomacy’, Kremlin-approved pseudo-private companies ostensibly operate as tools of informal political influence. In some cases, it is beginning to work, guiding countries in the region towards kleptocracy and state capture.
Authorities in Serbia have been using businessmen as fixers and go-betweens to maintain informal communication channels with key political players in Kosovo. Arguably this is to ensure that ethnic Serbs who live in the north remain loyal to Vučić and his political protégés, but it has also had an impact on the investment environment; contributing to opacity, and the uncompetitive awarding of lucrative projects.
Montenegro under Đukanović has inspired the rise of autocracy in the Balkans. Whilst this small state has seamlessly shifted allegiances between the EU, US, Russia, Turkey and other external influence since independence, it has rather effectively given the façade of democratic stability. More aptly, however, it has evolved into a ‘stabilocracy’ and shows how security in the region is given precedence over the rise of illiberal and authoritarian regimes that simultaneously exert significant influence over the investment and business environment.
A failed Kurdish peace process, and the power struggle with the Gülen Movement, have forced President Erdoğan to secure new political allies. Ironically, Erdoğan has found support from the very (informal) ultra-nationalist groups that he had purged less than a decade ago. With this emerging alliance, Erdoğan is further darkening Turkey’s security apparatus increasing the chances of human rights violations and power abuse for the security forces.
Political fluidity in Macedonia, largely tide to the question of the country’s name and Greece vetoing EU and NATO accession until resolution is found, is facilitating the rise of politically exposed private sector interests. Whilst it is still in government, individuals tied to and associated with senior ruling SDSM figures are isolating ways to secure personal financial benefit before there is a change in the status quo.