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.
Opportunities for growth are increasingly being stymied in the Western Balkans because of the growth of informal political influence (ostensibly through the rise of illiberal regimes), and an evolving notion of corruption. No longer is the main concern focused on influencers that ‘buy’ access to privilege; but more so on concerns that ‘legitimately’ elected leaders are presiding over the capture of state institutions and a massive redistribution of wealth.
Bulgaria’s Prime Minister, Boyko Borissov, has spearheaded recent legal reforms aimed at fighting public and private sector corruption. These reforms include the creation of a new anti-corruption unit with the remit to wiretap senior state officials. Although these efforts appear positive in their aims; given the trajectory of Borisov’s own political influence, there are concerns that a new anti-corruption unit with significant powers could be utilised against opposition groups, whilst further placing the private sector and judiciary under his influence.
Liviu Dragnea has started a public campaign of defamation against anti-corruption institutions that have accused him of leading a criminal organisation. To legitimise his position, Dragnea is using autocratic methods, whereas he is the protector of the national interests empowering him to manipulate the judiciary and security systems.
There are concerns that a series of reforms that reduce the independence of the Romanian judiciary will impact how international and non-politically exposed commercial players are able to compete in the market. If these reforms are passed, they have the ability to set the stage for the implementation of a de facto system of crony capitalism; a system that would ultimately serve the interests of the political and economic interests of Liviu Dragnea.
Despite his repeated demonstrations of loyalty to the current Turkish ruling elite, businessman Galip Öztürk was recently handed down a judicial sentence that will ultimately expose his assets to the government’s agenda. The case of Öztürk is important because it highlights an emerging trend in Turkey’s business environment - where the assets of even loyal businessmen are being made vulnerable to Ankara’s economic priorities.
Although the Bulgarian banking system is generally dominated by international banks, a small part remains under the control of indigenous entities, some of which remain open to allegations of questionable practices and associations. There are concerns that the largest of the country’s domestic banks will contribute to wider industry instability if they continue to be regarded as politically exposed, and open to providing politically influenced loans regardless of their commercial viability.
The PSD is assessed to be among the most influential actors in state-owned military companies. Not only are there indications that it can influence the appointment of directors, but it has a hand in shaping decisions made throughout the defence sector itself. Although Romania remains somewhat accountable to international defence organisations of which it is a member-state, such as NATO, this has not precluded the amount of influence it has secured over national players.
Romania has been the target of public allegations suggesting that members of the government have illicitly benefited from EU funds through opaque schemes involving county councils and the Ministry of European Funds. Recent developments have further reinforced these concerns - often driven by the opacity that surrounds the distribution of EU funding.
2018 is expected to be a year of consolidation in Bulgaria's banking sector. New laws and transparency requirements have been implemented in this economic sector, with the hope that these initiatives will reduce allegations of questionable activities associated with the country's banking sector. This is particularly the case with locally owned banks as they seek international investment.
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Authoritarianism, corruption, human rights violations, and political repression are elements that characterise political trends in Emerging Europe over the next year. Indeed, countries in the region will continue to move away from democratic reforms, while their ruling elite continue to secure their political power by leveraging informal mechanisms of influence.
The Romanian secret services hold significant political influence; in theory, a remnant of the Communist era. Information possessed by the various intelligence agencies – a de facto equivalent of Russia’s infamous ‘compromat’ - has been utilised to exert influence over the elite. Their rather unaccountable role has an impact on the country’s democratic institutions, including the judiciary, which is believed to be under the control of the secret services through the infiltrations of its agents.
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