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.
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.
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.
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.
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.
Driven by a religious ethos, government-linked foundations operate under low levels of accountability, a factor that has allegedly exposed some of them to questionable activities carried out by government officials. In addition to becoming embroiled in allegations of corruption, Turkey’s charities have also used been utilised as a resource distribution tool; more specifically, as a place where government loyalists are rewarded with employment.
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.