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Elements of State Capture in Serbia

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Elements of State Capture in Serbia Elements of State Capture in Serbia Case studies in two sectors Transparency Serbia Belgrade www.transparentnost.org.rs © 2018 Transparency Serbia This project is funded by the European Union. This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of Transparency Serbia and can in no way be taken to reflect the views of the European Union. Every effort has been made to verify the accuracy of the information contained in the report. All information was believed to be correct as of December 2017. Nevertheless, Transparency Serbia and Transparency International cannot accept responsibility for the consequences of its use for other purposes or in other contexts. 1 Table of Contents Executive summary ................................................................................................................4 Urban planning in the capital city of Belgrade based on private and political interests ...4 Damageable effects of political control of Electric Company of Serbia ............................5 Key Recommendations .......................................................................................................6 Urban planning ...............................................................................................................6 Public enterprises ...........................................................................................................6 Introduction and methodology ...............................................................................................7 Case studies............................................................................................................................9 EPS (Electric Company of Serbia - Elektroprivreda Srbije) ....................................................9 Relevance of Sector and Key problems ...................................................................................9 The Practice ..........................................................................................................................10 Belgrade Waterfront urban planning – public institutions serving private interests ..........21 Summary ......................................................................................................................21 Belgrade Waterfront – from announcement till alignment of planning rules.................21 Urban plan fitting to investor’s needs ...........................................................................31 Special laws for special interests ...................................................................................35 Contract signing - provisions that worsened concerns ..................................................36 Missed opportunities ....................................................................................................39 Building.........................................................................................................................40 Urban planning and constructions in Makis Field – same story or just consequences of previous captured processed? ..........................................................................................41 Summary ......................................................................................................................41 Bogoljub Karic - relation with government, SNS and Makis field project - the chronology .....................................................................................................................................42 Announcement of “Tesla city” ......................................................................................42 Further developments - urban planning .......................................................................44 Belgrade Metro Plans shifting .......................................................................................44 Recommendations ............................................................................................................50 2 3 Executive summary Within the Transparency International’s research project on possible state capture in several South-East European countries, Transparency Serbia looked for elements and patterns of that worrying phenomenon in two specific sectors. Those are urban planning in the capital city of Belgrade and functioning of public enterprises in the energy sector. Urban planning in the capital city of Belgrade based on private and political interests Urban city planning in Belgrade, capital city of Serbia is being captured by interest of private investors and more precisely those that are closely linked with the ruling political elite. Although Serbia has rules and regulation on urban planning that envisages preparation of expert studies, organizing of public insight (consultation) and approval of plans in the city council, in reality those plans are in most significant cases adapted or even adopted in first place with major purpose to serve particular interests. While Belgrade city has longtime history of abuses with construction permits, changing of land purpose, unifying of parcels and non-transparent urban planning in general, participants in such corruptive arrangements usually tried to stay hidden when violating the rules or abused legal loopholes. Since 2012, promotion and support of private interest is presented by the political leaders of Serbia and city of Belgrade as a matter of top national interest. For the purpose of “Belgrade Waterfront” project (app. 900.000 square meters), Serbia violated its own rules on expropriation, public private partnerships, taxation and public procurements, through “one time” legal mechanisms, such are “lex specialis” for BW project, adopted by the Parliament in April 2015, and wide provisions of interstate agreement between Serbia and United Arab Emirates (where private partner firm for this project is registered). Urban planning for the project formally followed the rules, but the whole state and city apparatus only looked how to fit with the interest of at that time only perspective investor. As a result, a) the shape of the biggest piece of construction land in the capital city center is not planned through architect competition as originally envisaged; b) the purpose of this land was not decided in a participative manner; c) investor was not selected on the basis of competition; d) state entered 30 years contract as a minority (32%) partner in a joint venture, although the value of land and investments to clean-up the terrain is significantly higher than the value of private investment; e) state committed to assign procurement of public works of almost 300 million EUR, without competition. More recently, minor partner in government coalition and businessmen, Bogoljub Karic, announced huge habitual construction project on Belgrade periphery (Makis) with information that everything is already agreed. City authorities did not confirm (nor denied) such claims, so competitive procedure is still possible, but other potential investors are already discouraged to show their interest for the same area. City of Belgrade authorities changed water source protection rules in the area in order to enable building on sight and 4 changed urban transportation plan in a way to include currently non-existing settlement with the first subway line of the perspective Belgrade metro network. These huge construction projects are presented by the top state and city politicians as a success in attraction of investors and economic growth and development. On the other hand, anti-corruption legal mechanisms are circumvented and key information, about business and other risks, duties of investor that are related to the public interest are missing. At the same time, any form of criticism and call for accountability is fiercely rejected and attacked by the government and government control media (including most of those private owned). Damageable effects of political control of Electric Company of Serbia Electric Company of Serbia is probably the most important company in the country, having in mind the number of employees, income and resources. It is organized as a complex public enterprise, incorporating dozens of smaller legal entities (i.e. hydro and coal plants). While the Law on Public Enterprises both in its 2012 and in 2016 version promoted professionalization, accountability, transparency and efficiency of these entities, none of these goals is achieved. Electric Company of Serbia (none as EPS, from “Elektroprivreda Srbije”), being the single largest public owned company, shows it in a larger scale: a) the operative management and in particular acting director, is purely politically appointed and widely considered as incompetent for the position; similarly, many of lower level managers are considered incompetent as well; b) there is no information that oversight board of the company, appointed by the Government, made efforts to rectify identified problems; c) EPS is practicing party affiliated employments, that is facilitated by frequent reorganization of company structure, discretionary based changes of systematization act with the description of working places and by maintaining several firms formerly connected to EPS plants from Kosovo; d) the profit of the enterprise is artificially increased in order to make a transfer to the budget, to present a budget suffices and to obtain political gain by linking it with the success of governmental policy; e) there is no comprehensive reporting and accountability
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