Bosnia Peace Operation:

Crime and Corruption Threaten Successful Implementation of the Dayton Peace Agreement

NSIAD-00-156: Published: Jul 7, 2000. Publicly Released: Jul 7, 2000.

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Pursuant to a congressional request, GAO reviewed the impact of organized crime and public sector corruption on the efforts of the international community to rebuild Bosnia and meet the benchmarks for the withdrawal of North Atlantic Treaty Organization (NATO) forces, focusing on: (1) how organized crime and public sector corruption might affect the successful implementation of the General Framework Agreement for Peace in Bosnia and Herzegovina (Dayton Agreement) in Bosnia; (2) whether the international community's anticorruption efforts have improved Bosnia's law enforcement and judicial system and reduced corruption; and (3) whether international assistance resources are being safeguarded and whether such assistance is being used by Bosnia in place of domestic revenues lost due to crime and corruption.

GAO noted that: (1) endemic crime and corruption is impeding the successful implementation of the economic, political, and judicial reform goals of the Dayton Peace Agreement; (2) according to senior U.S. and international officials and numerous studies, corruption is impeding progress towards implementing the Dayton Agreement, and conditions for the complete withdrawal of NATO-led forces will not be met unless Bosnian officials make concerted efforts to address this problem; (3) this, however, has not happened: crime and corruption continue to pervade Bosnia's political, judicial, and economic systems; (4) U.S and international officials further stated that this situation exists largely because Bosnian leaders from all ethnic groups have not demonstrated the political will to reform; (5) however, the Department of State said some more moderate government officials have cooperated with the international community and others have cooperated under pressure; (6) numerous assessments have also concluded that the institutional structure for law enforcement and public accountability continues to be inadequate, precluding successful prosecution of government fraud, corruption, and complex white-collar crime; (7) Bosnian, international, and U.S anticorruption and judicial reform efforts have achieved only limited success in reducing crime, corruption, and political influence over law enforcement and judicial systems; (8) efforts, led by the Agency for International Development, seek to curtail corruption through the elimination of communist-era financial control structures and the privatization of state-owned enterprises; (9) U.S and international donors have established procedures for safeguarding assistance to Bosnia, and there is no evidence that assistance is being lost to large-scale fraud or corruption; (10) however, due to the fungibility of money, such assistance may be used to replace Bosnian domestic revenues lost to crime and corruption; and (11) if the Bosnian governments strengthened the rule of law, and identified ways to collect some or all of the hundreds of millions of dollars lost annually as a result of widespread tax and customs duty evasion, as estimated by the international community, budget support might not be needed.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The Committee on International Relations, U.S. House of Representatives, does not plan to introduce the actions suggested in the matter for congressional consideration into legislation.

    Matter: Congress may wish to consider conditioning future U.S assistance to Bosnia on an explicit requirement that State certify that the Bosnian governments have taken concrete and measurable steps to implement anticorruption efforts and significantly improve their ability to control smuggling and tax evasion.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The Department State stated in its comments on the draft report, the 31 U.S.C. 720 report to Congress, and in testimony before the House International Relations Committee on July 19, 2000, that a reassessment of its strategy in Bosnia is not required since: (1) a reassessment was completed in 1998; (2) the strategy developed in 1998 is still valid; and (3) its strategy is continuously reevaluated and modified to meet changing needs. In addition, it said that it does place strict conditions on U.S. assistance and encourages other donors to do the same. Further, the Department believes conditioning certain types of assistance is counterproductive.

    Recommendation: The Secretary of State should take the lead in conducting a reassessment of the U.S strategy for assisting Bosnia to achieve the objective of establishing a democratic government and a market economy. The Department of State should evaluate unilateral and multilateral options for modifying the type and amount of assistance provided (including a review of the appropriateness of providing general budget support), place strict conditions on future assistance, and possibly suspend assistance until Bosnian political leaders independently demonstrate their determination to fight organized crime and corruption.

    Agency Affected: Department of State

  2. Status: Closed - Not Implemented

    Comments: The Department State stated in its comments on the draft report, the 31 U.S.C. 720 report to Congress, and in testimony before the House International Relations Committee on July 19, 2000, that it had discontinued the use of direct budgetary support. It added however, that it believed that budgetary support, with strict conditions, was an appropriate form of support for international financial institutions to provide.

    Recommendation: The Secretary of State should take the lead in conducting a reassessment of the U.S strategy for assisting Bosnia to achieve the objective of establishing a democratic government and a market economy. The Department of State should consider whether direct budgetary support is an appropriate form of assistance in the current environment in Bosnia.

    Agency Affected: Department of State

  3. Status: Closed - Not Implemented

    Comments: The Department State stated in its comments on the draft report, the 31 USC 720 report to Congress, and in testimony before the House International Relations Committee on July 19, 2000 that a reassessment of its strategy in Bosnia is not required since: (1) a reassessment was completed in 1998; (2) the strategy developed in 1998 is still valid; and (3) its strategy is continuously reevaluated and modified to meet changing needs. It added that it is working with political leaders that support the implementation of the Dayton Peace Agreement and is supporting the Office of the High Representative's efforts to make all Bosnian leaders comply with the provisions of the Dayton Agreement.

    Recommendation: The Secretary of State should take the lead in conducting a reassessment of the U.S strategy for assisting Bosnia to achieve the objective of establishing a democratic government and a market economy. The Department of State should determine how it can support those political leaders in Bosnia whose goals for addressing the problem of crime and corruption are consistent with the goals of the U.S. and the international community.

    Agency Affected: Department of State

 

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