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COMBATTING CORRUPTION IN 

BOSNIA AND HERZEGOVINA 

HEARING 

BEFORE THE

COMMISSION ON SECURITY AND 

COOPERATION IN EUROPE 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

MAY 25, 2016 

Printed for the use of the 

Commission on Security and Cooperation in Europe 

[CSCE 114–2–4] 

( 

Available via www.csce.gov 
COMMISSION ON SECURITY AND COOPERATION IN EUROPE 

LEGISLATIVE BRANCH COMMISSIONERS 

HOUSE SENATE 

CHRISTOPHER H. SMITH, New Jersey, 

Chairman 

ALCEE L. HASTINGS, Florida 

ROBERT B. ADERHOLT, Alabama 

MICHAEL C. BURGESS, Texas 

STEVE COHEN, Tennessee 

ALAN GRAYSON, Florida 

RANDY HULTGREN, Illinois 

JOSEPH R. PITTS, Pennsylvania 

LOUISE McINTOSH SLAUGHTER, 

New York 

ROGER F. WICKER, Mississippi, 

Co-Chairman 

BENJAMIN L. CARDIN, Maryland 

JOHN BOOZMAN, Arkansas 

RICHARD BURR, North Carolina 

JEANNE SHAHEEN, New Hampshire 

TOM UDALL, New Mexico 

SHELDON WHITEHOUSE, Rhode Island 

EXECUTIVE BRANCH COMMISSIONERS 

Vacant, Department of State 

Vacant, Department of Commerce 

Vacant, Department of Defense 

[II] 
COMBATTING CORRUPTION IN 

BOSNIA AND HERZEGOVINA 

COMMISSIONERS 

Page 

Hon. Roger F. Wicker, Co-Chairman, Commission on Security and Cooperation in Europe .............................................. 1 

Hon. Christopher H. Smith, Chairman, Commission on Security and Cooperation in Europe .............................................. 12 

Hon. Jeanne Shaheen, Commissioner, Commission on Security and Cooperation in Europe .............................................. 19 

Hon. Robert Aderholt, Commissioner, Commission on Security and Cooperation in Europe .............................................. 21 

MEMBER 

Hon. Scott Perry, Representative from the State of Pennsylvania ......................................................................................... 15 

WITNESSES 

Amb. Jonathan M. Moore, Head of the OSCE Mission to 

Bosnia and Herzegovina ......................................................... 3 

Thomas O. Melia, Assistant Administrator, Bureau for Europe and Eurasia, USAID ....................................................... 4 

Srdjan Blagovcanin, Chairman of the Board of Directors of 

Transparency International, Bosnia and Herzegovina ......... 7 

Dr. Valery Perry, Sarajevo-based Independent Researcher 

and Consultant and Senior Associate at the Democratization Policy Council ................................................................... 9 

[III] 
Page

IV 

APPENDICES 

Prepared statement of Hon. Roger F. Wicker ........................... 30 

Prepared statement of Hon. Christopher H. Smith ................. 31 

Prepared statement of Hon. Benjamin L. Cardin .................... 32 

Prepared statement of Amb. Jonathan M. Moore .................... 33 

Prepared statement of Thomas O. Melia .................................. 37 

Prepared statement of Srdjan Blagovcanin .............................. 41 

Prepared statement of Dr. Valery Perry ................................... 43 

MATERIAL FOR THE RECORD 

Submission for the record from Srdjan Blagovcanin ................ 46 

Response for the record from Thomas O. Melia ....................... 76 
(1) 

COMBATTING CORRUPTION IN 

BOSNIA AND HERZEGOVINA 

May 25, 2016 

COMMISSION ON SECURITY AND COOPERATION IN EUROPE

WASHINGTON, DC 

The hearing was held at 2 p.m. in Senate Room 212-10, Capitol 

Visitor Center, Washington, DC, Hon. Roger F. Wicker, Co-Chairman, Commission on Security and Cooperation in Europe, presiding. 

Commissioners present: Hon. Roger F. Wicker, Co-Chairman, 

Commission on Security and Cooperation in Europe; Hon. Christopher H. Smith, Chairman, Commission on Security and Cooperation in Europe; Hon. Jeanne Shaheen, Commissioner, Commission 

on Security and Cooperation in Europe; and Hon. Robert Aderholt, 

Commissioner, Commission on Security and Cooperation in Europe. 

Member present: Hon. Scott Perry, Representative from the State 

of Pennsylvania. 

Witnesses present: Amb. Jonathan M. Moore, Head of the OSCE 

Mission to Bosnia and Herzegovina; Thomas O. Melia, Assistant 

Administrator, Bureau for Europe and Eurasia, USAID; Srdjan 

Blagovcanin, Chairman of the Board of Directors of Transparency 

International, Bosnia and Herzegovina; and Dr. Valery Perry, Sarajevo-based Independent Researcher and Consultant and Senior 

Associate at the Democratization Policy Council. 

HON. ROGER F. WICKER, CO-CHAIRMAN, COMMISSION ON 

SECURITY AND COOPERATION IN EUROPE 

Mr. WICKER. Welcome. Welcome all. I am United States Senator 

Roger Wicker, and I’m happy to convene this hearing on the fight 

against corruption in Bosnia and Herzegovina. 

Chairman Smith and I have visited Sarajevo together in the 

past, and I appreciate his continued leadership toward ensuring a 

stable and prosperous country. 

The United States, as we all know, cares deeply about the sovereignty, stability, recovery, and future prosperity of Bosnia and 

Herzegovina. Since my first visit in 1995, the country has made 

tremendous progress. However, more needs to be done by the international community and Bosnian leaders to sustain these advancements. 

Here in Congress, my fellow commissioners, Senator Jeanne 

Shaheen and I were among those working to nurture private-sector 

entrepreneurship in Bosnia and Herzegovina. Last July, we participated in a presidential delegation to commemorate Srebrenica’s 
2 

20th anniversary. We heard from Bosnians eager to create and 

grow their own businesses. On the 20th anniversary of the Dayton 

Accords in November of last year, we introduced the Bosnia and 

Herzegovina-American Enterprise Fund Act to grow small- to medium-sized businesses throughout the country. 

Unfortunately, corruption in Bosnia and Herzegovina is widespread. Recent news reports have highlighted scandals involving 

senior politicians and concerns that financial assistance to communities that experienced flooding in 2014 may have been misused. In 

its Corruption Perceptions Index, Transparency International 

ranked Bosnia behind all other countries in the region except 

Kosovo and Albania. 

Demonstrative steps need to be taken by all levels of government 

to improve transparency and the rule of law. Left unchecked, corruption will hinder Bosnia and Herzegovina’s integration into Europe and NATO. Twenty years after Dayton, there is no excuse for 

corruption and the risk it brings to prosperity for future generations. 

I have raised these concerns with officials at the State Department. I encourage the administration to continue to support prosecutors and judges who focus on high-profile corruption and economic crime cases. The United States Government should also continue its support for investigative journalism and nongovernmental 

organizations advocating reform. 

We cannot gloss over the country’s deficiencies. Transparency 

and the rule of law are critical pillars to the future prosperity of 

Bosnia and Herzegovina. The people of Bosnia have already suffered through so much. 

I want to thank our government and the NGO witnesses for joining us this afternoon. The Helsinki Commission looks forward to 

your insights and counsel on the steps required to enhance transparency and the rule of law in Bosnia and Herzegovina. 

Now, when other members arrive, perhaps they will have statements also, but we’ll get right to witnesses. 

Our first witness today is Ambassador Jonathan Moore, head of 

the OSCE Mission to Bosnia and Herzegovina. The ambassador is 

well-known to the Helsinki Commission, with previous postings not 

only in Sarajevo but also in Belgrade, Minsk and Vilnius. Ambassador Moore also served as a congressional fellow in the Office of 

the Speaker of the House, as a national security fellow at Stanford 

University’s Hoover Institution, and as a deputy chief of mission at 

the U.S. embassy in Namibia. So welcome to Ambassador Moore. 

Our second witness is the Honorable Thomas Melia, assistant administrator at USAID for Europe and Eurasia. Mr. Melia is also 

well-known to the Helsinki Commission for his time with the National Democratic Institute, Freedom House, and as deputy assistant secretary in the State Department’s Bureau for Democracy, 

Human Rights, and Labor. Earlier in his career, Assistant Administrator Melia worked on the staff of the late Senator Daniel Patrick Moynihan. Given his extensive career focus on human rights 

and democratic development, we look forward to his insights regarding the issue of the day. 

Next, Mr. Srdjan Blagovcanin, our third witness, is chairman of 

the board of the Bosnia Chapter of Transparency International. 
3 

Transparency International has done much to expose corruption 

and to counter corrupt practices in Bosnia and Herzegovina, 

throughout Europe, and around the world. Mr. Blagovcanin has 

more than a decade of experience as a promoter of good governance 

and anti-corruption reforms, and of rule-of-law initiatives. I want 

to thank you for traveling to Washington to participate in this 

hearing. 

And finally, Dr. Valery Perry, an independent researcher and 

consultant who has worked for various organizations, including the 

United Nations Office on Drugs and Crime, the U.N. Development 

Programme, the OSCE, and NATO in Bosnia and Herzegovina. Dr. 

Perry is currently studying ways to counter violent extremism in 

Southeast Europe and Turkey. The Commission looks forward to 

Dr. Perry’s recommendations on ways to promote the rule of law 

and promote transparency in Southeast Europe. 

So, we will get started with our witnesses right away, and we 

will begin with a statement by Ambassador Moore. 

AMB. JONATHAN M. MOORE, HEAD OF THE OSCE MISSION TO 

BOSNIA AND HERZEGOVINA 

Amb. MOORE. Mr. Chairman, good afternoon, and thank you very 

much for this opportunity and for the attention that you and all 

the members of the Helsinki Commission give to Bosnia and 

Herzegovina. You know very well that everything in the Balkans 

is political, and that all politics is local. In that spirit, the OSCE 

team throughout Bosnia and Herzegovina is engaged across the 

country with partners at all levels of society to help foster stability, 

build respect for human rights, and put its citizens on the path to 

prosperity. 

Let me give you some quick and concrete examples. Education 

was one of the many victims of the war. Communities and ethnic 

groups were divided, and so were their schools. OSCE in Bosnia 

and Herzegovina has engaged at all levels to support quality education and bring schools and students together. 

Simply lecturing politicians and parents is not effective. As you 

know from your constituents, they have a right to be heard. We 

have found places where schools can be combined, meaning that 

children learn with each other and from each other, instead of 

being separated. And instead of trying to impose our will, we have 

negotiated successfully with those same parents, as well as with 

politicians and religious leaders, to tear down barriers. Zepce, a 

mixed community in central Bosnia, is a shining example of this. 

Our OSCE mission is very active in the sector of rule of law. We 

are one of many partners fighting trafficking in persons. We have 

an extensive team monitoring war crimes cases, where more than 

20 years after the war justice has not been done. In this, the mothers of Srebrenica are some of our most enthusiastic and effective 

allies. 

Our network of local partners is also essential for combating violent extremism. Terrorist attacks in Bosnia and Herzegovina, much 

more than elsewhere, fundamentally threaten the country’s stability. The 19 Coalitions Against Hate that the OSCE Mission in 

Bosnia and Herzegovina support have already proven their value 

in calling for tolerance and community values instead of division 
4 

and revenge. Thanks to the Coalition Against Hate in Zvornik, as 

well as to the mayor and Islamic community among others, the 

community there found positive common ground after the terrorist 

attack which occurred there in April of last year. 

Our skills and achievements in those areas, and our large field 

network of 10 offices around the country, give us a clear view of 

corruption, the main topic of today’s hearing. We are engaged with 

our domestic and international partners, including Transparency 

International, to bring public and media attention to the problem, 

to support reform efforts, and help lessen the burden of corruption 

on the people of Bosnia and Herzegovina. 

It is clear that simply having laws and institutions is not 

enough. Laws must be implemented and obeyed, and prosecutors 

and judges must do their jobs. Furthermore, old patterns of political patronage must stop. A lack of transparency in hiring employees in public institutions, concealing budgets, and even enrolling 

university students on political grounds blocks opportunities for the 

country’s talented young people and also obstructs, as we’ve seen, 

foreign investment. 

We have geared up our rule-of-law team at the OSCE Mission to 

Bosnia and Herzegovina to monitor corruption cases, where there 

have been far too few convictions. And we strongly support the 

cause of greater transparency. The public has a right to know who 

is working in public enterprises and for how much. Both with regard to prosecution and transparency, Sarajevo Canton is a particular leader. 

In conclusion, thank you again for this special opportunity. A 

personal note: We have seen each other on Capitol Hill, Vilnius 

and Minsk, Medjugorje and Dubrovnik, Belgrade and Tirana, Sarajevo and Srebrenica. Please visit us again so I can show you what 

OSCE in Bosnia and Herzegovina is doing, and introduce you to 

the people whose success is our goal. I very much look forward to 

your questions, Mr. Chairman, and to the views of my fellow panelists. Thank you. 

Mr. WICKER. Well, thank you very much. And it has been a 

pleasure to be with you, Ambassador Moore, and to speak to individuals in these various locales one-on-one. There’s nothing like a 

personal visit, and I certainly think when Senator Shaheen gets 

here she might mention what an honor it was to join with Secretary Albright and President Clinton and Congressman King in 

being part of the official delegation to the 20th anniversary of the 

Srebrenica massacre. And I believe we made a real contribution in 

a bipartisan and bicameral way in that regard. So thank you for 

mentioning that, and whenever I get a chance I do encourage my 

colleagues, to the extent that we can take care of business at home 

and for our constituents, that we do look to our role internationally. 

And we’ll move to Mr. Melia and take your statement, sir. Thank 

you for being here. 

THOMAS O. MELIA, ASSISTANT ADMINISTRATOR, BUREAU FOR 

EUROPE AND EURASIA, USAID 

Mr. MELIA. Thank you, Senator Wicker, for the opportunity to 

testify today on corruption in Bosnia and Herzegovina and the re-
5 

gion, and on the efforts of the U.S. Agency for International Development to address this challenge. 

As Secretary of State Kerry said in his remarks at the recent 

Global Summit on Corruption in London, ‘‘criminal activity literally 

is a destroyer of nation-states.’’ Furthermore, corruption is a significant obstacle to national social, economic and political development—the focus of my agency. 

Corruption leads to a weakening of democratic institutions, economic decay by discouraging investment, increased inequality, and 

it deprives states of the resources they need to advance their own 

development. In the wider European region, states weakened by 

corruption are also more susceptible to malign pressure and manipulation from Putin’s Russia, as any semblance of a rules-based 

order often seems to take a backseat to power, influence and greed. 

Finally, endemic corruption threatens states by depriving them 

of the most important resource of any democratic government: the 

trust and confidence of its citizens. Where public trust is absent, 

there can be little expectation of cooperation by citizens with government to build resilient democracies, let alone to do what is 

needed to counter emerging threats like violent extremism. 

For these reasons, the Obama Administration sees addressing 

the problem of corruption—and the need for open, effective representative governance—as a significant U.S. national security priority. Understanding that, we in the U.S. Agency for International 

Development work with governments, civil society, independent 

media, political actors and citizens to build the capacity to limit the 

likelihood of corruption, and to uncover, investigate and punish corruption when it occurs. 

It is a sad fact that corruption is a major problem throughout the 

Balkan region, and Bosnia is no exception. As you pointed out in 

your opening statement, Senator, Bosnia has a very low score on 

the Transparency International Perceptions of Corruption Index. 

More troubling, perhaps, is that according to this index, Bosnia is 

actually losing ground in its fight against corruption, its score having fallen by four points in the last three years. This is consistent 

with findings from Freedom House’s Nations in Transit data series 

on anti-corruption measures in Bosnia, and on democratic reforms 

more broadly, which show that the modest gains that were made 

in all measures peaked around 2006, with stagnation or backsliding in the years since. 

All of this indicates that corruption in Bosnia and Herzegovina 

is bad, even by Balkan standards, and possibly getting worse. 

When one takes into account Bosnia’s multiple levels of government and the fact that by some estimates the public sector makes 

up 50 percent of Bosnia’s GDP, the depth of the problem and its 

impact on citizens’ lives becomes all the more clear. Therefore, 

growing the size and strength of the private sector in Bosnia is of 

critical importance, both for the prospect of economic development 

and as a concrete means to limit the impact of corruption by limiting the opportunities of public officials to engage in rent-seeking 

behavior. 

USAID does this in several ways. For example, we have a new 

Development Credit Authority agreement in place with three commercial banks, valued at $30 million, as well as three older agree-
6 

ments valued at $46 million. To date, these loans have enabled the 

banks to disburse loans to more than 120 private firms, supporting 

close to 2,800 private-sector jobs and generating over 500 new jobs 

in the private sector. 

USAID is considering new opportunities, as well. This week, a 

team of economic experts from USAID is in Bosnia assessing what 

other options may be available to support the country’s economic 

growth and prosperity. This is in part in response to the proposal 

that you and other members of this Commission have made in 

sponsoring legislation to authorize an enterprise fund for Bosnia. 

Our team in Bosnia this week is looking at whether this would be 

the right approach, in tandem with looking at some of the other 

mechanisms that we have in place or might be able to put in place. 

We are also working to make public finance more transparent 

and accountable, reducing opportunities for irregularities and corruption. We have projects that are working to expand electronic 

services for payment of direct taxes and in the procurement process 

in Bosnia so that there are more opportunities for competition and 

for small businesses to participate in government contracts, but 

also there’s more transparency, which reduces the possibilities for 

corrupt rent-seeking. 

Corruption also occurs when local producers skirt regulatory 

standards—think of watered-down milk and other diluted products—to keep costs down. And especially when it comes to medicines and things like that, it puts consumers at real risk. 

We have a USAID project being implemented by Cardno Emerging Markets that helps to mitigate corruption by supporting agricultural producers to adopt stringent EU regulatory import standards. This program facilitated EU approval for a number of dairies 

to export milk to the EU, contributing to the economic growth. 

On the demand side of the equation, we support watchdog NGOs 

and investigative journalism, including Transparency International, but also including a network of independent journalists 

whose reports connect the dots as part of professional investigative 

journalism, and these civil society and journalist stakeholders have 

brought to light a number of corrupt officials and their corrupt 

dealings. This advocacy is critical, since threequarters of Bosnia’s annual $1.7 billion worth of procurements is 

done non-competitively, and hundreds of these procurements are 

awarded to companies owned or co-owned by elected officials. 

We’re also working to support the institution of a new special 

anti-corruption unit in the Bosnia and Herzegovina federal prosecutor’s office, mandated by a 2014 anti-corruption law. 

Organized crime often depends on the inability of law enforcement to track illicit activity across borders. So that’s why the journalists and the NGOs who can cross borders and report widely on 

their findings play an important role in advancing the exposure 

and control of corruption. 

In conclusion, though the threats posed by corruption in Bosnia 

to its economy, its public service, and to the state itself are great, 

we in USAID are working with our partners to limit opportunities 

for corruption, uncover them when they occur, and see that they 

are investigated and punished. We’re doing this together with our 

European partners, who in some cases enlarge our AID programs 
7 

with donations from other governments’ donor agencies. We’re also 

working closely with other U.S. Government agencies, such as the 

Department of Justice, which provides expert advice and assistance 

to investigators, prosecutors and judges. 

This effort will require significant political will from Bosnia’s 

leaders, NGOs and citizens. Progress will not be easy, and constraints related to the structure of the constitutional system in 

Bosnia may limit the possibilities for dramatic or early progress. 

Nevertheless, we will remain engaged. 

Thank you for the opportunity to testify, and I look forward to 

your questions. 

Mr. WICKER. Thank you very much, Mr. Melia. 

Mr. Blagovcanin. 

SRDJAN BLAGOVCANIN, CHAIRMAN OF THE BOARD OF DIRECTORS OF TRANSPARENCY INTERNATIONAL, BOSNIA AND 

HERZEGOVINA 

Mr. BLAGOVCANIN. Thank you very much, Senator Wicker and 

Chairman Smith. Thank you very much for this opportunity for me 

to speak on what I consider a very important topic. 

There are a lot of arguments to rightfully claim that corruption 

is the biggest problem today in Bosnia and Herzegovina. Direct 

damage to the country reaches hundreds of millions of dollars disappearing from the budget due to corruption. Indirect damage, due 

to a lack of investment caused by corruption, is difficult even to estimate. 

The crux of the problem is political corruption, which involves 

the highest political and public officeholders. Twenty years after 

the war, Bosnia and Herzegovina remains a country completely 

captured by corruption, where it is virtually impossible to get any 

public service without having to resort to corruption. 

Most relevant studies clearly indicate that in recent years Bosnia 

and Herzegovina has not seen any progress in strengthening the 

rule of law and the fight against corruption. Corrupt political leaders hold sway over key institutions in the country. This allows 

them to use all economic resources of the country in their own private interests. 

Political control over the judiciary and law enforcement agency 

allows corrupt leaders to be protected from prosecution. There are 

almost no cases of political corruption that result in judgments of 

conviction. Political corruption is ignored by public prosecutors because of political influence. 

The crux of the corruption problems lies in how political parties 

are organized. Devoid of basic internal democracy, they operate in 

a mafia-like manner. Their basic principle of operation is based on 

the distribution of the spoils. Their booty are budgetary funds, public companies, and public institutions. 

Political elites use clientelistic appointments as the main method 

of exercising control over institutions. In this way, political leaders 

create clientelistic networks, which they use to run the country. 

The real and almost unlimited power lies in the hands of a few 

ethno-political leaders. 

The political leaders are therefore not interested in reforms and 

European integration. They have learned their lessons from Cro-
8 

atia and Romania, two countries that had to tackle political corruption and prosecute their political leaders as part of their process of 

joining the EU. Therefore, the interest of political elites in the 

country is solely and exclusively to maintain the status quo. Any 

progress in the reform implementation directly affects and limits 

their power, and exposes them to criminal prosecution. Therefore, 

their strategy is to rhetorically accept reforms, while in practice 

they only feign reforms. 

Pervasive corruption affects human rights and freedoms. Cases of 

repression against the media and civil society remain widespread. 

Corruption within institutions prevents citizens from accessing justice. A backlog of over 2 million cases, in a country of 3.5 million 

people, means that the judicial system is completely blocked. Adjudication of disputes takes years to complete. 

The consequences of corruption are felt by citizens on a daily 

basis. Corruption exposes them to additional costs to pay for 

health, education and administrative services. Also, corruption undermines economic development of the country, trapping the majority of its people in poverty and depriving them of employment opportunities. The way the market is organized has a pernicious effect on the private sector. Privileged access to public tenders and 

privatization processes is reserved for cronies. 

Therefore, I want to reiterate what I said at the beginning: corruption is the biggest problem in Bosnia and Herzegovina today. 

Without progress in fighting corruption, it is not possible to make 

progress in the implementation of any other reform. 

How to make a breakthrough? As Fukuyama rightly pointed out, 

all reforms are inherently political. Therefore, it is about generating political will for reforms and not only strengthening capacity 

of the institutions. Leveraging and articulating the public’s deep 

mistrust in the government through citizens’ active involvement in 

decisionmaking should be prioritized in order to avoid another 

wave of destructive protests like those of 2014. 

Past experience shows that simply calling on leaders to undertake reforms and to take responsibility is not sufficient. Generating 

a genuine and articulated internal demand for reforms is key to 

achieving sustainable progress. Thus, I believe that reforming the 

way political parties operate and introducing internal party democracy would create conditions for dismantling the clienteleistic networks run by political leaders. 

Another important aspect of the reform concerns the strengthening and reforming of the judiciary. The judiciary must finally assume responsibility for prosecuting corruption. For this to happen, 

it is imperative to ensure that it is independent in its work and 

free from any political interference. 

In any case, Bosnia and Herzegovina still needs strong international support in undertaking reforms to strengthen the rule of 

law and fight against corruption. This also requires that the current EU reform agenda be expanded to include a detailed and specific plan for combating corruption and strengthening the rule of 

law. 

Thank you very much again for the opportunity to serve as a witness at this hearing today. And in addition to my written statement that I submit, I would like to ask you to include in the record 
9 

a paper that I recently authored for Johns Hopkins University. I 

believe it’s highly relevant for the discussion today. 

Mr. WICKER. Without objection, it will be admitted into the 

record at this point. 

Mr. BLAGOVCANIN. Thank you very much, Senator Wicker. 

Mr. WICKER. Well, thank you, sir. And that was about as breathtakingly downcast a report as I’ve heard about a country in a long 

time, but helpful nonetheless. 

Dr. Perry. 

DR. VALERY PERRY, SARAJEVO-BASED INDEPENDENT RESEARCHER AND CONSULTANT, SENIOR ASSOCIATE AT THE 

DEMOCRATIZATION POLICY COUNCIL 

Dr. PERRY. Thank you. And I’d like to thank everyone for organizing this hearing today to put this very important issue back on 

the agenda. 

We’ve heard a number of vivid descriptions about the situation 

of corruption in Bosnia and Herzegovina today. And it’s clear that 

the politics of corruption makes meritocracy impossible, weakening 

institutions and promoting brain drain of the best and brightest of 

the country. The politics of corruption also results in a system in 

which floods can devastate one-third of a country and no leaders 

or officials are held responsible or are held accountable for their 

failure to prevent, protect, prepare, or respond to such a disaster. 

The politics of corruption weaken the notion of civil society, 

shared purpose and joint vision, instead strengthening informal 

practices, patronage networks and exclusionary practices that are 

particularly damaging to a country only one generation removed 

from the most violent conflict since World War II. No political system anywhere is immune from corruption. Systems, structures and 

incentives either encourage or impede corruption. Societies ideally 

organize themselves in a way that minimizes corruption and maximizes the public good. This can be hit or miss anywhere and no design is ever perfect. 

However, Bosnia’s political economy was shaped by the war and 

by the Dayton Peace Agreement that ended it in 1995. Dayton was, 

and remains, a made-in-America product. For this reason, it’s important that we’re having this discussion. The problem of corruption in Bosnia is not a technical problem. It’s a political problem. 

In the absence of fixing the core political problems that both prevent accountability and allow impunity, all of the projects, capacity 

building, technical support and money in the world will not overcome the fundamental inherent weaknesses and democratic contradictions at the core of Bosnia’s unaccountable political system. 

In fact, after two decades and literally thousands of wellintended projects, it’s time to consider not only the diminishing returns of such approaches, but the broader negative impact of such 

efforts actually maintaining the illusion that a system that has 

failed for 20 years can in fact somehow be made to work. Continuing to prop up a system proven to be ineffective is akin to hoping that updating the software on your 15-year-old computer will 

help its performance. At some point you need to recognize that the 

problem isn’t the software but the hardware, and that no patches 

or workaround will improve its performance. 
10 

So what should be done? I’ll focus on three specific recommendations today. First, a package of legislative reforms aimed at reducing the possibilities for official corruption, abuse of office and collusion should be developed and supported. This would include laws 

related to conflict of interest, political party financing, and freedom 

of information, among others. And Transparency International has 

written on this in the past as well. Laws, by-laws and statutes regulating public enterprises also need to be urgently overhauled in 

line with available guidelines and international good practice. 

Many existing USAID and other U.S.-funded programs—ranging 

from support for investigative journalism to critical justice sector 

reform—can be better coordinated and recalibrated to support this 

effort. 

It’s important to recognize that there will be political and, in 

turn, institutional resistance to such reform, and every effort will 

be made to evade proper implementation. We’ve seen this happen 

for years. However, there would be overwhelming public support 

among the citizens. Further, such an initiative would be very much 

in line with the European Union’s own reform agenda, and in fact 

the notion that the country’s business environment can be improved without improving this environment of corruption reflects a 

fundamental misunderstanding of the political economy in Bosnia 

today. 

Second, the lessons of unsuccessful past privatizations in Bosnia 

must be studied, learned and applied by domestic and international 

interlocutors alike to understand both their role in further 

strengthening an oligarchical class of political and party leaders, 

and to understand why part of the country that has privatized 

nearly all of its public assets, the Republika Srpska, has in fact 

failed to enjoy any broad and durable economic or social benefits 

after such privatization. Future privatization should be put on hold 

until such time as there are reforms to the broader ecosystem to 

ensure fairness and transparency. Otherwise, the country risks seeing a further enriched and emboldened political elite, accompanied 

by questionable foreign investment in enterprises which is often 

more about real estate and asset stripping than about building a 

robust economy for the people of Bosnia. 

Third, it’s critical to understand how the election system in Bosnia contributes to the lack of accountability and makes it not only 

possible, but natural, for politicians to be elected and reelected 

without delivering anything to their voters other than limited and 

targeted patronage. Much has been written about this issue. Current election law reforms being discussed will in fact make it harder for new or small parties or independents to participate in the 

political system. This will further entrench the dominant political 

elite and party machines that have held control for a generation, 

further eroding the checks and balances needed to fight corruption. 

Substantial election reform is needed so that citizens actually 

know who really represents them at every level of governance and 

can vote them in and out of office; so that they have constituent 

services offices in their community that they can address with their 

interests and concerns, and, most importantly, to ensure that people in Bosnia and Herzegovina have the chance to be represented 

on the basis of being a citizen, not on the basis of being a Bosniak, 
11 

Croat a Serb, or the always marginalized others. These reforms 

could effect substantial change, and in fact do not require a Dayton 

II. In fact, any elite-driven, foreign-sponsored effort to try to engineer such reforms would very likely create a system even worse 

than the one we see today. Instead, reforms need to be citizen-focused, combining coordinated top-down support and bottom-up 

grassroots activity to create momentum among all political players 

and squeeze the elites to listen to their constituents. 

Bosnia and Herzegovina is a small country of less than 4 million 

people. And it’s fair to ask why the U.S. should continue to spend 

time on it, considering the many other foreign policy priorities and 

humanitarian crises facing the world today. The answer is simple: 

If the U.S. and its partners cannot support the development of a 

functional and accountable system in Bosnia, how can it possibly 

hope to support positive and peaceful political outcomes in other 

parts of the world? If the U.S. and its partners do not learn the 

lessons of failed postwar power sharing in Bosnia, there is the potential that similar foundational weaknesses will be introduced 

into other areas in crisis around the world, creating an illusion of 

peace and stability while corruption and spoilers flourish, social 

discontent is manipulated and society becomes entrenched in a 

state of frozen conflict. 

Finally, the same systemic failures and factors that allow corruption and unaccountable governance to thrive in these frozen conflicts actually foster the civic marginalization, social alienation, and 

in the worst cases enable the rise of extremist groups and 

radicalized individuals seeking extra-institutional remedies to political and social maladies. 

In closing, corrupt politics and the pain of an economic transition 

which has delivered very little benefit to the majority of people 

have not only reinforced public frustration with the post-war situation, but has revealed increasing dissatisfaction among people with 

the very ideas of democracy and capitalism, promotion of which 

have been some of the core U.S. foreign policy goals for more than 

two decades. 

It’s not too late to reverse these recent negative trends, though 

the clock is ticking as social divisions have reified and hardened in 

the divide and rule politics of the past generation. More ethnic politics and virtual partition will not help. Laws, strategies and initiatives that seek to hardwire accountability into the system, backed 

up by meaningful conditionality and enforcement mechanisms, can. 

I’m hopeful that this hearing will put this discussion back into the 

spotlight, and generate momentum for the change that’s so desperately needed if the promise of Dayton Bosnia is to be fulfilled. 

Thank you. 

Mr. WICKER. Well, thank you very much, Dr. Perry. And I do 

think everyone in the room can agree that the statements made 

have been vivid today. And obviously we have a lot of room for 

work. 

It’s my pleasure now to recognize Chairman Chris Smith for 

whatever opening statement he might have. 
12 

HON. CHRISTOPHER H. SMITH, CHAIRMAN, COMMISSION ON 

SECURITY AND COOPERATION IN EUROPE 

Mr. SMITH. Thank you very much, Mr. Chairman. 

In lieu of the opening statement, I would ask consent that it be 

part of the record since we’re well into the hearing. 

Mr. WICKER. Without objection. 

Mr. SMITH. And I thank you, because this hearing was your idea. 

I thank you for chairing it and for bringing us all together. This 

is extremely important and very, very timely. 

Just a couple of questions. And I’m sorry I missed some of the 

testimonies. We had votes on the House floor—Mr. Perry as well— 

so that’s why we are late. 

Mr. Melia, in reading your testimony you’ve made some excellent 

points about the importance of journalists. As we all know, in Azerbaijan, a Radio Free Europe stringer, or reporter, Khadija 

Ismayilova, was released. She had a seven-year prison sentence. 

We actually had a hearing of the Commission on her and the concerns that an American—you know, a woman writing for Radio 

Free Europe was arrested because she exposed just that, corruption, everything we’re talking about today. We’re awaiting more details about what has happened, but you talked about your journalist initiative and how important that is. And I’m wondering how 

unfettered those journalists really are. Are they able to report 

robustly, go anywhere, report any time without fear of retribution, 

physical or criminal liabilities? 

Secondly, let me ask a question about the about the noncompetitive contracts you talked about, which obviously are a grave invitation for fraud of the highest order. All of you might want to speak 

to this—in our efforts to promote reform are we pushing low-bid 

and, even more importantly, best value? We’ve found in our procurement here in the United States that it’s not always necessarily 

the lowest bid, but best value where objective criteria used by the 

procurers to ensure they’re getting the best deal from competent 

vendors? And it seems to me, since so many of these contracts are 

noncompetitive, we’ve learned so many lessons in America about 

sole-source procurement. Sometimes it works. Sometimes it absolutely does not. And many times, particularly at the state and local 

level where there’s even less transparency in the United States, a 

lot of people make a lot of money illicitly using noncompetitive solesource contracting. 

Thirdly, several weeks ago I met with Ms. Munira Subasic from 

the Association of Mothers Action of the Srebrenica and Zepa Enclaves. She herself lost her husband, son and 20 others at 

Srebrenica in July of 1995. Her frustration today regards the seeming impunity of hundreds of people, an estimated 850, implicated 

in the violation of international humanitarian law during the war 

who had their cases transferred from the international tribunal to 

the Bosnian courts. To this day these cases have not been processed, not one of them, which is outrageous on the face of it. And 

my question would be the extent to which corruption in law enforcement may be playing a role in that prosecutorial discretion 

where they do nothing. 

On trafficking, a similar issue. The numbers have gone down in 

terms of prosecutions and convictions. We’re awaiting the most re-
13 

cent TIP report. It will come out shortly. We’ll get a better feel for 

where Bosnia is. But it was tier two last year. And the prosecution 

side of the report points out in 2014 one prosecution, no convictions 

in 2014. That’s not a good record. And we know in the United 

States, every country, the commodification of women, the selling of 

women is increasing, not decreasing. We just had a major briefing 

of that last week from some of the NGOs that are involved, including ECPAT, which is the End Child Pornography and Trafficking 

organization. So I ask you what role corruption might play in that. 

And finally, Mr. Chairman, when we were at one of our OSCE 

Parliamentary Assembly meetings—I believe it was 2000, in Bucharest—it was all about corruption. As you pointed out, Secretary 

Kerry’s statement about how it ruins democracies. And that’s exactly what that entire conference was about, how it hijacks democracies and is the equivalent of the worst of the worst of human 

rights abuses. 

Mr. Melia, if you would start. 

Mr. MELIA. I can take a crack at a couple of those. I think Ambassador Moore and the others may be better suited to respond to 

your latter couple of questions. 

Let me say on journalism, you asked if the investigative journalists are unfettered and able to do their work. They are to a large 

extent, although a lot of their work doesn’t get reported in the 

mainstream media. There’s a fair amount of sensationalist fauxinvestigative journalism where scandals of one politician leaking 

information about his or her rival pops up in the newspapers or on 

television—that kind of clouds the discourse. The work that we 

support through the RIJN, which is the Regional Investigative 

Journalism Network, which is connected to the larger worldwide 

Organized Crime and Corruption Reporting Project, which got so 

much attention with the Panama Papers release in recent weeks, 

is dedicated to professional, fact-based, triple-checking-your-sources 

kind of journalism. 

It’s led by an American reporter from the AP named Drew Sullivan, who has trained a generation of journalists across the wider 

region, including Khadija Ismayilova, who you referred to. It was 

great news today that she was released on the eve of her 40th 

birthday. I don’t know if that was coincidence or not. But I think 

the worldwide campaign against her unjust imprisonment had a lot 

to do with it as well. So she’s a part of this network. It was founded 

in Sarajevo 20-some years ago, and grew region-wide from this very 

place. And so their work may not always be on the headline 

evening news in Bosnia, but it does get out and is around and is 

a constant fact-based source and a key reference point. So it does 

have an impact, even if it’s not always on the evening news. 

On procurement, which as I think we’ve all said in different ways 

and, as you know, is where political corruption interfaces with economic perversion of the marketplace. In Bosnia, as in a number of 

other countries from Ukraine throughout the region, where we 

have willing partners in legislatures and in ministries we do have 

a number of programs—and this is true in Bosnia—where we are 

helping to build out systems for increasingly transparent electronic 

procurement so that it’s out there what’s being sought by a government agency. On the one hand, it enables additional bidders to get 
14 

involved, so small businesses who may be located in small towns 

or remote from the capital get a chance to get in the marketplace. 

This contributes to lowering prices in some cases. But it is also 

clearer what the government is buying, and for how much. 

This is a work in progress. These systems get designed, get legislated, get put out there in regulation. I would say in all these countries, including in Bosnia, we’re in midstream in trying to help 

build them out and get people trained to use them, and then increasingly put more and more stuff online into these systems. So 

I think the electronic age has many ups and downs in our lives, 

but I think in this one regard e-procurement is an important step 

for combatting corruption. 

Mr. SMITH. Yes, Ambassador Moore. 

Amb. MOORE. Chairman Smith, thank you very much for the opportunity. We look forward to seeing you back in Bosnia again. Enjoyed our trip together to Medjugorje. 

Let me just make some quick responses. First of all, when it 

comes, of course, to media freedom OSCE works very closely with 

a citizen of Bosnia and Herzegovina, Dunja Mijatovic, who is in an 

additional year as OSCE’s representative for freedom of the media. 

Our mission and our media team work very actively directly with 

journalists, of course, and editorial offices and all around the country to support them. 

There have been some very concerning cases of raids of editorial 

offices, including by police armed with weapons, the seizure of computers, as well as individual assaults against journalists, most recently in the town of Visegrad, when journalists trying to report on 

a rally of the so-called Chetnik Movement were assaulted. These 

cases need to be investigated and prosecuted. The authorities responsible for rule of law as well as the police need to keep in mind 

what the rights and freedoms of journalists are. We use our voice— 

hopefully—eloquently, but we have certainly not solved the problem. It is a big part of what we try to do when it comes to media 

freedom issues. 

On transparency, we had the chance slightly earlier to talk about 

absolutely the need for transparency so that people know what is 

being spent in the name of the citizens, how many of their taxes 

are going to whom, what the salaries are, who gets what jobs. I 

pointed to Sarajevo Canton as a particular good example of this. 

Working with the media, they released salary information, the 

names of key employees in all kinds of public institutions. And although people know that corruption is everywhere, it was extremely interesting for the public to actually have the facts to see 

how outlandish and excessive a number the salaries were. We very 

much encourage that. And that example in Sarajevo Canton needs 

to be repeated throughout the country. 

And thank you also, of course, for mentioning Munira Subasic 

and other Mothers of Srebrenica. We spend a tremendous amount 

of time with them. Munira has asked for the support of the OSCE 

mission. And just a couple of weeks ago we co-sponsored a conference where we also brought in Serge Brammertz, the chief prosecutor of the court in The Hague, to talk about exactly this sort of 

issue. There are too many unresolved cases. The war ended more 

than 20 years ago and Munira and the other mothers, the other 
15 

survivors, and in the name of the people—victims of genocide and 

war crimes, they need to be—that needs to be respected. 

Criminals need to be brought to justice. The OSCE mission supports this process; we’re working with judges and prosecutors at 

different levels, we’ve engaged a very comprehensive expert-level 

analysis to make sure that the courts and the prosecutors, especially at the state level, are doing their job. We hope to have the 

results of that in the near future. It is unacceptable to all of the 

victims and to us that more persons have not been brought to justice there. 

Mr. SMITH. Did anybody want to touch on trafficking and the decrease in prosecutions and convictions? 

Amb. MOORE. With regard to trafficking in persons, yes, you’re 

exactly right. Of course, you know very well that the report will be 

coming out soon. I don’t know what the content of that report will 

be, since I am coming from OSCE structures. But on all levels, we 

want to see more prosecutions brought about. Sarajevo Canton is 

a good example of this because young people and women who have 

been victims have not felt comfortable coming forth with testimony 

and speaking directly to prosecutors. 

With our assistance, the prosecutor in Sarajevo Canton has specifically made space and reached out to victims, so that they feel 

more comfortable coming into the office and telling their stories. 

They’re concerned that there might be retribution against them. 

And the prosecutor there, Dalida Burzic, has done an excellent job 

of creating a welcoming atmosphere so that victims of trafficking 

can also feel that their rights are upheld. 

Mr. SMITH. Thank you, sir. 

Mr. WICKER. We are joined by Representative Scott Perry of 

Pennsylvania, Representative Robert Aderholt of Alabama, and my 

colleague Senator Jeanne Shaheen of New Hampshire. 

Representative Perry, do you have questions for the panel? 

HON. SCOTT PERRY, REPRESENTATIVE FROM THE STATE OF 

PENNSYLVANIA 

Mr. PERRY. I do, sir. Is now the time? 

Mr. WICKER. Now is the time. 

Mr. PERRY. Excellent. Well, I apologize also for being late and 

missing your testimony—Dobar dan! 

I know the discussion is generally about corruption, but I do 

have something I think potentially relates to at least some types 

of corruption, if not the corruption of society in Bosnia, and particularly with their security situation, in particular the security 

risks that relate to the infusion of Saudi financing for things such 

as the King Fahd Mosque, which was associated with the teaching—I guess at least the teaching—and some of the rhetoric for the 

attacks in Paris and, of course, some of the ammunition and the 

weapons came directly through Bosnia. And I’d like to hear some 

comments on that as well. 

And, Dr. Perry, I’m sorry I missed your presentation. We just 

went over trafficking, but I’m interesting in your solution set for 

governance. When I was there, I was with the Stabilization Force. 

And I know it was stabilized. Nobody saw that as long lasting or 

efficient in any way. And quite honestly, I’m amazed that it’s lasted 
16 

as long as it has. But I’d like to know your perceptions—as shortly 

as you can, or as briefly as you can—about what America’s involvement in that regard should be. With those two questions. 

Mr. WICKER. OK. Shall we start, then, with that question and 

then we’ll go to the issue of the issue of the influence of foreign 

money? Dr. Perry. 

Dr. PERRY. Thank you for getting right to the core of the crisis 

of political accountability in Bosnia. Over the last 20 years there 

have been a number of different efforts to try to re-engineer the 

structure and the politics and the constitution of Bosnia. And none 

of them have succeeded for a variety of different reasons. Now 

there are a lot of different actors who feel that the main way to 

move the country forward is by EU accession. And everybody does 

agree that EU membership would be good for the country. It’s just 

not going to happen anytime soon. It took 12 years for Croatia to 

finish its accession process. And Croatia agrees that it’s a country. 

And that’s something that’s still lacking in many ways in Bosnia 

and Herzegovina. 

However, it doesn’t mean that it’s impossible to try to look for 

some fundamental changes in the system in Bosnia. For example, 

there’s a number of structural reforms that could make a big difference and also demonstrate to citizens, to civil society, to regular 

people that change is possible. For example, there is no ministry 

of agriculture of Bosnia and Herzegovina, no state-level ministry of 

agriculture, which has led to numerous roadblocks in terms of people being able to export their goods. While there has been a lot of 

technical support to try to help dairy farmers and others to be able 

to meet the criteria at various levels to export their goods, in a 

market of 3.5 million people, the notion that there’s no concerted 

statewide agricultural development strategy is, quite frankly, a bit 

ludicrous. 

And what’s even most frustrating is that there is quite broad 

public support for this. A majority of Serb citizens in the Republika 

Srpska surveyed recently, but also going back to 2013, support this 

because they recognize that they’re losing from this current system. 

Developing a set of reforms to the constitution to allow for a ministry of agriculture would demonstrate that this is possible and 

that the sky does not fall, that people are no more or less a 

Bosniak or a Serb or a Croat than they were before. And it would 

also show civic groups, NGOs, that change is possible and that they 

can drive it. And so I would want to support that. There’s other 

low-hanging fruit related to health care reform, which would enjoy 

very broad support, and a campaign on trying to ensure and promote health care mobility around the country, which doesn’t exist, 

would be another fundamental structural change that would be 

possible. 

These structural changes would also, in the longer term, be complemented with some fundamental changes to the way that people 

elect their representation. If you ask the average Bosnian citizen 

who represents them in the state or entity or cantonal parliaments, 

they can’t give you a name. Sometimes they’ll say, well, this party 

does, but they can’t tell you somebody who they can hold accountable. And this is a reflection of the system, the election law, and 

the constitution, which the parties, quite frankly, like because this 
17 

way it’s harder to be voted out for failing to deliver for your constituents. 

The one layer of government that does function the best is the 

level of the municipality. And I don’t think it’s any surprise that 

mayors are directly elected. The problem is that if you keep the 

system in place right now, the mayors hit a ceiling. There’s only 

so much they can do because almost all of the money is controlled 

by the ethno-dominated cantonal and entity budgets. And it’s always manipulated. 

We saw some very interesting examples of some very good mayors who responded appropriately in the 2014 floods. And those who 

sought to try to work across party or ethnic lines were often punished in the media and by a number of other politicians who want 

to keep these issues alive. So again, I would argue for an effort to 

look at some structural reforms in the short term, to create some 

new state-level competencies supported by citizens, but then also 

try to find a way to make sure people know who represents them 

and that there’s actual responsibility and accountability in that relationship. 

Mr. WICKER. Before we get to part two, Dr. Perry, Mr. 

Blagovcanin suggests that laws need to be amended with regard to 

the political parties. Apparently you agree with that. If both of you 

could comment on what specifically is wrong with the laws governing how the parties operate, and how does that contribute to 

corruption? 

Dr. PERRY. Sure. One law is the law on political party financing, 

which creates an awful lot of ambiguity about money coming in 

from public enterprises and other sources, and then funding not 

the public good and not politicians, but funding party machines in 

a very cronyistic manner. And so this could very easily be amended. When you look at a number of other pieces of legislation, there’s 

no requirement for transparency. So again, as was noted earlier, 

it’s very difficult for people to find out what’s going on and to really 

be able to hold people to account in that way. 

I would also now note that when we’re looking at some of these 

issues of political party democracy inside the parties, because of 

the way that electoral units have been gerrymandered following 

the war, creating generally ethnically clean election districts, this 

means that there’s never ever any reason to be moderate or to put 

your hand across to the other side. In fact, it behooves you to be 

extreme and to keep ethnic fear and tensions alive. And until that 

changes, we’re not really going to see anything positive happening. 

And we’ve had a couple interesting examples where a political 

party will lose a substantial number of municipalities in local elections and there will still be no change in leadership in that party. 

This is not normal politics. Usually when a party substantially 

loses there is change in the leadership at the top. But that does 

not exist because it’s still a very clientelistic system. And I’m sure 

Srdjan would be able to provide some more light on that. 

Mr. WICKER. Mr. Blagovcanin, is it public money or is it donor 

money, as Dr. Perry put her finger on the problem? 

Mr. BLAGOVCANIN. I would say it’s public money, but in addition 

to that—— 

Mr. WICKER. It’s taxpayer money? 
18 

Mr. BLAGOVCANIN. Exactly. But in addition to that, I would like 

to add to what I mentioned in my statement, that I believe that 

the key problem when it comes to political corruption is how political parties are organized. Without internal democracy, political 

parties are functioning like mafia structures. Their only goal is to 

secure spoil. And spoil is public finances, public institutions, public 

companies. So I believe that introducing legislation which will provide for internal democracy inside the parties would be extremely 

important to democratizing the country as whole. 

Mr. WICKER. Now, before we move to Senator Shaheen, Ambassador Moore, can you help Representative Perry and the panel out 

on the issue of the influence of foreign money coming in? 

Amb. MOORE. Absolutely. Mr. Perry, thank you very much for 

your question on the issue of radicalization. Terrorist attacks in 

Bosnia and Herzegovina, much more than in many other countries, 

fundamentally threaten the country’s stability. We have recent 

numbers which are probably low estimates that there are 130 citizens of Bosnia and Herzegovina in Iraq or elsewhere in that region, 

part of Daesh or other forces. About 43 of them have been killed 

in that fighting. About 50 have returned. And they’re being tracked 

very carefully, although I have to say that sort of work is not the 

kind of work that OSCE directly engages in. 

Radicalization is a huge problem. There are certain questions, 

obviously, about how some of the funding gets to Bosnia and 

Herzegovina. There have been huge—theoretically humanitarian— 

donations to fund the building or rebuilding of religious institutions, houses of worship, in different parts of the country. The issue 

of fundamentalism and increasing radicalization, especially 

through social media, the Internet, in some cases people who’ve returned from Syria who are trying to recruit people to go to Syria, 

is a very comprehensive problem. 

At the same time, I would say it’s slightly outside the scope of 

the OSCE mission, which doesn’t cross lines into intelligence work. 

Our focus is on working more directly with the public. And we’ve 

had a lot of success with local communities where mayors and 

neighbors and the Islamic community, Catholic and Orthodox communities, are very aware of what’s going on in those communities. 

They come together to talk about community values. That’s something actually the OSCE mission in Bosnia and Herzegovina supports—19 coalitions like that around the country. After some concrete terrorist attacks like the one in Zvornik in April last year, the 

community came together again. Instead of calling for revenge, Orthodox and Islamic leaders sat down together and said: This is not 

what our community is about. We have to investigate this. We have 

to move forward. We have to come together. So it is a comprehensive issue. 

In terms of exact sources of funding, some of them are private, 

some of them come through, of course, states. You mentioned the 

interest of some countries in the Middle East in Bosnia and 

Herzegovina. There are, of course, individuals—that seems to be 

the bigger problem—who were radicalized, who came—in fact, I’m 

sure you’re very familiar from your military service with those who 

came to Bosnia to help fight on that side—and some of them have 

stayed. Not enough of them have left. But the level of 
19 

radicalization in society is a huge problem. And again, while any 

terrorist attack has terrible consequences for the victims, in Bosnia 

and Herzegovina it could really tear the country apart. So we pay 

very close attention to this and, speaking on behalf of the OSCE 

mission, particularly at the local level, as well as with the Ministry 

of Security. 

Mr. WICKER. Before I recognize Senator Shaheen, Dr. Perry, 

have you observed, as have I, that mayors trained in New Hampshire are really better mayors in Bosnia and Herzegovina? 

Dr. PERRY. Perhaps we should start sending more politicians to 

train. No, it is interesting, though, that for the past two decades, 

there have been a lot of different capacity development efforts to 

try to build a new cadre of political leaders. But there’s very little 

that we can see that has actually transferred into the day-to-day 

business of politics. It’s very difficult to make that leap. Either people go to New Hampshire, fall in love with it, and decide to never 

leave and never go back to Bosnia. Or, sometimes if they go back 

to Bosnia, they seek to try to change things from within, but they 

get so frustrated because they’re not actually able to operationalize 

the new things they learn, that they either give up or try to go and 

get a job at an embassy or the OSCE or someplace else that’s a little bit better than the private sector. 

And so it’s very difficult to try to find examples of individuals 

who have been able to make it past this ceiling to try to really 

change the level of discourse in politics. And this is after 20 years 

and probably thousands of people trained by either American or 

other funds. 

Mr. WICKER. Senator Shaheen. 

HON. JEANNE SHAHEEN, COMMISSIONER, COMMISSION ON 

SECURITY AND COOPERATION IN EUROPE 

Mrs. SHAHEEN. Well, for those of you who don’t know, Senator 

Wicker was referring to the mayor of Srebrenica, whose family fled 

to New Hampshire after the massacre and who went back and became mayor. So we’re very proud of him. 

I want to follow up on that line of questioning because I think 

you mentioned, Dr. Perry, that there are enclaves of the different 

ethnic groups and that sort of has gotten baked into the way government works in the country. How much of that is the result of 

the Dayton Accords and how much of it can actually be changed 

at this point? 

I was struck—and I’m sure everybody on the panel has been to 

the country—but I was struck when I was there that much of the 

challenge around getting people to work together seemed to be 

based on the fact that when the peace was set up after the war, 

the country was so divided by ethnic groups that it was very hard 

to think about how to get people to work across those ethnic lines 

for the benefit of the whole country. 

So I wonder if you could speak to that and to the extent that 

that’s baked in, and is there a way to fix it. You talked about some 

reforms, which I think make a lot of sense, but it sounds like those 

are sort of tinkering around the edges. 

Dr. PERRY. Sure. 
20 

At the 20-year anniversary of Dayton event in Dayton this past 

November, it was interesting to see that pretty much everyone who 

was there noted that when they were working on the Dayton 

Agreement and the Dayton constitution, that they never thought 

that the structure would remain in place 20 years later. There was 

always an assumption that the issue would be readdressed and 

overhauled at some point because they recognized the inherent contradictions within the draft even as they were doing it. 

But that fundamental reform hasn’t happened, and you’re right 

that we’ve ended up seeing instead municipalities, cantons, entities 

and then the state level, and even the lower levels have really been 

dominated by various ethno-national issues, meaning that there is 

no sense of political ideology in the country in terms of left-right. 

It’s just, you know, they are crooks, but they are our crooks and 

people feel a need to try to protect that in that way. 

What’s frustrating is that many people look at the war in Bosnia 

and say it wasn’t an ethnic conflict; it was a conflict about power 

and influence in which ethno-national issues and religion were manipulated by the leaders fighting it. But now, 20 years later we’ve 

seen that a number of these identity issues have begun to harden 

in a way that will not be fruitful for the long-term future of the 

country. There is no incentive for cross-group coordination. While 

there’s nothing technically preventing a number of municipalities 

in Herzegovina from working together to develop a business enterprise zone, the political parties don’t want to see it because they 

want to maintain the control that they have within the current environment. 

And what’s most troubling to me is that when I see people who 

are my age, different people who are parents, et cetera, they remember what joint life was like. They remember what it was like 

to fall in love with someone from the other side and to go to concerts and to travel. Their children don’t have that. There have been 

a number of different efforts, mostly with foreign funding, including the OSCE, to try to bring kids together on different study trips, 

et cetera. But these are never, ever done by the local officials, and 

they’re never done with any real effort to try to change the education system. 

And I think this is one of the big risks. The problem in the education system is not about school buildings. It’s about what children are learning. Right now we have a system where there is essentially a Catholic curriculum, an Orthodox curriculum and a 

Muslim curriculum, and about 40 percent of this content is different among the three. So children are growing up and coming of 

age and never being able to see that they’re citizens of the same 

society. And until we tackle what children are learning, the future 

looks grim. 

And I would also just point out that this is very much related 

to radicalization, because the lack of having any critical thinking, 

media literacy and analytical thought mainstreamed into the primary and secondary school systems means that a lot of people, especially in poorer rural areas, don’t have the skills to try to counter 

effective grooming by radicals. 

And so, unfortunately, educational reform is necessary in a substantial way, and the politicians and political parties will resist it 
21 

because the best way to maintain control is by making sure that 

citizens can’t question the system, and don’t know how to change 

a system in which they’re not being served. 

Mr. WICKER. Representative Robert Aderholt is chairman of a 

subcommittee on the Appropriations Committee in the House and 

is vice president of the OSCE Parliamentary Assembly. 

Robert, we’re glad to have you join us. 

HON. ROBERT B. ADERHOLT, COMMISSIONER, COMMISSION 

ON SECURITY AND COOPERATION IN EUROPE 

Mr. ADERHOLT. Thank you, Senator. It’s good to be here. Thanks 

for everybody being out for this hearing. 

Dr. Perry, you mentioned something I want to just follow up on. 

A little earlier you talked about the way that districts are drawn 

and you said they’re drawn in such a way where there is no encouragement to reach over to the others. Expand on that a little 

bit and talk about how these districts are drawn and if there is any 

way that you see that this could be changed for the future. 

Dr. PERRY. Unfortunately they largely reflect the ethnic cleansing that happened during the war and then the legitimization of 

all of these various units of administration after the Dayton Agreement. 

The sad fact is a lot of municipalities and regions that were once 

quite mixed are now more or less homogenous. And that’s been 

maintained, and would take some time for that to reverse. Return 

has not been complete because of the many political impediments 

over the past 20 years as parties have sought to maintain homogenous districts. I wouldn’t seek to start trying to change lots of lines 

of municipalities, et cetera, but there are different ways that you 

can change the vertical integration among the various levels of government to try to have more political responsiveness in terms of 

the election systems. 

Right now nobody needs to campaign on issues saying, you know 

what, I cleaned up the community park, I put lights in and I’ve 

gotten a new highway paved. They basically campaign on issues of 

us-versus-them ideology and then also on patronage, basically 

promising that they’ll continue to pay privileged pensions to veterans of their group, that they will continue to pay various different payments and subsidies to their people, as opposed to an actual issue-based campaign. 

And unfortunately, I’m pessimistic that this can change because 

over 20 years a lot of very smart people, from the National Democratic Institute, from a number of different USAID agencies and 

European agencies, have sought to try to change this to create an 

environment where issues are front and center. And after 20 years 

it really hasn’t changed, and the elections we saw over the past 

couple cycles were more of the same. And in fact, the election results in 2014 took us back to the same parties that started the war 

in 1991 and 1992. So I think there’s a need to sort of try to fundamentally look at where are these points that are keeping this 

ethnic system in place? 

Mr. ADERHOLT. So where we would see this is like, for example, 

in Republika Sprska. When the parliament meets in Banja Luka— 

I think it’s Banja Luka where the Republika Srpska Assembly 
22 

meets—they would have the districts drawn within the Republika 

Srpska are very ethnically—— 

Dr. PERRY. More or less. I mean, one very interesting thing right 

now is that while a census—the first postwar census was conducted 

in 2013—the results have not been released because the various 

political parties can’t agree on how the data should be counted or 

analyzed. And this is because they really don’t care about some of 

the basic census issues we would think of: how many people live 

in a family, what their roof construction is made out of and whether they get their water from a well or from a sewer system, a public system. All they want to do is try to consolidate and formalize 

the ethnic redistribution that has happened over the past number 

of years. 

In Republika Srpska you do have some areas where return has 

been moderately successful. However, it’s still much more of a majority-minority relationship as opposed to any sort of joint ideologically driven, issue-driven coalitions at any level of government. 

And unfortunately, as time has passed and as return slowed down, 

and in a number of cases has even reversed, it’s getting harder and 

harder for people who are either a minority or who choose not define, to try to find any political home and influence the system, 

which is creating a cycle where dominant ethnic politics is getting 

even stronger instead of weaker. 

Mr. WICKER. Mr. Melia, you mentioned that you are—I guess 

USAID is looking at S.2307, the Bosnia and Herzegovina-American 

Enterprise Fund Act, authored by Senator Wicker and Senator 

Shaheen, and that you’re not quite sold on it yet. As you know, this 

bill would authorize an enterprise fund modeled after the support 

for Eastern Europe Democracy Act of 1989. It would fund smalland medium-sized enterprises. It would be directed by a board of 

six American investors. USAID would be involved. It doesn’t score, 

I assume, the appropriation bill funding it would score but it is 

presently scored as having no cost. 

What needs to be done, in the opinion of any of you that are familiar with this act, to make it work? And is it an opportunity for 

us to put some conditions there that the enterprise fund would kick 

in if progress or steps were made in the direction of a more pluralistic approach to government and concrete steps to avoid corruption? 

Mr. MELIA. Two kinds of thoughts in reaction to the proposal 

come to mind. One is that, to the extent that a new enterprise fund 

might make sense—and it might—I would ask the question about 

whether it should only apply to Bosnia and Herzegovina. As we 

look around the region, we’ve had these enterprise funds in Albania, in Bulgaria and Romania, and then further to the north in 

Hungary, Slovakia, Poland and the Baltics. So one question would 

be: Why only Bosnia and Herzegovina? There are other countries 

in the neighborhood that might be in the same situation. So that’s 

one question. 

The second question or second set of issues is really about what 

the need for it is in Bosnia and/or in other countries. That’s why 

we have a team on the ground now of finance experts who are 

doing dozens of interviews with people in the business world, in the 

banking sector to explore the credit marketplace there. In part, this 
23 

is driven by the bill. We wanted to get a fact-based assessment in 

order to inform our reply to it or our suggestions on how it might 

be refined. 

Mr. WICKER. And we appreciate that. 

Mr. MELIA. So that assessment is underway now. We have a 

team out there that will be back in the next week or two and we’ll 

be putting together a report that we’ll share hopefully before the 

legislative process advances much further. 

We have in place five finance mechanisms in Bosnia and 

Herzegovina. They’re called Development Credit Authority guaranties, which essentially provide kind of backstop loan guarantees for 

banks to invest more readily in small and medium enterprises and 

in privatized businesses. They have not been fully subscribed. That 

is, there’s money on the table that could be lent out to businesses 

that has not been borrowed. 

Part of the assessment is looking at why that is, why there’s 

money available to be invested in businesses and the businesses 

aren’t asking for it. It may be administrative or other hurdles. It 

may be a lack of awareness of how credit works. Obviously the 

lending authority is different than an equity investment that was 

the hallmark of the earlier enterprise funds. 

They actually bought stakes in companies and, through that 

ownership share, would provide technical assistance on corporate 

governance and business development and all that. So it was more 

than just a loan from a bank. It was a loan with—or it was an investment with—benefits, and it came from the know-how of the 

people involved in the enterprise funds. 

So that’s the difference. If there’s this alternative model, which 

is the enterprise fund as opposed to the credit authority, that 

would make a difference in way that makes sense in Bosnia, then 

we’d be—— 

Mr. WICKER. Have they worked anywhere? 

Mr. MELIA. Yes, they’ve worked in several places. If you look at 

the—— 

Mr. WICKER. But where could you point us? 

Mr. MELIA. Well, nearby in Albania. 

Mr. WICKER. Albania has been a success, on balance? 

Mr. MELIA. There’s been a number of businesses that were 

jumpstarted and rebooted and succeeded. And the fund then sold 

off its shares and cashed out at a certain point and the businesses 

went on their way. 

Mr. WICKER. Was it 30 million [dollars]? 

Mr. MELIA. Albania, I don’t recall offhand. It may have been 30 

million [dollars] was put in there originally. 

Mr. WICKER. OK, well, let us know on the record other success 

areas. 

You know, why Bosnia and Herzegovina? Senator Shaheen, I 

think it’s for the same reason we’re having this hearing, for the 

same reason that we have a capacity crowd in here, it’s that the 

very power and influence of the largest superpower in the history 

of the world was brought to bear to end a conflagration and to see 

if we can make pluralism work in the area that gave rise to the 

term ‘‘balkanization.’’ 
24 

Ambassador Moore, do you have any thoughts to add? I’m sure 

you don’t, but—[laughter]—let me pull them out of you. 

Amb. MOORE. Mr. Chairman, I’m a diplomat; I always have 

thoughts. Thank you for the opportunity. 

Mr. WICKER. And on the one hand—[laughter]. 

Amb. MOORE. I only have one hand. 

Mr. WICKER. OK. 

Amb. MOORE. I swore the oath to the Constitution of the United 

States with it. 

To be clear, there are some success stories. And we’ve found it 

very successful to focus on them. Senator Shaheen made reference 

to the mayor of Srebrenica. The mayors in towns like Zepca and 

Zvornik and Bijeljina, they are multiethnic communities. They 

don’t have the balance they had. Valery is exactly right to point out 

that there hasn’t been enough return, but you have Serb majors 

trying to talk about the rights of their Bosniak fellow citizens. 

Again, I quoted the former speaker: All politics is local. Absolutely. 

All the more so in the Balkans. 

A way to focus and highlight and perhaps fund—whether it’s 

brick-and-mortar projects or it’s to support entrepreneurship in 

those communities where mayors have reached out to all of their 

fellow citizens to try and make a difference, to try and counteract 

all of the tensions and the divisions that were, it’s true, enshrined 

in the Dayton Agreement—there are some positive examples that 

we can build on. When those opportunities are shown in a certain 

set of communities, they can be seen elsewhere. 

Reference was made earlier to the fact that before the war everybody lived together. Well, yes, they did but they still went to war. 

Just having them live next to each other isn’t enough. This is why 

our focus, of course—following the guidance from the Helsinki 

Commission and looking at human rights—it’s not just, yes, I have 

a neighbor who is one of ‘‘those’’ but their kids go together to the 

same schools, they work in the same enterprises, they respect each 

other’s right and freedoms, they celebrate each other’s holidays together. That’s a very comprehensive project. 

And Valery is right in that framework too. Political parties are 

very reluctant and generally unwilling to do that. It’s the sort of 

thing that the international community can encourage. OSCE is 

trying to do that on the ground there. Your visits and your attention help to foster that as well. There are so many people telling 

good stories and doing good things. Unfortunately, they may be the 

exception rather than the rule, but we need to support them. 

Mr. WICKER. Mr. Blagovcanin. 

Mr. BLAGOVCANIN. I just need to add one thing. Sometimes, or 

even maybe oftentimes, a religious community or communities in 

Bosnia and Herzegovina are playing a role which is not quite positive. Sometimes the orientation is towards homogenization of the 

ethnic groups in Bosnia and Herzegovina, and sometimes they are 

inspiring interethnic problems in terms of hatred and similar 

things. So that’s just in addition to positive examples. Since I’m not 

a diplomat, I’m always trying to find the negative. [Laughter] 

Mr. WICKER. Senator Shaheen. 

Mrs. SHAHEEN. Well, thank you. 
25 

I would add to why is this room full and why does this hearing 

matter the fact that what happens in Europe matters to us, that 

the trans-Atlantic partnership is critical to our security and that, 

as we’ve seen, one of the places that is still not whole, free and at 

peace in Europe is the Balkans. 

And so it is not in our interest, just as I think it’s not in Europe’s 

interest, not in Bosnia and Herzegovina’s interest, to have continued ethnic strife, to have continued recruitment of foreign fighters, 

to have continued concerns about impediments to the country becoming a functioning democracy. So that gives opportunity for all 

of its citizens. So I would say there is a lot at stake here and it’s 

important for us in the United States to pay attention. 

Ambassador Moore, I would like to go back to the earlier reference to the Mothers of Srebrenica because they have also been 

in our office. And as you know, the mandate of the International 

Tribunal on War Crimes in the former Yugoslavia is to expire next 

year. Can you talk about whether you think that it should be renewed, what the chances of that are, and what the prospect of continuing to go forward with the prosecutions are? You mentioned it 

a little bit. 

Can I then also ask you or others on the panel to talk about 

what’s being done to counter violent extremism, the efforts to recruit foreign fighters that are going on in the country? 

Amb. MOORE. Senator Shaheen, thank you very much for that. 

Yes, certainly in regards to all the members of the Commission 

from the Mothers of Srebrenica, I was so pleased that Munira and 

other mothers we were able to cosponsor this event just a couple 

of weeks ago. They were very keen to see justice done, and we want 

to see justice done as well. 

There is a huge backlog of cases. These crimes occurred more 

than 20 years ago, and yet in so many instances, the vast majority, 

nobody has been brought to justice. The prosecutors and judges 

need to do their job. They need to do a better job. And we are trying to help them do that by monitoring the process of conducting 

these trials. We are supporting the mothers and other institutions 

in trying to get as much attention to these issues as possible. 

You mentioned ICTY, the International Criminal Tribunal for 

the former Yugoslavia. It is wrapping up by the end of next year. 

I think that’s a good, illustrative example. Everyone reacted in various ways to the conviction of Karadzic, the acquittal of Seselj. In 

both cases the chief prosecutor, Serge Brammertz, with whom we 

work very closely, is appealing those judgments, seeking a longer 

sentence in the Karadzic case and of course seeking a conviction in 

the Seselj case. No one was universally satisfied by those verdicts. 

‘‘It wasn’t enough or it was too much,’’ et cetera. 

The same problem does exist in Bosnia and Herzegovina. I think 

it’s unfair to have some people on the local level there look at everything through a political compass. It’s not true that each conviction and each acquittal has political overtones or antecedents, but 

each and every case is seen in that political context. We want to 

make sure that it’s a question of seeing justice and not politics. We 

want to make sure that the prosecutors present strong cases 

against all of the potential defendants with all of the evidence 

that’s before them. 
26 

In terms of the major cases that ICTY is dealing with, they have 

those two appeals to deal with. They also have the Mladic case. It’s 

been their intention and they’ve taken these steps to forward other 

cases involving war crimes and genocide in Bosnia and 

Herzegovina to the courts in Bosnia. That process is still underway. 

Again, the work needs to be improved, and we’re trying to help 

that done in the name of all of the victims and in the name of 

bringing justice. 

Mr. WICKER. Let me ask you this: Do you think there is, among 

a majority of leaders in the rank-and-file Bosnians, a desire to end 

the corruption and to devise a better, more inclusive, pluralistic 

government without all of these hyphens, and yet they just can’t 

seem to bring themselves to a place where this gets critical mass? 

What I’m asking is if there is something to be said for inviting 

all the parties back to Dayton, or to a Dayton or to a Geneva or 

someplace and see if everyone could agree to hold hands and have 

a do-over and get this right this time? We know that 20 years ago 

we never dreamed that the structure we imposed would still be 

there in 2016. So would anyone like to—Dr. Perry, you’re about to 

jump at that. Yes. [Laughter.] 

Dr. PERRY. Yes. No, I think that while fundamental constitutional reform and structural reform is needed, a Dayton II would 

be the wrong way to do it because the leading political parties don’t 

have a vision and don’t have a desire for a joint life in which you’ve 

got civic parties in a pluralistic community. And there’s really no 

interest in pressing forward with these reforms. There’s a lot of—— 

Mr. WICKER. Among the public? 

Dr. PERRY. I’m saying among the political parties. 

Mr. WICKER. No, but what about among the public? 

Dr. PERRY. I think there’s more of a sense that this is 

unsustainable among the public, but the people really just don’t 

know what to do. We saw in 2013 and then 2014 a number of civic 

protests that started to come out, very often related to issues related to corruption and ineffective governance, but they fizzled out 

for a number of reasons that have been analyzed and studied. Really, there was no political option to which they could hitch their 

wagon, so to speak. 

And so dealing with the political elites on any of these unresolved issues at a Dayton II would, in my view, be almost worse 

than what we’ve got now because it would probably end up creating 

a complete partition by creating a Croat entity, a Serb entity, and 

a Muslim or Bosniak entity, because that’s the writing we see on 

the wall today. And we’re seeing a lot of steps happening under the 

guise of federalism to create more ethno-territorial borders within 

the country so everyone has their own fiefdom, and this is completely—— 

Mr. WICKER. And actually they’ve got quite a bit of company 

around in Europe, don’t they? 

Dr. PERRY. They do, and this is what’s quite troubling again. 

There are many very functional federal states, but they’re looking 

for ethnic federalism where you’re only representing the people 

who are from your ethnic/religious group and no one else. And this 

will do nothing to make a cleaner, more effective, more accountable 

democracy. 
27 

And I was glad you used the word ‘‘pluralism’’ earlier because, 

unfortunately, we’re seeing less and less pluralism as things move 

forward because there’s almost an end-run end game now as political parties and politicians and some of the elites who have gained 

a lot of money and influence over the past two decades are seeking 

to consolidate everything they can before the party ends. 

Mr. WICKER. But, gentlemen, we’re taking steps backwards. Everyone agrees. Is there any big idea to break the logjam in this little country and make it work? [Pause.] Thank you. [Laughter.] 

Amb. MOORE. No. Again, all politics is local. There are local successes. If we can bring more attention to them, maybe we can inspire, maybe we can in some cases shame people to act differently, 

but there is no single fix. 

And Dayton II—I have to agree, Dayton II is not an option. The 

circumstances that forced an end to the war after three-and-a-half 

years of terrible crimes are just not there, not in the region and 

not elsewhere in the world. The mechanisms exist. If they choose 

to agree, they choose to amend their constitution, they have the 

ability to do that. The international community doesn’t. 

Mr. WICKER. So there’s not a desire to move to something different—— 

Amb. MOORE. No. 

Mr. WICKER. ——just the inability to get there. 

Folks, thank you very much. Does anyone else have anything to 

add for the good of the order? Final comments, Mr. Melia. 

Mr. MELIA. One last comment to take this back to where we 

started about corruption. I think in various ways everybody has 

said that it is this overlarge, interlocking governmental structure 

that has the public sector at every level so overlarge. That is a 

driver of corruption. There’s just too much, too many public officials 

handling the people’s money. 

Mr. WICKER. And I think Freedom House recognized that in a recent report. 

Mr. MELIA. So this is a driver of corruption and I think we need 

to understand that this constitutional structure is one of the contributors to this problem, among other problems. 

Mr. WICKER. Final comment, Dr. Perry. 

Dr. PERRY. Sure. 

Again, I think that we really need to try to speak directly to the 

99 percent of citizens in the country rather than only going through 

the filter of the political parties and trying to reach out to do some 

of these things. When you talk to people, when you talk to teachers 

and farmers and small business people, and young people who simply want to get on with it, they’re not talking about the same 

issues that we hear the political parties talking about. 

They’re not concerned about which census forms to count or not 

count so you can have more or less Muslims or Catholics in a given 

piece of territory. They want something normal. It’s just that there 

are no tools right now to try to easily vote people out of office or 

in office, or to try to get prosecutors to start cases to prosecute and 

hopefully incarcerate people. 

Mr. WICKER. Term limits maybe. 

Dr. PERRY. Some people would like that, I bet, in many countries, 

I suspect. And I think that we need to work with the public in this 
28 

way to create more of a grassroots sense of reform and possibility 

supported by a top-down set of conditionality and pressure related 

to the EU and other drivers to try to squeeze the middle that has 

simply been completely unresponsive to the needs and desires of 

the vast majority of citizens. 

Mr. WICKER. Final comments from Ambassador Moore and Mr. 

Blagovcanin. Ambassador Moore. 

Amb. MOORE. Well, we’re there, of course, to make sure that, like 

other participating states in OSCE, Bosnia and Herzegovina fulfills 

its OSCE commitments. And one of the ways they can do that and 

fight this effort against corruption is by pursuing the path to integration. They have declared their interest in joining NATO. They’re 

on the path towards the EU. 

It’s a long and slow path, but they need to make some very specific reforms on that path. That should help in some areas, but 

there are still concrete things that we can do, especially by shining 

a light on the positive examples that do exist there. And when you 

come there again and you see that, I hope you will agree. 

Mr. WICKER. Surely the EU is not going to admit a government 

that’s structured like it is. 

Amb. MOORE. I am unaware of any pre-decision by the EU in 

terms of exactly what the structure should be. There’s a long list 

of requirements that they need to fill, the thousands of pages of the 

acquis communautaire, the different chapters that have to be reviewed. They will need to implement all kinds of laws, not just introduce those laws, when it comes to public financing, when it 

comes to political parties and their activities, when it comes to how 

the judiciary works. It’s not a perfect fix, but there’s work that 

they’ll have to do. 

Mr. WICKER. But as you say, they also have to decide they actually are, in fact, a country. 

Amb. MOORE. The sense of nationhood in Bosnia and 

Herzegovina we haven’t touched on, but of course it’s a very—— 

Mr. WICKER. We touched on it briefly. 

Amb. MOORE. Yes. 

Mr. WICKER. And, Mr. Blagovcanin, you have the last word of 

this hearing. 

Mr. BLAGOVCANIN. Very briefly, starting point for consideration 

of all future reforms should be that political elites in a country do 

not have any interest to reform anything. That’s the best system 

in the world for them. They are accountable to no one. They control 

everything. They control public finance, public companies, lives of 

the people. So it’s about articulating the people’s deep mistrust in 

the system, how to ensure that citizens can influence what’s going 

on in the country. Thank you very much. 

Mr. WICKER. Thank you very much. 

Let me speak on behalf of the entire panel here. We are absolutely thrilled at the turnout today, the interest expressed by the 

attendance of rank-and-file individuals from whatever organizations or backgrounds. And we are grateful to the panel for their expertise and testimony. Thank you all. And this hearing is closed. 

[Whereupon, at 3:28 p.m., the hearing was adjourned.] 
(29) 

A P P E N D I C E S 
30 

PREPARED STATEMENTS

PREPARED STATEMENT OF HON. ROGER F. WICKER, CO-CHAIRMAN, COMMISSION ON

SECURITY AND COOPERATION IN EUROPE

The United States, as you all know, cares deeply about the sovereignty, stability, 

recovery, and future prosperity of Bosnia and Herzegovina. Since my first visit to 

Bosnia and Herzegovina in 1995, the country has made tremendous progress. However, more needs to be done by the international community and Bosnian leaders 

to sustain this progress. 

Here in Congress, my colleague Senator Jeanne Shaheen and I are among those 

working to nurture private sector entrepreneurship in Bosnia and Herzegovina. On 

the 20th anniversary of the Dayton Accords, we introduced the ‘‘Bosnia and 

Herzegovina-American Enterprise Fund Act’’ to grow small- to medium-size businesses throughout the country. 

In Bosnia and Herzegovina, however, corruption is a widespread occurrence. News 

reports have highlighted scandals involving senior politicians. There has been concern about where outside assistance to communities who experienced flooding in 

2014 really went. Transparency International has ranked Bosnia behind all other 

countries in the region except Kosovo and Albania in its corruption perceptions 

index. 

Demonstrative steps need to be taken by the state-level, entity-level and local governments to improve transparency and the rule of law. Left unchecked, corruption 

will hinder Bosnia and Herzegovina’s integration into Europe and NATO. Twenty 

years after Dayton, the conflict is no longer an excuse for corruption amongst the 

bureaucrats and politicians who are stifling the prosperity of future generations. 

With youth unemployment at 60%, young people leave the country if they get a 

chance. Bosnia and Herzegovina is losing its future. 

I have raised my concerns with State Department and believe these concerns are 

shared. The United States should continue to support prosecutors and judges who 

focus on high-profile corruption and economic crime cases. The United States should 

also continue its support for investigative journalism and non-governmental organizations advocating reform. 

If we support Bosnia and Herzegovina, we cannot gloss over the country’s deficiencies. The people of Bosnia have already suffered through so much. We need to 

support them and their aspirations for themselves and their children. We need to 

insist that their political leaders are responsive to the needs of the people they represent and accountable for their own actions. With this, opportunity and progress 

will follow. 
31 

PREPARED STATEMENT OF HON. CHRISTOPHER H. SMITH, CHAIRMAN, COMMISSION ON

SECURITY AND COOPERATION IN EUROPE

Today’s hearing focuses on a country of traditional concern to the Helsinki Commission—Bosnia and Herzegovina—but also on a concern that pervades the Western 

Balkans and many other states of the OSCE—corruption. 

Twenty years ago, Bosnia was in the first and most difficult phases of its recovery 

and reconciliation following the brutal conflict that began in 1992 and ended in 1995 

with outside intervention under U.S. leadership culminating in the Dayton Peace 

Accords. The country was devastated, and its people traumatized by conflict marked 

by the ethnic cleansing of villages, the shelling of cities and numerous other crimes, 

including the genocide at Srebrenica. 

Today, many of the physical scars of that period are gone, but the country still 

struggles under a complicated political framework reflecting the war-ending compromises adopted at Dayton. Beyond the well-known ethnic divisions, Bosnia’s 

progress in the past decade has been stymied by official corruption to the detriment 

of its citizens’ quality of life and the prospects for the country’s integration into Europe. While corruption is, indeed, not unique to Bosnia, perhaps it is worse there 

than elsewhere in part because of the lack of post-Dayton reforms. Rather than fix 

what’s wrong with the country, which could threaten those currently holding political power, officials at all levels simply focus on helping themselves to the privileges 

and opportunities that come with that power. 

People who have been through so much already deserve something better than 

this. 

This hearing will examine the current situation regarding corruption and its 

causes in Bosnia and Herzegovina, and look at efforts by the United States and the 

international community, along with civil society, to combat it. 

As they proceed, I hope our distinguished and expert witnesses could address two 

issues that may be related to corruption and are of particular concern to me. 

First, several weeks ago I met with Munira Subasic from the Association of 

‘‘Mothers’ Action of the Srebrenica and Zepa Enclaves.’’ Munira had herself lost over 

20 members of her family at Srebrenica in July 1995. Her frustration today regards 

the seeming impunity of hundreds of people—an estimated 850—implicated in violations of international humanitarian law during the war, who had their cases transferred from the international tribunal to the Bosnian courts. To this day, these cases 

have not been processed, which is an outrage. 

I would like to know to what extent corruption in law enforcement and the judicial system protects possible war criminals from facing justice. I also would like to 

hear whether these same people implicated in horrible crimes during the war might 

today be part of the corruption problem. I assume that someone willing to engage 

in ethnic cleansing would not hesitate from also taking a bribe, or committing fraud. 

Second, trafficking in persons remains an ongoing problem across the globe, including the Balkans and Bosnia and Herzegovina. In the immediate post-war period, 

the heavy international presence in Bosnia generated a tremendous, unforgivable 

but, unfortunately, largely unpunished demand for trafficked women as part of the 

sex trade, and the suppliers were as blatant as they were aggressive in their criminal enterprise. Measures were eventually taken in response, and Bosnia’s record improved markedly until recent years when the trend has been generally downward. 

Trafficking is a crime that takes organization, but it can be most successful in 

countries vulnerable to corruption. I would therefore like to know the extent to 

which our witnesses feel Bosnia’s record in regard to trafficking in persons is linked 

to its record in regard to corruption. 

With this introductory comments and concerns, I would now like to turn to the 

Commission’s Co-Chairman, Senator Roger Wicker of Mississippi, who has been 

vocal in regard to the need for Bosnia to address corruption issues and will chair 

the remainder of this hearing. 
32 

PREPARED STATEMENT OF BENJAMIN L. CARDIN, RANKING MEMBER, COMMISSION ON

SECURITY AND COOPERATION IN EUROPE

The Helsinki Commission, which celebrates its 40th anniversary next week, has 

a long history of support for Bosnia and Herzegovina—before, during and after the 

1992–1995 conflict there—which continues to this day. 

Much of my contribution to this effort has focused on the need to provide justice 

for war crimes, crimes against humanity and genocide. In that regard, the sentencing earlier this year of Radovan Karadzic by the International Criminal Tribunal brought particular satisfaction to those of us who pressed for years to have 

him apprehended and transferred to The Hague. 

Unfortunately for far too many people in Bosnia and Herzegovina, any satisfaction 

they may feel is overshadowed by frustration over the situation in their country 

today, and the struggle simply to make ends meet. The collective privileges of the 

major ethnic groups take priority over the individual human rights of those belonging to those groups, let alone those who do not. 

Inside what Freedom House has called these ‘‘ethnic fiefdoms,’’ we see patronage 

and corruption that benefits and protects the political elite. We do not see transparency. We do not see accountability. As a result, we do not see much progress in 

Bosnia today. We have tried repeatedly—during hearings, or during congressional 

visits to Sarajevo like the one I led in 2009—to encourage reform. It is frustrating 

to see how little has been accomplished given what we know is the country’s potential. 

We rightly criticize Bosnia’s political leadership for this situation. However, the 

international community—mostly the European Union but also the United States— 

has a large role to play in Bosnia and, as a result, some responsibility for encouraging their behavior. In particular, there has been an emphasis in our policies and 

assistance on maintaining existing stability at the expense of promoting positive 

change. Intransigence is accommodated, while conditions—such as resolving the 

Sejdic-Finci ruling to give Roma, Jews and others equal access to public office—are 

cast to the side. We helped create government institutions but negotiate with party 

bosses and often ignore civil society initiatives. We have encouraged constitutional 

and other types of reform but have focused too much on getting quick, incremental 

results when the people deserve something more. 

While corruption is a profound problem throughout the Western Balkans, this situation exacerbates it, and I hope this hearing and other efforts will encourage the 

international community to take a tougher line in combatting corruption. 

Within the OSCE, I have been active over the years in encouraging multilateral 

efforts to combat corruption, such as removing immunity from corrupt parliamentarians. I also welcomed the adoption in 2012 of the Dublin Declaration on Strengthening Good Governance, giving renewed emphasis to work in this area. One recent 

suggestion made in the spirit of this Declaration has been to follow the Financial 

Action Task Force recommendations for reviewing the financial activities of ‘‘politically exposed persons.’’ Public figures never like to have their financial activities 

scrutinized, but the public interest in thwarting abuses such as money laundering, 

bribery and fraud is clear. It will build trust within Bosnia and between Bosnia and 

its trading partners. 

Finally I want to also mention that much of my current work regarding the OSCE 

has been focused on countering various forms of intolerance in our societies. We 

know that, throughout Europe, enforced segregation of communities, discrimination 

based on creed or color and a more general denial of opportunities for advancement, 

puts democracy at risk, and provides fertile ground for violent extremism, including 

that which can lead to terrorism. Some of these conditions exist to varying degrees 

in Bosnia and Herzegovina, a country made more vulnerable by its sense of victimization in the 1990s. The corruption that exists could encourage their development 

and make it more difficult to thwart terrorist or other violent threats. I hope our 

witnesses can address this issue in their remarks. 
33 

PREPARED STATEMENT OF AMBASSADOR JONATHAN M. MOORE, HEAD OF THE OSCE 

MISSION TO BOSNIA AND HERZEGOVINA

I am deeply grateful to Helsinki Commission Co-Chairs Smith and Wicker and 

Commission members and staff for the opportunity to address key topics of relevance to Bosnia and Herzegovina and the wider community of OSCE participating 

States. I would like to especially thank the Commission’s Policy Advisor Bob Hand, 

who stands as a shining example of expertise and commitment due to his abiding 

interest and decades of engagement in the Balkans. On behalf of my distinguished 

team, I would like to express our appreciation for your attention and support. 

Bosnia and Herzegovina faces many challenges. The OSCE Mission to Bosnia and 

Herzegovina, with an extensive network of 10 offices throughout the country and 

320 dedicated professional staff, works every day with people in local communities 

as well as the most senior political leaders—and everywhere in between—to help 

keep the peace, protect fundamental rights, ensure the rule of law, and build prosperity. 

The framework for OSCE activities is grounded in the Dayton Peace Accords, negotiated at Wright-Patterson Air Force Base in November 1995 and signed in Paris, 

France one month later. ‘‘Dayton’’ is far from perfect, but it succeeded where other 

efforts failed. The peace accords and the constitution enshrined in them—which can 

only be changed through democratic means—continue to serve as a key foundation 

for Bosnia and Herzegovina and its citizens. Dayton brought OSCE to Bosnia and 

Herzegovina, giving us a special role in conducting and observing the elections. The 

role of the OSCE Mission has evolved: the Central Election Commission took on the 

responsibility of running elections in 2002. While taking on other tasks with the 

goal of helping the country achieve its OSCE commitments and integration aspirations, our Mission has maintained an diverse and active field presence and is engaged in a variety of fields, seeking and keeping very close ties with institutions, 

organizations, and individuals at all levels of society. 

The Mission’s work encompasses OSCE’s three dimensions—politico-military, economic and environmental, and the human dimension—with the assistance and guidance of the Chairman-in-Office, the Secretariat, and other institutions, including the 

Parliamentary Assembly and this Commission. Our international partners include 

the Office of the High Representative, the United Nations, the European Union, the 

International Criminal Tribunal for the Former Yugoslavia, the Council of Europe, 

and bilateral embassies. The Mission’s role in Bosnia and Herzegovina is expertly 

facilitated by strong media and policy planning teams, who advance and promote 

our extensive programmatic work in the areas of education, human rights, security 

cooperation, democratic governance, and the rule of law. 

Given the special opportunity to address to Commission today, while I will speak 

with particular focus on the main topic of corruption, I would also like to raise education, where our Mission has the lead role for the international community; the 

rule of law, where we have a comprehensive role in monitoring the work of the 

courts and prosecutors; and combating violent extremism, where the Mission has 

achieved some concrete successes, particularly at the local level. 

Education 

Education has been identified by many as one of the country’s highest priorities. 

The children of Bosnia and Herzegovina will only prosper if they have quality education: they need the skills, knowledge, and judgment to succeed in a modern and 

increasingly diverse world. Quality education requires well-trained teachers, professional administrators, effective curricula, up-to-date materials, safe conditions, and 

an inclusive environment. The protection of various distinctions, including languages of instruction, is an accepted international principle, one sought by most parents in Bosnia and Herzegovina. 

At the same time, segregated education is an obstacle that must be removed. In 

many schools, children of different ethnicities have no opportunities to interact with 

each other. That interaction is a vital element of the learning process. In the aftermath of the war, it is a reality that for many people in Bosnia and Herzegovina 

their identities are defined by their language and religion: denying that fact is not 

a path to a solution, and those rights must be respected. Administrative unification 

of schools—such as in Zepce, a community where we have very close cooperation— 

has been proven to be a positive step. By bringing children together, they gain insight into how to be better citizens of BiH and the world. In addition, by saving 

money wasted on duplicative staff and programs, more resources are available to 

repair school buildings and purchase the equipment and technology needed to provide quality education. 
34 

The OSCE Mission to BiH works with schools, parents, teachers, administrators, 

and political leaders to advance these goals. The fact that numerous jurisdictions 

have distinct and separate responsibilities for education makes work in this sector 

difficult; there is no single authority. It must also be said that in some communities 

the problems seem all but impossible to solve. Nevertheless, there are others where 

we have found and encouraged examples of success; where diversity, tolerance, respect, and vision have led to improved social and educational conditions. Religious 

communities have also played a very positive part in these efforts. 

We are proud to have engaged the most senior political leaders in joint events and 

statements to define the importance of the issue: at the same time, the best proof 

of success is seen in visits to those schools—even in the smallest communities— 

where children are getting the instruction their parents want, and where unnecessary and artificial barriers between ethnic and religious groups are fading away. 

Rule of Law 

Victims and witnesses are critically important for the successful processing of war 

crimes. The OSCE Mission to BiH is playing an established role in this field, with 

a team of legal experts that focus on the processing of war crimes cases. In that 

work, we have the full support of the country’s High Judicial and Prosecutorial 

Council, close collaboration with ICTY, and comprehensive relations with judges and 

prosecutors at all levels. This effort, supplemented by important funding from the 

European Union, helps bring war criminals to justice so many years after the end 

of the war. 

While our international partners are essential, it is a source of pride for the Mission to have the endorsement of victims’ families for what we are doing in this area. 

Just a few days ago, our Mission supported an international conference hosted by 

the Mothers of the Srebrenica and Zepa Enclaves and the Association of Victims and 

Witnesses of Genocide. 

Our relationships with judges and prosecutors and our proven professional capacities equip us for engagement in other areas as well. We are the only international 

actor assisting judges and prosecutors in processing hate crimes. Separately, we are 

a partner in efforts to combat trafficking in persons, and are preparing a rule book 

for the processing of trafficking cases. 

Combating Violent Extremism 

The problem of Foreign Terrorist Fighters (FTF) attracts much of the international community’s attention. Reliable estimates of the numbers of FTF in Syria 

and Iraq vary: Minister of Security Mektic has stated that there are approximately 

130 citizens of Bosnia and Herzegovina currently in Syria and Iraq, while 43 citizens have been killed in the conflict and around 50 have returned. However, far 

higher numbers have travelled from other OSCE participating States, and the impact of violent extremism within Bosnia and Herzegovina is a deeper concern. 

At home, Bosnia and Herzegovina has seen four terrorist attacks over the past 

six years, resulting in the deaths of two soldiers, two policemen, and the wounding 

of a third policeman in the October 2011 attack on the U.S. Embassy. The country’s 

authorities are working to do what they can, but Bosnia and Herzegovina is vulnerable. Given the deep scars left by the war, terrorist attacks could greatly damage 

the stability of the country if they lead to acts of revenge and a growing cycle of 

conflict. 

Combating violent extremism requires extensive coordination as well as the collecting of key data. The OSCE Mission to Bosnia and Herzegovina, given its mandate and capacities, is not in a position to gather or analyze sensitive information. 

However, we are taking advantage of our grass roots-level involvement throughout 

the country to make a difference: as in other areas, we see clear evidence of the 

essential role played by local communities. Having helped establish a series of 19 

Coalitions against Hate across Bosnia and Herzegovina, we found in them natural 

allies to build tolerance and combat violent extremism. These are locally-constituted 

groups of individuals and NGOs dedicated to working with each other as neighbors 

to emphasize positive and common rights and build broader respect and understanding throughout their communities. After the April 2015 terrorist attack in 

Zvornik, the local coalition there played a central role together with the mayor and 

the Islamic community in calling for calm and tolerance and opposing acts of revenge. 

Building on a project funded by the U.S. Government, we have now integrated 

the fight against violent extremism as a permanent element of our security cooperation effort, one joined by colleagues from all policy and programmatic areas. 
35 

Corruption 

As the Helsinki Commission has noted, corruption presents a comprehensive challenge to Bosnia and Herzegovina, where it can be found in numerous forms and at 

different levels. It threatens the functionality of public and private-sector institutions, wastes public resources, deters foreign investment, and damages citizens’ 

trust in government and the political system. Despite Bosnia and Herzegovina’s political figures and agencies increasingly voicing their concerns over the perennial 

dangers presented by corruption, there has been limited activity or political will to 

combat the issue directly. There are some innovative and important efforts underway to prosecute cases of corruption and to provide greater transparency, and we 

are using our voice and our resources to support them. In Sarajevo Canton, the government has set a high standard by revealing the salaries of many public officials, 

and the cantonal prosecutor is making headway on a comprehensive case of corruption where the management of a public enterprise blocked foreign investment. However, there are not enough examples of that, and clearly existing laws and institutions are not enough: more work must be done. 

The OSCE Mission to BiH has considerable potential added value for work in this 

sector, including: our expertise in rule of law and judicial affairs, as noted above; 

our heightened visibility and political leverage; our close support for governments 

at multiple levels; our regular engagement with various public sector institutions; 

our expertise with gender issues; and our extensive field office network and consequent local knowledge and working relationships. As in other areas, this last point 

is particularly relevant to our strengths in complementing the work done by others 

in the international community. 

Our Mission has met with numerous stakeholders, all of which responded positively to the prospect of greater Mission involvement in anti-corruption work, especially at the local level and in the area of trial monitoring. We have heard from various partners and potential donors that significant extra-budgetary funding might 

be available for anti-corruption projects initiated or run by the Mission. In addition 

to emphasizing the need for anti-corruption work with our existing partners such 

as educators, the media, local and higher-level representative bodies, and security 

institutions, there are two particular areas where we are well placed to do more: 

1) Corruption case monitoring: Despite the high number of allegations and investigations concerning corruption in BiH, there are relatively few indictments and still 

fewer convictions. A low prosecution rate in suspected corruption cases undermines 

public faith in state agencies, as officials widely believed to be guilty of corrupt practices are seen to act with impunity. We are prepared to use our existing expertise 

and practices in trial monitoring to develop a framework for expanding and more 

comprehensively following and scrutinizing the prosecutorial processes and capacities of BiH authorities. A potential U.S. Government-funded project ($500,000) includes a needs assessment for capacity-building activities based on trial monitoring 

findings which will be a crucial first step. 

2) Good economic governance and transparency/anti-corruption ‘‘Beacon Scheme’’: As 

noted above, most international partners are focusing anti-corruption activities at 

the entity and state levels, but the Mission has a unique capacity for more localized 

engagement. The Beacon Scheme in Bosnia and Herzegovina was launched in August 2005 by the OSCE and the Council of Europe as a means to identify, recognize, 

and promote innovation and excellence at the municipal level of government. Based 

on the UK Beacon Scheme, each year a number of themes are selected, and municipalities are invited to provide evidence of how they have achieved excellence in 

these areas. Successful municipalities receive a small grant to enable them to share 

their best practices with other municipalities, thereby improving the overall standard of local governance in Bosnia and Herzegovina. It is a proven methodology that 

encourages best practices and positive re-enforcement between municipalities. Existing templates and established practices mean that the Scheme could be rapidly implemented. Moreover, it demonstrates positive action to the public at the local level, 

where citizens most frequently interact with state authorities. Municipal and city 

authorities could be encouraged to innovate and adopt new practices for improving 

(financial) transparency and/or tackling corruption at the local level and promoting 

a positive business environment. Taking advantage of our field office network, the 

Mission could also utilize our Governance and Press and Public Information teams 

to further replicate and publicize best practices countrywide. These activities could 

go hand in hand with other possible initiatives in the area of good governance, e.g. 

reducing barriers to local economic development, increasing accountability mechanisms and promoting concepts and standards of good governance at the local level. 
36 

Conclusion 

Thank you again for the important opportunity to discuss these issues. I can tell 

you that from my many contacts with the people of Bosnia and Herzegovina that 

they want better lives for themselves and their children. They are tired of rhetoric 

and platitudes: they want results. Your attention and support will help us to continue to achieve positive results. Please take the opportunity to visit us so we can 

show you what we are doing and introduce you to the people whose success is our 

goal. I look forward to your questions, and to hearing the views of my fellow panelists. 
37 

PREPARED STATEMENT OF THOMAS O. MELIA, ASSISTANT ADMINISTRATOR, BUREAU

FOR EUROPE AND EURASIA, UNITED STATES AGENCY FOR INTERNATIONAL

DEVELOPMENT

Thank you, Mr. Chairman, Mr. Co-Chairman, and members of the Commission, 

for the opportunity to testify today on corruption in Bosnia and Herzegovina (BiH), 

and on the efforts of the United States Agency for International Development 

(USAID) to address this challenge. I would like to begin by describing the consequences of corruption, and then placing corruption in Bosnia in a broader regional 

context. Finally I will describe how USAID is working to help BiH, its citizens, government and NGOs, to fight corruption and to mitigate its harmful impact 

on society. 

It is fitting that the Commission for Security and Cooperation in Europe is addressing this topic, because corruption is an issue of national and regional security. 

As Secretary of State Kerry said in his remarks at the recent global summit on corruption in London, ‘‘criminal activity literally is a destroyer of nation states.’’ Corruption poses a direct security threat to states by enabling the smuggling of arms, 

persons, and drugs. 

Furthermore, corruption is a significant obstacle to development, the focus of my 

Agency. USAID’s mission is to partner to end extreme poverty and promote resilient, democratic societies while advancing our prosperity and security. But corruption leads to a weakening of democratic institutions, economic decay by discouraging 

investment, increased inequality, and deprives states of the resources they need to 

advance their own development. 

In the Europe and Eurasia region, states weakened by corruption are more susceptible to malign pressure and manipulation from the Russian Federation and 

other countries, as any semblance of a rules-based order often seems to take a back 

seat to power, influence, and greed including oligarchs, whose geopolitical goals do 

not respect international commitments to transparency, rule of law, and fair play. 

Finally, endemic corruption threatens states by depriving them of the most important resource of any democratic government—the trust and confidence of its citizens. 

Where public trust is absent, there can be little expectation of the cooperation of 

citizens with government to build resilient democracies, let alone do what is needed 

to counter emerging threats like violent extremism. 

For these reasons the Administration sees addressing the problem of corruption, 

and the need for open, effective, representative governance as a significant priority. 

U.S. foreign assistance plays an important role in formulating country-specific anticorruption strategies, and USAID democracy, rule of law, and governance programming is in the forefront in many of these efforts. In the transitioning countries of 

Europe and Eurasia, USAID cannot succeed in our mission as an agency if corruption is permitted to go unchecked and unpunished. Understanding that, the Agency 

works with governments, civil society, independent media, political actors, and citizens to build the capacity to limit the likelihood of corruption, and to uncover, investigate and punish corruption when it occurs. 

To understand the problem of corruption in BiH, it must be seen in its regional 

context. It is a sad fact that corruption is a major problem throughout the Balkan 

region, and BiH is no exception. According to the most recent Transparency International Perceptions of Corruption Index (2015), BiH had a score of 38 (on a 100 

point scale, with lower scores indicating higher perception of corruption), placing it 

76th out of 168 countries surveyed, behind all of its Balkan neighbors except Albania (88th) and Kosovo (103rd). More troubling, perhaps, is that according to this 

index BiH is losing ground in its fight against corruption, with its score falling one 

point in the past year, and four points from 2012. According to the World Bank’s 

World Governance Indicators (2015), control of corruption in BiH has changed little, 

if at all, from its worst days immediately after the conclusion of the war. This is 

consistent with findings from Freedom House’s ‘‘Nations in Transit’’ data on anticorruption measures for BiH, and on democratic reforms more broadly, which show 

that modest gains that were made in all measures peaked around 2006 with stagnation or backsliding in the years that have followed. 

Finally, USAID’s National Survey of Citizens’ Perceptions 2015 reports that over 

one in five persons surveyed reported paying a bribe to a public official, most often 

to doctors, nurses and police officers. Sixty-three per cent of citizens nationwide believe that the judiciary is not effective in combating corruption, and 62 per cent believe that public officials who violate the law are neither identified nor punished. 

All of this indicates that corruption in BiH is bad by Balkan standards, and possibly getting worse. When one takes into account BiH’s multiple levels of government, and the fact that, by some estimates, the public sector makes up fifty per cent 
38 

of BiH’s GDP, the depth of the problem and its impact on citizens’ lives becomes 

all the more clear. 

To combat corruption and limit its impacts on the state and society, the United 

States is supporting both democratic, inclusive governance (including by strengthening the justice sectors and civil society) and economic growth (including through 

private sector development, fiscal reforms, and reform of the energy sector). 

Growing the size and strength of the private sector in BiH is of critical importance both for the prospect of economic development and as a concrete means to 

limit the impact of corruption by limiting the influence of public officials in rentseeking behavior. USAID is working to do this in several ways. For example, USAID 

has new Development Credit Authority agreements in place with three commercial 

banks valued at $30 million dollars, as well as three older agreements valued at 

$46 million dollars. To date, loans have been disbursed to 120 private firms, supporting close to 2,800 private sector jobs and generating over 500 new jobs in the 

private sector. 

In addition, recognizing that governance and economic development at the local 

level are crucial to success, USAID is implementing Business Friendly Certification 

(BFC). By reforming municipalities and increasing transparency, BFC will improve 

the business enabling environment, ultimately contributing to additional private 

sector growth. 

USAID is always considering new opportunities as well. This month, a team of 

economic growth experts from USAID is in Bosnia assessing what other options may 

be available to engage to support the country’s economic growth and prosperity. Several members of this Commission have sponsored legislation authorizing an enterprise fund for Bosnia, and this team is looking at whether or not this would be the 

right approach to grow the private sector. 

The Agency is also working to make public finance more transparent and accountable. With a local partner, Finit Consulting, USAID works to eliminate nontransparent nuisance taxes for businesses, reducing opportunities for irregularities 

and corruption. The project will also improve transparency in government finance 

through the provision of IT solutions for budget management and the Treasury by 

introducing and expanding e-services for payment of direct taxes. This support will 

also be used to help entity tax administrations to conduct risk-based audits. 

Due to the risk posed by large transactions, the energy sector is an area of specific 

concern in the fight against corruption. Through an activity implemented by Advanced Engineering Associates International, USAID is working to transpose EU 

Energy Directive requirements into local legislation to govern the operation of the 

energy sector in BiH. Transparency in areas including the permitting of energy infrastructure projects will help to limit opportunities for corruption in this sector. 

Corruption also occurs when local producers skirt regulatory standards (say, with 

watered-down milk) to keep costs down, putting consumers at risk. A USAID 

project, implemented by Cardno Emerging Markets, helps mitigate corruption by 

supporting agricultural exporters to adopt stringent EU regulatory import standards, particularly food safety and veterinary and phytosanitary procedures. Recently, this program facilitated EU approval for eight dairies to export milk to the 

EU. As more producers meet EU standards there will be less room for corrupt practitioners to compete. 

While our economic growth efforts look to limit opportunities for corruption, other 

efforts are building the capacity to help citizens and civil society to uncover corruption when it occurs, and helping state bodies effectively investigate and punish 

culprits. 

For example, partnering with a local Bosnian organization, the Center for Media 

Development and Analysis, USAID is helping to build a coalition of 60 local NGOs 

to advocate for implementation of anti-corruption reforms necessary for EU integration. USAID supported civil society and legislative stakeholders as they initiated 

adoption of whistleblowers’ protections in 2013. Last year, with our assistance, a 

group of local NGOs started an advocacy campaign to increase transparency, competitiveness and accountability within the public procurement system and align it 

better with EU standards. This advocacy is critical since three quarters of BiH’s annual $1.7 billion dollars-worth of procurements is done non-competitively and hundreds of these procurements are awarded to companies owned or co-owned by elected officials. A few weeks ago Transparency International, also supported by USAID, 

presented legislative proposals to clarify and de-politicize the issue of conflict of interest in BiH. Similar actions are planned in the areas of public employment, health 

and education, which have proven to be sectors highly susceptible to corruption. The 

program also promotes civic monitoring, supports the production of independent, investigative video documentaries to expose corrupt individuals and provide evidence 

for prosecutions. Finally, as part of this project’s efforts to raise awareness and un-
39 

derstanding of corruption affecting citizens, USAID, together with our NGO partners, staged a traveling exhibit on the lack of procurement transparency in BiH’s 

public sector, featuring a dozen items procured by entity governments at grossly inflated prices. The exhibit opened in Sarajevo, and was staged in ten major cities. 

A Facebook post on the exhibit generated more ‘‘likes’’ than any post in the page’s 

history, and was viewed by over 170,000 people. 

The justice sector is another critical front in the fight against corruption. 

Partnering with Millennium DPI Partners, USAID helps prosecutors, judges, other 

justice sector officials and institutions be more responsive and accountable in the 

administration of justice, to better serve the needs of citizens. This effort, along with 

other U.S government efforts including that of the Department of Justice, counters 

corruption by encouraging more efficient prosecution of cases of corruption and organized crime, and by strengthening justice sector institutions’ ability to uphold public 

integrity and mechanisms of self-accountability. Through this project, USAID has 

partnered with all 19 prosecutor’s offices to help them to prosecute cases of corruption and organized crime more effectively and efficiently by improving the performance and authority of prosecutors, recognized as the weakest link among officials. 

USAID is also working with the Department of Justice’s Office of Overseas Prosecutorial Development, Assistance and Training (OPDAT) on advising anti-corruption 

prosecutors, improving police-prosecutor cooperation, and providing case-based mentoring to Bosnian counterparts in anti-corruption cases. We are also working, 

through mentoring, training and technical assistance to BiH’s High Judicial and 

Prosecutorial Council (HJPC), to institute new management systems for appointment of new judges and prosecutors—the most common ‘‘entry point’’ for politics 

into the work of the justice sector—and to conduct performance appraisals, give 

merit-based promotions and to provide incentives and rewards for the successful 

prosecution of cases. 

Regional collaboration is also key to fighting corruption. USAID is working with 

other countries in the region to ensure that regional best practices are shared with 

Bosnian counterparts. We will also support the institution of a new special anticorruption unit in the BiH Federal Prosecutor’s Office, mandated by a 2014 anticorruption law. USAID is also helping to increase cooperation and coordination 

among hundreds of state, entity, and cantonal law enforcement and justice sector 

institutions to prevent leaks of sensitive information that undermine the investigation and successful prosecution of corrupt cases. To strengthen disciplinary procedures for judges and prosecutors, USAID helps the state-level Office of the Disciplinary Counsel to better manage complaint procedures and autonomously review the 

conduct of judges and prosecutors and to recommend appropriate sanctions for unethical conduct and corruption of judicial officials. 

Finally, since ‘‘justice delayed is justice denied,’’ this project initiated improvements in the efficiency of enforcement of judicial decisions through a data-driven 

process that has led to recommendations, including a Judicial Effectiveness Index 

to identify bottlenecks and inefficiencies, which were embraced by the HJPC. 

While corruption and organized crime often depend on the inability of law enforcement actors to track illicit activity across borders, journalists are not bound by such 

limitations. Sunshine, as they say, is the best disinfectant. The first step in countering corruption is to expose it. Through the Regional Investigative Journalism 

Network (RIJN), journalists receive more intensive training and practical experience 

in producing documented, high-quality investigative journalism based on best international standards and practices. The program is designed to link these journalists 

across borders, improve their investigative skills through on-the-job training, and 

use innovative digital technologies to collaboratively produce cross-border investigative reports. It also works to build citizen demand to reduce corruption, fraud, and 

other criminal activities through increased exposure to professionally produced investigative journalism. RIJN has proven its ability to serve as a platform for getting 

results in exposing corruption, from its revelation that a prime minister in Bosnia 

and Herzegovina received a free apartment, leading to his indictment and eventual 

resignation, to its current reporting on regional corrupt leaders’ links to offshore accounts in the Panama Papers. RIJN has carefully tracked the impressive dividends 

from its reporting across the region: the recovery of at least $600 million in hidden 

assets by tax authorities; the closure of more than 1,300 companies; investigations, 

indictments, and arrests by law of 80 people—including an ex-president; and the 

resignation or sacking of ten government officials. 

In conclusion, though the threats posed by corruption in BiH—to its economy, its 

public services and to the state itself—are great, USAID is working with our partners to limit opportunities for corruption, uncover them when they occur, and see 

that they are investigated and punished. We are doing this together with our European partners, in some cases leveraging U.S. Government funds with donations 
40 

from allies. USAID is also doing this with other U.S. Government agencies, such as 

the Department of Justice, which is providing expert advice and assistance to investigators, prosecutors, and judges in BiH. The existence in BiH of the EU reform 

agenda, the broader EU Association process, and initiatives such as the Open Government Partnership offer BiH and its partners an opportunity to intensify efforts 

to fight corruption. 

This needs to be an ambitious, substantive, and multifaceted agenda for changes 

in law and in practice—changes that will impact the daily lives of Bosnia’s citizens. 

This effort will require significant political will from BiH’s leaders, NGOs and citizens. Progress will not be easy, and constraints related to the structure of the constitutional system in Bosnia may limit possibilities for dramatic progress. But despite these challenges, our decades-long commitment to peace in BiH demands our 

best effort. 

Thank you for the opportunity to testify. I look forward to your questions. 
41 

PREPARED STATEMENT OF SRDJAN BLAGOVCANIN, CHAIRMAN OF THE BOARD OF

DIRECTORS OF TRANSPARENCY INTERNATIONAL, BOSNIA AND HERZEGOVINA

Thank you very much, Mr. Chairman, Thank you very much for this opportunity 

for me to speak on what I consider a very important topic. 

There are a lot arguments to rightfully claim that corruption is the biggest problem today in Bosnia and Herzegovina. 

Direct damage to the country reaches hundreds of millions of dollars disappearing 

from the budget due to corruption in public procurement and privatization. Indirect 

damage, due to a lack of investment caused by corruption, is difficult even to estimate. 

The crux of the problem is political corruption, which involves the highest political 

and public officeholders. There are numerous well-documented corruption cases involving political leaders and top party officials. 

Twenty years after the war Bosnia and Herzegovina remains a country completely 

captured by corruption, where it is virtually impossible to get any public service 

without having to resort to corruption. Most relevant studies clearly indicate that 

in recent years Bosnia and Herzegovina has not seen any progress in strengthening 

the rule of law and the fight against corruption and, as such, is among the worstranking countries in the region. 

Corrupt political leaders hold sway over key institutions in the country. This allows them to use all the economic resources of the country in their own private interest. 

How pervasive corruption actually is can be seen on an everyday basis. Due to 

corruption in public procurement, taxpayers’ money—that is the money of the citizens of BiH—is used to procure goods, services and public works at prices that are 

severalfold greater than their actual cost. 

The example of the two recently collapsed banks also reveals the ruthless extents 

of corruption, with total damage exceeding half a billion dollars. The two cases involve the highest public officeholders, and the indictments against them have not 

been brought yet. 

Political control over the judiciary and law enforcement agencies allows corrupt 

leaders to be protected from prosecution. There are almost no cases of corruption 

that result in judgments of conviction. Political corruption is ignored by public prosecutors because of political influence. 

The crux of the corruption problem lies in how political parties are organised. Devoid of basic intra-party democracy, they operate in a mafia-like manner. Their 

basic principle of operation is based on the distribution of the spoils. Their booty 

are budgetary funds, public companies and institutions. Political elites use 

clientelistic appointments as the main method of exercising control over institutions. 

In this way, political leaders create neopatrimonial-clientelistic networks which they 

use to run the country. 

The real and almost unlimited power lies in the hands of a few ethno-political 

leaders, while institutions remain devoid of any content and are mere shells without 

any power. 

The political leaders and the ruling political parties are therefore not interested 

in reform and European integration. They have learned their lesson from Croatia 

and Romania, two countries that had to tackle political corruption and prosecute 

their political leaders as part of their process of joining the EU. Therefore, the interest of political elites in the country is solely and exclusively to maintain the status 

quo. Any progress in reform implementation directly affects and limits their unbridled power and exposes them to criminal prosecution. Therefore, their strategy is 

to rhetorically accept reforms and advocate for the country’s progress towards the 

EU, while in practice they only feign reform. 

Pervasive corruption affects human rights and freedoms. Corrupt politicians turn 

a blind eye and a deaf ear to the criticism coming from civil society organizations 

and the media. Hence, cases of repression against the media and civil society remain widespread. 

Corruption within institutions prevents citizens from accessing justice. A backlog 

of over 2 million cases, in a country of 3.5 million people, means that the judicial 

system is completely blocked in practice. Adjudication of disputes takes years to 

complete. Court rulings, even those made by the Constitutional Court, are not complied with unless they are in the interest of the privileged few. 

The consequences of corruption are felt by citizens on a daily basis. Corruption 

exposes them to additional costs to pay for health, education and administrative 

services. Administrative corruption is part of everyday life for citizens. 
42 

1 Fukuyama (2014). 

Another consequence of corruption is the growing inequality, where the privileged 

few have access to all public resources, while the vast majority of citizens are deprived of access to public services. 

Also, corruption undermines economic development of the country, trapping the 

majority of its people in poverty and depriving them of employment opportunities. 

For years Bosnia and Herzegovina has been among the worst-faring countries in 

Southeast Europe when it comes to attracting foreign investment. 

The way the market is organized has a pernicious effect on the private sector. 

Privileged access to public tenders and privatization processes is reserved for cronies, operating on the principle that losses are ‘‘socialized’’ while profits are 

privatized. 

Therefore, I want to reiterate what I said at the beginning of my talk. Corruption 

is the biggest problem in Bosnia and Herzegovina today. Without progress in fighting corruption it is not possible to make progress in the implementation of any other 

reform. It is impossible to reform the judiciary if it is corrupted. It is impossible to 

reform education if it is corrupted. Or public administration, or any other field for 

that matter. 

How to make a breakthrough? 

As Fukuyama rightly pointed out, all reforms are inherently political; 1 therefore 

it is about generating political will for reforms and not only strengthening capacities 

of the institutions. Leveraging and articulating the public’s deep mistrust in the 

government through citizens’ active involvement in decision making should be 

prioritized in order to avoid another wave of destructive protests like those of 2014. 

Past experience shows that simply calling on leaders to undertake reforms and to 

take responsibility is insufficient. Generating a genuine and articulated ‘‘internal 

demand’’ for reforms is key to achieving sustainable progress toward integrating the 

country into the EU. 

A viable solution to the problem of political corruption must be found at the level 

of the political system. Which in this case means the democratization of the political 

system and, above all, the key actors of the political system, namely political parties. Reforming the way political parties operate and introducing intra-party democracy would create conditions for dismantling the clientelistic networks run by political leaders that have captured the country’s institutions. 

Furthermore, it would allow a wider range of people to influence the political 

processes and this would, in turn, lead to better articulation of the demand for 

change and reforms. 

Another important aspect of the reform concerns the strengthening and reforming 

of the judiciary. The judiciary must finally assume responsibility for prosecuting corruption. For this to happen, it is imperative to ensure that it is independent in its 

work and free from any political interference. To counter political interference, it is 

crucial to ensure transparency in the appointment of judges and prosecutors. 

The judiciary has to gain public trust. This implies that the work of the judiciary 

is based on the principles of transparency and accountability. 

In any case, Bosnia and Herzegovina still needs strong international support in 

undertaking reform to strengthen the rule of law and fight against corruption. This 

also requires that the current EU reform agenda be expanded to include a detailed 

and specific plan for combating corruption and strengthening the rule of law. 

Thank you very much again for the opportunity to serve as a witness at this hearing today. 
43 

PREPARED STATEMENT OF DR. VALERY PERRY, SARAJEVO-BASED INDEPENDENT RE- SEARCHER AND CONSULTANT AND SENIOR ASSOCIATE AT THE DEMOCRATIZATION

POLICY COUNCIL

Introduction 

I would like to thank Representative Smith, Senator Wicker, and the Helsinki 

Commission for organizing this hearing. 

We’ve heard a number of vivid descriptions of the problem of corruption—and the 

politics of corruption—in Bosnia and Herzegovina today. 

The politics of corruption makes meritocracy impossible, weakening institutions 

and promoting brain drain of the country’s best and brightest. 

The politics of corruption results in a system in which floods can devastate one 

third of the country and no leaders or officials are held accountable for their failure 

to prevent, prepare, or respond to such a disaster. 

The politics of corruption weaken the notion of civil society, shared purpose and 

joint vision, instead strengthening informal practices, patronage networks and exclusionary practices that are particularly damaging to a society barely a generation 

removed from the most violent conflict in Europe since World 

War II. 

No political system anywhere is immune from corruption. Systems, structures and 

incentives either encourage or impede corruption. Societies ideally organize themselves in a way that minimizes potential for corruption and maximizes the public 

good. This can be hit or miss; no governmental design is ever perfect. 

Bosnia’s political economy was shaped by the war and the Dayton Peace Agreement that ended it in 1995. Dayton was, and remains, a ‘‘Made in America’’ product. 

For this reason it is important that we are having this discussion today. 

What Should Be Done 

The problem of corruption in Bosnia is not a technical problem; it is a political 

problem. In the absence of fixing the core political problems that both prevent accountability and allow impunity, all of the projects, capacity building, technical support and money in the world will not overcome the fundamental weaknesses and 

democratic contradictions at the core of Bosnia’s unaccountable political system. 

In fact, after two decades and literally thousands of well-intended projects, it is 

time to consider not only the diminishing returns of such approaches, but the broader negative impact of such efforts actually maintaining the illusion that a system 

that has failed for 20 years can in fact somehow be made to work. Continuing to 

prop up a system proven to be ineffective is akin to hoping that updating the software on your 15-year old computer will help its performance. At some point you 

have to recognize that the problem isn’t the software, but the hardware, and that 

no patches or workaround will improve its performance. 

So what should be done? I will focus on three specific recommendations today. 

First, a package of legislative reforms aimed at reducing the possibilities for official corruption, abuse of office and collusion should be developed and supported. 

This would include laws related to conflict of interest, political party financing, and 

freedom of information, among others. Laws, by-laws and statutes regulating public 

enterprises also need to be urgently overhauled in line with available guidelines and 

good practice. Many existing USAID and other U.S.-funded programs—ranging from 

support for investigative journalism to critical justice sector reform—could be better 

coordinated and recalibrated to support a holistic approach. 

There will be political and in turn institutional resistance to such reform, and 

every effort will be made to evade proper implementation; we have seen this happen 

for years. However, there would be overwhelming public support. Further, such an 

initiative would be very much in line with the European Union’s own Reform Agenda, and in fact, the notion that the country’s business environment could be improved without these reforms reflects a fundamental misunderstanding of the political economy in post-Dayton Bosnia. 

Second, the lessons of unsuccessful past privatizations in BiH must be studied, 

learned and applied by domestic and international actors alike, to understand both 

their role in further strengthening an oligarchical class of political and party leaders, and to understand why part of the country that has privatized most of its public 

assets (the Republika Srpska) has failed to enjoy any broad and durable economic 

or social benefits from these transactions. 

Future privatization should be put on hold until reforms to the broader ecosystem 

have been implemented; otherwise the country risks seeing a further enriched and 

emboldened political elite, accompanied by questionable foreign investment in enterprises which is often more about real estate and asset stripping than about building 

a robust economy for Bosnia and its people. 
44 

Third, it is critical to understand how the election system in Bosnia contributes 

to the lack of accountability and makes it not only possible but natural for politicians to be elected and re-elected without delivering anything to their voters other 

than limited and targeted patronage. Much has been written on this topic. Current 

election law reforms under consideration will in fact make it harder for new or small 

parties or independent candidates to participate in and influence political life. This 

will further entrench the dominant party machines that have held control for a generation, further eroding the checks and balances needed to resist and deter corrupt 

practices. 

Substantial election reform is needed so citizens know who really represents them 

at every level of governance and can vote them in and out of office; so constituent 

service offices operate in communities and serve as a link between representatives 

and the citizens they represent; and to ensure that citizens have the chance to be 

represented in government at every level. Representation should not be based on 

ethno-national affiliation—whether a voter is a Bosniak, Croat or Serb, or the consistently marginalized ‘‘Others’’—but simply whether a voter is a citizen. 

These reforms could effect substantial change, and do not require a ‘‘Dayton 2.’’ 

In fact any elite-driven, foreign-sponsored effort to engineer reforms would very likely create a system even worse than the one we see today. Instead, reforms need to 

be citizen-focused, combining coordinated top-down support and bottom-up pressure 

to create momentum among a population that is ready for such change, but uncertain how to disempower the system that has so effectively captured the country for 

so long. 

Why Does BiH Matter? 

Bosnia and Herzegovina is a small country of less than 4 million people. It is fair 

to ask why the U.S. should continue to spend time on it, considering the many other 

foreign policy priorities and humanitarian crises facing the world today. 

The answer is simple: if the U.S. and its partners cannot support the development 

of a functional and accountable system in Bosnia, how can it hope to support positive and peaceful political outcomes in other parts of the world? 

If the U.S. and its partners do not learn the lessons of failed post-war power-sharing arrangements in Bosnia, there is the potential that similar foundational weaknesses will be introduced into other peace deals, creating an illusion of peace and 

stability while corruption and spoilers flourish, social discontent is manipulated and 

society becomes entrenched in a state of frozen conflict. 

Finally, the same systemic failures and factors that allow corruption and unaccountable governance to thrive in frozen conflicts foster civic marginalization, alienation, and in the worst cases enable the rise of extremist groups and radicalized individuals seeking extra-institutional remedies to political and social maladies. 

In closing, corrupt politics and the pain of an economic transition which has delivered little benefit to the majority of the population in Bosnia have not only reinforced public frustration with the post-war situation, but has revealed increasing 

dissatisfaction with the very idea of democracy and competitive markets—promotion 

of which have been core U.S. foreign policy goals for more than two decades. 

It is not too late to reverse recent negative trends, though the clock is ticking as 

social divisions have reified and hardened in the ‘‘divide and rule’’ politics of the 

past generation. More ethnic politics and virtual partition will not help. Laws, strategies and initiatives that seek to hardwire accountability into the system, backed 

up by meaningful conditionality and enforcement mechanisms, can. 

I’m hopeful that this hearing will put this discussion back into the spotlight, and 

generate momentum for the change that is so desperately needed if the promise of 

Dayton Bosnia is to be fulfilled. 

Thank you. 
(45) 

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June 17, 2016 

The Honorable Roger F. Wicker 

Co-Chairman 

Commission for Security and Cooperation in Europe 

Washington, DC 

Dear Co-Chairman Wicker, 

At the May 25th Commission for Security and Cooperation in Europe hearing ‘‘Combatting Corruption in Bosnia and Herzegovina,’’ you asked that I provide additional 

details on the successes of the U.S. Enterprise Funds in Europe and Eurasia. 

Starting in the early 1990s, following a Congressional mandate, the U.S. Agency for 

International Development established ten investment funds throughout Central 

and Eastern Europe and the Former Soviet Union with total authorized funding of 

nearly $1.2 billion, collectively known as the Enterprise Funds. These funds were 

intended to jumpstart capitalism and entrepreneurship, as the funds would provide 

equity investments in newly privatized companies or start-up businesses. These 

ownership stakes would enable the fund managers to participate in the governance 

of the enterprises, which provided opportunities to model best practices in law-abiding corporate governance, consistent with free-market principles. After a period of 

ten or more years—during which time many of these businesses thrived and generated jobs—the funds would sell off their ownership stake. In many cases, the 

funds made gains on their investments when they sold these stakes. 

Enterprise Funds are an innovative development technique that achieved sustainable economic development impact while catalyzing additional investment resources. 

They also generated significant income that enabled the U.S. later to endow longerterm Legacy Foundations, which continue to pursue the overarching objective of private sector development, while also returning substantial sums to the U.S. Treasury. The following is a summary of the substantial economic and development impacts provided by funds originally endowed by the U.S. Congress in Europe and 

Eurasia: 

• Over 300,000 jobs were created or sustained through investment and development activities; 

• Significant development capital was provided to SMEs and entrepreneurs operating in early-stage transition countries where private investment capital was 

limited, which helped create an environment where the culture of private enterprise could flourish; 

• The Funds and their portfolio companies modeled good corporate governance 

and ethical business practices demonstrating that it was possible to operate successfully while paying taxes and not paying bribes; 

• $9.8 billion of additional capital was raised from co-investors and the creation 

of new private sector investment vehicles over the life of the Funds; 

• To date, the Funds have returned $225.5 million to the U.S. Treasury; and 

• Remaining proceeds of approximately $1.2 billion have funded nine long-term 

philanthropic ‘‘legacy’’ foundations, which continue to promote private sector development, and continue to build goodwill between the US and their host countries after USAID has exited the country. 

The Enterprise Funds have demonstrated significant success in achieving their 

original goal of promoting economic growth and private sector development in the 

region. These achievements include a wide range of tangible and intangible development accomplishments which are not captured by traditional financial indicators 

such as profit and return on investment. Still, the Enterprise Funds managed to 

overcome the challenges of investing in transitioning economies while achieving, collectively, positive overall returns on their investments even though this outcome 

was not the primary focus of the initial mandate. 

As might be expected, the efficacy of individual Enterprise Funds varied by country, 

based on the economic and political conditions on the ground, as well as the overall 

investment strategy and specific investment decisions made by each Fund’s Board 

and management team. The countries in which enterprise funds operated benefited 

significantly from an economic development perspective. Some of the notable 

achievements include: 

• The Polish-American Enterprise Fund established the largest micro-finance 

institution in Poland, disbursing $183 million through 69,275 loans; 
77 

• The Romanian-American Enterprise Fund pioneered investment banking 

to support privatization of state owned enterprises, including two banks and energy companies, attracting over $200 million in FDI; 

• The Baltic-American Enterprise Fund developed the necessary legal structure to support an annual $100 million consumer mortgage industry and the 

first mortgage backed securities in Eastern Europe; 

• The Bulgarian-American Enterprise Fund helped develop the necessary 

legal structures for mortgage backed securities and real estate investment 

trusts; and 

• The Albanian-American Enterprise Fund established a nation-wide bank in 

Albania, providing Western-style credit cards, ATMs, mortgages, commercial 

banking services, and $50 million in syndicated loans for public/private infrastructure projects. 

Thank you for your interest in this issue and for the opportunity to testify. 

Sincerely, 

Thomas O. Melia 

Assistant Administrator 

Bureau for Europe and Eurasia 

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