Center for LiberalDemocratic Studies

1
Corruption in the Customs Two stages and the
turning point in Serbia

• by Boris Begovic
• Center for Liberal-Democratic Studies
• 11th IACC
• 28th May 2003, Seoul

2
Stage One Black Knights Motives

• Rational dictators
• Motive I wealth maximization
• Motive II survival
• Controllable cash-flow
• Cronies hostages
• Preventing palace coup

3
The Environment

• International embargo
• Non-cooperative international community
• Protectionism
• High and complicated tariff rates
• Non-tariff barriers
• Complicated procedures

4
The Turning Point

• Political Change
• No criminal cases
• No mass labour shedding
• Human capital reshuffling
• No organized and state-sponsored corruption/crime
• New, different signals

5
The Change
6
The Mechanism Before

• Avoiding customs procedure altogether
• Avoiding customs levies altogether
• Predatory pricing and/or rent appropriation
• Police escort of the lorry
• Lower customs official blackmailed
• Vertical organisation

7
The Mechanism After

• False invoices
• forged document
• false firm
• Decreasing value of the merchandise
• Data bank is under construction
• Decreasing customs duties
• Earning some rent
• Traces (documents)

8
Before and After

• straightforward
• high profile
• low skills needed
• young lions
• no traces
• no risk
• no change

• sophisticated
• low profile
• high skills needed
• experienced old hands
• hard traces
• high risk
• constant change

9
The Necessary Conditions

• Foreign trade liberalization
• Foreign trade deregulation
• Good side effect
• Breaking with the past
• Reversing the flow
• Creating the new reputation

10
The Perquisites

• Government fights the corruption
• Political will
• Forward looking breaking with the past
• The meaning of (ultimate) justice
• There is no free lunch
• Some price must be paid

11
The Reports

• Fighting Corruption in the Customs
  Administration download pdf file from
  www.CLDS.org.yu
• CLDS stands for Center for Liberal-Democratic
  Studies, Belgrade, Serbia
• Project was funded by the US based CIPE and NED