Business Corruption

Despite improvements in the public procurement system, opportunities for corruption remain, such as through deliberate misinterpretation of provisions exempting purchases from competitive tender procedures or in later stages of the process in contracting and the execution of the agreements. Companies are recommended to use a specialised public procurement tool in order to mitigate the corruption risks associated with public procurement in Serbia.

Foreign investors should note that, even though they are welcome in Serbia's privatisation process and current investors generally find the investment climate acceptable, government treatment has at times favoured domestic over foreign investors. One example is that of one of the world's leading companies in the detergent business that had invested in the privatisation of a local company. Without prior notice, the investor was instructed to pay an extra tax on the severance payments for the privatised company's employees, even it had already agreed on the terms of the severance pay conditions with the government. According to the Center for Economic Reform and Transformation 2005, other major investors have reportedly had similar experiences after buying companies that were being privatised.

Read more about public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Political Corruption

There are various examples of corruption in public procurement procedures. For example, according to Global Integrity 2006, the Minister for Capital Investment participated directly in the procurement of used train engines and cars for the state railway company and was awarded the contract, which was closed without a cost schedule or the public tender required by law. When funds went unaccounted for, the minister himself closed the case, stating that he had ordered a police investigation and found no evidence of embezzlement.

A recurring theme in the corruption debate in Serbia is monopolies, and how business tycoons have been allowed to amass such large shares of the market. According to Global Integrity 2009, the Anti-Corruption Council extensively disputed the sale of a major retailer purchased by the owner of several other leading retailers in Serbia.

Read more about public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Frequency

World Economic Forum: The Global Competitiveness Report 2010-2011:
- Business executives give the diversion of public funds to companies, individuals, or groups due to corruption a score of 2.9 on a 7-point scale (1 being 'very common' and 7 'never occurs').

- Business executives give the favouritism of government officials towards well-connected companies and individuals when deciding upon policies and contracts a score of 2.4 on a 7-point scale (1 being 'always show favouritism' and 7 'never show favouritism').

Transparency International: Global Corruption Report 2009:
- 26.3% of companies surveyed state that corruption takes place 'often' or 'always' when companies compete for public sector contracts.

- Of the above 26.3%, 15.8% reported that they based their response on information they gathered from media or hearsay, while 10.5% reported to have concrete knowledge of public sector corruption.

The World Bank & IFC: Enterprise Surveys 2009:
- 16% of the companies surveyed expect to give gifts to secure a government contract.

- The average value of gift given to secure a government contract amounts to 0.27% of the contract value.