Šoškić: ‘Corruption in Serbia a cancer that destroys the country’

Corruption in Serbia is an elaborate bottom-up system, which effectively destroys institutions and the rule of law, writes the monthly magazine Biznis i Finansije.

According to the Fiscal Council’s calculations, corruption costs at least 1.6% of the gross domestic product (GDP) per year.

“(Corruption is) a malignant tumour that leads to stagnation, loss of competitiveness, increase in poverty and the country’s debt,” said Dejan Soskic, a professor at the Faculty of Economics at the University of Belgrade, in an analysis of the consequences of corruption in Serbia.

Due to the rise of a group of individuals and companies above all others who work within the law, free and fair competition in the labour market, the goods and services market and the money and capital market is destroyed.

Corruption, through the issuing of false diplomas and the hiring of people without adequate know-how, hinders entrepreneurial success based on skills and facilitates brain drain. It also encourages the proliferation of bad goods and services at excessively high prices, such as poor quality roads, renovation and construction of railways or the overhaul of power plants that soon afterwards come to a standstill, says the monthly.

The taxpayers pay the cost, and all this stifles innovation and devours entrepreneurial energies because it encourages those who carry out corruption, and not those who possess knowledge, quality and efficiency.

The “I do a favour to you, you do a favour to me” economy creates a special kind of “parasitic” businesses who monopolise the economy not by producing new values through competitiveness, but by redistributing already created goods, enriching themselves overnight. Such ‘entrepreneurs’ buy formerly strong but now almost defunct public enterprises, usually from the metal-processing, textile or electrical industries, for a few quid, but put an end to their commercial ambitions by squandering their products and laying off the workers. They are unable to breathe new life into the company through more rational business, new investments and innovation.

The problem that has long been the main obstacle to development, that is the decline of domestic private investments, is largely due to corruption. Companies involved in corruption extract their profits from private accounts and do not use them to reinvest in other businesses because they are not competitive. Because of corrupt profits through companies that got jobs from the state, the sub-contractors hired, even when they are of good quality, have low salaries and relatively low balance sheets to be able to access more serious loans from banks. This discourages all healthy businessmen from investing more in a market where unfair competition is ‘blessed’ from above.

“Such a strategy also does not allow for quality foreign investments, as the uncertainty caused by high corruption becomes part of the country’s risk premium and affects the growth of required yields and interest rates, as well as the growth of discount rates for all future cash flows produced in the country,” Soskic said.

As a result, potential foreign investors give up investing or, if they do, are less willing to pay for the property they buy and invest less in new production facilities to compensate for the uncertainty caused by corruption.

(021.rs, 26.04.2022)

https://www.021.rs/story/Info/Biznis-i-ekonomija/303961/Soskic-Korupcija-u-Srbiji-zlocudni-tumor-koji-vodi-u-povecanje-siromastva-i-duga-zemlje.html

 

 

 

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