- The Washington Times - Tuesday, July 10, 2001

The United States is designing a system to monitor financial aid to Yugoslavia to prevent the misuse of U.S. assistance in an environment fraught with corruption, U.S. officials said yesterday.
Last month, the Bush administration pledged $182 million in assistance to Belgrade for democracy-building, economic reforms and community development, but the State Department is concerned that the money could be misspent unless controls are in place to prevent corruption.
The United States will not give money directly to the government in Belgrade, a senior State Department official said, but will transfer funds to nongovernmental organizations, contractors and grantees for work in Yugoslavia.
“Aid to Yugoslavia doesn’t mean that you write a big check and hand it to the government,” a senior State Department official said yesterday on the condition of anonymity.
If either the Yugoslav or Serbian government benefits directly from U.S. aid through the so-called “budget support,” which is very likely in the near future, “we have safeguards that are put in place before the money changes hands,” a U.S. Agency for International Development official said, also on the condition of anonymity.
“When we decide on an amount to contribute, we would try to do it on the basis of expenditures the government has already incurred,” the official said. “So we would do it on a reimbursement basis. We would know that they have taken a certain action that we want to be supportive of and then give them the money after the fact.”
Concerns over accountability have been fueled by the findings in a General Accounting Office report on assistance to Bosnia-Herzegovina last summer concluding that, “although internal controls over international aid appear to be adequate … some corruption and fraud have occurred in the international assistance effort.”
The report recommended that the State Department “certify that Bosnia has undertaken concrete, measurable efforts to fight corruption, smuggling, and tax evasion before providing future assistance.”
After initially directing U.S. aid to reconstruction efforts in the wake of the 1995 Dayton accords that ended the war in Bosnia, the United States “shifted much of the focus of our assistance program toward implementing political and economic reforms to fight corruption,” the State Department official said.
But some economists questioned the effectiveness of the $1.28 billion in assistance the West pledged to Yugoslavia at a donors conference in Brussels on June 29, a day after Slobodan Milosevic, the former president, was handed over to the International War Crimes Tribunal in The Hague.
“Even if foreign aid has proven to be an effective ransom, which has delivered Milosevic to The Hague, aid has never delivered economic reforms it usually delivers no more than corruption,” said Steve Hanke, professor of applied economics at Johns Hopkins University and an economic adviser to Milo Djukanovic, president of Montenegro, the junior partner in the Yugoslav coalition.
“There is no rule of law in Yugoslavia, and the so-called business class has been nurtured by Milosevic,” he said.
While acknowledging that corruption in Serbia, as well as in Bosnia, is a “long-term problem,” the State Department official rejected the argument that, because there is corruption, no assistance should be made available to Belgrade.
“We are trying to work to get that changed,” the official said, noting that dealing with crime and corruption in countries that benefit from U.S. aid is nothing new for Washington.
Aid to Yugoslavia raises a number of issues, said a former State Department administration official.
“To what extent are the locals failing to do their own jobs, and will the money be spent in a way that insulates it from local control, if necessary,” said Jim O’Brien, the Clinton administration’s top official for the Balkans. “Everybody who goes into Yugoslavia has to bring their own assurances for transparency and accountability.”

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