Šoškić: “Corruption in Serbia, a cancer that is destroying 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 calculations by the Tax Council, corruption costs at least 1.6% of gross domestic product (GDP) per year.
“(Corruption is) a malignant tumor that leads to stagnation, loss of competitiveness, increased poverty and debt in the country,” said Dejan Soskic, a professor at the Faculty of Economics at the University. 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 rule of law, free and fair competition in the labor market, the goods market and services and the money and capital market is destroyed.
Corruption, through the issuance of false degrees 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 the poor quality of roads, the renovation and construction of railways or the rehabilitation of power stations which stop soon after, indicates the monthly.
Taxpayers pay the price, and all of this stifles innovation and devours entrepreneurial energies because it encourages those who commit corruption, not those who possess knowledge, quality and efficiency.
The economy of “I am doing you a favour, you are doing me a favour” creates a particular type of “parasitic” companies which monopolize the economy not by producing new values through competitiveness, but by redistributing already created goods, s rewarding overnight. These “entrepreneurs” buy for a few pounds once strong but now almost defunct public companies, usually metal, textile or electrical industries, but put an end to their commercial ambitions by wasting their products and laying off the workers. They are unable to breathe new life into the company through more rational activities, new investments and innovation.
The problem that has long been the main obstacle to development, namely the decline in domestic private investment, is largely due to corruption. Companies involved in corruption derive their profits from private accounts and do not use them to reinvest in other companies because they are not competitive. Because of corrupt profits through companies that have obtained jobs from the state, hired contractors, even when they are of good quality, have low wages and relatively low balance sheets to be able to access jobs. 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 investment, because the uncertainty caused by high corruption is part of the country’s risk premium and affects the growth of required returns and interest rates, as well as the growth in discount rates for all future cash flows produced in the country,” Soskic said.
As a result, potential foreign investors either forgo 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.
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