Closing Down Smugglers' Paradise

Montenegrin government measures designed to end the country's reputation as the "Balkan Colombia" have got off to a slow start.

Introduced in response to a shortfall in central government funds, the result of widespread tax evasion, and pressure from Western governments, the success of the crackdown, launched this August, depends on Podgorica's determination to root out corruption within its own ranks and to prosecute the powerful "dons" behind the illegal trade.

The government's first priority is to attack illegal imports. Traders have been offered an amnesty if they register and pay duties and taxes on the goods they have traded illegally so far. The financial police are currently searching for those who have not yet responded to this call. The final stage, expected to begin in September, is expected to bring investigations and prosecutions of the organisers of illegal imports and others implicated in the trade.

But many of the leading figures in Montenegro's underground economy may prove untouchable. Over the years, close connections and business ties have been forged with senior members of the government, police, customs and revenue departments. The fight against the illegal economy is turning into an increasingly high-profile fight against government corruption and the misuse of power.

Several corruption scandals involving Montenegro's most prominent political and economic leaders have rocked the country in recent months.

The most serious allegations involved Montenegrin President Milo Djukanovic. The Croatian weekly Nacional accused him of involvement in the cigarette smuggling racket and related murders. Djukanovic's alleged connections with the cigarette mafia were the subject of parliamentary debate for several days. A special commission has now been set up to investigate the so-called "Balkan cigarette affair".

Rade Bojovic, an analyst from Podgorica's Centre for Democracy, welcomed the government crack down on the black economy. But he remains sceptical that the measures will go far enough.

"It is difficult to imagine that the government will cleanse its own ranks of those implicated in corruption," Bojovic said, adding that the government will be punished at the ballot box should it fail to solve the problem of the illegal economy.

Expert estimates suggest 40-60 per cent of economic activity in Montenegro is connected to the black economy. Around 50,000 people share the proceeds. But unofficial estimates by independent economists indicate that between 70,000 and 100,000 Montenegrins, a sixth of the population, earn a living working in the black economy.

According to official data, around 100,000 people hold down legitimate jobs. The official unemployment rate is 37 per cent; unofficial estimates put it at nearly double.

Montenegro became a safe heaven for illegal trade in the early 1990s when international sanctions were imposed on the Federal Republic of Yugoslavia. During the years of international isolation, anyone who succeeded in smuggling goods past the international monitors was greeted as a hero.

First attempts to legalise black economy activity have highlighted the considerable problems the government faces. Some retailers answered the government's call to register illegal goods, mainly cigarettes and imported food, by August 10. The goods have been valued at around 20 million DEM.

All registered goods were legalised without any consequences for the owners. But when revenue officials began investigating the matter further, it turned out that there were many more unregistered goods floating around on which customs duties and tax had gone unpaid.

Meanwhile a shortage developed of imported goods, especially cigarettes. Prices shot up unexpectedly. Consumers were quick to voice their dissatisfaction with the government, which had failed to set in place a method of importing such goods legally.

Vendors from the Podgorica market, who have sold illegal goods for several years, gathered outside government offices to demand that their trade be legalised. They were soon joined by traders from nearby cities.

These traders hold the government responsible for letting the illegal goods enter the country in the first place. The stall holders say they are the last link in the black market chain and make the smallest profits. The big money goes to those who organise the large shipments into the country by truck, ship and aircraft.

Similar arguments were heard from legal retailers and caterers a few months ago when the government introduced cash registers in order to improve the levying of taxes. The retailers and restaurateurs complained that the tax police never went after the "big fish".

Montenegrin government representatives told IWPR that unofficial estimates put the value of goods stored in warehouses and belonging to the organisers of illegal trade at several million DEM. Illegal cigarettes alone are thought to be worth more than 15 million DEM.

Predrag Markovic, director of public revenue, claims "nobody would escape government control". But it remains to be seen whether this control is to extend to the confiscation of cigarettes and the impounding of the boats which bring them into the country.

Naturally, Djukanovic's opponents have made much political capital out of the cigarette-smuggling affair. But opposition figures have fallen foul of accusations of corruption, too.

Dragan Soc, president of the People's Party, has been accused of abuse of power while serving as justice minister from 1998 to January 2001. He allegedly embezzled several million German marks allocated for the reform of Montenegro's judicial system. Meanwhile Podgorica's senior prosecutor is gathering evidence on allegations that Soc also illegally allocated a computing contract worth 1.8 million DEM to the capital's Koding company. Soc's opponents claim Podgorica University's electronics department was paid 100,000 DEM for the same job.

Media reports also allege the Peoples Party leader bought a stolen car, another favourite illegal import product, for 15,000 DEM. Soc has not denied the charge.

The government meanwhile is in trouble over alleged corruption within Montenegro's telecommunications company, Telekom. A member of the company's board made the extraordinary remark, "I cannot remember if there were any funds which were handled legally". Telekom's dealings in the past year amounted to more than 50 million DEM. The Telekom director at the heart of the scandal, Jusuf Fetahovic, is a member of Djukanovic's Democratic Party of Socialists.

The mounting scandals have cast serious doubts into the minds of Montenegro's ruling elite as to how best to preserve their positions. One IWPR source claims that Djukanovic has decided to deal with the "big fish" this autumn. But their long-standing protective connections within the police and political establishment could make such a move very risky. Djukanovic's erstwhile allies may turn their backs on him.

Well-informed circles in Podgorica say the situation should become clearer in September when the Democratic Party of Socialists begins "putting its own house in order." There is mounting speculation that some powerful business people, who are also party members, could soon find themselves behind bars.

Zoran Radulovic is a journalist with Podgorica weekly Monitor.