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Purchasing political land with public funds

Political parties win elections through support they receive from affiliated businesses and then use the power to reward them financially

Prishtinë, 07 May 2011

Political parties win elections through support they receive from affiliated businesses and then use the power to reward them financially. Taking over power at central level, besides rewarding the businesses and interest groups, the winning party starts planning public expenditures totally depending on own objectives of winning and holding power in certain municipalities. This way, the municipalities that share evenly power between the two main parties in the meantime benefit mostly, as the power won centrally is being used to secure votes locally. The best example is the municipality of Prizren, in which according to few Preportr researches, PDK has made invested disproportionally compared to other municipalities. So the distribution of revenues from the public investments made between 2008 and 2010 has largely followed the interests of the party in power and not a specific criteria or regional development plan. Interests of the party in power also directed the public expenditures, totally disregarding the basic requirement that public funds be managed according to a previous plan that erives from a development program.

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This way, millions of public investments have been allocated to municipalities and approved to certain companies with the determining criteria being the home regions of the ministers or greater electoral interest of the party. In the same manner, the public investments made during the two years, have been disproportional with the size of residential areas and the number of inhabitants in different municipalities, as they are directed primarily politically. A “Preportr” analysis of 98 per cent of contracts signed by the Ministry of transport and the Ministry of education during 2008-2010 shows that a total of 416 mil Euros has been distributed to 199 companies through 385 public calls for bids.

Companies that Come from Ministers’ Regions and PDK Strongholds

“Preportr” research shows that a number of municipalities have been more importantfor the PDK. Ministry of Transport and the Ministry of Education have been careful to channel millions of Euros to companies that originate from the ministers’ regions or to those with dominant PDK interest, having great chances to win the local and national elections. Results show that companies that originate from Malisheva and Theranda, hometowns of former Minister of Education, Enver Hoxhaj, and former Minister of transport, Fatmir Limaj. Have received millions of euros of Kosovo budget exceeding the larger municipalities such as Peja, Mitrovica, and Gjakova. In total 23 companies from Theranda and Malisheva have won 59 bids benefitting this way over 62 million euros. During the same period, “Preporter” has proved that from these two ministries, only 15 companies from Peja, Mitrovica, and Gjakova have won bids in total amount of 12.5 mil euros.

Of these, only three companies from Mitrovica have won bids from these two ministries. More or less, the same trend follows allocating the public funds to companies in municipalities with broad electoral interests of the PDK. Prizren has been the primary battlefield for electoral win since 2007. The companies from Prizren, a city qualified as PDK’s Jerusalem during local elections in 2007, have benefitted much more during the last two years compared to companies in other municipalities. Research reveals a huge disbalance between Prizren companies, which benefitted from MEST and MTPT bids, and Prishtina ones. Whereas 61 Prishtina companies have benefitted over 121 million Euros from 123 bids, only 16 companies from Prizren have received 71 million through 42 bids.

In the same manner, companies based in the municipalities known as PDK strongholds have benefitted multimillion amounts of Kosova budget compared to municipalities known to belong to political opponents such as LDK and AAK. Companies from Shtime, Skenderaj, Drenas, and Ferizxaj have received 30 mil Euros more than municipalities of Podujeva, Deçan, Istog, and Junik. Besides, when bids had been granted to the “neighboring” municipalities, usually a considerable amount has ended in the bank accounts of the companies close to the people of the party in power.

The graph shows that municipality of Deçan and Istog have been left out of the trend and the reason why few companies in these to municipalities have been granted bids was, as you will see below, that they belong to people close to PDK.

Companies close to PDK

Presenting the distribution of public funds based on municipalities from where the winning companies originate does not present a clear picture on who are the real benefiters of millions of Euros of taxpayers money. “Preportr” has noticed a relation between the connections of the company owners and the municipalities where the companies have been registered in when winning the bid. Also, “Preportr” has found that companies in the municipalities that have not been traditionally governed by PDK have won bids when acting in consortia with companies from

the regions qualified as municipalities of PDK. Besides, “Preportr” has noticed cases when certain companies, from non- PDK municipalities, have won multimillion bids due to family ties with PDK officials. In the case of Prishtina, there are companies that have won bids of tens of millions in consortia with companies from Malisheva and Ferizaj. The company “Euro-Kos” from Prishtina, has won a tens of millions bid from the MTPT, and in majority of cases has been in consortia with companies from Drenica region or companies from PDK municipalities, such as Ferizaj. The company “Kastrioti” from Prishtina has won bids of more than 5 mil euros, but its owner comes from Drenica region. Besides these, the company “Damastion Projekt” has won bids of almost 3 million Euros in consortium with companies from Drenas and Ferizaj. The company “Ada Consulting Group,” also from Prishtina, owned by Avni Kastrati from Buroja, has won a 2 million bid. The same company employs Fadil Demaku as an adviser, a PDK deputy at the Assembly of Kosova and brother of current Drenas mayor, Nexhat Demaku.

Although municipality of Istog has continuously been governed by LDK, certain companies have won millions of Euros of public investments due to close ties to PDK structures. The Company “Albes,” owned by Hajredin Mavraj, is seen close to PDK structures, as the owner is a relative of “Epoka e Re” daily publisher, Muhamet Mavraj. This daily has traditionally been close to PDK. Similarly, the municipality of Deçan has benefitted from millions of public bids, although it has never been governed by PDK. The reason why companies here have won public bids has partly

to do with family ties the company owners have with certain PDK Deputies. The company “Arfa,” owner by Fadil Hadërgjonaj, has won almost 2 million Euros from MTPT. Fadil Hadërgjonaj is a relative of PDK deputy to the Parliament, Safete Hadërgjonaj.

Media reporting on companies close to PDK

Kosovo media have continuously reported on companies close to people in PDK winning the bids from public institutions. For this edition, “Preportr” has found that an amount of 40 million Euros has been granted/contracted by the Ministry of Transport and the Ministry of Education to the companies that have directly financed PDK’s electoral campaign during 2009. “KOHA Ditore” has reported months ago on how certain companies have benefitted millions of Euros and are listed in official reports of CEC as financers of PDK’s electoral campaign in 2009. The Weekly “Prishtina Insight” in one of its editions , had reported on companies close to Minister of Transport Fatmir Limaj which had won tens of millions of Euros from road construction. From these three media only one can conclude that about 63 mil Euros, from MTPT and MEST, have been contracted to the companied connected to PDK, as financiers of electoral campaign or close to people within party structures.

Investment in Ministers’ regions and PDK strongholds

When looking into regional distribution, Drenica comes clearly as a region which has benefitted mostly from investments of MTPT. Moreover, there have been more investments in the small town of Skenderaj than in the capital of Kosova. In the two year period, the MTPT has invested about 18.7 mil Euros, while in Skenderaj nothing less than 19 mil from the state budget. In Drenas, another small town in Drenica, the amount invested between January 2008 and December 2010 almost equals investments in Prizren. In larger towns, like Peja and Mitrovica, the investments are clearly much lower than in few clearly smaller municipalities.

Concerning investments made my MEST, there is a more proportional distribution among Kosovo municipalities. Nevertheless, the municipality of Theranda, hometown of then Minister of Education Enver Hoxhaj, has benefitted millions of Euros more than larger municipalities like Peja, Mitrovica, or Gjakova. “Preportr” has analyzes the overall distribution of public investments made by these two ministries among Kosovo municipalities.

Of total, municipalities known as traditional strongholds of PDK and those with considerable electoral interest have benefitted more compared to municipalities with larger number of inhabitants.

Based on public investments made, municipality of Skenderaj sits atop of much larger municipalities such as Prizren, Mitrovica, Peja, Gjakova. Nevertheless the graph remains the same as there are no drastic differences between the municipalities. However, a large portion of the bids has been contracted to companies close to PDK, or consortia that include at least one company from traditional strongholds of PDK. Clearly, the contracts assignment has been conducted based on political interests. Therefore, these investments do not have the stated effect for the areas since

the winning companies are those close to the political power. This way, the funds dedicated to the municipal investments, even in those not traditionally known as PDK ones, are diverted to the municipalities that have always voted this party. The graph also shows that small municipalities like Theranda, Skënderaj, or Drenas have either even or exceed amounts of public investments in Mitrovica, Gjakova, or Peja. Therefore it is clear that we are dealing with certain benefits from public investment projects, but also profiting of companies with certain origins from such projects depending on the interest of the political party in power.

Ministries reject meeting “Preportr”

“Preportr” has requested the Ministry of Transport and Ministry of Education to provide access to bid documents, in order to gain a complete and clearer insight on procedures according to which contracts have been assigned by these two ministries during 2008 – 2010. Preportr’s aim was to verify the compliance of these bids with the provisions of the Law on Public Procurement and to find out if these two ministries had previous capital investment plans before deciding to invest on certain regions of the country. In spite of official request made for meeting and following up for three weeks the departments of procurement in both ministries did not respond to “Preportr’s” request.

Public Procurement – the most affected sector by corruption

According to the Kosovo Anti-Corruption Agency the public procurement is the sector mostly affected by corruption. The Agency has continuously stressed in its reports that public procurement in Kosovo in most cases violates the law to benefit certain persons or companies. “Deeds or misdeeds in most cases refer to clear violation of procurement procedures as prescribed by the law through assignment of contracts that favor certain economic operators, and eliminating the operators that fulfilled the criteria of the call for bids file” says in Agency’s report for 2010. Senior Investigations Officer at the Agency, Blerim Kelmendi, informed “Preportr” that most frequent form of corruptive action regarding public procurement relates to abuse of official duty, favor certain companies over the others, massive falsifying of documents, abuse of official duty by procurement commissions, falsifying the diplomas of technical staff, falsifying authorization of international enterprise representation or falsifying their licenses, and bribery. The Agency’s report for 2010 supports the claims of this officer. The report claims that: “during investigations proofs have been found that indicate massive falsification of official documents that intend providing certain economic operators with public contracts. In cases they even use fictional names of professional personnel and falsify contracts with specific persons that have never been employed by those economic operators, or falsify reports for completion of duties that have not been completed although the contracting authority has completed

the payment. Equally problematic is proving and verifying the completion of the duties towards the state as such documents have also been falsified continuously. Bribery takes place mainly in cases when favors are other benefits are to be exchanged”. Since its establishment, the ACA reports have stressed that public procurement is the most affected sector by public funds abuse. The 2009 report concludes a situation similar to one in 2010. It states that “most often, open violation of public procurement procedures and the Law on Public Procurement has taken place by favoring certain economic operators for public contracts and eliminating other operators in spite of fulfilling the criteria ascribed by the call for bid file.” Also the 2008 report of the Agency concludes that the situation within procurement system is very grave with constant violation of the law in power. “Application of procurement procedures by the departments violated the law on public procurement; frequently the law is not applied at all, official documents are falsified (such as reports on procurement procedures), payments being made prior to completion of the assignment or before they have even started. The most scandalous part of this is that such documents are approved by the managers of the institutions” states the Agency report.

Results of positive investment contested

Those closely informed on the government’s public expenditure state that capital investments made by these two ministries have not generated the expected results. They are skeptical with the manner how these investments were made and where the money has been invested. For them, the governments until now, and especially the last one, did not have a specific economic development plan or a feasibility study which would determine the investment priorities. Lumir Abdixhiku, director of Riinvest Institute, disagrees with the way how millions of Euros have been expended for capital investments. He considers that the justifications of the government officials that the public funds have been invested in the areas that have not seen any investment for years are not just since the public funds must be invested projects that can regenerate them. “The government’s argument state that, the regions where investments were made, the regions they come from, have historically been the least developed. However, the capital investments are made wherever there is regeneration potential” states Abdixhiku. For the Chair of the Kosovo Chamber of Commerce, Safet Gërxhaliu, public investments were made without a concrete plan and as such have ended in the pockets and regions close to the politics. “Kosovo lacks a development plan. Had we a development plan, investments would generate economic development and reduce unemployment” states Gërxhaliu