SERBIA'S CAMPAIGN FINANCE: WINNER TAKES (ALMOST) ALL

UNCLAS SECTION 01 OF 02 BELGRADE 000098 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PGOV PREL SR SUBJECT: SERBIA'S CAMPAIGN FINANCE: WINNER TAKES (ALMOST) ALL REF: A) BELGRADE 79 B) BELGRADE 78 Summary -------------- ¶1. (SBU) The winner of Serbia's Presidential elections will receive more than $6 million in state funds to offset the cost of what is becoming an increasingly expensive campaign. Serbia's 2004 law on political party financing makes available public funds to offset campaign expenses of candidates in presidential elections. Losing candidates share a small share of the funds; the winner takes the lion's share. This will give the newly elected president, and his party, a tremendous financial advantage going into the next election event, the local elections set for May. End Summary. Funding for All -------------- ¶2. (U) According to the 2004 Law on Political Party Financing, election campaign costs are covered by an appropriation equaling 0.1% of the Republic of Serbia budget. The Ministry of Finance manages these funds. According to the law, the Ministry allocates 20% of the public election campaign fund equally among all political parties participating in parliamentary or local elections or all candidates in presidential elections. Following the election, the Ministry allocates the remaining 80% of the funds to the parties, in proportion to the number of seats won, or to the successful presidential candidate. If the funds paid out exceed the amount spent for the election campaign until the election day, beneficiaries return the excess. ¶3. (U) The Ministry of Finance appropriated 421.7 million dinars ($7.9 million) for the current presidential elections. Of this amount, the Ministry has already dispersed about $170,000 to each of the nine declared presidential candidates. The winner of the second round, either Boris Tadic or Tomislav Nikolic, will receive the residual $6.2 million to offset the cost of his campaign. Additional Funding Sources -------------- ¶4. (SBU) According to Belgrade Director of Transparency International, Nemanja Nenadic, parties or candidates may raise funds from private sources to finance the costs of electoral campaigns. In a January 10 meeting with poloff, Nenadic said that the amount of funds from private sources may not exceed 20% of the total funds provided from the budget. In this presidential election, that is $1.56 million. Individual contributions of private citizens must not exceed 0.5% of the 20% distribution (about $7,500),and individual contributions of legal entities or companies must not exceed 2% of that amount (about $30,000). The law requires candidates of parties to segregate campaign funds from general funds. The maximum amount that a candidate may spend in the current election campaign is $1.73 million ($170,000 from the public budget and $1.56 million from private sources). A candidate who overspends is subject to a fine of double the amount that he overspent, although, according to Nenadic, the law is not clear on this point. But is it Fair? -------------- ¶5. (SBU) Nenadic complained that the campaign financing process, while more appropriate for local or parliamentary elections where there are multiple winners, creates a "winner take all" environment when applied to presidential elections. He said that the current financing mechanism also disadvantages second-round candidates, since their expenses are far higher than those candidates who only compete in the first round. Ultimately, the loser of the second round will find himself with additional campaign expenses which will not be reimbursed. Reporting Income and Expenses -------------- ¶6. (U) The Republican Election Commission (RIK) has oversight responsibility in the financing process and candidates are obligated to submit a report on campaign expenditures to RIK within ten days following elections. The RIK appoints auditors to review reports and votes to accept auditors' findings. Since the January 2007 parliamentary elections, the government introduced a detailed election financing report, based upon a Transparency International initiative. Nenadic said, however, that the RIK's enforcement was weak, and he believed that some candidates may significantly exceed the spending amounts, with few consequences. The Actual Cost of Campaigning -------------- ¶7. (U) Only Liberal Democratic Party (LDP) candidate Cedomir Jovanovic has disclosed what he spent in the first round of the BELGRADE 00000098 002 OF 002 current election campaign (about 300,000 Euros or $440,000). The local tabloid Presse speculated on January 13 that Jovanovic had run the third most expensive campaign in the race, after Tadic and Nikolic. The same article estimated that Jovanovic's actual expenses could be more than $1 million. Other candidates will likely only announce when required by the RIK. Expenses for both Tadic and Nikolic will increase, as Serbia enters into the second round of this hotly contested campaign. Comment -------------- ¶8. (SBU) As a result of Serbia's campaign financing laws, the party which wins the presidential elections may replenish its coffers with more than $6 million in public funds. The second round loser will be out of pocket for most of his campaign expenses, and his party will be at a financial disadvantage at the start of the next campaign season, when municipal elections are held just a few months later in May. End Comment. MUNTER