The Kingdom of Bureaucracy

Business leaders admit regretfully that almost all of the economy now belongs to the state.

Privatization in Russia hasn’t happened yet.

The third annual National Business Forum opened in Moscow yesterday, attended by Russia’s political and business elite. All the speakers agreed that Russia is dominated by state monopolism, with a backward and inefficient economy. Oddly enough, senior state officials expressed agreement.

The third annual National Business Forum opened in Moscow yesterday, attended by Russia’s political and business elite. Allthe speakers agreed that Russia is dominated by state monopolism, with a backward and inefficient economy. Oddly enough, senior state officials expressed agreement.

The first speaker was Anton Danilov-Danilian, chairman of the board of experts at the Business Russia association. His speech demolished the government’s economic policies. Here are just a fewof the figures he cited. Agriculture still isn’t developing, and 70% of agricultural workers earn less than the subsistence minimum. Machine-building is stagnant, still drawing only 2.3% of allinvestment. In many important areas, prices are rising faster than the basic inflation rate: residential housing prices rose by 35% in2006, kindergarten fees rose by 28.5%, housing and communal services rates rose by 18%, electricity rates rose by 16.7%, and gasolineprices rose by 16%.

The criticism baton then passed to Sergei Borisov, president of the OPOR a Russia business association, who gave vivid descriptions of shameless pressure on small business from federal and regional authorities – from cash reigsters to criminal raiding. He emphasized that restraining the bureaucracy’s abuses and developing private enterprise is particularly difficult when opinion polls indicate that only 20% of Russian citizens support free-market values.

Viktor Pleskachevsky, president of the Professional Association of Registrars, added some statistics: over 75% of property in Russiabelongs to the state, while only 25% is privately owned. In Pleskachevsky’s view, real privatization has yet to begin. He maintains that anti-monopoly legislation ought to apply to the state when the state engages in business.

Senior Deputy Prime Minister Alexander Zhukov responded by saying that he agreed with the previous speakers on many points, admitting that something must be done about arbitrary abuses on thepart of bureaucrats and public servants.

Arkady Dvorkovich, head of the presidential administration’s analysis directorate, also expressed solidarity with the business leaders. He promised that the government will make a decision on VAT by spring: either cutting the rate or replacing VAT with sales tax. Dvorkovich said: “We regard the VAT administration situation as intolerable. It’s not just a tax problem – it’s a problem for business development as a whole. It leads to widespread corruption and outrageous overheads for exports and innovation activity, although we claim to support them.” Dvorkovich expressed satisfaction with the liberalism of the discussion, noting that the liberal speeches of state officials often conceal “large-scale corruption” and “lobbying for the interests of state capitalism.”

During a break, Dvorkovich told us that although he is generally in agreement with the forum’s speakers, he also believes that a great many things should be left as they are: “I don’t seeany need to announce a new national project for small and medium-sized business, as many propose. We can support business by using the existing instruments.”

Novye Izvestia July 11, 2007

Author: Roman Dobrokhotov
Tranlated by Elena Leonov.

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