Opposition leader Vladmir Ryzhkov, writing in the Moscow Times:
Russians are struggling to keep their heads above the water as the crisis deepens, but bureaucrats are continuing to live as if there were no crisis at all.
While wages in the private sector have fallen on average by 17 percent since Jan. 1, bureaucrats have received a 30 percent salary increase during the same period, according to data from the Higher School of Economics. It is important to note that over the past eight years, the number of bureaucrats has grown by 70 percent to 1.7 million people. Meanwhile, the officially registered number of unemployed workers in the private sector is approaching 2 million people, although economist Yevgeny Gontmakher and other independent analysts put the number at 5.8 million. Nonetheless, the number of bureaucrats hasn’t decreased, with the exception of a few cases of symbolic reductions.
Moreover, the state’s bureaucratic machine is squeezing the private sector at the worst possible time — during the crisis. While businesses are compelled to cut back on expenses and staff as sales plummet and the inflation rate increases, bureaucrats across the country are stepping up their extortion demands on the most vulnerable sector of the economy — small and medium-sized enterprises. If bureaucratic extortion was considered more or less “a cost of doing business” during the oil-boom years, during the crisis these attacks are crippling, if not fatal.
The nongovernmental organization Business–Solidarity recently conducted a survey of businesses in 20 Russian regions regarding the current business climate. Business owners everywhere reported similar conditions: The number of inspections and cases of bureaucratic extortion and blackmail have increased since the crisis started in September.
In Krasnoyarsk, one furniture maker pays $1,000 to $2,000 under the table to get each of its products “certified.” A small Izhevsk construction company with 20 employees had to pay authorities bribes amounting to 5 percent of each deal when it first entered the market. In Krasnoyarsk, a restaurant paid several thousand rubles for a diagnostic test to determine its level of moth infestation. Of course, all of these inspections and tests can be eliminated completely if the business owners give a bribe to the right person
Officials descend upon businesses far more frequently than the legally prescribed single visit once every two years. An Ufa advertising firm that had received an order from a state agency had to pay kickbacks to officials totaling 10 percent of the contract’s value.
One of the most popular tricks used by bureaucrats over the past couple of years is to “expose” illegal software on a company’s computers and then demand large bribes to remain quiet about it. In Ufa, a polygraphic company was forced to pay 60,000 rubles ($1,680) in such a scam. Of course, after paying the bribe, the company can continue using the pirated software without fear of reprisal — at least until the next inspection.
Russia is now six months into the crisis and nothing has been done to solve the bureaucratic abuse. President Dmitry Medvedev in early August said he was “fed up with all the inspections and harassment … Authorities must stop making life a nightmare for businesses.” During Prime Minister Vladimir Putin’s meeting on Friday with leaders of United Russia, State Duma Speaker Boris Gryzlov recommended a one-year moratorium on inspections for small businesses, a policy that has already been in effect in Kazakhstan. Gryzlov was also the main supporter of a bill, introduced in September, to reduce number of inspections for small businesses 40-fold. Unfortunately, it never got past the first reading.
Gryzlov also mentioned a new bill to help support small businesses that is expected to be approved by the Duma in July. But this initiative is lacking the teeth to be effective. For example, there is no provision for punishing officials who conduct unscheduled or superfluous inspections, nor are there plans to reduce the state’s bloated bureaucracy.
The bureaucracy continues to leech off of businesses. This is a deadly virus that is destroying Russia’s already weak small and medium-sized enterprises. In the West, these businesses are the engine of economic growth, and Russia needs to promote and defend small businesses to pull itself out of the crisis, to help diversify its economy and to join the league of developed economies.