Is Russia Ready for the WTO?

The Financial Times has a piece today about Russia, already a member of the G-8, succumbing to massive corruption which puts it on a world scale down with Nigeria and Sierra Leone, according to Transparency International. The OECD study on Russia simply describes the country as:

Bribing tax, fire, construction and almost any other inspectors has become a regular feature of doing business in Russia and kickbacks to officials in return for awarding lucrative state contracts have become particular prominent.

Large Russian businesses regularly contribute to various charity funds run by state enforcement bodies. However, the heaviest burden falls on small and medium-size business, which report that 8.5 per cent of the cost of doing business in Russia goes towards overcoming administrative barriers. "Building an honest, effective public administration is arguably the most important structural reform priority in Russia," the OECD finds.

The pervasive nature of corruption in Russia means that it affects every aspect of everyday life from renewing a passport to dealing with traffic police, according to the report.

As one Russian observer put it: "In the past you had to pay the bureaucrats to bend the rules. Now you have to pay them to do their job."

A joint survey by the World Bank and the European Bank for Reconstruction and Development has also recorded an increase in the number of "unofficial payments" for licences and state procurement contracts. The OECD has the following summary of its findings, enumerated by the FT:

....instead of improving the poor quality of public administration, Moscow has focused more on amassing assets in strategic sectors of the economy, increasing corruption and opacity. The OECD attributes some of the "pathologies" in Russian bureaucracy to its Soviet inheritance, but others have been developed over the past 15 years.

The problem of weak institutions in Russia is combined with unchecked powers in some officials. "The patronage dispensed by individual officials – particularly those managing state property or large financial flows – can be enormous, [allowing them] to pursue narrow private or political ends." In some cases, "the ties between state bodies and private sector interests are so close as to raise questions about state capture," the OECD says.

Government attempts to reform the civil and administrative services have been so far limited to reorganising structures and redefining roles, rather than developing civil society institutions. "The biggest single weakness of government’s efforts is the lack of attention devoted to citizens’ ability to defend their rights when in conflict with the bureaucracy," the OECD says.

The expansion of state ownership – one of the main trends in Russian economy – will contribute to corruption, rent-seeking and opacity, it says.

Looks like the poison that venomous little KGB chief Putin is administering to his political enemies is also circulating, in a metaphorical manner, throughout the Russian economy.