How corrupt are you? -Russia in reality

source: russiamonitor.blogspot.com

I read that the Swedish minister of Foreign Affair, Carl Bildt, whom I am also a big fan of, this week meet with Alexey Navalny, a Russian political and social activist. Mr Navalny blog has quickly become one of the most followed one with 150 000 visitors every day. He has managed to bring quite some publicity to the law enforcement agencies in the country. The subject for his blog is corruption that also regarding to President Medvedev is one of the country’s biggest problem. Navalny and his collaborators are with legal instruments aiming to minimize the corruption as much as possible. His contribution is important in order to improve and stabilize the climate of business that is crucial for the modernization of the country, as it requires foreign investments. Still regardless to whether a company is owned by shareholders or a state, they should be playing on the same field.

Corruption Index 2010

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source: worldofgorman.files.wordpress.com

This week Russia took a major step forward in its three-year effort to join the Organization of Economic Cooperation and Development, OECD, as they signed onto the Western-dominated forum's anti-bribery convention at a ceremony in Paris. That a reform of the legal system against corruption now is on the political agenda also for the Russian leaders is obviously positive. However while these anti-corruption efforts overall appear to be increasing, so are bribery and fraud. Still a huge amount of money is being stolen, “corrupt officials steal’s practically every fifth ruble from the country's defense budget through kickbacks and bogus contracts”, according to chief military prosecutor Sergei Fridinsky. The fact that bribery and corporate fraud have increased in Russia is a fact and even if most large companies have established some kind of anti-bribery measures foreign companies are often forced to take part of the corruption or to withdrawal. The managing Director of IKEA Russia, Per Wendschlag spoke recently to media: 'We must not tolerate corruption, we have very clear policies and regulations." (read more about Ikea and its restrictions for doing business in Russia here.)

The trend of globalization is forcing countries to adapt and to live up to its requirements, whereby Russia is not an exception. The globalization gives opportunities- but at the same time it is also easy to fall behind which it seams like Russia has if you compare the country to other countries from the BRIC’s. The price-earnings ratios in the BRIC countries are, on average, 50% higher than those in Russia. The country's ratio of market capitalization to GDP is two to three times lower than in the most developed G20 countries, and lower also than in Latin America and in Eastern European countries like Poland. Yet Russia experienced $21 billion of capital outflows in the first quarter of this year. Other obstacles for business include bureaucracy, infrastructure and the occasional shutdowns of the stock market. Indeed the upside potential for Russia is for these reasons large but I believe that the corruption and fraud will continue to be a problem until society begins to take it seriously.

Many people do still question Russia’s ability to deal with the problem and so do I. I wander why more people do not show anger when corrupt politicians do receive bribes or when public money is being stolen and ended up in someone’s pocket. The Russian people need to realize that corruption is a real threat to their society as it prevents people from getting better opportunities and contribute to social and economic instability. Corruption makes the country weak in every sense and sooner or later Russia will due to pressure be transformed.

source: cartoonstock.com