Not ready to throw in the towel

Russia's outgoing President  Dmitry Medvedev is going to come up with new policy roadmap to withstand the corruption. Source: Reuters

Russia's outgoing President Dmitry Medvedev is going to come up with new policy roadmap to withstand the corruption. Source: Reuters

Medvedev revives commitment to fighting corruption, discusses new policy roadmap.

Less than two months before leaving his presidential post, Dmitry Medvedev sat down with a team of experts behind Russia's Open Government initiative to hear and discuss measures that can help stem Russia’s rampant corruption.

There was no shortage of realism at the roundtable held at the State Road Safety Center on March 22. Four years after Medvedev became the first Russian president to emphatically condemn corruption and vow to tackle it, Russia still ranks 143rd in Transparency International’s 2011 corruption index.

“It is clear that this problem cannot be solved over a set period of time,” Medvedev said in his opening remarks. “No one – not I, nor the public – were under the illusion that it would take a few years.”

Among the steps Medvedev took after assuming office in 2008 were founding the Anti-Corruption Council and instituting a law requiring government officials and their family members to disclose their holdings. A tenth of those who filed a declaration in 2011 were found to provide wrongful evidence. “The first declaration campaign gave zero result,” Medvedev said.

More recently, his crusade featured a law that oversees government officials’ purchases and requires that anything with a cost of more than triple the family income be subject to scrutiny.

“For the first time in Russia’s 1,000-year history we have a legal framework for combatting corruption,” Medvedev said.

Preliminary results show the changes have yielded improvement, albeit meager. Having crept up from its 154th place in Transparency International’s 2010 ranking, Russia still scores below countries like Sierra Leone and Niger, where GDP per capita is a staggering $800 – a fraction of Russia’s.

“I am convinced that the authorities are committed to fighting corruption,” said Ivan Nineko, deputy director at Transparency International in Russia. “But at a local level more than anywhere else.”

Going forward, Medvedev said, the anti-corruption strategy would rest on five cornerstones.  The first one – outlined by Sergei Guriev, rector of the New Economic School – included deregulation and privatization.

“Government interference in the economy through state ownership and excessive regulations – is the main way with which a corrupt official increases his control over society and business,” Guriev said.

He said corruption was the greatest challenge for business, which imperiled the investment climate and caused massive capital flight (an estimated $84.2 billion in 2011).

“Corruption has always been there, but capital flight is relatively new,” said Ben Aris, editor-in-chief of Business New Europe. “But the big issue with corruption is how it affects small and medium-size enterprises.”

Aris argued that while privatization would be a fairly easy goal to accomplish, authorities should throw their weight behind reducing the  ubiquitous bureaucracy, where the bulk of corruption really dwells.

“If you are a small business [in Russia] with no money or connections, the bureaucrats come after you like a pack of sharks and you get eaten alive,” he said.

Meanwhile, as part of the path to deregulation, Guriev proposed a plan under which by Dec. 1 the government would provide a roadmap for privatizing selected companies. Already Medvedev is reported to have requested a number of companies to cut their government shares. Among these companies is Sberbank with a government stake of 57.8 percent

In addition to privatizing and deregulating, Medvedev welcomed a plan to use crowdsourcing to optimize the efficiency of government institutions.

Fighting high-level corruption was the second pillar of the strategy. Sergei Aleksashenko, Director of Macroeconomic Research at the Higher School of Economics, proposed establishing an independent body that would oversee corruption among the “highest echelons of authority.” The plan was partly rejected by Medvedev, who instead suggested an agency that would operate under the aegis of the Prosecutor General’s office.


“There is fear that if they establish something autonomous, sooner or later they’ll have to start keepings tabs on the highest-ranking officials,” said Nineko.

With his characteristic knack for witty commentary, Medvedev also dismissed the notion that Russians could be paid to inform on corrupt officials. To blow the whistle or not to blow is “practically a biblical question,” he said. Decades of informing on each other during the Soviet times have made Russians averse to the idea, Medvedev added.

As the third cornerstone of the agenda, panelists proposed enhancing transparency in state procurement and improving corporate governance in state-owned companies.  “I’ve spent eight years working for either a state company or a joint-stock company with a government share,” Medvedev said. “ To be honest, there is quite a lack of transparency there.”

As part of the solution, Medvedev said government officials should be removed from boards of directors of state companies. The measure would see the continuation of an overhaul in the management system of state-run companies, which Medvedev launched a year ago.

Increasing oversight of state procurement and creating a website to monitor state contracts were two other approaches Medvedev liked. Experts say that legislation and tools put in place to monitor state contracts still have loopholes, which result in kickbacks worth 2 percent of Russia’s GDP.

“To translate that into rubles, just imagine a one with 12 zeros behind it,” Guriev told the panelists.

In a country where the size of the government apparatus is as big as Russia’s, Aris said, implementation was bound to be more difficult. “We forget to account for geography. You can’t possibly compare the scale of what Russia has to do to what countries like Georgia or Norway have done.”

Other experts say the problem is with the lack of serious punitive measures. Being found guilty of corruption rarely entails anything beyond fines and administrative liability, with most jail terms being suspended. And at the meeting on Thursday, Medvedev stopped short of threatening those involved in illicit contracts with a penalty greater than losing office.

“There is no will to enforce tougher penalties,” Nineko said. “And with the change of the administration, let’s just hope that the existing measures stay in place.”

Every potential remedy, it seems, faces a form of rebuttal. The chairman of the Anti-Corruption Committee, Anatoly Golubev, insisted that all of the measures, including punitive ones, only served to exacerbate the problem. “The stakes of accepting a bribe grow,” Golubev said. “As do the price of the bribe and the network of accomplices.”

Last July, the Ministry of the Interior announced that the anti-corruption drive had pushed the average bribe paid to a government official up to 293,000 rubles ($10,000).

Golubev, whose organization works to engage the civil society in the struggle against corruption, suggested that instead of implementing “useless” ideas, authorities should facilitate public oversight through independent institutions and media. Though this was one of the five approaches furnished at the panel, Golubev said that, in the absence of public officials’ accountability, it too was ill-fated.

“The hiring policy is such that public officials do not answer to you or to me,” he said. “They only answer to whoever appoints them to office.” 

But experts at the Open Government initiative had faith in the idea of public-government partnerships. As part of another cornerstone of the strategy, they proposed fighting household corruption by raising awareness and shifting public opinion.

Household corruption pervades all of the public services sectors in Russia, according to a survey conducted by the Public Opinion Foundation (FOM). The market for corruption in the education sector – selected by the panelists as one of the target areas – accounts for $5.5 billion a year.

Medvedev warned of the need to take extra caution not to unhinge the system. “We all understand how delicate and sensitive the [education system] is,” he said. “But let’s select several regions and try a pilot project.”

The algorithm for tackling the problem is skewed, Golubev said of the efforts to implement new policies without first ensuring that public officials are accountable to the people.

“I don’t know why, but we tend to start making dinner by turning on the stove instead of going grocery shopping first,” he said.

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