Russia will not abandon market reforms

Boris Titov: "Foreign entrepreneurs in our country have it much better than our domestic small and medium enterprises. The law enforcement system protects them much better." Source: Mikhail Mordasov

Boris Titov: "Foreign entrepreneurs in our country have it much better than our domestic small and medium enterprises. The law enforcement system protects them much better." Source: Mikhail Mordasov

Business ombudsman Boris Titov tells RBTH why Russia needs an economic amnesty and how to improve the country’s business climate.

Boris Titov, owner of Russia’s largest champagne producer, is no stranger to pressure from officials. Now, in the position of Presidential Ombudsman for Entrepreneurs’ Rights, he has lobbied through the country’s first amnesty for businesspeople. RBTH spoke to Titov about what steps he is taking to improve the country’s business climate.

RBTH: Mr. Titov, you have occupied the position of Presidential Ombudsman for Entrepreneurs’ Rights since June 2012. What have you achieved in the past year, and have you managed to improve the business climate in Russia? 

Boris Titov: I cannot judge whether I succeeded in improving the business climate or not; only the entrepreneurs and citizens of Russia can do that. Unfortunately, we still have quite a lot of problems with the business climate in our country. 

RBTH: How many complaints has your administration received from entrepreneurs?

B.T.: To date, we have received more than 4,000 complaints. This was a huge amount, which required creating an institution for the handling of complaints. In the past year, we have established such a system. Its main distinguishing feature is that it is the most publicly open institution of all that we have in Russia.

The fact is that, in addition to our small organization of 30 people, regional ombudsmen with their own small administrations work in 68 regions of Russia. Many of these work on a voluntary basis, without a salary.

RBTH: What is the most difficult part of dealing with entrepreneurs’ complaints?

B.T.: It is very important to distinguish between those who are right and those who are wrong. We receive very many requests from people who are trying to use us in order to improve their own situation.

Our public procedures center, Business Against Corruption, must first determine the “purity” of the request. More than 50 law firms help us it in this, providing free legal assessments of requests and consulting services to entrepreneurs. 

 RBTH: Can foreign entrepreneurs apply to you?

B.T.: Yes, for this we have a special ombudsman for the protection of foreign investments. However, we received much fewer applications from foreign entrepreneurs than from Russian ones.

Foreign entrepreneurs in our country have it much better than our domestic small and medium enterprises. The law enforcement system protects them much better.

RBTH: When the draft of an amnesty for entrepreneurs convicted of economic crimes was being prepared, around 100,000 people were supposed to be released. In fact, it turned out to be a little more than 1,000 people. Why such a big difference?

B.T.: We expected that the criminal cases would be closed on a massive scale and all the remanded prisoners would be released. However, in the process of preparation of the amnesty bill, the number of criminal articles covered by it was reduced.

Thus, convictions under Article 159 of the Criminal Code that deals with fraud were not subject to the amnesty. The lion's share of entrepreneurs — more than 60 percent — was condemned under it.

The second reason is that the amnesty applied to entrepreneurs who had already paid off the damages they caused. How is this calculated? We believe that only the court can determine the extent of the damages, but law enforcement authorities decided to calculate damages on the basis of what was written in the investigation reports.

What the investigators wrote based on the verbal claims of the victims is considered the amount of damages, whereas the entrepreneurs are refusing to return the money, because, in their opinion, the claimed amounts were never proven in court.

RBTH: How different is the result of the amnesty from what you initially conceived?

B.T.: The amnesty was necessary for two main reasons: first, for humanitarian reasons, so that the entrepreneurs could get back to a normal life and to their families. This is already a positive achievement of the amnesty, no matter what the volume of people affected.

Second, this is also a signal from the authorities to entrepreneurs: “We have made some mistakes, we are fixing them now, we need business, and we do not see a future without the market economy.”

RBTH: Even despite the fact that so few people have been released?

B.T.: It is mostly the politicians who talk about numbers. For entrepreneurs, the important fact is: “Now it is not so easy to initiate a criminal case against me.” This amnesty was a signal of positive changes in the country, showing that it is safe to do business here. However, this is not enough.

The Strategic Initiatives Agency is already operating to ensure favorable treatment for business. As part of the SIA, ten roadmaps have been created to improve customs administration, to ensure access to the energy infrastructure, to support access to foreign markets, to promote exports, etc.

RBTH: You have also proposed an amnesty for illegal migrants. What will this achieve?

B.T.: If we suddenly deport all the migrant workers, the economy of the country will just crumble! Today, Russia desperately needs workers. Approximately every 15th job is taken by a migrant. Taking into account the demographic pit into which Russia had sunk in the recent past, the need for workers will only grow. And who will fill this need?

If we want our economy to develop at all levels, there should not be any shortage of specialists. Migration is actually one of the factors that should be used to stimulate economic growth.

We need to build a system in which job vacancies are placed on special sites and initially provided to the citizens of Russia. If within two months none of our compatriots applies for a specific job, the employer can attract a foreigner.

The most important thing is to ensure proper procedures and not to make them complicated.

RBTH: How do you see the further development of business in Russia?

B.T.: Russia will not swerve from the path of market economy. Russia is focused on this, and it has no other way to stimulate the growth of entrepreneurship. It plans to invest and to attract investments into industry and agriculture. The country's potential here is huge.

When I speak to students of economic universities, I try to explain to them that now there is the second Klondike in Russia. There was the first one [the 1990s is meant here], and now there is a second, because we had not been working on the macro-economy for a long time.

We used to build the economy as a resource-based one, where we imported everything and produced little. For example, agriculture has huge potential, because Russia has the greatest amount of black earth in the world and the best climatic conditions for a large number of agricultural products. For now, Russia does not use all its available opportunities in a very good way. However, things are changing for the better.

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