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Moscow Times
October 18, 2001
Borodin, Poll Allegations Hurt Russia Rating
By Megan Twohey Staff Writer
"Corruption is not just a collection of criminal activities in Russia, it is a perverse system of governance," according to a new report on global corruption released this week by Transparency International.
Take, for example, Pavel Borodin's safe return to Russia after being arrested in New York on charges of embezzlement. Or the bribery of doctors at free state hospitals and the reported incidents of fraud in the March 2000 presidential election.
The Global Corruption Report 2001's harsh assessment of Russia -- which experts say may affect foreign investment here -- is backed up by a compilation of surveys that rank levels of corruption in countries worldwide. Russia's rankings vary from poor to abysmal.
Russia comes in at 81 in Transparency International's Corruption Perceptions Index, which ranks 91 countries from the least to most corrupt places to do business. The index, released last summer, draws on 14 sources of data from several economic institutions and is based on the perceptions of business people and risk analysts.
Finland topped the list as the least corrupt country, while Russia is sandwiched between Pakistan at No. 80 and Tanzania at No. 82.
In Moscow alone, more than 15 percent of the 9 million-strong population had to deal with bribery in 1999, according to the International Crime Victims Survey, which looks at households' experience of crime, the police, crime prevention and feelings of insecurity.
The survey and index are among a number of rankings found in the appendix of the report.
"The appendix is the most important part of this report," said Yelena Panfilova, director of the Center for Anti-Corruption Research and Initiatives, the Russian branch of Transparency International. "One survey can be accused of being biased, but this report includes all possible research and studies, so you can make comparisons."
The analysis of corruption in Russia is contained in a 13-page section on the Commonwealth of Independent States.
Among other things, the chapter highlights some of the major corruption stories in the news, explains how certain individuals, groups or firms have become so powerful that they influence the formation of laws, rules and decrees and outlines reported incidents of election fraud.
"In Russia and Ukraine, [electoral corruption] guarantees that the state remains captured by the ruling elite and its kleptocratic oligarchy," the report said.
The decision by the government to post bail for former Kremlin property manager Borodin, who was charged by a Swiss court, "confirms that the Kremlin was worried about what Borodin could tell investigators," the report said, citing analysts.
The report also points out signs of counter-corruption in Russia, like reshuffles in the Cabinet. The report suggests that Putin, in an attempt to root out corruption in the security forces, filled the security posts in the Cabinet with friends and allies.
The Transparency International study is one of several that have given Russia low marks. The country received the worst ranking in this year's Opacity Index by PricewaterhouseCoopers, which measures the effects of opacity -- the lack of clear, accurate, formal, easily discernible and widely accepted practices in the world's capital markets -- on the cost and availability of capital in countries worldwide.
Such studies play a role in how foreign investors regard Russia.
"In Russia, you can't rely on official documentation or paperwork, so I read those indexes with interest," said Tanya Malcolm, a research assistant at the London-based Control Risks Group, which advises foreign businesses interested in setting up shop in Russia on the risks of doing business here.
"Potential foreign investors pay attention to these reports and rankings," said Andrew Somers, president of the American Chamber of Commerce in Russia. "They often serve as a red flag, show whether Russia is moving in the right direction and indicate to investors the areas they need to steer around."
Still, Somers said, the findings must be taken with a grain of salt. "Often these reports over-generalize, contain outdated information ... and do not reflect the dynamics that could be under the surface that are driving corruption in one way or another," he said.
Jen Tracy, who authored the sections on Russia, acknowledged that the format of the report forced her to use generalizations about corruption.
Nonetheless, she said, it wasn't a difficult decision to draw attention in the report to companies like Gazprom, which has come under fire for alleged asset stripping by its management.
"How powerful Gazprom has become and how little power government officials have over such a monster company shows the problem of oligarchy," she said by telephone from Sarajevo, Bosnia-Herzegovina.
Tracy's sentiment is echoed in the conclusion of the CIS chapter. It says that how Putin deals with large corporations will indicate "whether the country will be able to tear itself away from the post-Soviet crony capitalism that has strangled the economy and deterred investment for a decade."
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