#2 - JRL 7071
Business elite urge Russia's Putin to curb corruption, bureaucracy
February 20, 2003
Over 20 leaders of Russia's business elite Wednesday called on Russian President Vladimir Putin to uproot corruption and curb the sprawling bureaucracy they claim is crippling business growth.
Putin summoned the tycoons to the Kremlin to discuss a sweeping administrative reform aimed at streamlining the government, while cutting into the feeding ground for corruption.
"It is impossible to uproot corruption by punitive measures alone. It is much more efficient to create conditions that would make it easier to observe rules rather than dodge them," Putin said. Tycoons like the YUKOS oil company's chief Mikhail Khodorkovsky also spoke out against corruption, which he said reaped an annual 30 billion dollars (27 billion euros) in Russia, making up over 10 percent of the national gross domestic product.
Khodorkovsky urged the Kremlin to get rid of "some of the most odious" officials whose involvement in corruption was hard to prove but whose names -- which he did not identify -- were obvious.
Khodorkovsky cited the reform within the fuel and energy ministry as a success story, as the changes turned the ministry from "probably the most corrupt one in the country two years ago" to "one of the most transparent ones."
"An equal access to the pipeline system was introduced by law, differentiated taxes imposed by officials were canceled and officials no longer had the right to set different tax levels. Similar decisions can be made in other ministries," Khodorkovsky explained.
Other businessmen, such as the head of Severstal steel producer Alexei Mordashov, called on Putin to cut into the massive bureaucracy and stringent state control which made it nearly impossible for small business to break through.
Mordashov cited the example of a businessman who was forced to collect 137 official signatures to open a chain of retail stores near Moscow.
"Big business has enough means and resources, we can afford fighting the bureaucrats. But for a normal person that is impossible. The entrance ticket to business is ever more expensive," complained Vladimir Potanin, president of the Interros holding.
In comments televised by the RTR channel, Potanin also pointed out that curbing the sprawling state apparatus would help cut state expenses, allowing the government to reduce the unwieldy tax burden also crippling small business.
Russia had set itself a target of registering four million small businesses by 2000 when Moscow took the first steps towards market reforms a decade ago after the collapse of the Soviet Union.
But the number of registered small and medium-sized firms in Russia is some 843,000 -- only a third of all corporate entities in Russia.
However, an estimated 50 percent of small enterprises operate in the shadow economy, as businesses are driven to hide from seemingly arbitrary regulations and taxes.
The tax system had been subjected to reform early last year, but the change apparently proved ineffective and insufficient, particularly in the regions where local bureaucracy maintained its stranglehold on the economy.
However, the business elite leaders were optimistic after the Kremlin meeting, apparently hoping that their complaints fell on an attentive ear.
"The state's good will was demonstrated today, and before. Business displayed it too. For example, businessmen today spoke of corruption, knowing that it is also part of that system," Mordashov said in televised comments.
"That gives us hope," he added.