MOSCOW, (RIA Novosti political commentator Peter Lavelle) - INDEM's corruption report has made international headlines for the wrong reasons. Corruption is a problem in Russia, but INDEM's report actually demonstrates that the level of corruption is on the decline since it last reported on the subject 4 years ago.
From the moment the report was released, the media has been fixated on one particular estimate: the total amount of bribes being paid in Russia - a staggering $361 billion. INDEM would have us believe the level of paid favors in the country is approximately half of Russia's GDP. While this is certainly a huge number and a sensational headline, the simple fact is that the estimated number is impossible. The traditional estimate of bribes is somewhere between 10-20% of the GDP.
To put this figure into perspective, the government collected $118 billion in taxes in 2004. Bribes are an implicit and legal tax, meaning that adding the more than $300 billion would put Russia's overall tax burden at 65% of the GDP. This figure would be even higher if regional and local taxes were included. Such a tax burden would make doing business in Russia very difficult and severely limit economic growth.
While INDEM may be mistaken, other findings appear to be quite realistic - though for different reasons not immediately apparent.
1. Over the last four years the average bribe paid by a Russian businessman has increased 13-fold, but the number of payments has declined markedly.
2. The average bribe increased from $10,200 in 2001 to $135,800 in 2005 and officials now reportedly have "price lists" for services.
3. The mid-level payment for business has risen from $22,900 to $243,750.
4. The average number of bribes paid was 20% lower than in 2001.
5. The $3.01 billion paid for state services is related to education, medical care and draft dodging. However, the one exception to the reduction in the willingness to pay a bribe was to avoid the military service, which rose by about 20%.
Oddly enough, in the absence of appropriate legislation, the level of bribery for education, health care and other core state services suggests that Russia operates as one of the most liberal free-market regimes in the world.
INDEM appears to be correct when explaining why the number of bribes paid has decreased, while the amount of the average bribe has increased, saying that businessmen are increasingly looking to the legal system to resolve problems and many are simply refusing to pay bribes altogether, the economy is growing and administrative reform has been less than efficient.
The corruption report also suggests the average citizen is more aware of the law and less wiling to pay a bribe. Considering the size of the average bribe, this form of corruption involves a very small percentage of the population.
There are other very important conclusions that can be drawn from INDEM's corruption report. Corruption in Russia has not grown ten-fold in the last 4 years, but the nature of corruption in the form of bribery has changed remarkably. The amount of a bribe is an acknowledgment toward prosperity and the risk incurred in accepting the bribe. The average level of prosperity in Russia has increased in the past four years, but not enough to justify the extraordinary rise in bribe amounts. Therefore, the most significant factor affecting the bribe amounts is risk.
If this is in fact in play, then it should be assumed that it is more risky to accept bribes than it used to be, so greater amounts must be paid to justify that risk. This would all indicate that corruption in Russia is declining.
The most encouraging news is that those demanding a bribe and those willing to pay now put themselves at greater risk.
The opinions expressed in this article are those of the author and may not necessarily represent the opinions of the editorial board.
