- Title: RUSSIA/USA: Entrepreneurs face difficulties and danger doing business in Russia
- Date: 1st December 2011
- Summary: (SOUNDBITE) (Russian) TINA KANKIA, WIFE OF JAILED BUSINESSMAN STANISLAV KANKIA, SAYING: "He had his own business which brought us our main income. After his arrest, naturally we lost both the business and everything, and now, for more than one-and-a-half years he's been in jail. At the moment he's in (pre-trial detention centre) Matrosskaya Tishina. He's very sick, he's lo
- Embargoed: 16th December 2011 12:00
- Keywords:
- Location: Usa, Russian Federation
- City:
- Country: USA
- Topics: Business,Conflict,International Relations,Economic News,Politics
- Reuters ID: LVA2GD0T0CZSZA52OGT63H0I65U8
- Story Text: With more than 20 years of experience as a market economy under its belt, Russia's business activity continues to grow and is a field considered ripe for investment. Many entrepreneurs and small business owners, however, say that it is still a difficult and oftentimes dangerous place to do business.
Russian authorities say they want to raise the country's profile for doing business and to encourage Russian entrepreneurs. Russian president Dmitry Medvedev took office pledging to tackle pervasive corruption, reform law enforcement and the courts, improve the rule of law and work to turn the capital Moscow into a global financial centre.
While Russia's profile for ease of doing business has risen modestly in global rankings, entrepreneurial rights activists say that it remains a risky place to have a company.
Business Solidarity, a non-governmental organisation that works to protect the rights of Russian businesspeople is headed by Yana Yakovleva, herself an entrepreneur who has spent time in jail after refusing to pay bribes to police officials.
"Yes, in Russia you can make money because Russia is an absolutely empty market, where you can do lots of business. In Russia there is virtually nothing. But that money that you'll earn, well, that will be a big risk," Yakovleva told Reuters, adding, "Perhaps nothing will happen with you, but maybe something will. Anticipating that is absolutely impossible, and you can't put your hope on the protection of the government. The government will not protect you, and more than that, you will have to protect yourself from the government."
For many in Russia, opening a business isn't just a question of red tape and hassles. For many it means a legal sentence, and, all too often, jail time.
Stanislav Kankia, a businessman in his forties, was accused of fraud after a conflict with his bank. His wife Tina Kankia says that when Stanislav discovered instances of fraud on the part of the bank, bank employees felt threatened, and a criminal case was opened against him.
Now Kankia, 47, is in a pre-trial detention centre where he has suffered more than four strokes that have destroyed his health.
"He had his own business which brought us our main income. After his arrest, naturally we lost both the business and everything, and now, for more than one-and-a-half years he's been in jail. At the moment he's in (pre-trial detention centre) Matrosskaya Tishina. He's very sick, he's lost his health," Kankia told Reuters, outside of the detention centre where her husband was being held, adding that she had been unable that day to deliver necessary medicines to her husband.
Kankia is not the only entrepreneur who says he has fallen victim to a combination of corrupt courts, police officials and lawyers in Russia.
Some entrepreneurs in Russia, however, are fighting back.
"Rus in Jail" is a group started by journalist Olga Romanova whose husband Alexei Kozlov was imprisoned in an apparent case of government-sanctioned corruption on fraud and embezzlement charges in 2008, according to media reports. Romanova began the group earlier this year in an attempt to provide support for jailed entrepreneurs, their families and others who say they are victims of corruption in Russia's legal system.
Group members, including Tina Kankia, visit people in jail and at courthouses, work to support each other and engage in protests.
Romanova said corruption in Russia's legal system is endemic and that policemen and judges work in tandem to steal from businesspeople.
"Security authorities - the police, judges - realized that they can (persecute businessmen). You can do this, and this is a wonderful way to earn a living. In other words, they were shown a big, fat herd of sheep that they can slaughter, and they slaughter us," Romanova told Reuters.
Another Rus in Jail member, however, said that the problem for Russian entrepreneurs could not be wholly blamed on corrupt officials.
"The situation in Russia depends not just on law-enforcement bodies, judges and prosecutors, it also depends on civil society and on businessmen themselves. If businessmen play by the rules of corruption, and pay bribes to do their business, then they themselves finance corrupt officials, these werewolves in lapels, and crime. And if we want everything in Russia to be according to the law, if we want to live like they do in Europe, then our businessmen must refuse to pay bribes," former businessmen and founder of prisoner rights website "Gulag.net" Vladimir Oreshkin told Reuters.
Russia continues to get low rankings for corruption in international indexes. Russian firms are the most likely to pay bribes while operating abroad, and the most corrupt sectors are public works contracts and construction, according to Transparency International's latest "Bribe Payers' index", which ranked Russia 28th out of 28 countries indexed.
The situation for Russian businessmen, however is improving. According to World Bank, Russia is among the top 25 economies that have improved their business regulatory environment over the past six years. In 2010-2011 alone, Russia rose from 124th to 120th place in World Bank's global rankings on ease of doing business.
"There is a recognition at the level of the government that over the last ten years or so, it has been a very difficult business environment, that there are high levels of corruption, that there is excessive regulation and red tape, but, coupled to that, there are efforts underway to improve the quality of the business environment and we begin to see this in the indicators that we track," World Bank Group director of Global Indicators and Analysis, Augusto Lopez-Carlos told Reuters.
Yakovleva, whose NGO Business Solidarity has helped with pushing through legal reforms that protect Russian entrepreneurs, agreed that Russian laws are now more supportive of small business owners. She remains concerned, however, that the reforms are not wide enough, saying distrust of entrepreneurs remains widespread in Russia, and that many in the legal system have no respect for the rule of law.
With opinion polls predicting another four years of United Russia rule in Russia's parliament and return to the presidency for current Prime Minister Vladimir Putin, it seems that a change in Russia's ruling authorities is not on the near horizon for the country--something Yakovleva says is bad news for business in Russia.
"Unfortunately, our entire system needs reform, needs economic reforms, but so far we don't see any of this happening and in as much as the authorities aren't changing, you can't expect some new important and needed reforms," Yakovleva said.
Russia holds parliamentary elections on December 4, and opinion polls conducted by the independent Levada Centre have indicated that Putin's ruling United Russia party, although declining in popularity, will still win a majority in the 450-seat lower house of parliament.
Although Putin has pledged to diversify the Russian economy away from the energy sector and reduce corruption, widely regarded as one of Russia's worst systemic problems, he has failed to deliver on those promises. Contrary to his vows to improve the investment climate, several corporate conflicts during his presidency led to major foreign firms losing out to their Russian partners in lucrative joint projects.
Critics say Putin drove the legal campaign against the owner of the Yukos oil company Mikhail Khodorkovsky, who is serving 13 years in prison following convictions for financial crimes in two trials that the former tycoon's supporters say were politically-motivated.
As Russia's most popular politician, Putin is almost certain to win a newly extended six-year term. He could also then run for another term from 2018 to 2024, a quarter of a century since he rose to power in late 1999. He would turn 72 on October 7, 2024.
Russia, in World Bank's 2011 report, ranked at 120th out of 183 economies behind other former Soviet Union members including Georgia (16), Latvia (21), Kazakhstan (47) and Azerbaijan (66) in ease of doing business. - Copyright Holder: REUTERS
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