Tuesday, July 26, 2005

Civilized Way of Bribing

Peter Lavalle also believes that INDEM estimation of total sum that Russian business spends on bribes is impossible. I wrote about it in my previous post. Only Peter’s argument is different. He views bribes as illegal taxation of the business and argues that 65% of GDP tax burden is too high. I also agree with him that a sharp 13-fold increase of an average bribe looks possible and to a certain extent realistic. I believe an average bribe became so high mostly for one reason - corruption became ‘civilized’. TV shows make us believe that corrupt officials get bribes in cash – like, a big case packed with 100-dollar bills – in exchange for a license to build a hotel in a national forest reserve. While cash bribes were quite common some 10 years ago they are extinct today when it comes to bribing high rank officials. Nowadays you give cash in an envelope to a sanitary inspector who finds rats in your restaurant. If you want to get a permission to build, for example, a hotel in a highly lucrative, but closed for construction, national forest reserve you need to find a ‘special’ (albeit very respectful and transparent) legal advice company. There for a fair fee of 500 dollars an hour, respectful lawyers will tell you that there’s a certain loophole (quite possible, created on purpose by corrupt PMs) in the legislation. Certainly, that ‘special’ legal advice company will mobilize all its best lawyers and when you sign a 900 thousands dollar bill they will present a lot of very convincing arguments why it’s legal for you (personally) to build in that reserve. Of course, if you hire a company that is not ‘special’, their arguments will not sound that convincing for a high rank official who issues construction permissions. This way the matter is usually solved. Although, in my example – construction in a national reserve – just presenting convincing arguments will not be enough. The case should go to court. For that matter you don’t even need a corrupt judge like many would think. On the contrary, an honest judge would be more desirable. In the court your side is presented by highly professional, Rolex watches decorated lawyers with Harvard degrees. The government side is presented by Mr. Petrovich who got his lawyer degree in 1954 at the Mukhosransk University. You see, Russian government bodies are so underfinanced – they cannot hire a lawyer who asks for more than 50 dollars a month. It’s highly desirable that Mr. Petrovich is rude to the judge, looses important documents, occasionally falls asleep during the hearing and suffers from senile dementia. This highly Western way of giving bribes is so impeccably civilized and transparent, no wonder more and more Russian businesses switch to it. The irony in this matter is that Russian businessmen know exactly that they are still giving good old bribes. Western businesses operating in Russia act as a crowd in a fairy tale delighted by the emperor new clothes. American, European or Japanese businesses hire a Russian – ‘a guy who solves problems’ – and are very happy with his incredible effectiveness and luck. Their only concern – legal bills are too high for such a poor country as Russia. So, when you take into consideration all the extra costs, like keeping the legal advice company, paying lawyers, paying taxes, maintaining a chain that ultimately leads to the corrupt official private account on Bahamas, etc. – it’s no wonder that the average bribe increased from $10,200 in 2001 to $135,800 in 2005.


Andy said...

I agree the 13 times increase in bribery does seem very very high. But, I don't think comparing it to taxes is the best way to go. The money from bribery works circulates around the economy and can be recorded many times, wheras money from taxes go straight to the government, and can be recorded just the once.

Therefore, whereas your tax rubles only get counted once (when they go to the government), money paid in bribes gets counted many many times - a driver pays the traffic cop to let him off a fine, the traffic cop uses the money from the driver to pay a doctor to give his son an exemption from the draft, the doctor uses the money from the traffic cop to get a prime plot of land for his new dacha, etc, etc.

Anonymous said...

"This highly Western way of giving bribes is so impeccably civilized and transparent, no wonder more and more Russian businesses switch to it".

I don't get it, so it is the West to blame for the high level of corruption in the country?? If the western way is "so transparent" why is it still so attractive? Very poor writing.

Anonymous said...

Hmmm,after being detained in Red Square for over 2 hours a couple mornings ago, I have to say it's not very civilized at all. In fact it's downright scary. My friend and I were given the grand tour of the exterior of Red Square by two sullen policemen, all the while being told that we were going to jail for not having the proper white immigration form that is given at the airport.
We were carrying all forms of needed and necessary identification stated.
I knew what was wanted, but we held out and used my cell phone connection to a Russian business associate to negotiate out of the affair. They gave up on us when we said ,just take us in, enough already. They soon disappeared.
Moral of the story, carry all the papers, not the cash.

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