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29 Mar, 2010 08:18

PM looks to get tough with bureaucratic corruption

Vladimir Putin has promised a new approach to small businesses who suffer at the hands of corrupt officials. In a landmark speech, Russia’s premier pledged to slash red tape for the troubled sector.

Every month, shops like those of Tatiana, who runs a souvenir shop get a visit from a state official. He can claim she needs a new licence to sell puppets, or the display is a fire hazard. She doesn’t have the connections to stop the probes, so has to pay the fine, or a bribe.

“There are a lot of extremely talented people in this sector, but no one helps us.”

A shop owner must sign 500 documents a DAY to comply with legislation, the head of Diva fashion stores told Reuters news agency. He adds it’s “virtually impossible for a small business to start up here.”

Small and mid-sized businesses employ two-thirds of all workers in the European Union. In Russia, the figure’s just 20%. The government’s vowed to bring that up to EU levels within a decade.

In Transparency International’s corruption index of 180 states, Russia’s slipped to 146th, below Nigeria, Nicaragua and Pakistan.

But at a meeting with small business lobby, Opora, Vladimir Putin announced a radical change.

“The system of government inspections is to change fundamentally. The number of checks will fall sharply, and unjustified inquiries banned.”

Kirill Dmitriev, President of Icon private Equity, one of the country’s largest private equity firms is hailing a breakthrough.

“Today is a very important day for small- and mid-sized enterprises. Whereas in the West, business would not be checked for a couple of years, in Russia you would have fire inspections, lots of checks, and the government wants to reduce this dramatically now.”

Putin notes local officials are the most corrupt. He promised to divert corporate tax revenues to the municipal level, giving them an incentive to be honest. But, experts warn, old habits die hard.