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Russia’s Small Businesses Destroyed By Red Tape

From a completely oblivious Associated Press:

Russia’s small businesses squeezed, eye exit

By NATALIYA VASILYEVA | September 3, 2013

MOSCOW (AP) — … There are growing concerns that Russia’s burdensome bureaucracy and corruption are holding back the country’s economy, which has become increasingly reliant on massive oil and mining companies…

The country’s economic growth has been on a downward path since the start of last year. The Economic Development ministry estimates it will only be 1.8 percent this year — the slowest rate since 1999…

That’s terrible. Of course, out GDP for the latest quarter was only 1.7%, that is until the Obama administration decided to use a new measuring stick.

With Russian oil and gas exports slowing, the best hope lies with small and medium-sized businesses… But businessmen… claim the government isn’t backing its words with action.

When President Vladimir Putin was campaigning to win his third term as president in 2012, one of his promises was to increase the pay and benefits of state employees — who make up to 40 percent of Russia’s total workforce. Soldiers saw their pay more than double last year, while teachers got a 14 percent raise.

What is the Russian word for ‘stimulus’?

While this lavish spending has improved the lives of millions of Russians [who are state workers], it has put a strain on the country’s budget.

The private sector has seen its tax burden increase. The government has doubled employers’ contributions to the state-run pension fund, which small business association Opora estimated had caused about half a million small businesses, or 15 percent of the total, to shut down.

And yet we were told it would help our economy tremendously when Obama did it.

"Putin is trying to understand what’s going wrong, but he doesn’t get it," said Yana Yakovleva, who heads the advocacy group Business Solidarity…

That sounds vaguely familiar, too.

"Huge parts of the economy have gone back to their more or less previous state where they were controlled by a very, very small group of people," said Bernard Sucher, an American who has been running businesses in Russia since 1993. "This means that Russia is internally non-competitive and, of course, in global terms it becomes less and less competitive as an economy…

In a survey of 6,000 businessmen conducted last year by Opora, a business advocacy group, 42 percent of respondents reported "severe difficulties" in starting a new company. That’s not just due to the usual struggles, such as finding new customers, but the added cost of corruption — 27 percent of the respondents said that frequent inspections by regulators led to bribes being paid…

In our country these bribes are paid directly to the government in the guise of taxes and fines.

Boris Titov, who was appointed by Putin last year as an ombudsman for business people, said he was amazed to learn with what disregard many police officers and prosecutors view private business owners.

"They often doubt that doing business is necessary at all and that the country needs a class of entrepreneurs," Titov said at Russia’s top economic conference in June.

This view is largely a legacy of the Soviet Union, when people were sent to prison for trying to make profit. The murky privatizations after the 1991 Soviet collapse reinforced the idea that fortunes were never made honestly.

Funny, that’s the same view that the neo-Communists have in our country. Especially those in the administration.

The difficulties of doing business in Russia are pushing many to try their luck elsewhere. In one week in July, two of the five most-read stories on the website of the popular business weekly Kommersant Dengi were about how to settle abroad…

Well, don’t think of coming to the US.

This article was posted by Steve Gilbert on Tuesday, September 3rd, 2013. Comments are currently closed.

2 Responses to “Russia’s Small Businesses Destroyed By Red Tape”

  1. Oligarchy has no boundaries.

  2. Right of the People

    “What is the Russian word for ‘stimulus’?” – Stimuluski?




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