Bribery a $36B Business

May 22, 2002. Page 1
By Valeria Korchagina, Staff Writer

Russians pay out a staggering $36 billion a year in bribes and unofficial charges, an amount that adds up to more than half of 2002 government spending, or 12 percent of gross domestic product, according to a study released Tuesday.

Cash or expensive presents are given for everything from better treatment at a hospital to a business license or a favorable court ruling.

"The figures could be even higher. We were using the minimum levels," said Georgy Satarov, president of the Indem think tank.

The astounding picture of widespread corruption was uncovered by Indem in the course of a two-year project funded by the Danish government via the World Bank.

The report came just days after Transparency International, the Berlin-based anti-corruption watchdog, declared that Russian companies are the most likely to pay bribes to win or retain business in emerging market countries.

The Indem study found that Russian businesses paid about $33.5 billion a year in bribes in 2000 and 2001. Some 82 percent of Russian companies and individual businessmen were involved. The bribes eat up about 10 percent of each business transaction.

Another $2.8 billion was coughed up by individuals in so-called cases of casual corruption -- payments and bribes for free services such as education and health care.

About 75 percent of the bribes paid by businesses go to low-ranking local officials, either in city administrations or the local branches of federal authorities such as tax inspectors, according to the study. An additional 20 percent go into the pockets of regional authorities, while 5 percent go to federal officials.

"But it has to be noted that a share of the bribes taken by local officials are probably passed higher up," Satarov said.

Satarov said the executive branch of power took 99 percent of bribes, a sign that the economy remains tightly regulated.

For the study, Indem interviewed 2,000 individuals, 700 companies and 23 experts, a group that included former ministers, state officials, retired law enforcement personnel and "people who are often referred to as oligarchs," Satarov said.

"It is clear that on top of the legal tax burden there is a shadow burden on companies in the form of bribes," Satarov said.

The largest share of bribes, or 34.6 percent, is collected by services such as fire and sanitary inspectors. The average bribe amounts to $2,532, and on average a business has to pay off each service agency twice a year.

Licensing authorities come in a close second place with 34.2 percent and an average bribe of $4,686. Fiscal officials like tax inspectors have 22 percent, and the bribe is $3,830.

The everyday Russian doesn't have life any easier.

His biggest beneficiary, however, is not the traffic police, so notorious for their roadside checks. They come in third place, taking $368.4 million a year from the pockets of individuals. With roughly 100,000 people -- including secretaries and other support personnel -- employed by the traffic police across the country, that breaks down to about $300 per employee per month in bribes. The average official salary of a traffic police officer in Moscow, meanwhile, stands at 2,000 rubles ($64) a month.

The most money in bribes goes for health care, costing patients $602.4 million a year. It is followed by education, where students pay $450 million a year to get into colleges and universities.

Courts, which charge for just or favorable decisions, come in fourth place at $274.5 million a year.

Satarov said the hidden costs of supposedly free higher education have grown rapidly in recent years because of the ongoing conflict in Chechnya. School provides a way out of compulsory military service for young men.

Paying doctors and military recruitment offices to get out of the army costs $13 million a year, the report said.

"Such a high level of bribes in the health and education system effectively means that part of the population simply cannot afford the services granted under the Constitution," Satarov said.

Some 11 percent of Russians do not even attempt to seek higher education fearing the costs. And at least 12 million Russians are deprived of medical care.

Satarov said the root of the problem in health care and education is low state funding.

"It [taking bribes] is just a way to compensate in order to survive," he said.

His view was supported by Nikolai Shaklein, a State Duma deputy and a member of the Duma's anti-corruption commission.

"Everyone knows that a surgeon or a doctor should be 'thanked' because he or she is poor," Shaklein said.

Meanwhile, many of the myths surrounding corruption have little basis in reality, Satarov said.

For example, a widespread belief that corruption was much higher during President Boris Yeltsin's rule is unfounded, he said. "In fact, corruption is at least the same level now or perhaps slightly growing," he said.

Russians also believe corrupt officials initiate the bribes. Instead, most survey respondents said they themselves took the lead.

But bribery, of course, seems to work. The study found that a bribe greased the wheels in more than 90 percent of all cases.

Satarov said the government did not appear to be ready to tackle the issue. While researching the study, Indem contacted the government and offered to work jointly to assess the problem and find ways to crack down. "But we were told to wait until the government figures out its own priorities," Satarov said.

http://www.themoscowtimes.com/stories/2002/05/22/001.html