Essay: Russia's unfriendly business environment
The Kennan Institute indicates concerning Russia:
| “ | Albats suggested that democracy should be viewed as a commodity that needs to have buyers. In order for democracy to develop in Russia, there must be a class of "consumers of democratic politics," consisting primarily of people involved in small and medium businesses. Unfortunately, Albats warned, this constituency is in decline in Russia. The number of people employed in small and medium business has declined from a peak of 8.9 million in 1995 to only 6.3 million in 2001. At the same time, the proportion of bureaucrats relative to the population has been increasing: In the last days of the Soviet Union, there was one bureaucrat for every 75.6 citizens, and in Russia today there is one bureaucrat for every 49.6 citizens.
Thriving in a system rife with corruption and little accountability, Soviet-trained bureaucrats have stifled the growth of small businesses in Russia, according to Albats. She noted that the majority of regulations existing in Russia today were issued not by the Duma or the President, but by various state agencies—between 1991 and 2001, Russian federal ministries imposed 1474 regulations on business, compared with 156 passed by the legislature. Albats contended that bureaucrats find it easier to control several large businesses than many small businesses, and have set up a regulatory framework to reflect that preference.[1] |
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See also: Vladimir Putin is a corrupt kleptocrat and an authoritarian
Contents
Russia's poor business climate, low labor productivity and weak property rights
See also: Low labor productivity is one of the most acute and important problems facing Russia
In 2018, the Organisation for Economic Co-operation and Development (OECD) states concerning Russia's low labor productivity and its poor business environment:
| “ | Labour productivity is a key precondition for high growth of output, employment and wages and central to long-term growth in living standards...
Earnings quality is close to the bottom of OECD countries, partly due to low labour productivity resulting from a low capital stock in the economy. More than 30% of workers face high job demands with few job resources to meet these demands... Sanctions and other import barriers have hampered technology transfers from abroad. A poor business climate, in particular weak property rights, impedes innovation.[3] |
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In 2023, the USA was over 200% more productive in terms of labor productivity than Russia when measured using purchasing power parity.[4][5]
For more information, please see:
Russian corporations hit by a tsunami of bankruptcies
On March 7, 2024 Newsweek reported:
| “ | Russia has seen a sharp spike in corporate bankruptcies, according to a report that comes as Vladimir Putin looks to tax companies more to pay for his social program and the sanctions-hit economy continues to face turbulence.
The business newspaper Kommersant reported that in the first two months of 2024, corporate bankruptcies had increased by more than a half compared with the same period last year—and experts predicted an increase in insolvencies in future. Bartosz Sawicki, market analyst at Conotoxia Fintech, told Newsweek Russian firms are facing refinancing issues "as the effects of monetary tightening are starting to kick in." Kommersant said that in January and February this year, 571 and 771 companies respectively, were declared bankrupt—57 percent and 61 percent more than in the same months in 2023, citing court records in the country's Unified Federal Register of Bankruptcy Information.[7] |
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A 2024 Business Insider article indicates:
| “ | "Companies are experiencing problems with refinancing as the effects of monetary tightening are starting to kick in," Bartosz Sawicki, a market analyst at Conotoxia, a Polish fintech firm, told Business Insider.
Apart from war-related sectors such as arms production, the Russian economy looks "far from rosy," Sawicki said. "Although Russian companies are doing their utmost to dodge sanctions, international trade has become a significant issue for plenty of them," Sawicki wrote in an email. "The private sector also feels the pressure of macroeconomic instabilities, which deepen as the economy is on the verge of overheating," he added. It could get worse. Russian President Vladimir Putin's regime is coming under tightening Western trade restrictions, including secondary sanctions against companies doing business with the country. Putin has also pledged to give Russians billions of dollars in lifestyle upgrades weeks before they head to the ballot for the country's presidential election later this month. While it's unclear where the extra budget for Putin's promises will come from, the Russian leader has proposed changes to the tax system that are designed to result in more taxes from high-income individuals and businesses — which could put even more pressure on private companies.[8] |
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Many high-income people are fleeing Russia
- Russia is ‘hemorrhaging’ millionaires, June 2022
Russia and investment capital: Investopedia indicates that "Investing in Russia Is Risky Business"
- Why Investing in Russia Is Risky Business, Investopedia
See also
User:Conservative's essays
References
- ↑ Bureaucrats and Russian Transition: The Politics of Accommodation
- ↑ Why Is Russia So Unproductive?, Moscow Times, 2019
- ↑ How does Russia compare?, Organisation for Economic Co-operation and Development
- ↑ Statistics on Labour Productivity, International Labor Organization website
- ↑ List of countries by labor productivity (Ranked using purchasing power parity)
- ↑ Russia Hit By Tsunami of Bankruptcies, Newsweek, March 7, 2024
- ↑ Russia Hit By Tsunami of Bankruptcies, Newsweek, March 7, 2024
- ↑ [Russia's economy appears resilient, but companies are going bankrupt by the hundreds], Business Insider, 2024
