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Russia corruption costs $318 billion – one-third of GDP

Despite efforts of Medvedev and Putin, Russia corruption forces businesses to add as much as 40 percent to production costs.

By Correspondent / November 23, 2009

MOSCOW – Why does the price of everything, from housing to food, keep shooting up in Russia despite a harsh economic downturn that’s intensifying competition and dragging costs down just about everywhere else in the world?

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There’s a simple answer to that question, say experts: corruption.

“We estimate that businesses must add up to 40 percent to their production costs,” due to the toll of bribery, official extortion and economic crime,” says Anatoly Golubev, chair of the grass-roots Committee to Fight Corruption, who says corruption is a bigger threat to Russian society than terrorism. “It corrodes peoples’ souls and destroys the state from within.”

Surveys show that the vast majority of Russians encounter corruption at almost every turn in their daily lives, from dealing with traffic policemen to securing a place in a good school or getting a vital personal document renewed. Most businessmen maintain a permanent line in their ledgers entitled “problem solving” – a euphemism for paying bribes to inspectors, cops and local officials.

“If you’re a government official in this country, and you have some sort of power over people, you invariably use it for your personal advantage,” says Masha Lipman, an expert with the Carnegie Center in Moscow. “It’s a ubiquitous problem.”

The independent InDem Foundation in Moscow, which does the most comprehensive studies of the problem, estimates that Russians pay an estimated $318 billion in bribes each year – a whopping one-third of gross domestic product.

In a survey released last week, the international consultancy PricewaterhouseCoopers found that 71 percent of domestic and foreign companies working in Russia were victims of “economic crime” in the past year, double the rate that prevails in other BRIC countries – Brazil, India, and China – and a 12 percent jump over a similar study in 2007.

Medvedev: Corruption 'public enemy No. 1'
Kremlin leaders are acutely aware of the problem, and have frequently made it a rhetorical priority. Prime Minister Vladimir Putin, who was Russia’s president from 2000-08 and is still viewed by many as the most powerful leader in the country, insisted from the beginning of his presidency that corruption was at the top of his to-do list.

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