Publication: Monitor Volume: 7 Issue: 128

A key piece of legislation–part of the Russian government’s effort to debureaucratize the economy–appears in danger, thanks to lobbying efforts state bureaucrats are aiming at State Duma deputies. As originally conceived by German Gref’s Ministry of Economic Development and Trade, the bill would have reduced sharply the number of activities requiring licenses. Such licensing has been a major factor in the country’s unchecked corruption and the correspondingly stunted growth of small businesses. According to a study done by Moscow State University, one out of ten rubles paid by Russian consumers for goods and services goes toward costs imposed by such “administrative barriers.” These costs, according to the study, amounted to 162 billion rubles (some US$5.78 billion) in the first nine months of last year alone–a sum almost equal to the cost of servicing the state’s debts during the same period, which totaled 166 billion rubles (Izvestia, June 29).

Gref’s ministry originally sought to reduce the number of licensed activities from more than 300 down to forty or fifty. Press reports on the numbers, it should be noted, have contradicted one another. According to one, there are more than 500 activities subject to licensing at the federal level alone and no one is sure of the exact total number of activities subject to licensing at both the federal and regional levels. In any case, the government, after being subject to bureaucratic lobbying from within, introduced legislation last April reducing to 104 the number of activities subject to licensing. The Duma passed that bill in a first reading last month. Along with the fact that lobbyists had managed to keep many activities on the licensing list, some advocates of small and medium-sized businesses complained that the bill also exempted a number of powerful agencies and ministries from new regulations that would restrict the right of various bodies to carry out audits and checks, which give officials a pretext for extracting bribes from businesses (see the Monitor, April 23, June 8).

Since it passed in a first reading last month, the bill has been under discussion in the Duma’s committee on property, which has been the target of strong pressure from bureaucrats who, as a newspaper put it, are “desperately fighting to keep their privileges to issue… permissions for everything, from catching stray dogs to building pipelines.” These bureaucrats have reportedly found supporters among members of all of the Duma’s factions, including the pro-Kremlin Unity party, who have put forward some 400 amendments that would put at least 150 types activities back on the list of those subject to licensing. The paper quoted unnamed Duma deputies as saying that had been offered “good money” for pushing through these “small amendments.” The real immediate aim of the lobbyists, however, may be to get the licensing bill, which is set for a crucial second reading tomorrow (July 6), taken off of the Duma’s agenda indefinitely (Izvestia, June 29).

The problems facing the government’s debureaucratization efforts were further underscored on June 29. After a meeting with President Vladimir Putin, Mikhail Fradkov, head of the Federal Tax Police Service, announced that he had cut the number of deputy chiefs in his agency from seven to three. He added, however, that a tax police chief would be named for each of the seven federal districts created by Putin last year, each of whom would have the rank of deputy head of the Federal Tax Police Service. This, of course, means a net gain of three Federal Tax Police Service deputy chiefs (Izvestia, July 1). Deputy Prime Minister Aleksei Kudrin, who is also finance minister, recently claimed in an appearance before the Duma that the government had reduced the total number of federal bureaucrats, but was contradicted by State Duma Deputy Yegor Ligachev (see the Monitor, June 28).