The Business of Raiding

In the 1990s, Russian companies would – at best – ignore calls for combating corruption; at worst – they would reward and facilitate it.  They had their reasons – mainly that when the Soviet Union collapsed corruption became a way to get things done, to keep deals moving while state institutions lay in ruins.  But as corruption settled in, it became more of a problem than a solution.

Enter the new hybrid of Russian corruption – corporate raiding.  To simplify, it is a way for people with connections to state institutions to take ownership of companies for a fraction of their real price; or some times for free.

How the process works is explained wonderfully in this article by the Moscow Times.  Importantly, the author notes how raiding continues to proliferate despite presidential calls to stop:

Since taking office, Medvedev has ordered the introduction of anti-corruption measures to protect small and medium-size businesses, and at the end of June, Kremlin chief of staff Sergei Naryshkin submitted a plan for tackling the problem to the president.

Despite the talk and early measures in the anti-corruption campaign, raiders appear to be continuing their criminal activities undisturbed, especially in the regions, where businesses are more at the mercy of the local authorities than in Moscow.

Another proof that corruption is not a problem of individuals – its a systematic problem.  Calls to stop – even at the highest levels of government – will be largely ineffective without comprehensive measures to reform the institutional climate within which corruption takes place.  In other words, if opportunities are there for people to use their political influence to take over businesses, they will use those opportunities regardless of what the president says.

Published Date: July 09, 2008