Faced with a corrupt judicial system, what strategies do Russian businesses employ to resolve business disputes? Lately, less murder and more litigation.
Faced with multinational firms who are liable under U.S. and U.K. laws for their Russian partners’ corrupt practices, how do Russian businesses gain access to international partners? Start putting in place anti-corruption compliance programs.
Those were some of the answers that came from experts from Russia and the U.S. had some answers at a recent panel discussion co-hosted by CIPE and the Kennan Institute, “Corruption and Business in Russian: National Problem, Regional Solutions.” Jordan Gans-Morse, an assistant professor of political science at Northwestern University, presented the results of his innovative research on how non-oligarchic firms are surviving in an atmosphere of endemic corruption. Against this backdrop, CIPE Moscow Program Officer Natalya L. Titova, joined by CIPE partners from St. Petersburg, Chelyabinsk, and Kaliningrad, spoke about a CIPE program in Russia that is helping regional businesses to meet international anti-corruption standards in order to join global value chains.
Azerbaijani students attending a two-day seminar on entrepreneurship December 27-28 respond to the question, “who believes that they could start their own business?”
Forty percent of Azerbaijan’s population is under the age of 25, but less than a third of Azerbaijani youth are employed. This is partly due to economic policies that have restricted the private sector, particularly small and medium-sized businesses, leaving many young people to regard the government as their only path to employment. Topics such as free market economics, democratic governance, and entrepreneurship are largely absent from university curricula, and many young Azerbaijanis are not even aware that starting their own business is even a possibility, let alone a viable career option.
Since 2011, CIPE together with the Entrepreneurship Development Foundation (EDF) and its partner the Baku Education Information Center (BEIC) have trained 92 young Azerbaijanis on economics and business topics – and this number will be more than doubled as the training programs are scaled up in 2014-2015.
Participants, ranging in age from recent university graduates to mid-career professionals, attended weekly seminars over a ten-week span, tailored to the local context, based on CIPE’s Development Institute materials which were designed to improve young people’s understanding of the core democratic values underpinning entrepreneurship and the functions of a free market economy.
Thanks to its Special Economic Zone status, many foreign companies assemble cars and electronics in the Kaliningrad region for the broader Russian market. But corruption remains a major barrier.
At public events on corruption, no matter how sophisticated the participants and no matter how narrow the subject, the discussion invariably seems to wander off topic. Often the audience members want to speak about a high-profile case like the suburban Washington, DC, politician’s wife who stuffed $79,000 into her undergarments when federal agents came knocking. Sometimes, speakers wander off into digressions on how one nation or another is inherently corrupt because of cultural and historical factors. Frequently, attendees simply conflate different kinds of corruption – petty, political, commercial – into in insoluble morass.
This was the case at a recent CIPE-supported event held in November in Kazan, Russia. One of the 70 participants began to derail a technical discussion of Russian legislation with a series of questions about recent arrests of regional political leaders on bribery charges. Some of the audience perked up. Others looked uncomfortable, not expecting this at a conference on how to boost investment by improving firm-level compliance with anti-corruption laws.
Igor Belikov, the event’s moderator and head of the Russian Institute of Directors, deftly reined in the discussion and with a bit of humor brought it back to the subject at hand – how mid-sized firms can reap the benefits of globalization by putting in place anti-corruption compliance programs that give the firms better access to multi-national companies’ global value chains.
“But wise is the man who disdains no character, but with searching glance explores him to the root and cause of all.” — Nikolai Gogol, Dead Souls
Corruption in Ukraine cuts across regions, all sectors of the economy, and almost every institution. In some sense it’s become a rallying point: since everyone is harmed by corruption, CIPE’s private sector-led, collective action approach to anticorruption in Ukraine is based on bringing the business community together to work towards common solutions.
Given that Ukraine’s business associations are among the country’s weakest civil society institutions — such associations did not exist during 70 years of Communist rule — small and medium-sized enterprises (SMEs) are underrepresented nationally in civil society and political life. Despite this fact, Ukrainian public discourse on issues affecting the business community is vibrant and relatively open. This appears to be improving on the regional level, in part through CIPE support of business associations representing SMEs, a little more notably each year. Individual business associations, as well as eight new coalitions of associations, now work collectively at the regional level.
Turkmenistan’s capital Ashgabat, seen at night. (Photo: Wikimedia Commons)
The private sector faces challenges to growing and developing within Turkmenistan’s primarily state-controlled economy. For small and medium-sized entrepreneurs in the regions, the challenges vary but include overregulation and excessive bureaucratic procedures. A survey of SMEs in the country’s five regions found similar obstacles for business growth as well as some differences.
In the northern province of Dashoguz, SME representatives identified the following as the most pressing barriers to growing their businesses:
- Limited access to credit
- Lack of information on business-related legislation
- Not enough information available about the domestic market situation
In Ahal region, where the capital Ashgabat is located, entrepreneurs report that the situation for business has stabilized in the past year. SME owners expressed optimism about the state of their business activities, asserting that if one is persistent and driven, it is possible to operate a successful business. SMEs in the Balkan region, which borders the Caspian Sea, also note some improvements in the ease of doing business, citing market stabilization as the main factor.
Recently I stumbled across Andrey Kurkov’s Death and the Penguin,
a deadpan satire of a single man and his pet penguin struggling to get by in Ukraine’s capital, Kyiv. The little novel points squarely at the sometimes absurd but functional atmosphere of Ukraine, where corruption runs rampant and entrepreneurs struggle to hold their own.
The novel follows Viktor, a middle-aged aspiring writer living with his pet penguin, Misha. True to real life, the zoo had been giving away hungry animals to anyone who could feed them. Viktor, abandoned by his girlfriend, took Misha in. For Viktor, too, times were hard, so when he is offered the questionable opportunity to write obituaries for VIPs who are still living, he is quick to accept. Unfortunately, these obits turn out to be a sort of hit list: following each obituary, the subject’s death ensues, which he discovers only later in the morning newspaper. He soon comes to realize that the last obituary he will write will be his own.
Andrey Kurkov poses with a penguin. (Photo: Random House UK)
Kurkov’s depiction of post-Soviet life is lined with deadpan satire that clings to the edges of the structures of corruption that have made the country hostile to its own people. One day a commercial comes on the television: penguins in Antarctica, splashing, at home. Misha begins to throw himself at the screen. Ukrainians researchers pop into the frame.
“I appeal to private entrepreneurs and others with funds – on you depends whether our scientists will be able to continue their work in the Antarctic. Have a pencil and paper ready for the account number to which sponsor donations can be made, and a telephone number on which you can hear details of what your money will be spent on,” says a woman. Viktor runs to jot down the information. Despite his friend’s skepticism, Viktor makes a donation, hoping to send Misha to Antarctica. But when that last obit is requested, it is Viktor who takes a place among the crew – it is these entrepreneurs who have saved him.
On June 11 the World Bankreleased a report titled, “Moldova: Policy Priorities for Private Sector Development.” The report highlights business constraints and proposals for reform in five key areas: customs administration, tax administration, business regulation (licenses, authorizations, permits, and inspections), competition framework, and access to finance. These priorities are in line with the National Business Agenda (NBA) prepared by CIPE partners in Moldova. In fact, the World Bank report makes multiple references to the 2012-2013 NBA document, citing it as “reflecting the views of a broad range of private sector stakeholders.”
The NBA is not only a document. To prepare it, a network of over 30 business associations and chambers of commerce from across Moldova go through a well-structured process that includes building broad consensus on priorities, analyzing the legal framework for each issue, and developing joint proposals for reform. Using this methodology, the chambers and associations utilize the NBA framework to prepare for a constructive dialogue with government. CIPE has partnered with leading Moldovan think tank Institute for Development and Social Initiative (IDSI) to build the capacity of NBA members to jointly articulate not only the key barriers businesses face, but also concrete proposals to overcome them.
In addition, CIPE and IDSI have been providing assistance to the NBA member organizations to create a private sector platform. Today this platform is well-known among policymakers, the broader business community, and civil society as the NBA network. The member organizations are committed to developing a partnership with government through public-private dialogue. The goal is to work together on improving the economy, creating more jobs, and improving the climate for doing business. The voice of the NBA network is especially important in the reform process as it represents the views of the small and medium-sized domestic enterprises that comprise a majority of the Moldovan private companies.