Business Group Urges Action on Graft

MTTitov at a news briefing, where he unveiled plans for an anti-graft lobby.
Boris Titov, the head of business group Delovaya Rossia, on Thursday unveiled plans to lobby the government over the rampant corruption that has plagued small and medium-sized businesses.

The lobby group will coordinate the actions of Delovaya Rossia member companies in raising issues with government officials, Titov told a briefing for reporters.

The initiative comes a day after the Constitutional Court banned law enforcement agencies from selling material evidence, a complaint voiced by businesses that fear corporate raiding by officials in cahoots with business rivals.

The government of President Dmitry Medvedev and Prime Minister Vladimir Putin has pledged to introduce measures to reduce arbitrary investigations into businesses by law enforcement agencies. On Monday, Putin said such investigations were costing the country $7 billion per year.

Titov and his colleagues on Thursday expressed dismay at the scale of challenges faced by small businesses in the country, including the problems of corporate raiding, fraud and excessive taxation.

"Small and medium-sized businesses can't compete" because of administrative pressure and a lack of access to capital, said Yury Nikonov, general director of mobile phone company Svyaznoi.

Titov said the country's manufacturing sector had many difficulties and that it was often more profitable for small manufacturing companies to purchase and resell goods from China, where businesses employ very cheap labor and enjoy low tax rates.

Titov also warned that the country was discouraging investment from foreign, as well as homegrown, entrepreneurs.

"Foreigners are ready to invest in Russia, but Russia isn't ready to receive their investments," Titov said. "There has to be a system of measures [that makes] working in Russia profitable for investors."

Titov urged the authorities to devote more resources to developing businesses, adding that "only when [the country] has capitalism and competition will a real middle class exist."

Also, the government should allow more foreign workers to immigrate and sponsor re-education programs for the unemployed, Titov said.

He cautioned against measures to restrain inflation, saying the government should not attempt to "freeze" the economy, as the economy "isn't even warm, and the markets aren't full."

"Russia's inflation will decline gradually and eventually disappear," Titov said.

Vladimir Gruzdev, a first deputy State Duma speaker and former major shareholder in supermarket chain Sedmoi Kontinent, said small and medium-sized businesses were not "in the shadows -- they just haven't really developed."

Titov said Delovaya Rossia supported Wednesday's Constitutional Court ruling on the resale of goods seized as evidence.

Even though it "isn't very crucial for the Russian economy or social life in Russia, it is a step toward transparency and eliminating corruption," he said.

Titov said current efforts to reduce interference in business were "a good step forward."

He added that the government should first "solve the problems of the past before tackling those of the present," later explaining that he was referring to a tax amnesty for companies, in addition to the already-implemented tax amnesty for individual investors.