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. Last Updated: 07/27/2016

Trade Licenses Hurt Market, Aid Officials

The Russian government is preparing to review in parliament a bill "On the Licensing of Separate Business Activities." This will greatly determine the level of economic freedom in the country as well as the level of corruption, since licensing is an ideal medium for venal officials.


Many business activities today are licensed by various government bodies. On the federal level alone, there are more than 300 normative acts that limit business activities. Similar limits exist on the local level. And licensing is, above all, a means of limiting access to the market.


Various ministerial branches and regional authorities are trying their best to expand the list of businesses that can be licensed. The Economics Ministry, however, which is preparing the government's bill on licensing, is interested in creating favorable conditions for the development of private initiatives and is striving to shorten that list.


The past few months have witnessed a severe behind-the-scenes battle between the Economics Ministry, with the support of the Justice Ministry and the Anti-Monopoly Committee, on the one hand, and all those interested in widening their control of business through licensing on the other. Last week, Deputy Economics Minister Sergei Vasilyev debated the question of licensing with his colleagues at the Russian Committee on Publishing and representatives from several subjects of the federation.


The administrations of the federation subjects are firmly insisting on their right to license all aspects of trade and services. The local authorities argue, for example, that a buyer might be sold products that are spoiled or dangerous to his health.


Representatives from the Economics Ministry counter that the law, "On the Sanitary Well-Being of the Population," gives much power to health and epidemiological services for controlling the quality and safety of products. A health inspector can stop the production of certain goods or close a restaurant down. Moreover, there is also the State Trade Inspection.


In response, the representative of the Moscow Licensing Chamber, Vladimir Zavodnov, said store and restaurant owners are afraid of health and trade inspections. He considers that the only real way to ensure that they follow trade rules and respect consumers is to hold the threat of revoking their licenses over them.


Curiously, though, during the three years that licensing of business activities by the Moscow mayor's office has been in effect, the number of trade violations has actually grown. What then are the benefits of licensing to consumers?


Licensing -- with the exception of certain cases where it is clearly necessary such as atomic energy, medicine or banking -- only strengthens government power.


The Economics Ministry is now engaged in heated debate with the Committee on Publishing, which insists on licensing publishers. If the Publishing Committee wins, then it is highly likely that, in the case of a Communist victory in the presidential elections, the licensing mechanism will be used to put pressure on closing down publishers who put out democratic periodicals. Thus, the discussion around the licensing law could have far-reaching political consequences.





Mikhail Berger is economics editor of Izvestia.