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. Last Updated: 07/27/2016

Open Tenders Seen as Populist Move

Russian President Boris Yeltsin launched his war on corruption by issuing a decree last week designed to weed out graft in the awarding of government contracts, but critics say the regulations are riddled with loopholes.


Under the current system, state contracts are awarded in secrecy, which has allowed bureaucrats to line their pockets at the expense of the cash-strapped government.


But the decree, published Tuesday in the government newspaper Rossiiskaya Gazeta, requires government procurement to be carried out through open tenders as of May 1 for everything from food supplies for the army to construction projects.


First Deputy Prime Minister Boris Nemtsov, who is the driving force behind the anti-corruption battle, has vowed to implement the decree with a "red-hot hand."


But some analysts remain skeptical.


"The decree could be used as a weapon against political and economic rivals," said Sergei Kolmakov, an analyst at the Fond Politika think tank. "I hope it will work, but it now looks like a populist move."


Under the new rules, the government can carry out closed tenders in areas such as defense and national security, but it can also limit participation in bids for goods "urgently" needed or if competitive tenders are too costly or time-consuming.


It also excludes "technologically complex products" from open tenders, but does not provide further details. Moreover, the decree allows the government to decide that a closed tender is simply "the best way" to award a state contract.


Alexander Morozov, an economist with the World Bank, acknowledged that the decree opened some avenues for abuse, but said the standards set by the government were not unusual compared to those of other countries.


"Loopholes are in every country's regulations ... it's unavoidable," Morozov said. "The decree is detailed and meets our expectations."


He added that the signing of the presidential decree was a condition of the International Monetary Fund's Extended Fund Facility program for 1997, under which Russia receives monthly tranches from a $10 billion loan awarded last year.


Another area of the decree that is open to abuse is a provision that calls on the government to draw up a list, in two month's time, of special items which will not be subjected to open tenders. "We will decide which items will be included on the list of exceptions," said Alexander Shkursky, a department chief at the Economics Ministry. He denied that the loopholes would be an open invitation for more corruption.


But Vladimir Todres, a journalist for Itogi magazine, wrote that the decree could open up the possibility of widespread graft."It is easy to imagine the crowds wishing to get on the 'exclusive list' that will be breaking down the doors at the Economics Ministry at the end of June," he wrote.


According to Itogi, the original version of the decree prepared by the Economics Ministry made no mention of a list of exceptions, and was added during the document's tortuous route to the President's desk.


"A lot of signatures need to be put on a document like this. At some stage a signature became an obstacle and they were forced to put this clause in to push it through," Todres said in an interview.


A draft version of the decree had been floating around the presidential administration for two years, Nemtsov said in a recent interview with The New York Times. But he said he had personally made sure the decree was pushed through.


Despite the loopholes, some felt the new rules were an improvement. "The more openness and transparency in the system the better," Morozov said.