Putin calls for legislation that would block corrupt police, health, fire-services officials
who traditionally blackmail small and mid-size businesses and force them to pay bribes

The Moscow Times

MOSCOW — The government spends nearly $7 billion per year investigating companies for procedural infractions, Prime Minister Vladimir Putin said Monday, calling on the government to change fundamentally its approach toward regulating business.

More than 20 million investigations are carried out each year, Putin said at the weekly meeting of his Presidium, an inner body of the Cabinet. The figure, he said, does not include tax investigations.

"I haven't even mentioned the 'informal expenses' for businesspeople, which, of course, are considerably higher [than the government's expenses]," Putin said, Interfax reported.

The comments came as Putin was discussing a package of bills aimed at protecting the rights of small and medium-sized businesses. The proposed legislation would simplify business registration, eliminate insurance on certain goods and limit government intrusion by criminalizing extra-procedural investigations conducted by police and Interior Ministry agents, the news agency said.

Despite the current economic boom, small and medium-sized businesses have failed to develop apace. The problem is not so much finding labor or the high cost of real estate but the time and manpower wasted dealing with an unruly and corrupt bureaucracy, said Katya Malofeyeva, chief economist at Renaissance Capital.

Police, health and fire services often conduct random inspections of businesses to elicit bribes. Large companies frequently employ workers whose primary function is to manage such bribes, but for smaller businesses, this is not an option.

"Any time of any day, any inspector can come and check for whatever they want," Malofeyeva said. "Legally prohibiting people from doing so is a move toward reducing barriers for small and medium business."

The proposals, which also aim to clarify business ownership, could provide protection from the practice known as "raiding," whereby criminal elements wielding falsified documents forcefully seize businesses.

Last year, the number of known illegal business and property seizures reached 512, an Interior Ministry official said in March.

— July 15, 2008