Russia's+Opportunities

=Russia's Opportunities (and Solutions to Its Problems) = Russia (main page) Russia's Problems Terms Solutions

Russia's Potential
 Russia, although plagued with corruption, still has much potential that can be developed to transform Russia's economy into a major one. Most of Russia's potential lies in Russia's resources, which have enabled and will continue to enable the country to have a solid base of income.

= =  One of the things that Russia's economy has to its advantage is its abundance of natural resources. Russia, which is the largest country in the world in terms of area, stretches across nine time zones. The country is the world's largest exporter of natural gas, supplying about 25.8% of the world's total. Russia is the second largest exporter of oil behind Saudi Arabia, exporting about 10.7% of the world's total. Russia also is the third largest exporter of steel and aluminum. Additionally, the country has large deposits of coal and contains vast amounts of timber. In recent years Russia has also increased its agricultural output, becoming a net-exporter after being a net-importer, which should enable the country to focus its attention on other sectors of its economy. Also, Russia has the ninth largest population in the world, with about 140 million people.   According to the International Monetary Fund and The World Bank, exports of oil and natural gas have been responsible for generating more than 60% of export revenues. Also, 30% of all FDI is directed toward that sector. However, simply exporting the resources and generating revenue is not enough. Currently, the success of Russia's economy depends on the success of its oil and natural gas exports. Russia needs to wisely invest its money in different sectors of the economy which will help stabilize the economy and also allow for a steady development. With such a large population, and an abundance of resources, Russia has the roots which should enable it to be powerful economically—provided that it fixes its infrastructure and stems corruption.

Fixing Russia's Problems
 Fixing the major problems which face Russia and its economy is not an easy task. Corruption, asset stripping, modernizing the government infrastructure, and enforcing laws which protect the property of individuals and corporations require large amounts of capital—both financial and labor. However, the resources will be well used if they are directed toward fixing Russia's problems because they will allow Russia's economy to reach its full potential and be a major player on the global economic stage.

Corruption
When Dmitry Medvedev succeeded Vladimir Putin as president of Russia, he made it clear that one of his goals while in office was the elimination of corruption. Indeed, not long after taking office, he signed an anti-corruption package which made the punishment for corruption much harsher. However, a problem with the legislation is that it does not include criminalizing the act of //offering // a bribe, only the act of //completing // a bribe. "But the legislation falls short because it does not criminalize the offering of a bribe—only completed acts of bribery. This is a significant problem because many enforcement actions begin when an honest official reports that he or she has been offered a bribe" (Welu). Also, the law does not cover the problem of judicial corruption. "Another defect of the new law is that it does not target judicial corruption. This is a serious shortcoming, since both the police and the judiciary are perceived by many Russians to be highly corrupt" (Welu). One complication that arises when trying to tackle corruption in Russia is that many do not view corruption as being morally unacceptable; rather, they view it as a normal way of life and they find it necessary to play along in order to get what they want. "[In Russia] it's seen as a normal part of everyday life" (Feifer).



In order to prevent corruption in Russia, several important steps need to be taken.

 
 * //<span style="font-family: Georgia,serif;">foreign review of corruption //
 * <span style="font-family: Georgia,serif;">Due the widespread pervasion of corruption, the most effective way to ensure that corruption is being stemmed is to have the enforcement of ant-corruption reviewed by a foreign, non-interest group which would make honest reports as well as cite those who commit acts of corruption. Because corruption is so ingrained and exists at every level in Russia, it is necessary to to have it be reviewed by outside observers who are not part of the system, and are less likely to take bribes. At the current point in time, the likelihood of the laws continuing to not be enforced are too high.
 * <span style="font-family: Georgia,serif;">//<span style="font-family: Georgia,serif;">criminalization of both the offering of and the accepting of bribes //
 * <span style="font-family: Georgia,serif;">Because at the present moment it is not illegal to offer a bribe but only to complete the transaction, there is no risk on the part of the briber to offer a bribe, as it poses not risk of being punished. However, if it were to be a criminal offense to offer a bribe as well, the risk of offering would increase, and the likelihood that one would make the attempt would decrease. Thus, in order to reduce corruption, it needs to be illegal both to offer and to accept bribes.
 * <span style="font-family: Georgia,serif;">//<span style="font-family: Georgia,serif;">penalty of corruption should outweigh the benefit //
 * <span style="font-family: Georgia,serif;">In order to reduce the enticement of corruption, the penalty of offering or accepting bribes needs to //<span style="font-family: Georgia,serif;">dramatically // outweigh any potential benefits. By making the penalty of being corrupt harsh enough, it will provide a large motive to play by the rules. Bribes are only offered and accepted because they provide a more beneficial alternative than following the laws. Thus, once it is more beneficial to play by the rules, corruption will be eradicated.

<span style="font-family: Georgia,serif;"> <span style="font-family: Georgia,serif;">
 * <span style="font-family: Georgia,serif;">//<span style="font-family: Georgia,serif;">foreign intolerance of corrupt commerce //
 * <span style="font-family: Georgia,serif;">The U.S. Foreign Corrupt Practices Act (FCPA) (1977) made it illegal for any U.S. citizen or corporation or any corporation that is registered in the United States (such as in the securities exchange, et cetera) participate in corrupt activities in a foreign nation. This discourages U.S. companies and individuals from bribing foreign officials as getting caught would result in unfavorable punishments by the United States. Laws similar to the FCPA should be enforced by all countries dealing with Russia so as to discourage corrupt practices in Russia. If foreign companies do not offer or accept bribes, it will change the culture and view of corruption within Russia and make it less prevalent. "Change may come as Russia gets more integrated into the global economy. But it will come only if non-Russian companies doing business in Russia began to insist, lobby, and educate in favor of an anti-corruption culture and a level playing field" (Welu).
 * <span style="font-family: Georgia,serif;">//<span style="font-family: Georgia,serif;">restructuring social values //
 * <span style="font-family: Georgia,serif;">In Russia, corruption is viewed as a normal way of life. Simply enacting laws which would punish corruption will not end depravity because it is rooted so deep within the society. Thus, Russia needs to reform the societal view of corruption by implementing awareness of the problems it creates as well as impressing the immorality of it on the younger generation. Changing the social values which do not currently consider corruption to be negative will take a long time; however, that does not mean that it will not be worth it. Initiating awareness of the problems of corruption will pay big dividends down the road and will eventually help restructure the culture which views corruption as normal. Thus, this should be implemented, but in the meantime for solutions aforementioned should also be practiced.

<span style="font-family: Georgia,serif; font-size: 14px; line-height: 21px;">**<span style="font-family: Georgia,serif;">Modernizing the Government ** <span style="font-family: Georgia,serif;"> Many of Russia's institutions are still clear aspects of the Soviet legacy. Large oligarchies still continue to dominate the different markets which make it very difficult for new corporations to emerge, and also provide little incentive for more efficient means of production.


 * //<span style="font-family: Georgia,serif;">reducing the dominance of the oligarchies //
 * <span style="font-family: Georgia,serif;">Upon the creation of the Russian Federation after the collapse of the Soviet Union, privatization occurred which consisted of allowing private individuals and corporations to purchase state-owned industries. However, for the most part, these "oligarchs" were corrupt and did not help better the economic situation. In general, what happened was the dominance of the state-owned corporations turned into the dominance of the private owned corporations. Furthermore, the oligarchs maintained lots of power and influence on the government, which enabled them to continue their corrupt practices. After Putin entered the office of Russian President in 2000, he began combating large corporations which stood in the way of growth of the economy. However, Putin went too far. Instead of splitting up the corporations and punishing the corrupt executives of the oligopolies, he nationalized the corporations. Although it has greatly reduced the corruption and asset stripping within the companies, it still has not solved the problem of only a few companies dominating the market. According to Rawi Abdelal, the Joseph C. Wilson Professor of Business Administration at Harvard Business School, "Over the past 10 years, during which time Putin has led the country as president or premier, he has strengthened Russia's nascent capitalist economies and institutions. However, in the process, he has stoked the Kremlin's apparently infinite appetite for power. That, I believe, represents a growing threat, not only to Russia's development but also to companies wishing to do business there." These companies need to be broken apart to allow for fair competition, and this will also allow for new companies to emerge and will provide incentives to modernize.

<span style="font-family: Georgia,serif;">
 * <span style="font-family: Georgia,serif;">//<span style="font-family: Georgia,serif;">redrafting and enforcing property protection //
 * <span style="font-family: Georgia,serif;">In order for small businesses and new businesses to be able to survive and compete, their rights and their property need to be under the protection of the government. This means that the Russian government needs to strengthen these laws by rewriting them to make them strong and clearer as well as increasing capability of the laws to be enforced. Also, foreign investors will be more comfortable investing in Russia knowing that their investments are under the protection of the Russian government.

<span style="font-family: Georgia,serif;">What This Means
<span style="font-family: Georgia,serif;">Russia's economy depends on fixing these problems. The growth of the economy with these problems will be much less than the growth if these problems are fixed. The economic potential that Russia has due to the abundance of natural resources that it contains, the fact that it already has a functioning government, and a large population which can serve as a labor force, is currently being held down by problems of corruption and Soviet legacies. If foreign investors feel safe putting their money into Russia, they will contribute a lot more capital which will enable Russia to further its growth and attain a position as a global economic leader. Russia has the potential, it just needs to rid itself of the corruption that plagues it and cut off the negative Soviet legacies that hold the economy back. As China, Japan, Singapore, South Korea and Germany—among others—illustrate, once investors feel that putting their money into a country is worthwhile, they will help the country's economy grow. Russia, with its vast amounts of resources and large population, is no different. It just needs to prove that it is a safe investment.

<span style="font-family: Georgia,serif;"> For sources, go <span style="font-family: Georgia,serif;">here.