Russian militia: between public and private interests

Message from the bottom of Russian Militia: 

Russian Police departments are all about rent-seeking - Russian policemen are doing their jobs NOT by serving the public interest, but by serving the private interest of the higher ranked in their bureaucracy; corruption, collecting premium bribes, protecting criminals, defying the rule of law, is their de facto job. There is no room for honest professionals like Aleksey Dymovsky.

Private police would be ideal, but probably not the most practical solution yet. A more interesting observation is that police corruption is not an unknown phenomenon to developed democracies like the US,  but there it is much, much less of a problem than it is in weaker democracies. What is the best approach to address this gap is one challenging question for Russian leaders in particular, and all market reformers in general.

More on this in international media:

I was glad to hear he got away with only being fired and not killed like most journalists reporting on corruption in this country do.

PS Note:

I don’t exclude the possibility of Dymovsky being part of some government-led masquerade. Having lived there and, at that time, having my father forced to resign his position because of corrupt pressures, plus just by looking at their GDP, I don’t need special proof of persisting corruption in this country’s institutions. But if they do plan a reform, I believe thorough investigations to assess the real effects must be carried out by local and international non-biased experts as well, on the ground, before and after implementation. How else do you think it will be possible to prove that this was more than a superficial attempt for the sake of improving Medvedev/Putin/Russian image, and that it did change de facto institutions?

BSEC Bubble Chart 2007

Why so poor?

Looks like the poorest piece of the Central Asian part of CIS is virtually bordering the EU. I believe there’s room for more… growth, much more than <$3000 per capita for everyone. In Moldova’s particular case  it is a shame that it’s been close to 19 years, right by Central Europe, and only this?! What’s the “excuse”? Why so serious poor?

Data source: 2009 World Development Indicators, World Bank.

Of course I have an answer, testing&testing. Will come back with results in a future post.

Cultural and Institutional reality

A tragicomic story on what’s essentially a result of bad institutions in Moldova.

I enjoy Igor Cobileanski’s works a great deal, but I think he misses the point when saying that he’s only illustrating a cultural reality specific to Moldovan people. The truth is that there wouldn’t be any “cultural reality” that he’s so fond of had there not been the corrupt institutional system guiding peoples’ incentives and behavior toward unproductive and destructive activities.  What Cobileanski should really be getting at is not a romantic view on Moldova’s cultural reality as he states, but rather a disturbing institutional reality which, I believe, is sadly the case for all of the “failed” ex-soviet democracies (Moldova, Ukraine, Kazakhstan, Russia, Belarus, Azerbaijan, Kyrgyzstan, Uzbekistan, Turkmenistan).

Measuring “Doing Business in 2010″ – World Bank vs. Reality

Doing Business - World Bank 2010

In newly released “Doing Business 2010” report, World Bank has very good news! In 2009, pro-enterprise reforms went 20% up; Eastern Europe, Central Asia, Middle East and Northern Africa are world regions with the most reforms implemented per country.

Between June 2008 and May 2009, 287 reforms were recorded in 131 economies, 20% more than the year before. Reformers focused on making it easier to start and operate a business, strengthening property rights and improving the efficiency of commercial dispute resolution and bankruptcy procedures.Two regions were particularly active this year: Eastern Europe and Central Asia and the Middle East and North Africa. In Eastern Europe and Central Asia, 26 of the region’s 27 economies reformed business regulation in at least one area covered by Doing Business. Governments in the Middle East and North Africa are reforming at a similar rate, with 17 of 19 reforming in 2008/09. In both cases, competition among neighbors helped inspire widespread reform.

I am in particular cheery for Moldova. As one of the top 10 performers in reforming business, Moldova’s 2010 regulations are supposedly making it easier for local entrepreneurs to start up a business (“offers an expedited, 24-hour company registration service for an additional fee”), to register property (number of days to register land went from 48 to 6 days), and paying taxes (employers’ payments to social security funds went down).

However, I am skeptical about World Bank’s tools and methodology as far as measuring “de facto” versus “de jure” improvements in doing business over time in country X or Z.  Especially with respect to the rigid assumptions in their approach to target businesses: no corruption, no foreign trade, ltd. only, 100% local ownership, etc. Their narrow definitions of business assume away a lot of potential inhibiting factors ( increases in either formal, informal or both types of transaction costs) that could offset the new achievements in regulating business. A few new official business reforms, therefore, might not de facto translate into easier doing of business in Moldova or in any other country, just as it also might not say a lot about development.