Despite progress, corruption remains a huge problem for Russian firms

In a previous post written jointly with Arvind Jain, Arvind and I highlighted some recent findings concerning businesses in Azerbaijan. Below, I extend the discussion to another country, Russia. What follows is a brief summary of our main findings, with more details available in the country note, found hereThe note is based on newly collected firm-level data on various aspects of the business climate and experiences of a statistically representative sample of firms Enterprise Surveys. The data also contain information on various measures of performance and the structures of the firms. The main findings are as follows.

The Russian Federation has, on average, the largest firms (by number of full-time permanent employees) in the Eastern Europe and Central Asia (ECA) region (figure 1). Despite having such large numbers of employees (relatively speaking), only a small percentage of Russian firms are exporters. In addition, at 12 percent, the percentage of firms that have an internationally recognized quality certificate is lower in the Russian Federation than the ECA average. To make matters worse, senior managers in the Russian Federation spend 20 percent of their time dealing with government regulations, the second most time of any country in the region.

Corruption and crime have been other constraining factors for Russian firms. Incidents of informal payments requests are much higher in the Russian Federation than in the rest of ECA. Fortunately, there has been a reduction in the number of incidences of corruption over the last few years. Between 2005 and 2009, the percentage of firms expected to make informal payments to “get things done” declined sharply from 76 to 32 percent, and the percentage of firms that made informal payment to tax officials also declined, from 52 to 20 percent.With its exportation limitations, cumbersome government regulations, and widespread corruption and crime, Russia has a long path to catch up with its ECA neighbors. However, as the data show, the first steps have been made. We look forward to tracking Russia’s progress over the coming years.