The Moscow Times: The New Kremlin Dreamers - by Michael Bohm

For the complete report from the Moscow Times click on this link

The New Kremlin Dreamers - by Michael Bohm

Several weeks ago in Voronezh, First Deputy Prime Minister Igor Shuvalov said the ambitious goals for "Strategy 2020" remain in place despite the economic crisis. He also said Russia has every chance of becoming the world's most desirable place to live by 2020. "This is no fairy tale," Shuvalov added, but if you examine the strategy closely, it certainly looks like one.

The most important ranking is not mentioned in Strategy 2020 at all -- the Transparency International's corruption index, in which Russia ranks 147 out of 180 countries in 2008. Corruption is particularly onerous for Russia's struggling small and medium-size businesses, which make up only 10 percent to 15 percent of the country's GDP. In the United States, small and medium-size businesses are the engine of economic growth, comprising roughly 50 percent of the country's private GDP and creating about two-thirds of net new jobs annually.

As long as Russian bureaucrats (and competitors) are free to terrorize businesses by creating "administrative barriers," extorting bribes and raiding, economic growth in the real sector will always be insignificant. To his credit, President Dmitry Medvedev is backing a new law to assist small businesses, which will, among other things, limit the number of government inspections of businesses. Most likely, however, these limitations will be easily sidestepped when bureaucrats simply extort a larger amount of money per inspection.