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© RIA Novosti. Vitaliy Ankov

Corruption comprises up to two-thirds of property prices in Moscow

by at 04/05/2011 16:27

Prices on Moscow’s notoriously expensive property market are being inflated by up to 60 per cent due to rampant corruption, according to new research.

And your daily shopping involves handing over 15 per cent of the purchase price to cover dodgy dealings behind the scenes.

Bureaucratic inefficiency and corruption are stalling economic growth, fuelled by laws which encourage sharp practice, competition development experts have concluded in a government sponsored report on improving the competitive business climate in Russia.

Meanwhile, new anti-corruption legislation could make it harder to stand up against the kickback culture.

 

Bribes raise real estate prices

In real estate there is a system of generating bribes through legal means – via expert evaluation and agreements, said the report’s co-author Vadim Volkov, Vedomosti reported.

For example in many departments “pocket” companies thrive. In theory they are independent, but have an informal monopoly on receiving various documents.

Paperwork pushes back construction deadlines and bribes for overcoming red tape are 5-15 per cent of the project’s cost, corruption payments for connecting to public utilities run at 7-10 per cent.

Informal payments to complete the red tape when building a house are typically seven times greater than doing things by the book.

 

Laws encourage corruption

Laws are such that they invite violations.

“If the authorities fully follow the law, no building will ever be opened: the laws are consciously created in such a way that the possibility of corruption remains,” said Management Development Group’s executive partner Dmitry Potapenko.

The discretionary powers of the officials are so vast that they do not need to break laws to receive corrupt payments, said Sergei Plaksin from the Higher School of Economics. The informal payments are often on the initiative of businesses who wish to speed up the process.

Because of low predictability and high risks business plans do not exceed five years, and the rush to recoup the costs also leads to higher prices.

 

Complaining about bribes may become more difficult

A new law could place the responsibility of proving corruption directly on the shoulders of those complaining about it.

Prosecutors have introduced a bill that calls for complaints to be backed up with factual proof of dubious practice, as well as a detailed breakdown of who was responsible and which rules were broken.

That puts too much pressure on plaintiffs, and will deter people from going to court, Vladimir Yuzhakov of the Strategic Research Centre, told Vedomosti. The burden of proof will lie too heavily on the plaintiff, rather than prosecutors and investigators.

The bill has been sent back to the prosecutor’s office to be reworked, with some sources pointing to serious concerns about the practical application of the proposed legislation. Presidential aide Arkady Dvorkovich said there were only technical issues to deal with.

 

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