
Corruption is forcing Russia’s best and brightest to flee the country - sharms
http://www.newsweek.com/2010/08/14/putin-s-russia-exile-businessmen.html
======
rdtsc
I am out. I have been gone for many years and just keep watching it from a
distance. I am not touching that country with a 10 foot pole. I don't want to
go near it. I recently payed a higher price for a plane ticket just not to
have to connect through Moscow.

Capitalist economy + corrupt judicial system + corrupt government officials at
all level = hell for businesses.

You cannot do anything unless you bribe or do something illegal. Then if you
become successful, both the mafia and the corrupt govt officials come after
you. The police threaten to press charges, the mafia offer protection from the
charges. You are fucked either way.

~~~
old-gregg
Chill out comrade. The country you left and despise so much doesn't exist
anymore and I've learned to treat these sentiments as a mental reinforcement
for your decades-long decision to leave.

The country I left and frequently keep visiting is great: I love the people,
the food and the culture. I love what I hear from young graduates, I like
seeing people smile more and new businesses pop up everywhere. I like doing
business there myself. And by the way we are growing. The quality of tech.
talent is impeccable, easily on par with US schools and the latest waves of
graduates have good English as well.

Not everything is rosy yet, but the risks are manageable, especially when you
"zoom out" and face the entire spectrum of possibilities of why your business
may fail. Lack of customer interest/traction is orders of magnitude scarier
problem that issues with authorities.

Be my guest and stay out, it only makes me easier to compete because I'm in.

~~~
raquo
> risks are manageable

Not really. I live a hundred meters away from the future Skolkovo site and if
they decide they want my land, it will not be manageable for me, even though
they have no rights for it.

You're right though that not everything is so bad. But I don't see it getting
better at macro-scale. If anything, the economic growth of the last X years
was despite, not because of government actions.

~~~
old-gregg
_... if they decide they want my land, it will not be manageable for me ..._

<http://en.wikipedia.org/wiki/Eminent_domain>

~~~
guelo
Give me a break! If the US government decides to take your property through
Eminent Domain you will be properly compensated and you can appeal all the way
to the Supreme Court without fear of being thrown in jail.

~~~
old-gregg
Perhaps you should give me a break with you screaming about jails. My wife's
parents lived in an older house in historic district of downtown Kazan. When
the government "took their property" to rebuild the area they compensated them
by a _much_ nicer and bigger apartment in a great neighborhood. I am just
pointing out this is not uncommon to relocate folks for the common good in
many countries.

Presumably you're expecting to be mistreated _automatically_ just because
you're in Russia and this happens to you. I don't believe there are any
grounds for that assumption. Granted, chances of that happening in Russia are
higher but as I mentioned earlier, on the grand scheme of things I (and most
entrepreneurs I know) find those risks to be insignificant.

~~~
thaumaturgy
There's room for you both to be right. People tend not to have problems with a
government or laws until they find themselves on the wrong end of them.

------
snitko
As a Russian I'm, of course, concerned about it. Almost every intelligent
young person under 30s here believes that the system is really broken. However
we don't see any changes and I've been puzzled why.

Theoretically, even the most egoistic government who's only purpose is to get
more for themselves must realize that in order to preserve it's welfare it
must make sure the citizens are doing fine. Russians are not desperate yet, so
maybe the government has found the right balance. Obviously, many are involved
in the scheme and many people have things to lose if the government initiates
a real war on corruption. So the government must be afraid too and that fear
is greater. However, I don't think you can keep that balance forever. Like the
article suggests, the brightest flee the country and someone has to make the
economy going.

I realize I probably don't know many things guys up there are aware of, but it
seems pretty obvious from down here that the only thing that should be done to
help the country bloom is to eliminate corruption. For real. Then all those
silicon valleys and scientists start reappearing on their own, healthcare
starts recovering, investors begin coming back. Focus.

~~~
mattchew
_Theoretically, even the most egoistic government who's only purpose is to get
more for themselves must realize that in order to preserve it's welfare it
must make sure the citizens are doing fine._

This is true if the government is secure in its power. If the rulership--or
factions within the rulership--are worried about losing their privileges, they
may just grab what they can when they can.

~~~
snitko
That's a popular point here. Many think they're just grabbing as much as they
can while they can. I don't know. Maybe it's true, but it seems to me it would
be quite a task to run and hide later. It may be easier to stay and secure the
environment (by eliminating corruption and making it safe). Maybe I'm wrong.

~~~
sliverstorm
Not to stereotype, but I have noticed all my friends who have a live-fast,
die-hard sort of attitude- the type that is appropriate when you're not
entirely sure if you'll see tomorrow- were born in Russia.

So, I would hazard a guess the folks you speak of are simply not conditioned
to be thinking about 'later'.

~~~
snitko
That is probably one of the most correct stereotypes about Russians. For
example almost no one ever saves money here. Nor in the banks, neither under
the pillow.

~~~
lfnik
I have married a Russian and I can also confirm this. Adrenaline junkies
galore in Russia

------
igorlev
I left the country right when it fell apart so I'm not exactly an expert on
the current events, but from what I see doesn't seem like 20 years have made
any difference.

I think you can trace this whole mess to Brezhnev's Zastoy(Stagnation) period
of Soviet history (<http://en.wikipedia.org/wiki/Brezhnev_stagnation>). The
upper echelons of government achieved a comfortable and stable enough level of
life and pretty much froze the rest of society in time, in order to support
their lifestyle. They cracked down on any dissension or change from the status
quo which by definition means that they cracked down on the most
entrepreneurial and dynamic members of society. They jailed the makers and
made the thieves rulers.

And unfortunately you can keep this charade going for a while; in the
70's-80's you can steal technology from the West; in the 90's you can sell
minerals and in the 2000s you can wait for your people to invent something and
then steal it from them. When the Soviet Union fell down there was a glimmer
of hope but it was silly to think anything would change. You have now 2-3
generations of people at the highest levels of power who grew up with this
mentality and it's not going to change any time soon.

It's sad, I remember watching a talk show on a Russian satellite station where
the discussion was whether Russia needed an "innovation economy" or whether
pumping and mining is perfectly fine. An obviously liberal member of the panel
was pleading and cajoling with the others that oil and timber don't last
forever and they only enrich a few people. The other side, a representative of
a mining concern, had an awesome reply: "They'll last long enough for me"

...and to hell with the rest of you

------
raquo
I wanted to write a lengthy comment about the problems in Russia, but it was
going to be so long that I'll just list the key points, they're pretty much
self-explaining:

Corruption, weak law enforcement, very strict laws, everyone is guilty,
selective enforcement, no rule of law, government has a backdoor to every
process, government can block or initiate any action (think business
operations, bankruptcy, legal actions), courts not independent of course, weak
property rights, insanely complex and outdated legislation, people adapted to
this system, some actually prefer it because they can buy their way out of
troubles.

I hope I will be able to immigrate out of here in 2011. It's not my job to
estimate my _brightness_ though.

~~~
huhtenberg
> _out of here in 2011_

Where to?

~~~
raquo
The final destination for me is US, the path may vary.

~~~
elai
You'll be taxed internationally as a US citizen/PR for an income over a
typical worker even if you don't live there anymore, so do beware. The USA is
pretty much the only significant country does that.

~~~
yardie
This is trotted out all the time and the number of people it actually affects
is miniscule.

* You are taxed on any income over $85,000.

* You can deduct any taxes you pay to the host government from your Federal Income tax.

The first and second apply to me and every year my US tax bill is 0.

Now, if I was making FU money it might be different, but most Americans
working abroad never worry about this situation. Except if your Geitner, who
just forgot.

~~~
loewenskind
>This is trotted out all the time and the number of people it actually affects
is miniscule.

I think that's a bit of a misrepresentation. It's "miniscule" compared to the
number of Americans living outside the country. Mainly because the majority of
Americans living outside the country are in the military and not affected.
There are various places in at least Europe where $85k is extremely easy to
hit.

Further, it's not just the fact that you'll have to file this stupid tax form
every year for the rest of your life. There is a new law that if you have more
than $10k at any moment in time throughout the year you have to report the
_bank accounts_ that held the money. That's right. Even though you live and
work in some other country, the _US_ expects you to tell them your bank
account information. Failure to comply results in a pretty hefty fine.
Needless to say, even if _you're_ willing to do this, you bank may not be. The
end result is that it's damn inconvenient to be an expat. And it gets worse
every few years.

Oh and did I mention that inheritance taxes still apply to you (when you die
or when you inherit)?

~~~
yardie
Yes, I'm one of those Americans that has hit 85k repeatedly. But taxes in
Europe is higher than they are in the US, 35% to 25% avg.

The last important line item is deduct the taxes you paid locally from your
estimated US tax contribution. If you come out negative you owe the IRS 0. If
you live anywhere in Europe 90% of the time you will hit 0.

>It's "miniscule" compared to the number of Americans living outside the
country. Mainly because the majority of Americans living outside the country
are in the military and not affected.

To me, the military doesn't count because 1) bases are treated as US territory
they aren't taxed locally 2) Most military is tax exempt for duty and hazard
pay. I'm referring to the 100,000 Americans in London and 50,000 in Paris.
There are no US military presence in either of those cities and the US
embassies can't hire them all.

>There is a new law that if you have more than $10k at any moment in time
throughout the year you have to report the bank accounts that held the money.

This only applies to citizens living in tax shelters (ie Switzerland,
Luxembourg, etc.) and if you are putting your money their and not honestly
reporting it I have no sympathy at all when you get audited.

>Oh and did I mention that inheritance taxes still apply to you (when you die
or when you inherit)?

Can't forget inheritance tax. Ole Dubya had to repeal it even though it only
applied to his billionaires club.

~~~
loewenskind
>But taxes in Europe is higher than they are in the US, 35% to 25% avg.

In "Europe"? You mean parts of Europe or even most of Europe. In Switzerland,
Lichtenstein, etc., it's lower.

>This only applies to citizens living in tax shelters (ie Switzerland,
Luxembourg, etc.)

Uh... why do you think that is, eh? Think about that for a minute.

>and if you are putting your money their and not honestly reporting it I have
no sympathy at all when you get audited.

Oh yea? If I _live and work_ there and happen to put my money where I _live
and work_ you have no sympathy for me not wanting the US to bother me about
it? Why does the US need to know? Why is it there business? I don't use their
resources. No other first world country does anything like this and there is
no excuse.

------
sridharvembu
India is known to be a very corrupt country too, but in my personal experience
and the experience of others I know well, the on-the-ground-reality can be
quite good. India is a vast country, so all generalizations are very likely to
be both right and wrong and many many times of each, but where we sit in India
(Chennai in the deep south - but this applies to Bangalore as well), India is
a good place to do business. The main thing to accept about India is the
general atmosphere of chaos, the feeling that everything-is-breaking-down-but-
somehow-running, but if you can mentally look past that, there are huge
opportunities.

The reason I say all this about India is that a western journalist could write
a similar story about India or China, yet there exist many versions of reality
in which the story would be wrong.

Both India and China export a lot of people too. But normally you would not
describe that as "fleeing corruption" but more of "seeking economic
opportunity." Is Russia any different from that perspective? I don't know the
answer, I am just asking the question.

~~~
electromagnetic
From what I understood in India corruption is kind of societal. Government
officials take a sort of 'cut' for doing things (this can be seen in France,
however from what I understand in France it gets things done now rather than
getting it done whenever), otherwise you're screwed.

From what I got in Russia the cut is an all level corruption, often with
organized crime involved taking their own cuts.

Ex: Say in India you have to pay a bribe for a business license, in Russia
you'd have to pay a bribe for a business license and then you have to pay for
protection from the mob, then you likely have to pay protection from the
crooked cops.

At least, this is how it's always been represented to me.

~~~
iampims
I don't know where you got the idea — that corruption in France is significant
— from. Care to elaborate?

~~~
CaptainZapp
Transparency International (an NGO fighting corruption) rates France at 26th,
India at 84th and Russia at 146th.

The league table can be found here :

[http://transparency.org/policy_research/surveys_indices/cpi/...](http://transparency.org/policy_research/surveys_indices/cpi/2009/cpi_2009_table)
.

It doesn't seem that France is overly corrupt (if maybe overly bureaucratic)
and I'd like to second your question for clarification.

~~~
iampims
Thanks for the link.

There is no doubt that France is overly bureaucratic — but having lived there
for almost 25 years, I've only heard about a handful of corruption cases.

~~~
electromagnetic
The corruption I've seen isn't actual corruption as it isn't inhibiting the
proper processes, however a lot of the government officials seem to be prone
to 'doing favors' in receipt of something. I've seen this in the UK and
Canada, but France seems to be more accepting of it.

------
huhtenberg
Let me see if I got it right.

Chichvarkin was able to build his "multi-billion dollar empire" with clean
hands, and then all of a sudden the corrupted government noticed his success
and cracked down on him.

I am sorry, I find this very hard to believe. A more plausible explanation is
that "Russia's best and brightest" simply stepped on the toes of the very same
corrupted officials that helped him with his rise.

This is not to say that best and brightest, those who are _considering_
starting a business, are not leaving the country because of the corruption.
It's just that Chichvarkin is not a good example to illustrate the point.

~~~
dchest
The point is, you absolutely cannot build _any_ business with "clean hands" in
Russia. It's like a chicken and egg problem.

~~~
rdtsc
That is true. The "anti" corruption police branch is the center of corruption.
Everyone who gets anything done business wise has to bribe someone, steal
something or defraud somebody.

If they become successful they'll get the knock on their door from the "anti-
corruption" officials who tells them charges will be pressed since they used
"unclean" methods in the past. Unless, of course, you offer to pay even more
bribes to bribe the anti-bribery police....

And yes, it is a chicken and egg problem. Even on the cultural level. Starting
from the hospital when the baby is born, up through kindergarten, high-school,
university and so on there are expected bribes to be payed. So people already
grow up with this constant culture of corruption in mind. It is like a latent
infection, always there in the background.

------
cousin_it
Article is spot on about the corruption - if anything, the tone is too mild -
but overall I can't say the situation for businesses has become worse since
the 90s. Police methods have simply displaced blatantly criminal methods from
the ecological niche :-) Yes, today businesses get taken over by corrupt
police and courts. In the 90s it was done by kidnappings, soldering irons and
automatic gunfire in the centre of Moscow. And _also_ corrupt police and
courts.

Disclaimer: I'm a Russian living in Moscow. Wouldn't dream of starting a
business here. Life as a programmer is pretty nice, though.

------
stretchwithme
I thought it was absurd that Medvedev was here several weeks ago exploring how
get more innovative companies growing in Moscow. Maybe not terrorizing them
might be a good first step.

There are good reasons Sergei Brin called it Nigeria with snow.

------
Konstantin
It's not an issue of Putin's control. It's an matter of people's mind.

I'd like to point out two issues. 1\. Too many people here want a tough and
strong leader with nearly absolute political power. Few days ago I ran into my
childhood friend. And he told me, by the way, 'You know buddy I'd like to see
a Tsar as a leader'. I was deeply depressed. I think it's a heritage of the
Soviet where people could sidestep responsibility of their own life.

2\. Most people do not like entrepreneurs. So you are entrepreneur. Then
you're fraud and rouge by definition (in the eyes of common people). That's
why Chichvarkin did not gain public backing. And it's a sad and shameful
thing.

I think things will change someday. But it will take neither one nor three
years but half a score.

------
yurylifshits
The situation is more complex. All bad stories mentioned in the article are
described pretty accurately. On the other hand, there are big businesses that
feel OK to be in Russia. The trick is to be in coalition with government/law
enforcement. Unlike US you can not operate keeping full independence.

~~~
ovi256
>there are big businesses that feel OK to be in Russia

Ikea recently withdrew, abandoning several in-construction stores. Supposedly,
they couldn't take the twists and turns anymore.

~~~
vl
Withdrew is incorrect. It appears that Ikea suspended further investments, but
still continues to operate existing stores.

[http://www.ikea.com/ms/en_US/about_ikea/facts_and_figures/ik...](http://www.ikea.com/ms/en_US/about_ikea/facts_and_figures/ikea_group_stores/russia.html)

------
nxd
It is interesting to see this article today as the South African president has
just used Russia as an example, to defend his attitude to the media (more
about that below). As a South African, reading stories like this is
frightening, since we seem to be embracing a trajectory that could lead us the
same way.

While corruption is pretty high, it doesn't impact most people's day-to-day
lives. However, serious institutional problems are becoming apparent: there
have been cases where company directors have been removed by politically
connected individuals, due to corruption at the government agency that
registers companies. Significant amounts of real estate have been stolen due
to corruption at the deeds office. And mineral rights are being seized because
of weak controls at the government department that regulates these rights. In
one case last week, a listed steelmaker was forced to buy mineral rights from
a group of politically connected at a huge premium. All of these have been
widely reported in the media, but that is where the problems start.

South Africa's media and constitution generally allow for free expression,
but, a few weeks ago a newspaper was launched with an explicitly pro-ruling
party stance (by some of the same people who benefitted from the steel
shakedown described above). At the same time, proposals were released for a
statuatory tribunal to regulate the print media (South Africa already has
libel laws, so this has been interpreted as an opportunity to muzzle the
press). The government is also pushing an act that would allow government
officials broad powers to classify information. And a journalist was
dramatically jailed (on what seem to be trumped up charges) by an elite police
unit, days after reporting on a huge, and apparently irregular lease made by
the Police Commissioner, again with a politically connected individual.

Will South Africa lose whatever gains it has made and follow the path of
Russia? I hope not, but I am becoming increasingly pessimistic.

~~~
temphn
You should leave South Africa while you still can.

------
snom370
A lot of big companies are learning the hard way that doing business in Russia
is riskier than they thought, when the other party has the legal system on
their side. One example that made it to national politics, and AFAIK ended up
being settled by basically giving in to the demands:
<http://en.wikipedia.org/wiki/Alfa_Group#Dispute_with_Telenor>

------
shadchnev
Russia as of today isn't good or bad. For some people, what's happening is
inappropriate, others accept it. For everyone here, I guess, Russia seems a
nightmare but there are quite a few Russians, many of them, actually, who
genuinely support Putin and Medvedev and have no desire of leaving. It's a
different mindset, different way of life.

As for me, I left for London when I was 23, 4 years ago, never visited Russia
ever since and have no intention of going back. Many (most, almost all?) of my
friends who exiled feel the same.

------
known
I think you should hire a local politician (
<http://en.wikipedia.org/wiki/Member_of_Parliament> ) on your payroll if you
wanted to do business in countries like Russia and India.

------
bh23ha
You can replace Russia with almost any developing country and that sentence
would be equally true.

For some it would be war more then corruption and for a very few it's not true
at all, but they won't be developing for long.

~~~
varjag
Russia is not a developing country though.

------
andreyf
And has been for decades... so?

------
dnsworks
Come on, is this really news?

------
DenisM
sad :(

