Дек
26
2016

Who are the reformers in Russia?

 (# 3 in the series of articles «The Anatomy of Reforms in Russia») In fast-paced changing modern world it is crucial to develop state institutions and improve the regulatory policies – or in other words to implement reforms on a constant base.

Under the word “reform” I understand every sufficient change made in regulation that affects society, business or state itself. Russian Federation took attempts to establish stable and effective process of conducting regulatory reforms in 2012-2016. Some individuals and institutions called reformers have played major role in that process.

Further I suggest you information about the institutional base of reforms in Russia, Strong-Weak Analysis and some suggestions how that state-run processes can be improved in future.

It is important to get acquainted with reformers due to their high influence on future development of the country as balanced regulation stipulates and supports a market economy. That is their job to adopt the system to new demands and establish non-conflict work of complex mechanism – legislation. Supposedly they are heroes of our times as well as entrepreneurs, doctors and scientists.

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For the last 5 years Russian Government and state-affiliated “think tanks” are at the pinnacle of the system reform activities. Other state bodies – Parliament, judicial and regional authorities – are lack of importance due to their insufficient role in the system of power. Mostly representatives from business and non-governmental sectors are excluded from the process of conducting the state reforms. Universities and scientific institutions also stay aside and show less of their potential to be the progressive research centers. The main roles of the above mentioned actors participating in reform activities are to be explored in that article.

State activity
The executive power of the Russian Federation is a general basis of developing and implementing legal reforms in the country. Other branches of power such as judicial and legislative possess weak potential and are suppressed by executive ones.

The judicial power lost it strength after the abolishment of the Supreme Commercial Court in 2014 and lack of related tacit competition with the Supreme Court. A common consensus is achieved among the Russian lawyers that the state decision to restructure the supreme judicial bodies is controversial and it negatively affected the overall legal system in Russia. The Constitutional Court of the Russian Federation is a narrow specialized and conservative state body, not interesting in consideration with reform activities.

The State Duma and the Federation Council of Russia as a legislature bodies can serve as major reform centers. But unfortunately they are not. Today the political system is deformed and dominated by the “United Russia” party – so parties have less interest to compete for people’s votes and establish effective mechanism to change the legislative just-in-time and in system manner.

The quality of adopting laws nowadays is arguable not only among professionals. In general Russian Parliament is discredited by the bulk of scandal, reactive and poorly written laws adopted as a state reaction to mass protests in Moscow 2011-2013. That governmental body is often called a “mad printer.” Record low turnout of voters at the elections for the seventh convocation of the State Duma in 2016 (less than 50 percent of Russians) proves that ordinary people appraise bad performance of that institution. That also raises the question of its legitimacy.

Heads of the federal subjects of the Russian Federation and the Presidential Administration of Russia stay aside.

According to the Constitution Russia is a federal state. Regional authorities have some rights that constitute formal independence from the federal center including the president of the Russian Federation. But today most of the issues are dependent on central authority. The legal term “division of power” is a vestigial form. Russia can be named a unitary state after the enduring 15 years process of centralization and everywhere federal control. By the way the reformer project to improve the business climate in Russian regions, National rating of investment climate, led by the Agency for strategic initiatives is argued to be political and media ones despite being meaningful. Due to the lack of their own reformer potential Russian federal subjects don’t play leading roles in conducting law reforms.

The Presidential Administration of Russia as an executive office that coordinates the activity of all state bodies and structural units under the authority of the President by its function cannot serve as a center for law reforms. Such an activity can be fulfilled in the Government and related structures. There was one exception when in November 2016 the State Council Presidium, an advisory body that assists the President, discussed measures to improve the attractiveness of Russian regions for investors. The reform activity of a special group with Governor of Tyumen Region Vladimir Yakushev being in charge of it is considered to be temporarily. Also the activity was related to the above mentioned National rating of investment climate which positive effect is arguable.

Thus, the Russian government is a main center for conducting law reforms in Russia, considering the improvement of the business climate and legislation. Ministry of Economic Development of the Russian Federation acts as a responsible functional state body (Minister — Maxim Oreshkin since November 2016, before – Alexei Ulyukaev), and the supreme official is the First Deputy Prime Minister of the Russian Federation Igor Shuvalov.

Special coordinating and consultative bodies are forming in the Government for resolving complex multilateral issues. Now there are 2 major settings considering economic reforms:
-  Government Commission on Economic Development and Integration
- Government Commission on competition and the Development of Small and Medium-Sized Enterprises

The chairmen for both bodies is Igor Shuvalov, that makes him the major reformer and responsible for the economic development of modern Russia. Special working groups prepare materials for the meetings of those Commissions. In particular the Group for the improvement of business climate aimed to lead regulatory reforms exists. It is dealing with international trade, dealing with construction permits and getting electricity in context of the World Bank’s project “Doing Business”. Deputy Minister of Economic Development of the Russian Federation Stanislav Voskresensky and CEO of the Agency for Strategic Initiatives Andrei Nikitin are in charge of that influential Group.

In its turn the Group gets analytical material and suggestions to work with from different groups of exports, consulting firms and state agencies – so called “think tanks”.

The major “think tank” are:
- Joint-stock company SME Corporation with public functions regulated by special law. The organization was founded in 2015 on the base of the Agency for loan guarantees. It is headed by Alexander Braverman. The major projects are Supporting Small and Medium-Sized Enterprises, Providing loan guarantees and the new project of creating the system of One Window Service Offices in favor of business.
Funders: Federal budget of Russia, Vnesheconombank
Funds Available: 50 – 80 bln rubles (0,8 – 1,3 bln USD) in 2015-2916

- Autonomous non-commercial organization “Agency for Strategic Initiatives to promote new projects” (ASI). The organization was founded in 2011. Andrei Nikitin is a chief executive officer.
The major projects are National Entrepreneurial Initiative, National Technology Initiative, National rating of investment climate.
Funders: Joint-stock company Rosneftegaz, Federal budget of Russia, Vnesheconombank.
Funds Available: 10+ bln rubles (160 mln USD) in 2012-2016. It is also planned to provide for the National Technology Initiative’ projects 5+ bln rubles in 2016-17.

- Center for strategic research (CSR). It was founded in 1999. Highest-ranking figures are Alexei Kudrin and Pavel Kadochnikov. The major projects are the Economic development strategy for Russia till 2024, Transport infrastructure reform.
Funders: self-funding.
Funds Available: 500+ mln rubles (8 mln USD) in 2015-2016

- Analytical Center for the Government of the Russian Federation. The Analytical Center was founded in 2005, and in 2015 it got the status of Autonomous non-commercial organization.
Konstantin Noskov is a head of the Center.
The major projects are Development of a Model for the Northern Sea Route, Strategy for modernization of the Transport Infrastructure and Reform of the Inspection & Supervision state system in Russia (2017-2025).
Funders: self-funding, Federal budget of Russia.
Funds Available: 500+ mln rubles (8 mln USD) in 2015-2016.

Society and business activities
Some of the non-governmental organizations possess scarce possibility to represent interests of their members in state bodies. Among famous ones are Russian Union of Industrialists and Entrepreneurs, OPORA Russia, Russian Business, Chamber of Commerce and Industry. Federal Business ombudsman Boris Titov plays special role and have some influence due to a legal tie with state authority.

Mostly Russian business is not involved direct in reform activity. Representatives of large-sized companies prefer to lobby their interest through some members of Parliament or high-ranking civil servants behind the scenes. Till last times interests of SME business were indirectly promoted by non-governmental organizations and business association. Partly because of comparatively low efficiency authorities decided to establish a new institute of Business ombudsmen (2012) and SME Corporation (2015).

Authorities of all levels (federal, regional) try to engage business in direct communications on the base of consultative councils and Project offices of different kinds. These attempts, however, have always proved unsuccessful considering long-term and stabile effect due to organizational problems and politics in appointing the candidates.

System approach in dealing with reforms has shown Alexei Kudrin with his NGO platform — the Committee for civic initiatives — founded after the mass protests in Moscow in 2011-13. He engaged some experts to prepare suggestions of conducting judicial, law enforcement and some other reforms. Virtually they just remained as ‘plans’ while Mr.Kudrin switched to prepare a new Economic program in behalf of the President Vladimir Putin. Also Business ombudsman Boris Titov has taken active position in promoting Economic Development plan of Russia suggested by informal association of experts “Stolypin Club”.

For my sorrow Russian scientific institutions and universities does not play sufficient role as centers for reforms being dependent on state authorities. The recent scandal with European University at St. Petersburg losing its license just an example how vulnerable they are. In future, indeed, universities have to demonstrate their influential potential if they pretend to be highly ranked in international educational ratings.

It is interesting to find out that pro-governmental and patriotic organization famous for their marching in unison with central point of view (e.g. “Ours”, “Officers of Russia”, Cossack’s movement) are not determined as expert platforms participating in reforms. I suppose it’s due to lack of the expertise.

Finally, some words about oligarch or wealthiest businessmen’s role in conducting reforms need to say. Historically according to unwritten rules Russian rich businessmen are not allowed to participate in politics in converse, for example, to Mr.Trump, who has just experienced that role in US. Publicly open Reform activity challenging the current regulatory system virtually can be interpreted as threat to authorities. In that sense Mikhail Prokhorov with his political party “Civic Platform” (2012-2015) and Putin’s vis-a-vis Mikhail Khodorkovsky, who after the jail have founded the “Open Russia” project, are most famous exceptions. Nowadays the last one performs political activity and announces the opening of new initiatives in 2017 — “Open economy”, “Center for managing investigations”, while it is not clear whether Mr.Prohorov has personal plans to participate in politics or social activity in the next year.

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In context of the overview of participants of the reform process it is possible to formulate its major strong and weak sides relating to the subject involved.

Strong sides:
- Understanding who are responsible and involved in conducting reforms in modern Russia.
- Existence of state “think tanks” that can fulfill the task of proposing, drafting and implementing reforms (ASI, CSR, SME Corporation, Analytical center and others).
- Central management and supply of the reform process only in short time perspective.

Weak sides:
- Not proper quality of reforms and low efficiency of the process to prepare and implement them are caused by ignoring the importance of the legal component. Mostly legal professionals are not engaged in the reform process or participate wrong way. Ministry of Justice plays weak role.
- Failed balance of powers, caused by a dominant strong executive branch of power, ultimately limiting the effectiveness and reform potential of the system. In long term perspective centralization badly affect all state institutions and mechanisms of interaction between them. Lack of power and sources to implement reforms on regional level as well as low level of engagement from the State duma and judicial authorities are the given reality today.

Possibilities:
- It looks like at some levels of government consensus is achieved to improve the efficiency of bureaucracy. Anti-corruption raids and project management method of tackling with priority issues including reforms are just some used tactics in 2016.
- Strengthen competition of “think tanks” for scarce financial resources in conditions of the budget deficit can be useful if coordinated professionally and in a fair way.

Risks:
- Violation of the system’s overall approach to reform process on different levels of authorities: counter-reforms, inconsistency between different bodies, lobbying, episodic or ragged pace changes of the legislation, bureaucratic inertia, bad management and so forth.
- Unfair and unconstructive competition between state bodies and agencies or another words ‘political’ confrontation that usually leads to underhanded dealings and manipulations. That could be prejudicial to the efficiency of reforms.
- Lack of resources or unfair distribution of them among state bodies and agencies according to ‘political’ criteria not efficiency reasons.
- Weakened responsibilities and poor performance at lower levels of governance including those servants who work in front-offices. A successful implementation of reforms strongly suffers of not enough engagement being shown by ordinary employee.

Taking into account above stated I suggest some ideas of improving the reform process in Russia.

Suggestions regarding executive branch of power:
- Major role in conducting regulatory reforms should play legal professionals: Ministry of Justice as coordinator and Legal Center for reforms as an influential “think tank” (not present today). A process of changing legislation in modern constitutional state requires implementing that approach with common sense. I am slightly confused of the Ministry of Economic Development of the Russian Federation being responsible for improvement business regulation in 2012-2016 in connection with World Bank’s Doing Business project.
- A special status and social security issues of the reformers, civil servants involved in a constant reform process, should be protected by the law on the federal level. It is important because they confront bureaucracy.
- Proactive business engagement in reforms should be guaranteed by its participation rate of minimum 80 percent of the consultative councils and open process of appointing candidates for those unpaid pro bono positions. Building direct mechanisms of interaction with beneficiaries is a good strategy to better understand and regulate economic activity.
- Attempts to alter current models of budget financing including Project based approach in governing which is tested in Russia recently should be prolonged and intensified.
- For the purpose of public control the financial information (income, spending, sources, etc.) of state-owned organizations, including corporations and autonomous non-commercial organization, should be open and available

Suggestions regarding judicial branch of power:
- Revival of the Supreme Commercial Court could restart informal competition and catalyze the reform activity of the judicial authorities.
- Special courts or institutions to resolve disputes within civil service similar to military courts could tackle problems connected with reform activity – restructuring, mergers and acquisitions inside the bureaucracy.

Suggestions regarding legislative branch of power:
- Performing KPI for members of Parliament that comprises an appreciation of the reform activity could strengthen legislative power‘s potential in that field and affect overall competition among state authorities in constructive way.
- To improve the quality of the legislation all proposed bills regulating priority issues including business activity should be discussed with experts and pass through special procedure evaluating bill’s impact on public relations. The procedure usually called “Regulatory Impact Assessment” is already being used by executive authorities.

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In conclusion, today the Government of the Russian Federation plays an exclusive role in conducting Russian law reforms. The major bodies considering economic reform process are Government Commission headed by the First Deputy Prime Minister of the Russian Federation Igor Shuvalov. That highly ranked person is responsible for a positive business climate in the country and thus ours prosperity.

State funded “think tanks” are backbone of the reforms providing government bodies with relevant analysis to address their Economic development challenges. One of the most supportive institutions is Agency for Strategic Initiatives which was funded for more than 10 bln rubles (160 mln USD) in the last 5 years. Signs of growing competition for financial resources are observed among the “think tanks”. In 2016 the Analytical Center for the Government of Russia shows growing activity and started long-term project of reforming the Inspection & Supervision state system in Russia (2017-2025). While the activity of Corporation SME is confined to specified issues of supporting small and medium sized business it could challenge other “think tanks”, for example ASI’s project “National Entrepreneurial Initiative” with the same beneficiaries. Recent appointment of Alexei Kudrin as a chairman of the Board of the “Center for strategic research” and followed President’s order to present him the new Economic Development Program in 2017 could change current roles among major reform centers.

Nowadays reform activity in Russia is crucial to modernize the state governance system and to create friendly and stabile business environment in order to attract foreign investments. For the last 5 years many attempts have been made by Russian authorities to achieve these scopes, however, it’s yet to be proved how successful they are.

Among the main obstacles are low level of professionalism and lack of legal competence among participants of the reform process, absence of real political competition in the legislative body of Russia and bound low motivation to establish and sustain the process of conducting law reforms of high quality, as well as some other controversial management and political decisions of the last 5 years.

Nevertheless, honestly speaking, Russia has a great potential to establish one of the most effective system of providing public services in the world and therefore – good performance of its governance taking into account the persistent attempts to achieve that. The great leap from 120th rank to 40th in World Bank’s Doing Business rating by 2016 is one of the vivid examples of that will.

 

Thank you for your attention!

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Please contact me at midavcher@gmail.com

 

(c) The author of the text is Vadim Cherdantsev
Moscow, December 2016

Digital image was found on the Internet 26.12.2016 http://www.chinadailyasia.com/

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