Monday, July 19, 2010

Window on Eurasia: Corruption Makes Russian Highways Most Expensive But Shortest Lasting in the World, Expert Says

Paul Goble

Staunton, July 19 – Massive corruption means, a Moscow economist says, means that road in Russia “cost four times as much, last one quarter as long, and require repairs costing four times as much as roads in countries with similar climatic conditions,” a situation that both threatens future construction and undermines chances for economic modernization.
In today’s “Novaya gazeta,” Nikita Krichevsky, a scholar at the Moscow Institute of National Strategy, says that because officials are interested in stealing as much as they can from the budget and because highway funds are an easy target, Russia currently has some of the most expensive and poorest roads in the world (
In Russia, the average cost of building one kilometer of hard surface roads is 17.6 million US dollars, compared to an average figure of 6.9 million US dollars in the European Union, 5.9 million in the United States, and 2.2 million in China. And these discrepancies are not significantly reduced if one compares Russia with countries having a similar climate.
One of the reasons that corruption is so easy in this sector of Russian life, Krichevsky suggests, is that there is so much dishonesty about it. Rosstat reported that in 2009, Russia built 42,000 kilometers of roads of all sorts, an impressive figure but almost certainly an invented one he concludes.
According to the statistical agency, the situation regarding paved roads was worse: there was no increase at the federal level, there was a decrease in the size of the network of regional and municipal roads, but the agency reported, “roads of local importance increased by 23,000 kilometers.”
That figure, Krichevsky says, is “nonsense.” This year, 65 of the 83 regions of Russian can’t make ends meet. Consequently, the figure of 23,000 km in new roads is at the very least improbable and more likely an invention. Expert estimates of the real total range from 2700 km downward.
“Someone is prettying up reality with statistics, and this isn’t Rosstat,” the economist continues. The data comes to the statistics agency from various ministries and administrations, and Rosstat’s summation of these data first elicits “a nervous laugh and then a sense of shame” because they “produce distrust in all other indicators Rosstat provides.”
The level of corruption in the highway construction and repair sector and the reasons many officials aren’t interested in any change, Krichevsky suggests, is shown in the following story told by a businessman who won a highway construction contract in one of the regions near Moscow.
When the businessman went in to sign the contract, the bureaucrat in charge “reminded him that there are certain rules of the game, and said these were 70/30.” The businessman replied he “agreed” and would give the 30 percent kickback. “But the official responded: ‘You didn’t understand me correctly: you give me 70 percent, and 30 percent remains with you.’”
That is a major reason why Russian highways are so expensive to build and why so few of them in fact are, Krichevsky argues. But there is another problem: Russian roads are built not to last but to require repairs, often just after the road is opened. That offers officials yet another opportunity for theft and corruption.
What makes the decision to use outdated construction technologies, the economist says, is that “our natural situation not simply permits but dictates the need of using” iron-reinforced concrete as do other countries in the north where there are better and longer-lasting roads and far less corruption.
If Russia is to modernize, Krichevsky continues, Moscow must work to reduce the level of corruption from the nearly 50 percent of GDP it constitutes now to the three to ten percent of GDP it forms in most countries. Eliminating it entirely is not a realistic goal, however nice that sounds.
But given the current Russian system of administration, it will be impossible to achieve that because the motivation of the bureaucrat and of the businessman is “identical.” They both want to make money for themselves, and no one will be able to change that overnight even with the introduction of draconian punishments.
In the highway sector, Krichevsky continues, these “corrupt appetites” each up “from 50 to 70 percent of the cost of roads,” far more than the 40 percent corruption consumes in the case of housing construction. And what that means, if nothing else is done, is that more money for roads will simply mean more corruption.
And Russia needs more roads. Krichevsky says the network should “at a minimum” be twice as large as it is now, something that could be achieved by building 7,000 to 8,000 kilometers of paved roads every year for the next 20 to 25, a reasonable goal if somehow corruption can be cut back.

No comments: