Russia: Political and institutional effectiveness

Content Type
Country Data and Maps
Institution
Economist Intelligence Unit
Abstract
No abstract is available.
Topic
Politics, Background, Forecast, Political and institutional effectiveness
Political Geography
Russia

Russia is formally a "super-presidential" political system, with a high degree of power vested in the executive. The "vertical of power" was a leitmotif of Mr Putin's efforts to reconstitute and recentralise state power during his first two presidencies. In practice, however, the capacity of the president and the government to implement policy is circumscribed by weak institutions and an inefficient and inflexible bureaucracy. Russia has been characterised as a hybrid state, in which the formal institutions of governance co-exist with informal networks that can subvert constitutional order and rule of law.

Informal networks subvert the rule of law

Although Mr Putin is more powerful than any other individual, his capacity to influence the political system as a whole is limited. Realisation of policy decisions is inhibited by corruption and the high degree of informal practices, which undermine the rule of law. Limitations on the media and civil society also hamper public oversight of policy formation and implementation. As a result, when major policy issues are at stake, there is a tendency towards "manual control", in which leading officials, or Mr Putin himself, take direct responsibility for the implementation of policy. This personalisation of the policymaking process only reinforces the informal practices that it is intended to resolve. Businesses should not assume that government legislation or even executive orders from the president will necessarily change practices on the ground, or that legal judgments will be consistent with new laws.

There is likely to be a partial rebalancing of power away from the centre in favour of the regions in 2016-20. The re-establishment of direct gubernatorial elections in 2012 (albeit with nominations partly controlled by the centre) will prompt regional heads to focus more closely on local issues, and also endow them with greater legitimacy. Changes to the voting system for the next general election may have a similar effect. Lower oil prices will cut federal financing to the regions and municipalities.

The ineffectiveness of the state and bureaucratic interference in the economy are still serious obstacles to doing business. Weak institutional and political accountability makes policymaking vulnerable to lobbying by powerful political-economic groups. Russia will remain a "limited access order" in 2016-20, in which politically connected insiders maintain high barriers of entry to new market participants.

The quality of the public administration is unlikely to improve significantly during 2016-20. Nevertheless, contrary to most impressions, the number of bureaucrats is not particularly large compared with other countries. Civil servants represent less than 3% of the employed labour force, similar to China and Turkey, and far lower than the OECD average of about 9%. The problem with the bureaucracy is that it is corrupt and inefficient, not that it is too big. A smaller civil service might even compound the problems of inefficiency.

The court system is slow, underfunded and open to political influence and capture by private interests. Corporate "raiding", in which companies use law enforcement services and/or the judiciary to seize the business of a competitor, is a significant risk to doing business. The decision in 2013 to merge the Supreme Arbitration Court, which ruled on business disputes, with the Supreme Court, which oversees criminal and other civil disputes, represented a further setback to judicial independence. The arbitration courts had been separated from the general court system in the 1990s and had built up a track record of upholding property rights and supporting corporate governance.

Corruption cases are often used to settle business or political scores

Corruption remains a serious business risk. The largely state-controlled media cannot be relied upon to investigate and publicise corruption. Anti-corruption investigations are often used as a tool in political and business disputes, rather than to enforce the rule of law. Fiscal pressures may push the government to take more concerted steps to try to reduce the scale of high-level corruption in areas such as state procurement. However, tackling the broader problem of corruption requires deep structural and regulatory change, which could prove highly disruptive. The political environment has grown more authoritarian since Mr Putin returned to the presidency in May 2012. The operations of independent media outlets have been further restricted, and controls on the Internet have been increased. Curbs on the freedom of the press reduce the likelihood that efforts to counter systemic corruption in the bureaucracy and state enterprises will be successful.

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