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TT Business Intelligence Report Vol. 1, No. 23, 3 June 2002 Business Intelligence, Crime, Corruption and Debt in Europe and the former Soviet Union  CZECH REPUBLIC CZECHS BELIEVE CORRUPTION TO BE A "VERY URGENT" PROBLEM A survey carried out by the Centre for Public Opinion Research shows that 73% of Czechs believe corruption is a "very urgent" problem. Twenty-two percent are of the opinion that it is a "fairly urgent" problem. Corruptionis placed first among the problems considered as serious by respondents. It is closely followed by organised crime, which 70% consider to be "very urgent". (NewsBase 31.v.02) GOVERNMENT DECISION ON NOVA HUT STEELWORKS The government decided on Wednesday, May 29, to sell the debt-ridden Nova hut steelworks (NH) to Dutch company LNM Holdings, cabinet spokesman Libor Roucek said. The decision came two days before the exclusivity for talks expired. Nova hut managers welcomed the Cabinet decision, saying it was a positive step towards the faster stabilisation of the company and a successful completion of the restructuring of the Czech steel sector. "The NH management expects the incorporation of the company in a strong steel-producing group to help preserve production and planned employment, and to restore the trust of customers and creditor banks, above all the International Finance Corporation (IFC)," Nova hut said. (NewsBase 31.v.02) PRAGUE MAYOR'S DECISION TO RESIGN Prague Mayor Jan Kasl of the Civic Democratic Party (ODS) said on Tuesday, May 28, he had decided to resign and leave the party over the issue of corruption. "I am really fed up," Kasl said. Kasl was elected after the 1998 local elections, when the ODS formed a coalition with the Social Democrats at Prague Town Hall. "I increasingly feel that when making decisions the Town Hall members for the ODS prefer personal to public interests," Kasl said. He said that he had not managed to convince other members of the Town Hall about the necessity to struggle against the corrupt environment. (NewsBase 28.v.02) POLAND WLADYSLAW JAMROZY CHARGED Prosecutors have charged Wladyslaw Jamrozy with incurring losses for the state-run PZU insurance company when he headed it in 1998-2002. Jamrozy, who was arrested earlier this week, is accused of failing to closely examine documents filed by real estate dealers and exceeding his official powers in buying property on PZU's behalf. Jamrozy, who denies any wrongdoing, faces up to 10 years in prison if convicted. PZU, in which the State Treasury has a 55% stake, controls some 60 percent of Poland's insurance market. Jamrozy was appointed by the last government. (NewsBase 03.vi.02) HUNGARY FORMER HUNGARIAN LEGISLATOR JAILED FOR BRIBERY Former Hungarian Smallholders' Party deputy Zoltan Szekely has been sentenced to six years in prison and banned from public office for 10 years after being found guilty of two counts of bribery, Hungarian radio reported on 27 May. Hungarian media reported that Szekely was caught accepting a bribe in October 2000. This is the first time since the collapse of communism in Hungary that a person has been convicted for corruption for actions committed while serving as a National Assembly deputy. (RFE/RL 30.v.02) YUGOSLAVIA MILOSEVIC REGIME Some $6-8bn slipped out Yugoslavia during the Milosevic regime, C-Bank official Dusan Lalic announced, adding that tracking down and returning the money to the country would takes years. Lalic said that money was funnelled into accounts in 52 countries in the 1990s, with the majority ending up on Swiss and Russian accounts, the Belgrade daily Danas reported. Reacting to criticism from Justice Minister Vladan Batic that the C-Bank had prematurely closed the books on investigating funds channelled to Cyprus, he said that Cyprus had been only a "way station" in the process and that since the C-Bank reports only to the Federal Parliament, it was up to police organs to finish the job. (NewsBase 03.vi.02) RUSSIA PUTIN CONSIDERS CRIME A 'SERIOUS THREAT' TO THE COUNTRY Speaking at a Kremlin meeting devoted to combating organized crime, President Vladimir Putin told law enforcement representatives that "crime in the country continues to increase at an alarming rate," RTR and RIA-Novosti reported on 31 May. The situation is very bad and, despite all efforts, there has been no perceptible change, Putin said. In the first quarter of the year, crime increased in 28 subjects of the federation, Putin noted, adding that in Moscow and Pskov Oblast, crime had risen by 90 percent. "All this means that crime remains a serious threat to the [national security of the] country and citizens are overwhelmed by insecurity over their own safety," Putin concluded. (RFE/RL 31.v.02) PUTIN SUGGESTS REMEDIES TO COMBAT CRIME Putin suggested that law enforcement agencies take active measures to get rid of those "who turn their service into a form of business," RIA-Novosti reported on 31 May. He also suggested that regularly rotating personnel both in Moscow and the regions would help combat corruption by disrupting longstanding ties between officers and other interests. This practice, known as "rotation of cadres," was a standard anticorruption practice of the Soviet-era KGB. (RFE/RL 31.v.02) CORRUPTION CONTINUES TO TAKE A HUGE BITE OUT OF THE RUSSIAN ECONOMY Presenting in Moscow the results of a two-year study of corruption, the director of the INDEM think tank, Georgii Satarov, said that Russians pay about $37 billion each year in bribes and unofficial fees, a sum that is roughly equivalent to the revenue portion of the 2002 federal budget and equals about 12 percent of the country's gross domestic product, Russian news agencies reported on 22 May. Satarov, a political adviser to former President Boris Yeltsin, said that the study, which was funded by the Danish government via the World Bank, demonstrates that corruption remains a formidable element of the Russian economy. About 90 percent of the bribes are paid by businesses, with roughly 75 percent going to low-level local officials, although Satarov said that many bribes are then passed on to more highly placed officials. Among the leading "corruption services," the study named export licensing and quotas, state budget transactions, tax transfers, customs duties, privatization deals, and the servicing of regional debts to the federal budget. Although corruption has a long history in Russia, Satarov argued that it has increased massively in scale and become much more cynical in form during the post communist period. (RFE/RL 30.v.02) RUSSIA HOPES TO REPATRIATE MONEY LAUNDERED IN SWITZERLAND During the recent visit of a delegation from the Russian Audit Chamber to Geneva, investigators showed a keen interest in repatriating Swiss bank deposits that allegedly stem from several money-laundering cases from the 1990s, "Le Temps" reported on 21 May. "We are talking about a sum of at least 300-500 million Swiss francs [$190-316 million]," an unidentified Geneva lawyer with whom the Audit Chamber has had contacts told the newspaper. Moscow is especially interested in a controversial deal involving Angolan debt to the Soviet Union that was carried out by then-Deputy Finance Minister Andrei Vavilov, and an estimated $300 million belonging to Russian businessman Sergei Maiorov, who allegedly illegally transferred these funds out of Russia. (RFE/RL 30.v.02) SAILORS SENTENCED FOR STEALING WARSHIP'S ANTI-AIRCRAFT MISSILE SYSTEM The Vladivostok Garrison Military Court has sentenced Aleksei Ilyukhin and Dmitrii Markin to 6 1/2 and 5 1/2 years in prison, respectively, for stealing a portable antiaircraft-missile system from a Russian warship, RIA-Novosti news agency reported on 27 May. Markin admitted to stealing the missile system to sell it on the black market. Ilyukhin was given a stiffer sentence, since the investigation revealed that he initiated the crime. Markin's trial took place after Ilyukhin's, as the former spent some time in hiding before being captured. (RFE/RL 30.v.02) RUSSIAN INVESTMENT ABROAD EXCEEDS INWARD FOREIGN INVESTMENT The State Statistics Committee reported that the amount of Russian investment abroad continues to exceed foreign investment into Russia. Statistics show that Russian outward investment reached nearly $4.4 billion in the first quarter of 2002, a 40.7 percent increase from the first quarter of 2001, Interfax reported. Foreign investment in Russia in the first three months totaled just $3.8 million. The committee pointed out that Russian capital abroad returns to Russia after a short period of time. For this reason, the amount of Russian capital accumulated abroad was just $3.6 billion in late March, which is less that what was invested in the first quarter of this year. Of Russian investments accumulated abroad, $2.4 billion represents direct investment, $155 million portfolio investment, and another $1.03 billion other investment. Russia's largest accumulated investment figures are in Belarus ($577 million), Iran ($554 million), Cyprus ($452 million), the Netherlands ($434 million), Liberia ($227 million), Moldova ($170 million), Armenia ($127 million), the British Virgin Islands ($118 million), the U.S. ($94 million), and Germany ($70 million). (RFE/RL 30.v.02) BRIBES KEEP RUSSIA EFFICIENT Doing business in the former Soviet Union is a challenging undertaking. Finding the right partner and knowing the local customs is a fundamental requirement. Stories have filled the media and films depicting Russian organized crime as a formidable force to be reckoned with, but the true cost and scope has often gone undefined. Corruption, while often mentioned, has not been exhaustively researched. The "Financial Times" on 23 May reported on the "brilliant presentation" of Georgii Satarov that provides some answers to the scope of the problem. Satarov, who runs the think tank INDEM (Information for Democracy), interviewed "700 businessmen and 2,000 people from other walks of life." The conclusions of the research were remarkable. According to his research, "private citizens pay at least $2.8 billion a year in bribes, and businessmen pay at least $33 billion." If these figures are accurate, bribes amount to a figure more than one-half of all taxes collected by the Russian government. Russian budget revenues in 2000 were $40 billion. Speculation is that the amount businesses paid in bribes are lower than reported, and, if so, bribes may equal or even exceed the level of taxes collected by the government. The efficiency of bribery was also measured. A full 98 percent of those interviewed acknowledged satisfaction with the results of the bribe. In Satarov's words, bribery is a "very efficient and dependable market,... the most efficient services market in our country" according to the "Financial Times" story. Interfax reported on 21 May the breakdown of bribery as follows: "People spend the most money on admission to universities ($449 million), followed by bribes to traffic policemen ($368 million) and courts ($274 million). The total amount of bribes paid for various services relating to medical care reach some $600 million," Satarov said. The report also linked the payment of bribes for university admission as a means for obtaining deferment from the army. With the war in Chechnya still simmering and the high levels of injuries and suicides resulting from the alleged hazing of young military recruits, families appear increasingly inclined to do whatever is possible to avoid military service. However, this trend is not only restricted to Russia itself. Corruption watchdog Transparency International (TI) for the first time recently listed Russian companies as the most likely to offer or pay bribes for contracts in emerging market countries, followed by firms from China and Taiwan (see "RFE/RL Business Watch," 21 May 2002). Another point tracks the criticism Russian President Vladimir Putin has leveled at the Russian bureaucracy. Information obtained in Satarov's study claims that 99 percent of businessmen who paid bribes did so to Russian government employees. Government workers often delay approval of licenses and other permissions that are required for businesses to operate. As the efficiency figures indicate, once a bribe is paid the obstacles disappear and the problems are solved. Putin openly complained about this when he criticized the corrupt and inefficient Russian bureaucracy in his annual address in April. When Satarov asked interviewees how they feel about the conditions surrounding living and working in Russia, the response surprised him, according to the "Financial Times" story. Rather than the cynical reaction to which Russians are accustomed, the most common response was very different, he said: "I hate our system of government which puts people in such situations." (RFE/RL 30.v.02) UKRAINE PROSTITUTES SHUN LOW-PAID OFFICE WORK Most Ukrainian prostitutes say they are in the business to avoid working in an office, a recent survey showed. The Ukrainian Institute of Sociological Research interviewed 636 prostitutes working in 12 cities, Interfax reported. Some 73 percent said they chose prostitution "in order to not work for kopecks in some office". Sixty-one percent said it was a way to save money. Only 21 percent said they sold themselves because they had no other way to earn income. Ukrainian pimps allow prostitutes to retain some 20 percent of the money they earn, the report said. The average monthly income of a Ukrainian factory worker is around $60. A prostitute is paid on average between $20-30 per customer. Some 250,000 Ukrainian women work as prostitutes, the report said. (RFE/RL 30.v.02) KAZAKHSTAN PRESIDENT NAZARBAEV ORDERS INVESTIGATION INTO REPRISALS AGAINST MEDIA Addressing the Almaty city administration on 30 May, President Nazarbaev ordered the Prosecutor-General's Office to take under special control the ongoing investigation into the reprisals last week against two independent newspapers, Interfax reported. He said those responsible must be found and brought to justice as soon as possible. Also on 30 May, the European Union representation in Kazakhstan issued a statement criticizing reprisals in recent months against several independent media outlets, Interfax reported. Speaking the same day at a press conference in Moscow, Rozlana Taukina, who heads the Independent Media Association of Almaty, said 22 independent media outlets have been closed in Kazakhstan over the past month. She said Nazarbaev has charged the National Security Committee with intimidating independent journalists to prevent the circulation of any information on the ongoing investigation into Nazarbaev's Swiss bank accounts, RFE/RL's Kazakh Service reported. (RFE/RL 31.v.02) NAZARBAEV AND POLISH PRESIDENT DISCUSS ECONOMIC COOPERATION Kazakh President Nursultan Nazarbaev has signed accords on combating organised crime and granting mutual assistance in customs-related cases. Nazarbaev and his Polish counterpart, Aleksander Kwasniewski, discussed economic co-operation and the situation in Central Asia. Nazarbaev stressed that Poland is Kazakhstan's most significant partner in Central Europe, with annual trade reaching $250 million. Nazarbaev took part in the opening of the Kazakh Embassy in Warsaw on Friday, May 24. The same day Poland's Polonia TV channel inaugurated broadcasts in Kazakhstan to some 50,000 ethnic Poles. (NewsBase 30.v.02) GEORGIA STATISTIC OF THE WEEK A total of 120 million laris ($54.6 million) is taken annually in bribes in Georgia, Caucasus Press on 29 May quoted Economy, Industry, and Trade Minister Gia Gachechiladze as saying. That figure is reportedly based on calculations by World Bank experts and Georgian statisticians. (RFE/RL 31.v.02) EVENTS THE SECOND GLOBAL FORUM FOR LAW ENFORCEMENT AND NATIONAL SECURITY Dates: 11-13 June 2002 Location: 1 George Street, London Building on the foundations established at the inaugural LE&NS Global Forum in 2001, the second forum will advance the four main points raised at the first event namely: raising awareness, highlighting strategic relevance, investing in global institutions, and developing co-operation particularly in intelligence sharing. The target audience is all who are involved in ensuring the security and well-being of both national and corporate infrastructures against non-traditional threats from the likes of organized criminals, cyber warriors, militant activists, environmental polluters, fraudsters and corrupt officials. Interested parties will include: senior government officials; top business executives; key managers in the defence, law enforcement, national and corporate security sectors; civil-emergency planners; NGOs; leading academics; and the media. Further details about the event can be found by contacting Ms. Claire Farrugia on +44 (0)20 8846 2800 or alternatively at: www.lensforum.com INFORMATION PROVIDERS NEWSBASE NewsBase is a leading provider of business and economic news and intelligence from Russia, Central Europe and the FSU. Daily bulletins and industry specific weekly reports backed by an archive containing over 10 million words combine to provide a comprehensive service to a global blue chip client base. Contact: Duncan Cunningham T: +44 (0)131 478 8535 F: +44 (0)131 478 7001 E: [email protected] W: www.newsbase.com RADIO FREE EUROPE / RADIO LIBERTY Radio Free Europe/Radio Liberty is a private, international communicationsservice to Central, Eastern and Southeastern Europe; the Caucasus; and Central and Southwestern Asia funded by the U.S. Congress through the Broadcasting Board of Governors. Contact: Peter Baumgartner T: +420 (0)2 2112 2039 F: +420 (0)2 2112 2012 E: [email protected] W: www.rferl.org TEMPLETON THORP T +44 (0)20 7520 9380 F +44 (0)20 7504 8180 E [email protected] W www.templetonthorp.com |
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