Monday, April 19, 2004

Guardian - Putin Hikes His Pay to Fight Corruption

I inexplicably missed this story earlier. Despite the negative spin the Grauniad's correspondent is trying to put on this development, I actually think it's a very good idea, and it isn't a novel one either, having been implemented with some success by Singapore's Lee Kuan Yew. Better to pay civil servants decent salaries upfront than to have them make up the difference on their own initiative through corruption.

Vladimir Putin has come up with a novel way to fight corruption. In one of the first major reforms of his second term, the Russian president has raised his own salary and those of his ministers by up to five times.

Bribe taking is rife among the army of bureaucrats who retain a stranglehold on Russian business and society.

Yet a presidential move to stem this damaging influence on the country's pride and economic development has started with incentives at the top.

The Kremlin head has not made performance-related pay part of his agenda before. But yesterday the Russian media reported that he signed a decree on April 10 increasing the salaries of about 10% of federal officials.

The respected business daily Vedomosti said the decree "on the improvement of labour wages" for state servants gave Mr Putin a 100% pay rise. His wages last year were 70,000 roubles (£1,400) a month but will this year amount to about 146,000 roubles (£2,800).

Ministers' salaries will rise five times to about £20,000 a year, and some departmental heads will receive 12 times their present paypackets. Although a report appeared in Rossiskaya Gazeta, the state newspaper, a Kremlin spokeswoman declined to give "official confirmation" to the reports.

Vladimir Pribylovsky, president of the Panorama think-tank, said: "This reform won't appear on state TV or be declared loudly. When Yeltsin increased his salary, it was done by a secret decree."

Before his re-election campaign in March, Mr Putin declared his entire capital assets at about 8m roubles (£155,000), as well as two small flats, some shares, and a field near Moscow. He will now earn a sixth of President George Bush's salary and a fifth of Tony Blair's. As Russia bristles at the eastward expansion of Nato and the EU, he will be able to say he earns 50% more than the president of the Baltic accession state of Estonia.

His new prime minister, Mikhail Fradkov, has repeatedly said that bureaucracy would be cut - perhaps by a fifth - and that those remaining would receive higher wages. But the pay rises have yet to lower the headcount, raising fears that Mr Putin's favoured strengthening of the state will simply raise the burden on the taxpayer.

Mr Pribylovsky said that most bureaucrats, who receive low salaries of about £170 a month, benefit hugely from the array of privileges granted to them. At the high end, these include free flats worth millions, chauffeur-driven cars with government plates which do not have to obey traffic laws, free international phone calls and discounted holidays.

"If high salaries would substitute for these, it would be OK. But nothing indicates this is the plan," he said.

Russia's bureaucracy now comprises 1% of the entire population - double the amount employed towards the end of the Soviet era. In 1990, there were 663,000 bureaucrats. Today there are 1.25 million - a significant proportion of the country's 145 million population.

The wage rise is an attempt to discourage bureaucrats from supplementing their wages with bribes by giving them salaries comparable to those in parts of the private sector.

But Georgi Satarov, president of the INDEM Foundation, told Ekho Moskvi radio: "Isolated from a series of real anti-corruption measures, this reform will not have any result. Analysis of other countries shows there is no correlation between official corruption and the level of wages."

It's true that simply hiking wages without implementing tough anti-corruption measures won't suffice, and the ballooning of the Russian bureaucratic to twice its Soviet (!) level is indeed disturbing in the extreme, but Mr. Satarov is simply talking nonsense when he says there's no correlation between official corruption and the level of wages. A stronger incentive to corruption cannot be imagined than paying powerful servants of the state wages so low that it is impossible for them to subsist without soliciting bribes, and £170 ($300) a month is a laughable sum to expect anyone with a family to live on, even in a country as poor as Russia.