Entrepreneurial Exodus

Today Simon Shuster from Time Magazine paints an alarming picture of a Russia which is not only battling demographic decline but risks the potential mass emigration of its business class.  Apparently a survey released June 10 by VTSIOM has found that 21% of Russians want to emigrate, in comparison with 5% in 1991.  The working climate Shuster describes in this in-depth piece leaves the reader in little doubt as to why this phenomenon may be on the rise:

For those just starting out, the most common fear is not competition or bankruptcy but a visit from corrupt officials, who go around soliciting bribes or offering paid protection, which is known as a krysha, or roof. Last month, the Economy Ministry said that in 2010 alone, Russians paid $581 million in bribes to authorities for “security provisions,” an incredible 13 times more than in 2005. As dozens of cases have shown in the past, a business owner who declines to have a krysha can expect to get visits from fire inspectors, tax auditors or the police until the company is overwhelmed with fines and red tape. If the owner still does not cooperate, a minor criminal case can be opened, often under the vague law forbidding “illegal entrepreneurship.” A brief stint behind bars then usually does the trick.

Against the most stubborn businesspeople, often the type whose firm is coveted by a well-connected competitor, a corporate raid is a favorite weapon. These have become so common in Russia that a cute nickname for them has entered the vernacular: maski-shou, or “mask show,” a twist on the name of an old sitcom. It is when gunmen, usually masked private security or special forces, enter a business and literally take it over, seizing documents and locking the management out. This tactic has been used in politically tainted cases, such as the government takeover of NTV television in 2000, and the 2003 raids against Mikhail Khodorkovsky, the oil tycoon now serving 14 years for fraud and other charges. Smaller mask shows rarely meet the threshold anymore for news in the national media.

But by word of mouth and articles in the online press, such stories spread fast in business circles. For Terentev, the wake-up call came last February, when one of the data centers of Agava, a leading Russian Internet-hosting company, was raided by police on suspicion of hosting an unlicensed video game. Six weeks later, the company’s server farm was raided by another police unit, this time on suspicion that one of its servers was hosting child pornography. Instead of taking the server in question, the police shut down all of them, forcing many of Agava’s clients off-line. The news caused such an outcry that President Dmitri Medvedev, who styles himself as a techie crusader for the rule of law, personally intervened the next day. The servers were quickly switched on.

Read the whole article here.