Daniel Kaufmann, Brookings Institution
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1 Reset Within Russia?: A Comparative Governance Perspective Daniel Kaufmann, Brookings Institution Presentation at the Public Conference The Risks of the Reset, at the Heritage Foundation, Washington, D.C., October 25 th,
2 The Worldwide Governance Indicators (WGI) Governance: set of institutions by which authority in a country is exercised specifically: Political cluster: the process by which those in authority are selected and replaced 1. VOICE AND ACCOUNTABILITY 2. POLITICAL STABILITY & ABSENCE OF VIOLENCE/TERRORISM Economic cluster: the capacity of government to implement policies and provide public services 3. GOVERNMENT EFFECTIVENESS 4. REGULATORY QUALITY Institutional cluster, the respect for institutions governing interactions among citizens & the state 5. RULE OF LAW 6. CONTROL OF CORRUPTION 2
3 Control of Corruption, WGI Source: Worldwide Governance Indicators, by D. Kaufmann, A.Kraay and M. Mastruzzi, October Dark red indicates countries in the bottom 10 th percenti8le rank; light red between 10 th and 25 th percentile rank; orange between 25 th and 50 th ; yellow between 50 th and 75 th ; light green between 75 th and 90 th and Dark green between 90 th and 100 th percentile (exemplary governance) 3
4 Control of Corruption Worldwide, WGI, end-2010 Somalia Afghanistan Eq. Guinea Zimbabwe N. Korea Angola Iraq Haiti Venezuela Russia Ecuador Nicaragua Paraguay Indonesia China Guatemala India Bolivia Argentina Colombia Mexico Jamaica Peru El Salvador Greece Italy Brazil S. Africa S. Korea Costa Rica Slovenia Estonia Botswana Spain Portugal USA Uruguay UK Chile Hong Kong Switzerland Australia Canada Norway Netherlands Finland Singapore Sweden New Zealand Denmark Good Corruption Control [Russia] Control of Corruption Level Margin of Error Source: Worldwide Governance Indicators, by D. Kaufmann, A.Kraay and M. Mastruzzi, October Dark red indicates countries in the bottom 10 th percenti8le rank; light red between 10 th and 25 th percentile rank; orange between 25 th and 50 th ; yellow between 50 th and 75 th ; light green between 75 th and 90 th 4 and Dark green between 90 th and 100 th percentile (exemplary governance)
5 Quality of Governance in Russia in Global Perspective, WGI 2010 Good Gov. Voice & Accountability Political Stability Government Effectiveness 100 Regulatory Quality Rule of Law Control of Corruption Russia E. Asia NICs Eastern Europe Source: Worldwide Governance Indicators, by D. Kaufmann, A.Kraay and M. Mastruzzi, October
6 Russia: Change in Governance Good Gov Voice & Accountability Political Stability Government Effectiveness Regulatory Quality Rule of Law Control of Corruption Source: Worldwide Governance Indicators, by D. Kaufmann, A.Kraay and M. Mastruzzi, October
7 Unbundling Corruption in Russia: What do Firms Bribe for? % of Firms Bribe Frequently 100% 80% Bribery in: Trade Licenses Utilities Procurement Judiciary 60% 40% 20% 0% Russia China Estonia Poland Ukraine Source: EOS firm survey, WEF countries. Question: In your industry, how commonly firms make undocumented extra payments 7 or bribes connected with permits / utilities / taxation / awarding of public contracts / judiciary? (common never occurs).
8 Procurement Bribery Score Russia Bribery in Procurement, High Frequency of Bribery 6 Ukraine 5 4 Russia China Poland 3 Estonia Source: Executive Opinion Survey, 2010, World Economic Forum; All years except for 2002 are two year rolling averages
9 Log GDP per capita (PPP) Control of Corruption & National Incomes: 300% Development Dividend of Good Governance r = RUS CZE CHL Low WGI Control of Corruption, 2010 High Source: Worldwide Governance Indicators, by D. Kaufmann, A.Kraay and M. Mastruzzi, October
10 Log GDP per capita (PPP) Control of Corruption & Income per Capita: Governance Deficit & Economic Vulnerability r = RUS Governance Deficit CZE CHL Low WGI Control of Corruption, 2010 High Source: Worldwide Governance Indicators, by D. Kaufmann, A.Kraay and M. Mastruzzi, October
11 World Bank Doing Business Rankings, 2011 (out of 183 countries) Russia Hungary Czech Republic Poland S. Korea Ease of Doing Business Index Starting a Business Construction Permits Getting Electricity Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Resolving Insolvency Source: World Bank Doing Business, 2011, 183 countries ranked 11
12 FDI into Russia: Comparative Perspective Country Annual FDI (mns.) FDI per capita Brazil 48, Russia 41, India 24, China 105, Chile 15, Germany 46, Estonia 1,500 1,148 Source: World Development Indicators & UNCTAD Stats.
13 Russia WEF Global Competitiveness Ranking, Compared (1) Russia Czech Republic Poland Brazil S. Korea Global Competitiveness Rank (out of 143) Institutions Infrastructure Macroeconomic Environment Health and Primary Education Source: WEF Global Competitiveness Report, 2011 Cont. 13
14 Global Competitiveness: Efficiency Enhancer & Innovation and Sophistication Rankings Russia Czech Republic Poland Brazil S. Korea Higher Edu. & Training Goods Market Efficiency Labor Market Efficiency Financial Market Dev Technological Readiness Market Size Business Sophistication Innovation Source: WEF Global Competitiveness Report,
15 Global Competitiveness Index, 2011 Corruption Control & Global Competitiveness High 100 r = CZE CHL 60 RUS Governance Deficit Low Control of Corruption, 2010 Low High 15 Source: EOS firm survey, WEF Global Competitiveness Survey 2011 & ' Worldwide Governance Indicators, by D. Kaufmann, A.Kraay and M. Mastruzzi, October
16 Reset on Russia Reset: A domestic dimension? Subpar performance on governance, across the board Subpar investment climate & Doing Business environment Both subpar in terms of level/quality today, and trends Medium/Longer Run: Economic & Competitiveness Risks Possible sources of homegrown demand for improved governance & investment climate? 16
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