Russia’s Economic Liberalization Faces a Bear in the Woods

National Center executive director David W. Almasi reports on his experiences at the U.S.-Russian Investment Symposium:

In the 1984 presidential race, Ronald Reagan’s campaign wasn’t afraid to talk about the bear in the woods. At the time, the bear represented the Soviet Union’s strategic threat to world freedom. In the famous commercial, it was noted that not everyone wanted to acknowledge the problem of the bear and asked voters if they felt America should be strong enough to counter its threat. Overwhelmingly, Americans supported Reagan and his policies led to the demise of the Soviet Union.

A relative of the old bear seems to be back. Despite years of reform, the rule of law in Russia is in decline. Elections are suspect, if allowed at all. Restrictions have been placed on the press. There is a climate of fear with regard to the government, and allegations of corruption are rampant.

At the U.S.-Russian Investment Symposium held this week in Washington, everything seemed nice and sunny. Business, government and policy leaders were all smiles. Despite the decline in the rule of law in Russia, this new bear went largely ignored.

During a question-and-answer session, I asked the Russian minister of information technologies and communication, Leonid Reiman, this question:

Despite the best efforts of the business community, the continuing decline of the rule of law in Russia serves to discourage foreign investment. What would you say to those interested in investing in the telecom sector in Russia who are worried about allegations of government corruption and the systematic erosion of the rule of law?

The room became tense. Reiman smiled and tried to laugh it off. He acknowledged the bear of corruption exists but said it is becoming less and less of a problem. The solution? Clear-cutting the forest. He says new moves towards transparency in government will make corruption harder to hide.

Transparency in a country where the broadcast media is controlled by the state and the other media is looking over its shoulders?

My concerns seemed to be shared by speaker Philip Merrill, the chairman and CEO of the Export Import Bank of the United States. In a panel held earlier, he recognized the bear as an impediment to investment. Merrill says the problem is getting worse. To paraphrase him: In Russia’s recent past, liberalization of the economy and progress toward dull democraticization could be described as two steps forward and one step back. Today, it is one step forward and two back.

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