28 November 2012

Business in Russia etc.: A Worrisome Future On the BRICs?

Russia ranks 120th on the World Bank’s ease of doing business index. Despite promises of reform, Moscow has yet to transform its image, if not reality, as a corrupt Mafia state. It is some distance from being competitive with major economies in most industrial and service sectors. Capital flight more than doubled in 2011 to $84.2 billion (from $33.6 billion in 2010) and is projected to be some $50 billion in 2012. The current political environment has made it more difficult for small and medium businesses to thrive.

Still more worrisome looking to the future is Russia’s brain drain. Over 1.25 million people have left Russia in the past decade, and in a recent poll in Novaya Gazeta, 62.5 percent of 7,237 readers surveyed said they were considering leaving because of discontent with the economic and political regime. This is playing out against the backdrop of negative demographic trends and projections suggest that Russia’s population will shrink from its current 142 million to some 124 million by 2030. _National Interest
Instead of reforming, Putin's Russia appears to be digging itself more deeply into the role of authoritarian oil state, with close ties to dictators and tyrants, and a rapid shutting off of opportunity for the average Russian at home.

Six months after returning to power in the face of mounting opposition, Russian President Vladimir Putin is exercising his political capital—and doing so in imperial fashion. The most recent example: earlier this month, sitting at a small table in his ornate, oak-walled office in the Kremlin, Putin announced that Russia was creating the world’s largest publicly traded oil company. The goal: to restore the glory of Russia the only way Putin seems to know how—the raw acquisition of power. “He is trying to keep stability, as he sees it, with billions of dollars in oil,” said Evgeny Gontmakher, an analyst at the Institute of World Economy and International Relations, a Moscow-based think tank. “I predict chaos.” _Anna Nemtsova
I have always seen Putin as something of a thug. But until recently, I considered him to be at least a bit shrewd. Lately he has been behaving like a total knucklehead.

As a result, the early promise that he displayed after the end of the tumultous Yeltsin years, seems to have faded away altogether.
More than 2.5 million people have left Russia during the past decade, sparking fears of a new brain-drain.

A third of Russia's young professionals are thinking of leaving the country, according to the Russian market research company ROMIR.

Many of them are making plans to go to countries whose economy is performing less well than Russia's. So why do they want to leave? _BBC
There is plenty of empty land in Russia, as ethnic Russians emigrate and as those who stay fail to procreate.

Meanwhile, China grows stronger -- building better ships, submarines, military jets, and drones & cruise missiles. The dragon watches and waits impatiently for an opening to seize the tempting riches of a rapidly depopulating Eastern Siberia.

China has its own problems with corrupt authoritarianism, of course. But China's corruption has not become as much of an obstacle to doing business, as Russia's corruption has been. Still, China is struggling with brain drains and capital flight, just like Russia.

Meanwhile, of the other BRICs, India is drowning in corruption. And with an average population IQ that is much lower than that of either Russia or China, India's ability to distribute its technological and economic progress through most of its population is quite limited. In addition, besides having to face a nuclear Pakistan and a nuclear China on its different borders, India is perpetually poised on the verge of a bloody religious civil war that could break out at any time.

Finally, Brazil will do well as long as commodities prices are flying high. Should China in particular slow its buying spree, the millstone of corruption around Brazil's neck is likely to show itself by a decline in the nation's economic numbers.

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