Sunday, August 09, 2009

An insight into the Russian economy

Given that capitalism came to Russia about twenty years ago, one would have hoped that the country might have made more progress that, in fact, it has. However, some understanding as to why this might be can be gleaned from the White Sun of the Desert blog (Tim used to work in the Middle East: there's little white sun of the desert on Sakhalin Island—where he has been for the last few years).
A colleague forwarded this to me, sourced from here. It describes the procedures, time, and cost to build a warehouse in Russia.

Data as of: January 2008
Estimated Warehouse Value: RUB 26,120,000
City: Moscow




















































































































































































































































































































































































No:ProcedureTime to complete:Cost to complete:
1Apply for an act of permission for use to the Department of City Planning Documentation Development at the Architecture and City Planning Committee of Moscow (MoskomArchitektura).1 dayno charge
2Request and obtain situation plan of district and conclusion for a District Land Commission from the Architecture Planning Department (APD)15 daysRUB 43,680
3Request and obtain a conclusion from Territorial Union of Land Use Regulation15 daysRUB 4,330
4Request and obtain a decision by the District Land Commission on land plot provision and city planning regulation30 daysno charge
5Request and obtain clearance of draft disposition of Prefect with the Architecture Planning Department (APD)7 daysno charge
6Request and obtain clearance of draft disposition of Prefect with the local government7 daysno charge
7Request and obtain clearance of draft disposition with the Territorial Union of Land Use Regulation7 daysno charge
8Request and obtain the disposition on preparation of an act of permission for use by the Prefect7 daysno charge
9Request and obtain a conclusion on compliance of the proposed building with specified city planning and territory use regulations152 daysRUB 4,500
10*Request and obtain technical conditions from water and sewage services45 daysRUB 17,673
11*Request and obtain technical conditions for an electricity connection with MosEnergo30 daysRUB 5,490,520
12*Request and obtain technical conditions to connect to telephone line30 daysRUB 3,000
13*Request and obtain approval from MoskomArchitektura on engineering of the facility14 daysRUB 4,500
14Request and obtain an act of permission for use from MoskomArchitectura30 daysRUB 6,700
15Request and obtain disposition of Prefect on the inception of construction design (decision on construction)60 daysno charge
16Request and obtain approval of design conditions by the Department of Well-Being of MoskomArchitektura7 daysRUB 53,300
17*Request and obtain approval of design conditions by the Department of Preparation of Project Approvals of MoskomArchitektura14 daysRUB 12,100
18*Request and obtain approval of design conditions by local government7 daysno charge
19*Request and obtain approval of design conditions by the Prefect's Office14 daysno charge
20*Request and obtain approval of design conditions by the Emergency Situation and Civil Defense Department14 daysRUB 14,728
21*Request and obtain approval of design conditions by Moscow State Expertise14 daysRUB 7,364
22*Request and obtain an act of the Moscow Geological-Geodesic Department15 daysRUB 36,700
23*Request and obtain approval of design conditions by the Sanitary Services (Rospotrebnadzor)30 daysRUB 13,800
24*Request and obtain approval of transport routes from the Moscow City Transport Agency30 daysRUB 8,837
25*Request and obtain approval from the State Inspectorate of Road Safety (GIBBD)30 daysRUB 8,837
26*Request and obtain approval from the Department of Comprehensive Well-Being of the city30 daysRUB 4,600
27*Request and obtain approval from the Department of Nature Use under State Ecological Expertise21 daysRUB 29,455
28Request and obtain Sketch No. 2 from the Moscow Geological Institute30 daysRUB 10,100
29Request and obtain approval of Sketch No. 2 from the Moscow Architecture Committee (MoskomArchitektura)30 daysRUB 4,000
30Request and obtain the construction passport from the Moscow Geological Institute30 daysRUB 8,837
31*Request and obtain approval of volumes of "outline of construction arrangement" and "GenPlan" from MoskomArchitektura30 daysRUB 6,500
32*Request and obtain approval of volumes of "outline of construction arrangement" and "GenPlan" from the Prefecture30 daysno charge
33*Request and obtain approval of volumes of "outline of construction arrangement" and "GenPlan" from the GenPlan Institute30 daysRUB 12,200
34Request and obtain Regulation No. 2 and certificate of approval of Architectural City Planning Decision30 daysRUB 3,600
35Request and obtain project approval by Moscow State Expertise60 daysRUB 58,000
36Request and obtain permission for construction (building permit)10 daysRUB 11,460
37Receive inspection by the State Inspectorate of Architecture and Construction Supervision during foundation construction1 dayno charge
38Receive inspection by the State Inspectorate of Architecture and Construction Supervision during structure construction1 dayno charge
39Receive inspection by the State Inspectorate of Architecture and Construction Supervision during engineering works1 dayno charge
40Receive inspection by the Union of Administrative Technical Inspection (UATI) – I1 dayno charge
41Receive inspection by the Union of Administrative Technical Inspection (UATI) – II1 dayno charge
42Receive inspection by Union of Administrative Technical Inspection (UATI) – III1 dayno charge
43Receive inspection by the Union of Administrative Technical Inspection (UATI) – IV1 dayno charge
44Receive inspection by the Union of Administrative Technical Inspection (UATI) – V1 dayno charge
45Receive inspection by the Union of Administrative Technical Inspection (UATI) – VI1 dayno charge
46Receive inspection by the Union of Administrative Technical Inspection (UATI) – VII1 dayno charge
47Connect to water services30 daysno charge
48*Request and receive inspection by the Energy Supervision Board1 dayno charge
49Connect to electricity and sign an agreement with Energosbyt14 daysno charge
50*Request and connect to telephone services5 daysno charge
51Request and convene the Approval Commission30 daysno charge
52Request and receive the disposition on operation of building (occupancy permit)10 daysno charge
53Request and receive plans from the Bureau of Technical Inventory (BTI)30 daysRUB 55,000
54Register the building after completion30 daysRUB 7,500
 
* Takes place simultaneously with another procedure.



54 different bureaucratic hurdles to overcome in order to build a warehouse. And it should be noted that the costs listed are the official costs only, which the authority in question can legally charge. Often before an authority will consider an application, the submitted documents must be checked and approved by a third party private company which is the only one the authority will recognise, and hence can charge what it likes. I have seen these companies charge $30k for “pre-approving” what the governmental authority charges $200 for, and it is not difficult to understand where a big chunk of this additional fee ends up. With so many authorities to satisfy the scope for corruption is enormous, and many of these approvals bodies have become industries in themselves offering lucrative careers involving little more than glossing over documents at ones leisure whilst accepting hefty backhanders either directly or via a third party company, which may or may not be owned by your brother.

As Tim says, this might give you some idea of the time and money it would take to try to build something really big—such as an oil platform.
If anyone wants to know why Russia remains poor despite a well educated population possessing impressive technical skills, looking at how long it takes to complete a simple construction project and what is involved is a good place to start looking.

You have to sink all of that time and effort into building the facilities—and then the Russian government decides that it is going to confiscate your asset anyway (good luck cosying up to Shell, Putin).

7 comments:

Tom Paine said...

I am delighted to see you moving into my territory. I suspect Russia is by no means the worst place on Earth in this respect. It is fascinating to see how complicated a bureaucracy can make the permitting of a simple shed though, isn't it? Only people entirely divorced from the need to earn a living could think such a process sane. I am verifying the data on the site your friend used as his source (for the jurisdictions where my firm practises law). If it's accurate I will suggest to my marketing team that we publish a graph on our website comparing the days required in each. Maybe we can get some competition going between countries now desperate for the inward investment they were spurning not 18 months ago.

Elby the Beserk said...

Excellent. It all makes working man to do. Were we to have to suffer another Labour "government", then I have no doubt the same approach would be enshrined here also.

neil craig said...

Still a damn site easier than building a golf course in Scotland, where Trump has been trying to get permission to start for 3 1/2 years. This despite the fact that all 4 parties publicly, & the overwhelming majority of locals enthusiastically, support him.

Joe Public said...

The reason it's so quick & low-cost is that they didn't want a gas supply, and have to request a quotation from GazProm!

David Gillies said...

Hernando de Soto in 'The Mystery of Capital' identified lengthy and overly-bureaucratic application processes as one of the major factors in explaining why the Third World is so poor (the principal reason is the lack of secure property rights). However once you have an entrenched bureaucracy whose very livelihood depends on these Byzantine rules, reform is well-nigh impossible (the intersection of Public Choice Theory and the well-known reluctance of turkeys to vote for Christmas).

Anonymous said...

Given that Socialism/communism and Bureaucracy are pretty much the same thing, it doesn't seem like Capitalism has, in fact, arrived in Russia at all.

Richard said...

I wonder what the equivalent here would be? Not much better these days I suspect. Environmental impact surveys, archaeological digs, health & safety, building regs, etc. etc. Plus fat payments to the local council to get planning permission (and that's the legal ones, never mind bribes)