By Vestnik Kavkaza
Experts consider the outflow of capital from Russia to be part of the global process, arguing that the global interest in the markets of developed countries to the detriment of developing countries, especially those which export raw materials, is growing. In the first half of this year, net private capital outflow from Russia amounted to 38.4 billion dollars (28.4 billion in the first quarter and 10 billion in the second quarter) against 40.1 billion dollars for the same period last year. In 2012, the export of capital from Russia, according to the latest estimates, slowed to 53.8 billion dollars from 84.8 billion a year earlier. First deputy chairman of CBR, Kseniya Yudaeva, says that the Bank of Russia expects capital flight to fall by the end of the year, and a growth in banks' demand for refinancing at the Central Bank in 2014 to 0.7 to 1 trillion rubles is also expected.
Head of the Funds Center HSE, Professor Nikolai Berzon in an interview with VK pointed out two main reasons for the outflow of funds from Russia: poor investment climate and corruption.
Investment climate
“There is legal capital outflow when a Russian company having not found attractive investment in Russia legitimately invests its own money and earned means in investment projects abroad. If all investment problems if Russia would be solved, if everything were marvelous, and then there was extra money, then let us export our capital abroad, it would all be perfect. But in fact, there are a lot of unresolved issues in Russia. Investment is needed, but investments unfortunately go over there. And a Russian businessman, business is always looking for more profitable and less risky conditions... If these factors are more attractive overseas, the capital goes there. This is legitimate capital outflow, it is a specificity of doing business, and nothing can be done about it. So, first, it is necessary of course that Russian businessmen invest in Russia, but for this to happen it is necessary that it is beneficial for them, that it is appealing. It is necessary that when an investment project is implemented, the rules do not change, taxes are not raised, interest rates are not raised. That there is no need pay bribes and “cut deals”. It is a bad investment climate”.
Corruption
“Corruption component in the total outflow of capital, according to expert estimations counts for about 50-60%. We should fight with this. But we should fight not in order to prevent this outflow, but to deal with real corruption. When a capital outflow occurs in includes corrupt officials and corrupt executives of corporations that illegally have earned capital and in order to legalize it in some way they move the capital abroad through a network of phony companies. This is the second reason. Here are the two reasons for this. Corruption must be fought not with words, but in real life with action. Then, perhaps, the capital outflow will be reduced”, Berzon says.
Meanwhile, the head of the department of the exchange business and securities of the Plekhanov University Vladimir Galanov argues that capital outflow has always existed: "There are common causes of capital flight, such as taxation – the capital goes where the tax burden is smaller. However, there are specific reasons for our country's capital flight. They can be summarized by the words "unreliable sources of personal income"."
Galanov sees two causes of this insecurity: "The first reason has to do with the fact that private ownership of capital is nominal in our country. Business is "under the hood "of the state, and everyone understands that he may lose his capital. Capital cannot be taken out of the country, but the income from it can be taken out.
The second aspect of this insecurity is linked to the legitimacy of the people's labor payment as a source of personal income".
The causes of illegitimacy, according to Galanov’s theory, are of two kinds: there is legal illegitimacy, when windfall income is received by government officials in the form of corruption. They have nowhere to invest their money, and it is sure to leave the country.
And there is social illegitimacy, associated with the gap between the average wage level in the country and the wage of top executives. The general feeling is that society will never accept the fact that someone earns 30,000 rubles while another person can earn 30 million. Where possible, these funds also need to be taken out somewhere.”
To get rid of this negativity, Galanov proposes changing the relationship between government and business: "The root of the country's development is in business development. It means that business must be given the terms to easily develop, invest, save, accumulate, and not to fear for its tomorrow. If this is not provided, the specific reasons I mentioned will never be eliminated, and the outflow of capital will continue to rise."
