Russia is getting better. Slowly but surely the economy is modernizing and streamlining the way businesses are run. It’s not Europe, and certainly not the U.S., but according to the World Bank’s annual Doing Business report, it’s got the BRIC countries beat my a country mile. On the Ease of Doing Business Ranking, Russia even scores higher than Luxembourg. Luxembourg!
This year Russia was ranked 51 out of 189 countries measured. Last year, it was ranked 62. Russia has maintained “a strong reform momentum,” according to the Russia program leader for the World Bank, Sylvie Bossoutrot.
Russia scored among the top 10 best performers globally in registering property (8) — better than the United States — and is fifth worldwide in enforcing contracts. By comparison, the U.S. is ranked 21.
Russia has made headlines over the last year, but not because of its economic reforms, which are far from explosive. They’ve been the bad guys from Washington to Brussels since the March 16 annexation of Crimea, then a Black Sea peninsula owned by Ukraine. After that, they helped bankroll and support separatists in the Donbass region of Ukraine, an important industrial hub that has bee laid to waste because of pro-Russia fighters trying to follow in Crimea’s footsteps.
Then there is the Syria bombardment, where Vladimir Putin is seen propping up another candidate for American Middle East regime change, Bashar al Assad. Both the U.S. and Russian military are tag-teaming a fighting against ISIS, but it is unclear just how well the partners are getting along on the battlefield. The two together would make a legionary force against Islamic terrorism. Instead, most of the English language media see (or want to see) the beginnings of a proxy war between Obama and Putin.
All of this turned Russia into the black sheep of the world economy. But while sanctions and oil prices sent the economy into a recession this year, the central bank leadership has managed what everyone thought would become another ruble crisis last year. Elvira Nabiullina was ranked as the world’s best central banker for 2015 by EuroMoney magazine in September. Inflation is declining. The ruble is stable and in lock-step with oil, not geopolitics, and most investors expect Russia’s economy to grow next year after adjusting to lower oil prices and important bans.
World Bank researchers said Russia has been busy streamlining licensing procedures and reducing the number of state inspections required for small businesses this year. The change helped Russian businesses increase annual sales in regions with strong government institutions. Simplifying licensing requirements in these regions is associated with a 4.5 percentage point increase in annual sales growth, while reducing the number of state inspections per business led to a 12 percentage point increase in sales growth.
The report also shows that regulatory reform to encourage business entry was most successful in regions with greater government transparency, not greater government control. Businesses were most attracted to stable, open governments operating in areas of Russia with an above-average educated citizenry and greater fiscal autonomy from Moscow.
In Russian states meeting these criteria, the probability of fully implementing reforms was expected to be 8 percentage points higher, and the probability of meeting business entry targets was 11 percentage points higher.
The share of new firms using illegitimate business licenses also dropped by more than half.
“In some ways Russian corporate governance is better than in Western Europe or the US,” says David Herne, a fund manager at the Specialized Research and Investment Group in Moscow. “Where Russia falls down today is in implementation of the law.”