Russia 111130 Basic Political Developments

National Economic Trends

Report Sees Economic Crime Decline

By Howard Amos

PwC

Of the 126 respondents, 37 percent said they had been a victim of economic crime in Russia over the last 12 months. That was 3 percent higher than the global average of 34 percent, but a big decrease from 2009, when the figure for Russia was 71 percent.

Who the Fraudsters Are

Portrait  of typical Russian fraudster (% of cases)

Male (81%)

John Wilkinson, a partner at PwC, said the decline in the number of economic crimes was not necessarily linked to a drop in the willingness of organizations to report incidents, but a reflection of an absolute reduction.

"In 2009, in the depths of the economic crisis, there were additional motives for management to misrepresent figures and for individuals to want to [illegitimately] obtain bonuses or other benefits because of a shortfall in the cash that they had," he said.

Irina Novikova, PwC director for accounting investigations, fraud risks and controls, said the drop could be the consequence of a reduction in the rate of detection. She also linked this to the fallout from the 2009 crisis when many companies reacted by firing back-room staff, including control officers and accounting staff — making fraud and other transgressions more likely to go undetected.

Almost one-third of respondents said they had suffered more than 10 instances of economic crime in the preceding year. And losses were substantial: 22 percent of participants who had witnessed a transgression said they had suffered a case where losses were more than $5 million. Seven percent reported damages between $100 million and $1 billion.

Problems were much more common in larger organizations. Fifty-eight percent of companies that employ more than 5,000 people reported fraud, compared with 20 percent in organizations with less than 1,000 workers.

As in surveys from previous years, bribery and corruption accounted for a much higher percentage of economic crime observed by respondents in Russia (40 percent) than for the rest of the world (24 percent).

But the Russian figure showed an 8 percent drop from 2009, when corruption accounted for 48 percent. This decline contradicts other international measures of corruption in Russia that show an increase. Transparency International placed Russia 146th in its 2009 corruption perception index; in 2010 the country ranked 154th.

Wilkinson told The Moscow Times that an increase in the number of respondents to the anonymous PwC survey showed a growing willingness to discuss the issue and was an indicator of greater transparency. For the first survey in 2003, not a single participant admitted to an incidence of economic crime, meaning that the survey was obligated to report a zero percent rate for Russia.

Those invited to take part in the survey included about 3,000 executives from the country's top 1,000 companies, including multinational ventures. 126 individuals replied, up from 87 in 2009.

Respondents to the 2011 survey were not optimistic about the future — 73 percent said their organization will continue to be highly vulnerable to economic crime.

Read more: http://www.themoscowtimes.com/business/article/report-sees-economic-crime-decline/448896.html#ixzz1fB0DB1No

http://www.bne.eu/dispatch_text18068

bne
November 30, 2011

A biannual survey of economic crime records a steep drop for Russian in 2011. 37% of Russian companies in Russia were hit by economic crime in 2011, according to the the sixth Global Economic Crime Survey from PricewaterhouseCoopers (PwC). The figure marks a steep drop down from 71% in 2009 and 59% in 2007, and draws nearer to global average of 34%, the BRIC average of 31% and Central and Eastern Europe average of 30%.

The report said the drop was partly due to more small and medium enterprises being included which report fraud less.

40% of respondents said they faced problems connectec with bribery and corruption in 2011, 13% said they refrained new market or business opportunity due to corruption risks.

Nabiullina upgrades 2011 GDP growth projections from 4.1% to 4.2%

http://www.bne.eu/dispatch_text18068

Alfa
November 30, 2011

According to Minister of Economic Development Elvira Nabiullina, this year the GDP growth rate should reach 4.2% instead of the previous 4.1% target. In the meantime, she reiterated that investment growth will reach 6% and will remain single-digit in the coming years, partially reflecting the governmentÕs inability to provide more financing for investment projects.

We are not surprised by the upgrade in the 2011 GDP growth rate forecast. While the 1H11 growth was a modest 3.7% y/y, the global turmoil pushed households to increase spending in September-October, boosting retail trade growth to 8-9% vs. 5-6% in previous months and resulting in 4.3% y/y GDP growth for 10M11. We have recently mentioned in our comments that this trend is making our 3% growth forecast for 4Q11 too pessimistic and implies that the annual growth rate should be slightly above our initial 3.8% projections. Thus, it is not a surprise that the government also sees arguments for a small upgrade in the official growth target.

Meanwhile, in the absence of any mention of state investments declared by the minister yesterday, we are skeptical about the ability of the private sector to generate recovery. The strength of the recent capital outflow, which may reach 5% of GDP this year, implies that investments from the real sector are likely to remain modest in coming years, limiting the upside potential for growth. We thus take this yearÕs better than expected GDP growth as a one-off event and continue to expect a slowdown to 2.6% next year.