COMMENT: Despite rapid growth, Russian state bureaucracy still not particularly large

By bne IntelliNews January 31, 2011

Seija Lainela of Bank of Finland -

bne: The Kremlin is finally focusing some of its energy on cutting Russia's legendary red tape - a move which is intimately entwined with the growing fight against corruption. An administrative reform has been launched that plans to cut state jobs by a fifth this year.

Prime Minister Vladimir Putin highlighted the point by telling a Soviet-era joke to presidium of the presidential council for local government in January: "A spy comes to Lubyanka [the square where the KGB headquarters were located] and says, 'I want to surrender.' They ask him, 'What country are you spying for? The US? Then go to Room 5.' In Room 5 they say, 'Okay, you are an American spy, but have you got any weapons? If you have, go to Room 7.' In Room 7 they ask him, 'Have you got any special means of communication? If you have, go to Room 20.' In Room 20 they ask him, 'Have you got a mission?' 'I have.' 'In that case, off you go and carry it out and don't disturb the people who are working'."

Putin concluded: "This has unfortunately been a practice here for many decades, if not centuries. But today we have all the resources to change this practice."

While the Kremlin has been quite successful in containing the power of the oligarchs and the regional governors, it has consistently lost the battles on the administrative reform front against its own bureaucracy, Deutsche Bank said in a recent note.

According to Finance Minister Alexei Kudrin, after sizeable increases in the bureaucratic headcount since 1992, in 2008-2010 the number of federal civil servants increased by 19,000-20,000, while another 60,000 and 50,000 additional bureaucrats were added at regional and municipal level, respectively. Accordingly, the government is now targeting a 20% cut in the bureaucratic headcount in 2011-2013, which should save the federal budget around RUB40bn per annum. In 2011, the government is projecting a cut of 5% in the number of federal bureaucrats, with another 5% and 10% targeted for 2012 and 2013.

Seija Lainela of the Bank of Finland assessed the government's chances of success in a note, which follows:

Rosstat reports that in 2009 the number of civil servants in Russia totalled just under 1.7m, of which 52%, or 878,000 persons, were in federal government service. Another 17% of government employees worked for regional administrations and 3% for local governments. Russian total employed labour force in 2009 was 69m people.

The number of civil servants rose continuously throughout the 2000s. The fastest increase was seen in the number of federal civil servants. During 2000-2009, the total number of state employees increased by 44%, with the number of federal civil servants increasing 68%. The sharpest rises in the number of civil servants occurred in 2005 and 2006.

An extensive reform of local administration was carried out gradually since the mid-2000s, leading to the creation of more than 20,000 local administrative units. In 2008, the state administrative system was reformed so that many duties implemented at the federal level were transferred to regional and local officials. These reforms were one of the reasons driving the expansion in the number of civil servants.

International comparisons of civil servant numbers are difficult, as different countries use different definitions and Russia's own statistics do not lend themselves easily to interpretation. Generally speaking, the corps of Russian bureaucrats is not particularly large compared with other countries. Civil servants represent less than 3% of the Russian employed labour force. The corresponding average for OECD countries was 9% at the start of the 1990s. However, the share may have declined since then.

The need to reduce the number of civil servants has long been discussed in Russia. On December 31, 2010, President Dmitry Medvedev signed a decree on increasing administrative efficiency. The decree affects federal civil servants both in the federal administration and at regional and local levels. Under the decree, the ceiling number of civil servants will be lowered by 20% during 2011-2013. The first 5% reduction will occur already at the end of March.

The 20% reduction is calculated on the basis of a maximum allowed number of civil servants, not the actual number that is typically somewhat lower as many civil service posts are not filled. The Finance Ministry reports the programme will cut more than 100,000 posts over the next three years, which translates into a reduction in wage costs of more than RUB40bn (about €1bn) in 2013. About half of the savings will be used to increase the pay of civil servants that still have jobs.

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