Difference between revisions of "Otkat (Russia)"

''Otkat'' is widely used in public procurement: the state allows itself to be overcharged, and the bureaucrats responsible for the purchase pocket the difference between the actual price and the stated price. As a result, part of the public funds gets diverted for private gain. According to the Russian law on public procurement, state purchases must be conducted via transparent competitive tenders according to the principle of obtaining the ‘best quality for the lowest price’. However, in reality, numerous techniques are employed to evade the procedure, thus undermining honest competition and allowing the practice of ''otkat'' to flourish. During the tender process a company affiliated to the bureaucrat often makes the winning bid.  In 2013, the Russian Court of Auditors concluded that 70 per cent of the largest tenders were awarded without any competitive process (Zamakhina 2013<ref>Zamakhina, T.  2013. ‘Schetnaya Palata Uznala Strashnoye: 70% Goskontraktov Zaklyuchayutsa v Seroy Zone’ Moskovskij Komsomolets, 16 August http://www.mk.ru/economics/article/2013/08/15/900166-schetnaya-palata-uznala-strashnoe-70-goskontraktov-zaklyuchayut-v-seroy-zone.html</ref>). Moreover, ''otkat'' is a widespread practice in the procurement procedures of big state-owned conglomerates and by monopolies such as the state gas giant Gazprom. Similarly, the suppliers of goods and services involved in the kickback schemes may be affiliated to the conglomerate and, in some instances, have been identified as its (shell) subsidiary, opaque in terms of ownership and registration.

''Otkat'' is widely used in public procurement: the state allows itself to be overcharged, and the bureaucrats responsible for the purchase pocket the difference between the actual price and the stated price. As a result, part of the public funds gets diverted for private gain. According to the Russian law on public procurement, state purchases must be conducted via transparent competitive tenders according to the principle of obtaining the ‘best quality for the lowest price’. However, in reality, numerous techniques are employed to evade the procedure, thus undermining honest competition and allowing the practice of ''otkat'' to flourish. During the tender process a company affiliated to the bureaucrat often makes the winning bid.  In 2013, the Russian Court of Auditors concluded that 70 per cent of the largest tenders were awarded without any competitive process (Zamakhina 2013<ref>Zamakhina, T.  2013. ‘Schetnaya Palata Uznala Strashnoye: 70% Goskontraktov Zaklyuchayutsa v Seroy Zone’ Moskovskij Komsomolets, 16 August http://www.mk.ru/economics/article/2013/08/15/900166-schetnaya-palata-uznala-strashnoe-70-goskontraktov-zaklyuchayut-v-seroy-zone.html</ref>). Moreover, ''otkat'' is a widespread practice in the procurement procedures of big state-owned conglomerates and by monopolies such as the state gas giant Gazprom. Similarly, the suppliers of goods and services involved in the kickback schemes may be affiliated to the conglomerate and, in some instances, have been identified as its (shell) subsidiary, opaque in terms of ownership and registration.

''Otkat'' remains an under researched practice both because of its informal character and due to the involvement of state bureaucracy. However, it has implications for the political economy as a whole: by participating in ''otkat'' schemes, firms not only need to generate illicit black cash, but they also have to deal with an inevitable mismatch between the actual and ‘on-paper’ transactions, which in turn requires further illicit operations and concealment techniques. Viewed from this perspective, ''otkat'' deserves more scholarly attention, as its prevalence may be key to understanding the endurance of the shadow economy in Russia and in other emerging economies.

''Otkat'' remains an under researched practice both because of its informal character and due to the involvement of state bureaucracy. However, it has implications for the political economy as a whole: by participating in ''otkat'' schemes, firms not only need to generate illicit black cash, but they also have to deal with an inevitable mismatch between the actual and ‘on-paper’ transactions, which in turn requires further illicit operations and concealment techniques. Viewed from this perspective, ''otkat'' deserves more scholarly attention, as its prevalence may be key to understanding the endurance of the shadow economy in Russia and in other emerging economies.