Disaster prevention in Russia: are stricter regulations desirable?
Introduction
Is tightening the screws helpful in disaster prevention? How will the Kemerovo fire affect Russian politics?
The fire
On March 25, a fire in the Zimnyaya Vishnya (“Winter Cherry”) Trading Center in Kemerovo, a city in Western Siberia in Russia, killed 64 people and injured another 69, according to official estimates, reports Lenta.ru. Unofficial sources report more victims.
The disaster stirred calls for better disaster prevention regulations. Some analysts are concerned that toughening regulations makes conducting business difficult. Many others argue for more safety measures.
Many people blamed Aman Tuleyev, Governor of the Kemerovo oblast, for the fire. On March 27, about 4,000 protesters assembled, demanding Tuleyev’s resignation, reports Natalia Mikhaleva, of the Ura.ru information agency. On April 1, President Putin approved his resignation. Aman Tuleyev had served as Governor since 1997, reports Lenta.ru.
The benefits of large malls and safety issues
Large malls exploit scope and scale economies. Providing different products in one building is less costly than in different facilities. Offering them in large quantities and in one large, multi-story building enables saving on land and many inputs. Consumers gain from saving time and money that they would need to spend to get to different locations.
Large malls require increased safety measures. Providing emergency exits requires spending. Usage of flammable and toxic materials increases damage risks, though alternatives may be costlier. The taller the building, the higher the risk to lives in case of casualties. Nevertheless, a wide one or two-story building is usually more expensive to construct.
The benefits of large malls and safety issues
Large malls exploit scope and scale economies. Providing different products in one building is less costly than in different facilities. Offering them in large quantities and in one large, multi-story building enables saving on land and many inputs. Consumers gain from saving time and money that they would need to spend to get to different locations.
Large malls require increased safety measures. Providing emergency exits requires spending. Usage of flammable and toxic materials increases damage risks, though alternatives may be costlier. The taller the building, the higher the risk to lives in case of casualties. Nevertheless, a wide one or two-story building is usually more expensive to construct.
Direct and indirect costs of disasters
Achieving efficient disaster prevention implies accounting for both damage and prevention costs. Efficiency is attained when the cost of some additional unit of prevention is equal to the damage cost of an additional unit of damage. Since the same measure may prevent different disasters, the estimated probability of each possible disaster should be accounted for in calculating the damage cost, making it a risk-weighted average.
Disasters impose direct and indirect damage costs on society. Direct costs include loss of lives, damage costs to the building and compensation that the owner or the insurance company must pay to the victims.
There is no measure to assess the cost of individual lives. The justice system in most countries, including Russia, regards a life as priceless, criminalizing slavery. Yet many governments look at the impact of disasters on human capital, on willingness of people to pay for risk reduction, on compensation for damages that citizens consider fair, or some hybrid of these approaches, to estimate the value of a statistical life (VSL). In 2017, the value of a statistical life in Russia, based on surveys on compensation that Russian people consider fair, amounted to 5.7 million roubles, reports RBC.ru, the website of RBC channel.
The owner of the Zimnyaya Vishnya center in Kemerovo incurred substantial losses from the fire. The damage costs are estimated at about 4 billion roubles, or 69.36 million dollars at the March 25 rouble exchange rate. For each dead victim, relatives are eligible to 3 million roubles (52,020 U.S. dollars.) Thus, actual compensation is lower than the statistical value of a life. Lessees may also request compensation of foregone benefits and incurred losses.
The owner could have avoided compensating out of pocket, had the building been insured. Insurance in Russia is voluntary. An insurance policy costs about 30 million roubles (520,201 U.S. dollars) per year, and tenants would pay for it. Since there were 27 tenants leasing retail space from the owner, each would spend slightly more than 1 million roubles (17,340 U.S. dollars). The owner had not obliged the lessees to purchase insurance, reports Alyona Martynova, of the Komsomolskaya Pravda newspaper.
Indirect costs include revenue declines and the resulting decrease in the number of new trading centers and the relevant jobs being created over time. These costs are more difficult to forecast and mitigate.
Inspections of small businesses
The fire in the Zimnyaya Vishnya trading center also led analysts to question whether small enterprises should receive preferential treatment in checkups. Normally, the mall would be checked for compliance with fire safety rules in 2016. Yet that year, the Russian government exempted small businesses, except those regarded as having high disaster risk, from regular inspections. From January 1, 2016 and until the end of 2018, the Emergencies Ministry, the Russian Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing, and other authorities would have no right to conduct inspections of over 1 million entities.
The trading center was classified as a small business. Russian legislation considers a company small if it employs no more than 100 people and its revenue does not exceed 800 million roubles. In 2016, Zimnyaya Vishnya reported revenues of 68 million roubles (1,095 thousand U.S. Dollars) and losses of 24 million roubles (386.47 thousand U.S. Dollars), reports the BBC Russian Service.
These preferences have pros and cons. The moratorium on small business inspections reduces barriers to entry, decreasing monopoly power of large businesses and lowering prices. Bribes to circumvent regulations become less common. Yet the restriction on the number of employees discourages hiring above the limit. Companies may under-report their revenues, and this may have been the case for the mall. The risks of exposure to disasters may increase, though statistics suggest that is not the case.
Achieving efficient disaster prevention implies accounting for both damage and prevention costs. Efficiency is attained when the cost of some additional unit of prevention is equal to the damage cost of an additional unit of damage. Since the same measure may prevent different disasters, the estimated probability of each possible disaster should be accounted for in calculating the damage cost, making it a risk-weighted average.
Disasters impose direct and indirect damage costs on society. Direct costs include loss of lives, damage costs to the building and compensation that the owner or the insurance company must pay to the victims.
There is no measure to assess the cost of individual lives. The justice system in most countries, including Russia, regards a life as priceless, criminalizing slavery. Yet many governments look at the impact of disasters on human capital, on willingness of people to pay for risk reduction, on compensation for damages that citizens consider fair, or some hybrid of these approaches, to estimate the value of a statistical life (VSL). In 2017, the value of a statistical life in Russia, based on surveys on compensation that Russian people consider fair, amounted to 5.7 million roubles, reports RBC.ru, the website of RBC channel.
The owner of the Zimnyaya Vishnya center in Kemerovo incurred substantial losses from the fire. The damage costs are estimated at about 4 billion roubles, or 69.36 million dollars at the March 25 rouble exchange rate. For each dead victim, relatives are eligible to 3 million roubles (52,020 U.S. dollars.) Thus, actual compensation is lower than the statistical value of a life. Lessees may also request compensation of foregone benefits and incurred losses.
The owner could have avoided compensating out of pocket, had the building been insured. Insurance in Russia is voluntary. An insurance policy costs about 30 million roubles (520,201 U.S. dollars) per year, and tenants would pay for it. Since there were 27 tenants leasing retail space from the owner, each would spend slightly more than 1 million roubles (17,340 U.S. dollars). The owner had not obliged the lessees to purchase insurance, reports Alyona Martynova, of the Komsomolskaya Pravda newspaper.
Indirect costs include revenue declines and the resulting decrease in the number of new trading centers and the relevant jobs being created over time. These costs are more difficult to forecast and mitigate.
Inspections of small businesses
The fire in the Zimnyaya Vishnya trading center also led analysts to question whether small enterprises should receive preferential treatment in checkups. Normally, the mall would be checked for compliance with fire safety rules in 2016. Yet that year, the Russian government exempted small businesses, except those regarded as having high disaster risk, from regular inspections. From January 1, 2016 and until the end of 2018, the Emergencies Ministry, the Russian Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing, and other authorities would have no right to conduct inspections of over 1 million entities.
The trading center was classified as a small business. Russian legislation considers a company small if it employs no more than 100 people and its revenue does not exceed 800 million roubles. In 2016, Zimnyaya Vishnya reported revenues of 68 million roubles (1,095 thousand U.S. Dollars) and losses of 24 million roubles (386.47 thousand U.S. Dollars), reports the BBC Russian Service.
These preferences have pros and cons. The moratorium on small business inspections reduces barriers to entry, decreasing monopoly power of large businesses and lowering prices. Bribes to circumvent regulations become less common. Yet the restriction on the number of employees discourages hiring above the limit. Companies may under-report their revenues, and this may have been the case for the mall. The risks of exposure to disasters may increase, though statistics suggest that is not the case.
After reguations were eased, the number of fires and deaths did not increase. According to the Emergencies Ministry statistics, 7,284 people died from fires in 2017, 40% less than in 2010, also reports the BBC Russian Service. Perhaps the possibility of bribes had made fire inspection prior to the easing of regulations ineffective.
Proposed remedies
The Russian authorities will tighten the fire inspection regulations. Fire inspectors from the Emergency Ministry are to resume checkups. (Since 2007, fire inspections were conducted only when the building is ready for usage.) Construction materials will also be verified for fire safety. Measures to prevent revenue under-reporting must be designed. The Emergency Ministry will now classify multi-functional trading centers as facilities with high fire risks, allowing inspections at least once a year. The Ministry of Economic Development also argues that dismissals from checkups should be granted, based not on size, but on fire risk. Finally, children’s areas will move to first floors. It is common for large trading centers in Russia to illegally locate children’s zones on the top floor to increase sales in nearby boutiques. The existing legislation should be enforced better, reports the BNK information agency.
Proposed remedies
The Russian authorities will tighten the fire inspection regulations. Fire inspectors from the Emergency Ministry are to resume checkups. (Since 2007, fire inspections were conducted only when the building is ready for usage.) Construction materials will also be verified for fire safety. Measures to prevent revenue under-reporting must be designed. The Emergency Ministry will now classify multi-functional trading centers as facilities with high fire risks, allowing inspections at least once a year. The Ministry of Economic Development also argues that dismissals from checkups should be granted, based not on size, but on fire risk. Finally, children’s areas will move to first floors. It is common for large trading centers in Russia to illegally locate children’s zones on the top floor to increase sales in nearby boutiques. The existing legislation should be enforced better, reports the BNK information agency.
Political impact
The Kemerovo fire took place a week after Putin’s doubtful victory in the March 18 election for the fourth term as President. Dubious statistics about the number of victims, talks about poor regulation and the long term of governor Tuleyev, a member of the ruling “Unified Russia” Party, may hurt the President’s popularity. However, new sanctions, caused by the possible use of Russian-made chemical weapons in Syria, overshadow the impact of the fire, and the Government has room for more propaganda. Since Tuleyev had already resigned and the government has proclaimed new measures, protests are unlikely to resume.
Conclusion
Government efforts to ease conducting business in Russia have decreased bribery. However, gaps in legislation made various facilities vulnerable to disasters, such as fires. The government is tightening regulations. The new wave of sanctions against Russia and the resignation of Governor Tuleyev lower the political impact of the fire in Kemerovo.
Notes
A 2017 study by International Association of Fire and Rescue Services showed that, between 2001 and 2015, Russia had an average of 7.5 deaths per 100,000 people from fires, compared with 1 in the United States, 2.7 in Kazakhstan and 0.5 in France and Germany. Out of 41 countries that the study covered, Russia had the worst death rate.
References
The BBC Russian Service. Vacation for businesses: Why did fire inspectors not check the trading center in Kemerovo. https://www.bbc.com/russian/features-43515956. 2018.
BNK. For discussion: How the tragedy in Kemerovo will change the Russian legislation. https://www.bnkomi.ru/data/news/76762/. 2018.
International Association of Fire and Rescue Services. World fire statistics. https://www.ctif.org/sites/default/files/ctif_report22_world_fire_statistics_2017.pdf. 2017.
Lenta.ru. In Kemerovo, people began to say “Farewell” to the victims of the fire. https://lenta.ru/news/2018/03/28/proshanie/. 2018.
Lenta.ru. Putin accepted Tuleyev’s resignation. https://lenta.ru/news/2018/04/01/prinyato/. 2018.
Martynova, A. The burnt Zimnyaya Vishnya trading center in Kemerovo was not insured. https://www.kp.ru/daily/26810/3847197/. 2018.
Mikhaleva, N. Over 4,000 protesters in Kemerovo demand Tuleyev’s resignation. https://ura.news/news/1052328624. 2018.
RBC.ru. Over a life, the cost of a life of Russians increased by 1 million roubles. https://www.rbc.ru/economics/27/06/2017/59523d3c9a7947d75f8792bf. 2017.
The Kemerovo fire took place a week after Putin’s doubtful victory in the March 18 election for the fourth term as President. Dubious statistics about the number of victims, talks about poor regulation and the long term of governor Tuleyev, a member of the ruling “Unified Russia” Party, may hurt the President’s popularity. However, new sanctions, caused by the possible use of Russian-made chemical weapons in Syria, overshadow the impact of the fire, and the Government has room for more propaganda. Since Tuleyev had already resigned and the government has proclaimed new measures, protests are unlikely to resume.
Conclusion
Government efforts to ease conducting business in Russia have decreased bribery. However, gaps in legislation made various facilities vulnerable to disasters, such as fires. The government is tightening regulations. The new wave of sanctions against Russia and the resignation of Governor Tuleyev lower the political impact of the fire in Kemerovo.
Notes
A 2017 study by International Association of Fire and Rescue Services showed that, between 2001 and 2015, Russia had an average of 7.5 deaths per 100,000 people from fires, compared with 1 in the United States, 2.7 in Kazakhstan and 0.5 in France and Germany. Out of 41 countries that the study covered, Russia had the worst death rate.
References
The BBC Russian Service. Vacation for businesses: Why did fire inspectors not check the trading center in Kemerovo. https://www.bbc.com/russian/features-43515956. 2018.
BNK. For discussion: How the tragedy in Kemerovo will change the Russian legislation. https://www.bnkomi.ru/data/news/76762/. 2018.
International Association of Fire and Rescue Services. World fire statistics. https://www.ctif.org/sites/default/files/ctif_report22_world_fire_statistics_2017.pdf. 2017.
Lenta.ru. In Kemerovo, people began to say “Farewell” to the victims of the fire. https://lenta.ru/news/2018/03/28/proshanie/. 2018.
Lenta.ru. Putin accepted Tuleyev’s resignation. https://lenta.ru/news/2018/04/01/prinyato/. 2018.
Martynova, A. The burnt Zimnyaya Vishnya trading center in Kemerovo was not insured. https://www.kp.ru/daily/26810/3847197/. 2018.
Mikhaleva, N. Over 4,000 protesters in Kemerovo demand Tuleyev’s resignation. https://ura.news/news/1052328624. 2018.
RBC.ru. Over a life, the cost of a life of Russians increased by 1 million roubles. https://www.rbc.ru/economics/27/06/2017/59523d3c9a7947d75f8792bf. 2017.
