Moscow Is 3rd Most Costly City, Survey Says

Moscow's prices have risen so dramatically that it has become the world's most expensive city outside Japan, according to an international survey.In a comparison of 155 goods and services, Moscow was the third costliest city, behind only Tokyo and Osaka. The report was issued Wednesday by the Swiss Corporate Resources Group, a Geneva-based consulting company used by international firms to calculate living allowances for expatriates. Moscow had a rating of 135, based on New York City as the mean at 100 points. It was still far behind Tokyo at 207 and Osaka at 194.St. Petersburg was eighth with a rating of 119, and Kiev was rated as the 10th most expensive city at 115. In comparison, Paris and London, traditionally regarded as expensive capitals, were 14th and 16th respectively.The survey includes costs such as food, alcohol, clothing, services, transportation and leisure, but not housing and schooling.A spokesman for Moscow Mayor Yury Luzhkov dismissed the Swiss survey as overly dramatic. "I think it's not a correct comparison," said Igor Zverev. "You can't put Moscow in third place; as a capital it is not any more expensive than other capitals such as Warsaw, Berlin or Sofia. They are all now in the same economic situation."Asked to explain the city's rising costs, he replied: "Only the devil knows."Economists say the Russian capital's high prices are largely explained by limited market competition."It is firstly because of price gouging due to lack of competition and secondly because privatization is not taking place; that which they call privatization is nothing of the sort," said Larisa Piyasheva, the former economic adviser to Moscow City Hall. "The government practically controls the economy and this leads to high monopolist prices."Sky-high charges are especially prominent in the hotel and restaurant market, where the consumer has a very limited choice for a city of Moscow's size.Western-standard apartment complexes also seek fantastic prices. A two-room apartment on the outskirts of Moscow at Park Place costs $6,300 a month, paid a year in advance, a company representative said Thursday.Moscow's restaurants also present diners with some of the world's heftiest bills, and again competition has yet to drive down prices. The city now has about 400 restaurants, according to the mayor's office, compared to roughly 20,000 in New York City, which has less population than Moscow."The problem is not only is there not real competition, but competition is artificially destroyed," said Alexei Rutkevich, a philosopher at the Russian Academy of Sciences. "It is extraordinarily difficult to open a cafe or enterprise, and any business needs to pay the Mafia and corrupt officials."Many businesses also complain that on top of corruption and crime, high government taxes lead to increases in consumer prices.Some goods and services still remain far below world price. The metro at 100 rubles (about 5 cents) a ride is still one of the great transportation bargains, and most Muscovites pay little more than a few dollars a month in rent.Yet astronomical prices are spreading across many sectors of the local economy. Some tennis courts that were once free now cost $20 an hour. To rent a Toyota Corolla, the only car available for rent at Hertz Thursday, costs $140 a day. Andrei Fonkin, manager of Hertz's rental department, said that the costs reflect duties of 140 percent on importing foreign cars. Nonetheless, he said Hertz has no problem renting at such prices."Foreigners don't pay from their own pocket," he said. "The company pays for them; that's why they don't care about price."