TBILISI, DFWatch – In the years from 2004 to 2011, the Georgian Parliament had ten votes of confidence for the government and approved ten government programs, although the programs changed each year and almost never followed the steps of the previous one.
This is one of the findings in a new report by Liberal Academy Tbilisi about Georgia’s economic transformation. It starts off describing the 1990s and the time before the rose revolution in 2003, and compares it to what happened after Mikheil Saakashvili came to power.
The government chose a liberal policy and conducted many reforms in various areas of society.
Each new prime minister came with new plans and presented them to parliament.
“There were such numbers in the government’s program when Vladimer Gurgenidze’s came, if it became true then, we should have been living in Switzerland by now,” says Tengiz Shergelashvili, one of the authors of the report. Vladimer (“Lado”) Gurgenidze was prime minister in 2007 and 2008.
One of the current government’s most important reforms is the fight against corruption. If we believe international indices the reform has been a success. Corruption was completely overcome on a lower level.
But this has come at a price. In several areas, the government just closed down the corrupt public body, instead of restructuring it. For example, it closed the antitrust agency because it was corrupt.
The same thing happened to that public body which used to monitor safety in the work place.
The result is that several areas that need an active and engaged government are left without. This has led to the emergence of monopolies and oligopolies in markets such as fuel, for example, while in the labor sphere workers face injuries and death because safety rules are not followed.
Elite and political corruption has formed on higher levels.
“Despite successful changes, the level of transparency in administrative bodies, decentralization and engagement of citizens wasn’t achieved,” the report says.
But there were improvements in regards to foreign direct investments, increase in GDP, which led the country to perform better in international ratings.
The government chose a policy of large-scale and fast privatization. The first large steps in regards to so-called libertarian policy were observed when Kakha Bendukidze became economy minister.
The government started deregulation in different sectors of the economy, tax liberalization, foreign trade liberalization, labor legislation liberalization, which led to the current situation, where employers have almost no restrictions, while workers cannot even defend their rights by going to court. Verbal and short-term contracts, firing without explanations, no guarantees for employees – these are just part of the problems employees are facing now.
“The Georgian labor code is almost always on top of the most liberal codes around world, you can guess why,” the authors write.
The government policy admittedly led to increased foreign direct investments, which reached its peak in 2007, but this didn’t have any effect in terms of creating jobs.
The majority of investments were in real estate.
According to the report, in parallel with increasing investments, the rate of unemployment was increasing.
“We may conclude that these investments don’t function to create assets oriented towards the future.”
Looking at the general picture, the processes of deregulation and closing down many government bodies made the country one of the top places in terms of ease of doing business.
On the background that the government chose a liberal policy, conducting libertarian reforms, deregulation and least interference in private business, there are many challenges in regards to property rights. There are many media reports about interference in property rights. Transparency international Georgia recently presented one of the latest incidents, when people gave their property away to the government for free. (http://dfwatch.net/why-do-many-georgians-give-their-property-to-the-state-59795)
Among recent cases is the story of the man who founded Elit Electronics, who claims that the government took his business away from him. The electronics chain is now in the property of banks.
The report goes detailed through each government plan presented to parliament. The main problem, its authors argue, is that each new plan has not been prepared on the basis of previous ones. There is no consistency, previous steps aren’t evaluated.
Economic analyst Mikheil Jibuti says that looking at the general picture, there have been no significant changes for the last decade in regards to the country’s economy. It used to be in transition process and still is in transition.
He adds that it is difficult to make precise conclusions about numbers, because the government has not carried out a population census [the last census was in 2002, ed.], and any analysis must therefore be based on population estimates by international organizations.