How to Regulate
19 August, 2014
Georgia needs to learn to regulate. It is one of the toughest jobs a government has. And rarely has it been done well. In the Soviet period there was some effective regulation but not much. Because almost all decisions were made by Moscow, the regulations themselves were usually ill advised and by the time they got down to the regulators, seemed arbitrary. Nobody remembered their original purpose. During the Shevardnadze era, the purpose of a regulation was to give an
official an excuse to get money from the people in order for people to be allowed to ignore the regulation.

Under Misha, Kakha Bendukidze was the one everybody listened to regarding regulation. And he hated it, on principal. He felt that the market would regulate everything and that even if it some regulation was desirable (and it was never desirable), the state could not regulate anything effectively anyway. At the start of his period as minister, he asked the head of every state entity that regulated anything why they should keep their jobs? Unless they had a great answer, they were all fired. The government at least in its rhetoric was deeply libertarian and therefore anti-regulation. I remember a senior member of the government saying there should be no state enforced food safety rules because the market would take care of it.

It helped that a great deal of state regulation moved on line thanks to a clear vision and help from the Estonians. Putting regulations on line makes it much easier to police bribes. This was the period when the new civil and public registries were set up, and are now more advanced than those of the most of the richest and most developed countries. But there were other sectors that desperately needed regulation and didn't get it. Fuel quality is very low, and cars in Georgia pollute much more than they do in Western Europe because there is no enforcement of international emission standards and the fuel is such low quality. Forestry is still largely unregulated and deforestation continues to be a problem. Food safety is also a problem and if Georgia wants to export its food products to the EU, they will need to meet very high standards. The building process and buildings themselves are incredibly unsafe.

Throughout the economy, among consumer goods as well as commercial goods, there is a general lack of regulation and a lack of understanding about how to effectively regulate. So here are a three ideas for the new government to begin to focus on this:

1) Know which government entities, and which jobs have the responsibility to regulate and be sure there is a clear process. Which are decisions made by cities, and which are made nationally? All regulation needs a clear process to be introduced, discussed publicly, decided upon, administered, and improved. Be careful of LEPL's or Legal Entities of Public Law, which are badly catalogued, and of unclear authority. Be sure that the chain of responsibility ends at somebody who is elected by people.

2) Follow the EU. The European Union is the number one regulator in the world now. A factory in China that is manufacturing something, the specifications they are most careful to meet are the EU's because if they meet that, then they will almost certainly meet the often less stringent American standard, and those of other countries. There is no reason that Georgia, which is a very small import market, needs its one specific regulation for almost anything. Just adopt the European standards for things whenever possible. This will keep things clear and will make things easier for importers and exporters.

3) Listen to those nearby. Often when somebody, perhaps in parliament or a ministry, sees the need for a regulation they will draft what they feel is needed and try to implement it as soon as possible. Don't do that. Talk to others whom it may affect. Ask those in and near the implementation area. Particularly ask older people who will know how to find a way around the regulation, and younger people who may not understand the idea of the regulation in the first place.

So far, no Georgian leadership has had a successful regulation policy or plan. Let's hope this one becomes the first to succeed.