Closer to EU
18 October, 2012

New government of Georgia is expected to move Georgia closer to the EU community by changing the Singapore economic model for the European model.

Non-governmental economic watchdogs messaged the new government on October 15, 2012 within the frames of the Georgian National Platform of the Eastern Partnership’s conference that secured property rights, effective anti-trust regulation and strong self-governance are key challenges Georgia needs to overcome to get back to the way of the EU integration.

The conference dubbed as the Post-Parliamentary Elections

Political Process and Future Prospects summoned diplomats as well as political figures of both the Georgian Dream, a political coalition that won the parliamentary elections 2012, and the ex-ruling party of the National Movement, to discuss problems festering in Georgia for years and outline future prospects.

Philip Dimitrov, the EU Representative to Georgia and Richard Norland, the US Ambassador to Georgia, participated in the conference. Dimitrov stressed that the EU has always been constant in its relationship with Georgia and expects allegiance from Georgia too.

The reason Dimitrov had to remind Georgia to be a loyal friend is that Georgia diverted from its declared EU integration course undertaken in 2006 onto the Singapore. In 2006 Georgia signed the EU Neighborhood Policy obliging Georgia to adopt the European regulated-market economy. Instead, government chose the regulation-free Singapore economic model opposing to the EU direction in every essence. As a result Georgia faced outrageous violation of property rights; monopolies grasped the market and self-governance went in the shadow of central power.

Davit Narmania, Director of Caucasus Institute for Economic and Social Research, a member of the National Platform of the Eastern Partnership’s Civil Society Forum incorporating over 100 non-governmental organizations, believes new government has to solve these three key challenges to get closer to the EU community.

“Due to outrageous property violation practiced for years in Georgia the country ranks 131 out of 144 countries researched by The Global Competitive Index (GCI). From the point of view of effective court system Georgia ranks number 95 as far as the court system where proprietors as well as any other person were supposed to find the truth was ineffective,” Narmania said in the interview to Georgian Journal.

He believes the property protection depends on political will and calls the upcoming new government to make courts free of political pressure to solve property disputes.

Another key challenge is unfettered trade and free competition. It is an open secret that Georgian market is reined by monopolists and oligopolies since 2005 when the Rose-government canceled the anti-trust agency together with the legislation and left the market vulnerable to trusts. Demur Giorkhelidze, an economic analyst, calculated [together with other experts] that monopolist companies enjoy roughly USD 1.7-2 billion super-profit each year thanks to this legislation gap. He particularly whips pharmaceutical companies which take advantage on medical needs of families most of all.

“You know we go on everything when it comes to medicines and are ready to buy any medicine whatever they cost if our family-members need them and pharmaceutical monopolist groups take advantage out of this. All pharmaceutical companies are rogues who rob our citizens, they enjoy USD 800 million super-profit per year, 300 million super-profit comes on oil market, plus food prices and the overall super-profit accrues to USD 1.7-2 billion roughly,” Giorkhelidze said to Radio Palitra.

Narmania thinks the reason is Singaporization of Georgia.

“I together with other economic profile members of the Platform think it was a mistake to cancel the anti-trust service and legislation. If there were some problems with the agency [structure] government had to solve the problems, improve the defects in legislation and make the Competition Agency stronger. Instead we left market vulnerable for years and the result is it swarms with monopolist and oligopoly companies,” Narmania said.

The anti-trust service and legislation were formally restored in Georgia this year under the EU pressure. In 2008 when the EU offered Georgia free trade opportunity the EU named restoration of competitive law and agency among four key preconditions to Georgia to start negotiations. Georgian government obeyed but reluctantly and protracted approval of anti-trust law until the spring of 2012. However non-governmental experts as well as business community find the law inadequate to insure independence and efficiency of the Competition Agency. They worked out a package of recommendations but the ex-ruling powers ignored them.  “Now we provide the new government with our recommendations and standpoint once again and are committed to protect them so as to put them into reality and create a really independent agency for free trade and competition,” Narmania elaborated.

The third key economic issue new government has to tailor to the EU legislation is fiscal decentralization and strong municipalities. Although the Rose-government carried out the decentralization policy experts believe it falls far from the EU model: Self-governance became kind of an additional part of central power. It still depends on the central budget and has a feeble voice in decision-making policy. Despite the fact that ex-ruling power still prevails in municipalities Narmania finds it quite possible to shape out a strong self-governance till self-governing bodies elections come in 2014, if there is a political will.

“The voice of parliament is decisive to this end. The issue demands legislation changes and it is up to the parliament to make these changes. The remaining period is quite sufficient to make self-governance closer to European system [if parliament decides so],” Narmania said.