Ministry of Finances Accused of Protectionism
04 April, 2013
Ministry of Finances Accused of Protectionism
Georgian Carriers accuse government of protectionism in favor of state-owned Georgian Post to transform it into the market monopolist. Carriers also fear Georgian Post is just a front figure to a certain Azeri carrier company striving to get a monopolist position at the regional level. Government swears Georgian Post’s privileged position is a temporary remedy to combat contraband. Around 10 Georgian carriers put their businesses on a two-month halt in result of the increased bureaucratic burden in customs clearance procedures
the Ministry of Finances of Georgia (MOF) required in its special order issued by end-January of this year as an anti-smuggling remedy. The new regulations admit carriers to implement customs clearance only if they are reputable and experienced, have own warehouse, managed to work out and install own special software system in 7 days for declaring cargos in electronic system, and organize timely payment of import duties and the service fee by the importer
However the new regulations seem redundant to both carriers and sector pundits as apparently put Georgian Post, the only carrier responding to the said criteria at the moment, in an advantageous position at expense of infringing interest of other market players. Besides, it opposes the World Trade Organization (WTO) rules focused on simplification of bureaucratic burden in customs procedures. As a consequence, to implement customs clearance of the imported goods carriers have to move their goods to warehouses of Georgian Post that increases transportation costs by around 25%. Moreover, if carriers will become customers of Georgian Post they are exempted to ensure the payment of the taxes by their clients while this function apparently is the prerogative of Revenue Service (RS) as carriers are responsible only for transportation services. Private carriers believe Georgian government lobbies Georgian Post. Transparency International Georgia having researched the case finds the claim grounded. MOF argues that implementation of customs clearance through the state-owned Georgian Post is very helpful to set a full anti-smuggling control at transportation market until it will be set in full compliance with the law that includes loopholes as of yet. It pledges to discharge the market of the monopolist gradually in several months. Tea Machavariani, founder of Star Group carrier, fears that meantime Georgian carriers will be unable to operate; this gives an opportunity to Azeri carriers take over Georgian market and control the regional transportation market completely. This deprives Georgia of its natural hub function to handle with customs clearance on the European-Asian bound cargos in the South Caucasian transit corridor that will be implemented in Azerbaijan instead.
“Representatives of companies affiliated with one big Azeri carrier are already prowling in Lilo marketplace [where big importers are concentrated] recruiting importers to use their service and giving them money in debt without interest to make necessary procurements,” Machavariani told Georgian Journal. Moreover, she finds Georgian Post includes big contraband risks rather than other carriers for unlike other carriers Georgian Post is not connected with ASYCUDA [an Automated System for Customs Data developed by the UN] that insures comprehensive registration of the import in compliance with the WTO rules.
“Therefore, Georgian Post creates a big black hole of contraband in fact as it cannot ensure full registration of imported cargos. According to one declaration of Georgian Post, which I have at hand, 10 tons of cargo took 50 places, while normally around 70 kilo takes one place. Now calculate the volume of goods that remains unregistered.”
Irakli Lekvinadze, an economic analyst, believes Georgian Post’s privileged position was created by previous powers to have a shadow financing channel and new powers should not use it as an anti-smuggling tool. “If the RS has contraband suspicions, it has a financial police for that and let them inspect the suspected carriers and not boost a new monopolist in this fight,” he said.
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