Strategic enterprises to be identified
30 January, 2014
Strategic enterprises to be identified
Georgian government plans to create a list of enterprises of strategic importance to the country. Privatization of these enterprises will be put under special criteria and control. To this end, on 21 January at a meeting of his economic council Georgian Prime Minister Irakli Gharibashvili initiated a project.
As Shalva Tadumadze, Parliamentary Secretary, informed media after the meeting, based on the law on state property, for now only objects owned by the state will be put on the list. The initiative
will not cover already privatized objects or enterprises in private ownership.
The selection criteria will be worked out by a special group, and in accordance with risks and challenges Georgia faces, Giorgi Kvirikashvili, Minister of Economic and Sustainable Development, elaborated: “We think such a list must exist, this is an international practice. Almost all countries have criteria based on which divesture of certain objects are defined and controlled.” Georgian railway (a fully state-owned enterprise), television antennae, the trunk gas pipeline running from Russia to Armenia, and some other objects are expected to be included.
In fact, Georgia had a list of strategic objects prior to the large-scale privatization process begun when the United National Movement held power. But UNM rejected the concept of “strategic importance,” in the sense of its belief that the state is a poor manager and enterprises not privatized have no prospect for development.
This approach led to a conflict of interest with Washington in 2004-2005 when the Georgian government decided to award the trunk gas pipeline to the Kremlin-owned energy giant Gazprom because Georgia could not afford its rehabilitation. And only Washington involvement settled the matter: the White House financed repair of the pipeline.
However, the previous approach to strategic objects was not flawless: the list was limited to around 100 objects, and without criteria for selection and management terms clearly defined and regulated by law. “The list was inflated and included almost all big enterprises in the country. Therefore it made sense to remove some objects from the list,” Irakli Lekvinadze, an economic analyst, said in an interview with Georgian Journal. “However, the concept of strategic units is a must for a country like Georgia that has serious geopolitical importance in the region. The political (and economic) interests of several big countries like the US, Russia, and Turkey clash here. Therefore we should define our priorities and handle certain objects like the railway and pipeline, for example, differently from just economic enterprises.”
But to insure further development of enterprises, Lekvinadze recommends not prohibiting their privatization. “I think such objects can be privatized, but after certain analysis and terms,” he said.
Levan Alapishvili, a legal analyst and head of Future Initiatives, believes government has to clarify the definition and criteria of strategic importance units, as well as their management terms, in the law first; and create the list only afterwards, based on strict legal terms.
“This will remove privatization-related inconveniences. The important enterprises will be granted the status of strategic importance, but instead of privatization they can be put under private management without changing hands of ownership,” Alapishvili explained.
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