Voluntary funding or state pressure?
17 April, 2014
Voluntary funding or state pressure?
The funding scheme of the Public Service Halls deployed throughout Georgia since 2011 - 2012 poses questions about corruption deals or state pressure on businesses. This is the message sent early this April by a recent report of the Institute for Development of Freedom of Information (IDFI) that studied financing of 12 Public Service Halls (PSHs) mushrooming within a year and a half in the country as a part of one of the most acclaimed public reforms carried out by
the previous authorities. According to the report, the private sector financed 4.2% of the construction works voluntarily.
These PSHs built in 12 major cities of Georgia gained high international rating to Georgia for eased red tape and consumer-tailored services. On the other hand, its funding is wreathed in non-transparency: GEL 214 365 260 in total was spent on the construction of these houses while 67.3% or GEL 144 291 594 of this budget was funded by Legal Entities of Public Law set up with Justice Ministry [such as the National Agency of Public Registry, the National Execution Bureau, and the State Services Development Agency], 13% or GEL 27 819 813 was financed by the state budget, 15.4% [GEL 33 163 926] came from other public law structures including the National Bank of Georgia (NBG), as well as the State Audit Service while the works that required the remainder GEL 9 089 927 or 4.2% were implemented by 13 construction companies free of charge.
The most bizarre aspect of this PSHs funding story is the charity of the private sector. In November of 2013, IDFI asked the Justice Ministry for copies of the contracts with these 13 companies, however, the Ministry has ignored this request up to date without any explanation. The IDFI tried to find a reasonable explanation itself. As a matter of fact, all companies acting voluntarily are involved in the construction activity and their incomes depend on this. One of the key income sources of such companies is participation in state construction projects. Therefore the IDFI questions their volunteerism.
State pressure looks also questionable because in this case, after the shift in power, the victimized companies might have undertaken relevant legal procedures to restore justice. However, only two appealed to the Prosecutor’s Office that bespeaks of state crackdown on them. Others refrained from commenting on the alleged state crackdown, and only one confessed that it would have appealed to law-enforcing bodies if there had been a precedent where illegally seized property was returned to the owner.
Therefore, the non-governmental watchdog thinks that the “volunteering” companies very likely entered in these deals with the state and secured the implementation of other [larger] state projects in exchange for free work. This version looks more realistic if you take into account that the former power contracted operator companies directly for state projects while bypassing the electronic system of tenders.
For example, the Ltd Zimo, which implemented the biggest volume of the works [worth of GEL 2 479 207] free of charge for the PSHs, has also implemented works for big state projects such as construction of the Black Sea University in Batumi, the pier and monument in Lazika, the construction of autobahn etc. The head of Ensis Ltd, another significant volunteer that implemented works worth of GEL 1.5 million without charge, was detained on a money laundering charge after the power shift. Based on dubious motivations of the said volunteer activity of funding state projects, the IDFI presumes that illegal deals and state pressure were behind these deals.

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