Postal Corruption: Changes in Georgian postal regulation law will create a monopoly
09 October, 2014
Postal Corruption: Changes in Georgian postal regulation law will create a monopoly
A new draft law on Georgian postal communication implies the creation of statutory monopoly of the market while it provides no reasonable economic benefit. Such practice opposes the best world practices and international obligations including the Association Agreement with the EU and the World Trade Organization.

The draft makes the state-owned Georgian Post a legal monopoly in four markets such as letters and parcels shipping, customs warehousing services, courier expedition and money transfers If this draft becomes law, around 40
communication companies including global names like DHL, TNT, UPS and FEDEX operating in Georgia for up to 20 years, are expected to quit. Both companies and sector analysts say such practice may leave a black eye on Georgia’s investment image. In fact the world knows only one similar precedent situation in Turkmenistan when international postal companies left the country in 2005.
According to Natia Kutivadze, a legal analysts at Transparency International Georgia, the key concern is that Georgian Post will be directly selected as a national operator handling the universal postal service [that includes access to basic postal services which does not include luxurious services like courier or express shipping] for 5 years while the EU law allows a 2-year term for such an operator and requires selection via open tender. This draft gives an exclusive right to the Georgian Post to handle letters and parcels under 2kg and 30kg respectively while the maximum international cap limit is 100 grams.
“Georgia is committed to impose no restrictions on cross-border provision of courier services under the DCFTA [Deep and Comprehensive Free Trade Agreement]. It seems that the notion of a back-up universal postal service, which the European Commission understands defines the scope of statutory monopoly (i.e. reserved area) covers not only letter mail up to 100 g, but also international parcel mail up to 30 kg,” reads the comments sent by the European Commission to the Economic Ministry on July 27.
Otherwise, once parcels cross the Georgian border, Georgian Post will take control for their final delivery. Other operator companies are expected either hand over their cargos to Georgian Post and pay extra charges for the service, or take huge losses and quit the market. On the other hand, the provision opposes their core business principles: they decline to share responsibility and reputation with any other company. That said, all international companies pledge to leave the Georgian market unanimously if the drafted legislation becomes law.
“This is a matter of reputation and responsibility to the client,” Nino Menteshashvili, CEO of the TNT representative company operating in Georgia for almost 25 years, told Georgian Journal. “Only Georgian companies will agree to operate via Georgian Post. No international company will agree to operate via other operator, we cannot tell our clients that we are not responsible for our services.”
The draft was created by the Ministry of Economy and Sustainable Development of Georgia and was slated for parliamentary discussions even this past May. But the submission process became protracted after the interested business sectors as well as the international community made negative comments and predictions about the draft and called upon the Ministry to implement the changes in line with the international norms.
European Express Association sent a letter to Giorgi Kvirikashvili, vice Prime-Minister and Minister of Economy, on August 25. The EEA reminded Kvirikashvili that the draft infringes Georgia’s obligations against the WTO rules on unlimited market access in courier services. But all to no avail. The ministry did not make any change in the draft and was reluctant to communicate with the European Commission via video-conference. Finally, the Commission set the date for the video-conference on September 26 and asked the Ministry to send a revised draft version in two weeks. Yet it is still unclear whether or not the task was implemented. The Ministry did not meet GJ’s repeated requests for comments or information on the issue. Neither did they explain the purpose of these much criticized changes.
The private sector believes the reason is personal benefit.
“180 million USD is the income of post business per month and if the said changes come into effect, 95 percent of this will go in the pockets of new Georgian companies that are expected to enter the market under the Georgian Post’s umbrella. Some of these companies are already registered and others are being registered and all are in the names of relatives of top officials as far as I am aware. Very likely this money will go into their pockets instead of the state coffer,” Menteshashvili said.
If the statutory monopoly will be authorized all international companies plan to sue the Georgian state at an international level.

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