Tbilisi’s views on Georgia reforms

by Georgy Kalatozishvili, Tbilisi. Exclusively for VK

The Kyrgyz parliament has recently visited Georgia to study reforms. Kyrgyz MPs are not pioneers of the process. Georgia has been visited by numerous delegations from post-Soviet states in the last years. Timur Kulibayev, head of the National Economic Chamber of Kazakhstan “Atameken Union”, has recently proposed using Georgian experience to improve the business climate. Georgian reforms are indeed a brand. Some of them could be beneficial for other post-Soviet states, if they agree on a Velvet Revolution, such as the one in Georgia in 2003 or in Ukraine in 2004.

Saakashvili’s achievements are improvement of authority and faith in state institutions and formation of anti-corruption police, which has the population’s trust, comparably with the Georgian Orthodox Church. Eduard Shevarnadze, a former Georgian President, said in a radio interview that Georgia would collapse without corruption. But the reforms prove that corruption is not what keeps the society together. It can be consolidated by modernization. The Georgian leader simplified registration of companies and reception of driver’s license and started building new clinics in distant regional centers.

The president also rid the country of criminal authorities, brought in social justice and social exams, allowing people from poor families to have equal chances with the elite to enter the most prestigious education centers for free.

These systemic breakthroughs are a lot more essential and important than increase of budget from $500 million in 2003 to $4 billion in 2011. A country without oil and gas has a significant economic rate of 6-7%, despite the war, terrorist attacks and the world financial recession.

One of the main adjustments was transforming bureaucracy. It is not just the new young staff, but adjustments of functions. Reformers lifted almost all licenses. Georgia has one of the world’s simplest forms of opening business. Registering a new firm or company takes just a few hours. Any inquiry can be received in a few hours without leaving the house, using Internet. The “single-window” principle allows one to receive any inquiry or document at the Justice House, if no Internet access is available.

A situation when a company is registered in the morning and starts operating in the evening with all its staff and communication facilities operating is common practice in Georgia. Taxes may be paid using the Internet without having to contact the tax police. The latter inspects companies once in several years. A tax payer needs to present a tax declaration by April 1. It has an electronic form. A tax payer receives an SMS message confirming reception.

Customs terminals have advanced equipment. Customs clearance takes no more than an hour. This is why Georgia has become the top re-exporter of vehicles in the region. It is not just low taxes, but excellent service as well. All talks between functionaries and citizens are recorded on audio or video cameras. They are checked by special services to make sure officials show not rude behavior.

But the numerous benefits have disadvantages as well. Firstly, bureaucracy is becoming less flexible: functionaries punish for even the slightest violations. Post-Soviet states, unlike centuries-long experience of business laws in Europe, need more flexibility. In other words, low corruption and high service are not enough, officials need more creativity and readiness to take responsibility together with business. Combination of fulfilling the goal and eradication of corruption are a complicated problem that has not been solved in Georgia.

The other disadvantage is that simplification of all procedures inspires fraudsters to make profit, for example, by purchasing and selling apartments in the Internet. There is no longer need for high bribes for a functionary and long queues to his office. But to be fair, it should be noted that such effects can be omitted. Besides, we do not reject medicine just because it may cause a bad effect in one out of a thousand cases.

Thus, a lot in Georgian reforms is indeed of interest for former Soviet states. Time will show whether Mikheil Saakashvili, who insists on the need to “break the old system” and switch of elites (revolution) was right.