8/11/2019 Public Service Georgia's Reform

1/21

Leadership and Management for Integrity

Budapest, July 5, 2012

The Georgian Case

10:4512:00 CEU TIGY Room

Between 2004 and 2012 Georgia underwent major transformation. One of the mostcorrupt countries in the world became an example for others in successfully defeating

corruption. The third poorest country of the former Soviet Union in 2003 tripled its GDPPer Capita, had a ten fold increase in the National Budget and became the biggest

exporter of electricity in the region by 2012. The home to Pankisi Gorge, no mans landknown for businessmen kidnappings, and Soviet era mafia, Thiefs in Law, made it to

the top ten in Doing Business ranking of the World Bank and holds the second position inthe world for registering property and 8thposition in starting business.

So how did Georgia, the country known for its limited natural resources, manage toachieve so much while dealing with two breakaway regions of Abkhazia and South

Ossetia, engaging in armed conflict with Russia and being brushed off by two of its mainallies, the European Union and the United States.

This session will focus on the reality of post Rose Revolution setting and the difficultiesthat abrupt changes of power bring to reformers. It will look at The Georgian Case

through the prism of four basic principles: Full Eradication of Corruption, Efficient andResponsive Governance, Libertarian Vision in Policy Development and Implementation,

Total Deregulation and Complete Privatization leading to total liberalization. Thediscussion will focus on anticorruption reforms, crime prevention and law enforcementimprovements, building transparent and friendly business environment through easy

licensing and registration procedures, liberal labor legislation, taxation and trade policies,reforms in energy, educational, social protection and penitentiary systems.

8/11/2019 Public Service Georgia's Reform

2/21

GEORGIA IN 2003

1. The Regime: Unpopular and Visibly Weak

2. The Electoral Process: Transparently Fraud3. Economic Situation: Desperate

4. Communal and Social Services: Virtually

Nonexistent

5. Security Forces / Military: Undersupplied and

Hungry

6. Corruption: Widespread

7. Opposition Leaders: Credible, (Eventually) United,and Decisive

8. External Pressures

8/11/2019 Public Service Georgia's Reform

3/21

Treasury empty State weak

Micro management at governmental level

Credibility of the new government low

Supporters / Participants waiting for returns

Expectations of the population very high

No time to develop policy, plan reforms

Result: Make decisions and deal with consequences later

IMMEDIATELY AFTER REVOLUTION

8/11/2019 Public Service Georgia's Reform

4/21

No natural resources

Small country / Small market

Destroyed infrastructure

Unskilled workforce

Poor fiscal and monetary standing

Abkhazia / South Ossetia conflicts

Survival Mode / No Vision

Oligarchs running the country

Solution: Experiment with total liberalization and build a strong

state

WHAT TO DO?

8/11/2019 Public Service Georgia's Reform

5/21

Full Eradication of Corruption

Efficient and Responsive Governance

Libertarian Vision in Policy Development and Implementation

Total Deregulation and Complete Privatization Leading to Total

Liberalization

BASIC PRINCIPLES

8/11/2019 Public Service Georgia's Reform

6/21

VISION / STRATEGY FOR REFORMS

8/11/2019 Public Service Georgia's Reform

7/21

ERADICATING CORRUPTION

8/11/2019 Public Service Georgia's Reform

8/21

ERADICATING CORRUPTION: Getting Rid of Licenses and Permits

8/11/2019 Public Service Georgia's Reform

9/21

8/11/2019 Public Service Georgia's Reform

10/21

8/11/2019 Public Service Georgia's Reform

11/21

8/11/2019 Public Service Georgia's Reform

12/21

8/11/2019 Public Service Georgia's Reform

13/21

8/11/2019 Public Service Georgia's Reform

14/21

ERADICATING CORRUPTION: Property Registration

8/11/2019 Public Service Georgia's Reform

15/21

50,000 policemen fired in one day

Higher requirements and vigorous trainingBetter salaries and benefits

Permanent undercover operations to identify bribe-takers

82% of population developed trust in police

ERADICATING CORRUPTION: Police Reform

8/11/2019 Public Service Georgia's Reform

16/21

Economic Success

8/11/2019 Public Service Georgia's Reform

17/21

Fiscal and Monetary Performance

8/11/2019 Public Service Georgia's Reform

18/21

REFORMS: Full Privatization

8/11/2019 Public Service Georgia's Reform

19/21

REFORMS: Labor Legislation Reform

8/11/2019 Public Service Georgia's Reform

20/21

SUCCESS: Reform of the Energy SectorFull Privatization

GETTING IT RIGHT: Reforms in Taxation and Trade Policies

IN THE PROCESS: Education ReformA Bumpy Ride from

Deer Leap to Bear Step

FAILURE: Health Sector Reform

Does privatization always

work?

REFORMS: Policy Lab

8/11/2019 Public Service Georgia's Reform

21/21

Judiciary reform

Elections

Media pluralism Monopoly and regulations

EU requirements:

Deep an Comprehensive Free Trade AgreementVisa Facilitation

REFORMS: Far from Perfect