Transparency International Georgia's Proposals for Georgia’s National Anticorruption Strategy and 2021-2021 Action Plan
In January 2021, Transparency International Georgia officially presented 14 specific anticorruption proposals which should ideally be incorporated into the country's updated Anticorruption Strategy and the action plan for the next two years. The proposals are based on our in-depth studies on the local context as well as on international best practices.
We believe that the updated National Anti-Corruption Strategy must reflect directly and adequately the significant challenges facing the country in terms of corruption which both domestic and international organizations have spoken about increasingly often. Specifically, the strategic document must state unambiguously that high-level corruption specifically and the complex forms of corruption linked with it are the most significant challenge facing the country.
Consequently, the Anti-Corruption Action Plan must focus primarily on the ways of combating high-level corruption, of which the establishment of an independent anti-corruption agency is the most important one. International experience clearly suggests that the establishment of an independent institution tasked with combating corruption is the kind of instrument that can yield results in terms of the fight against high-level corruption in the shortest amount of time.
Moreover, it is necessary to implement a number of reforms which the Georgian Government has committed to carry out in various formats and in different ways. These include:
- Making the information about the beneficial owners of companies fully public.
- Implementing in practice the system of whistle-blowing on corruption-related offenses and protection of whistle-blowers.
- Improving the system for the disclosure of the assets of public officials and the verification of asset declarations.
- Implementing a mechanism for the management of conflicts of interest.
- Making the public procurement database fully open (publishing it in an open data format).
We believe that, without direct acknowledgement of the problem of high-level corruption, it will be impossible to achieve any significant results in the process of combating corruption. Unfortunately, the Georgian Parliament refused to acknowledge the problem as it decided in February not to consider the legislative proposal regarding the establishment of an anticorruption agency, which was initiated by a group of independent members of the previous Parliament in cooperation with Transparency International Georgia.
In this context, it is even more important to ensure that the National Anti-Corruption Strategy reflects adequately the country's most significant challenge in items of corruption, so that a foundation is laid for the necessary reforms.
Transparency International Georgia's anti-corruption proposals:
1. Establishment of an Independent Anticorruption Agency
As far as corruption-related challenges are concerned, a lack of appropriate response to the crime of high-level corruption -- the cases involving high-ranking officials or influential individuals with links to the ruling party -- has become particularly evident in Georgia in recent years. A 2018 resolution by the European Parliament noted that "high-level elite corruption remains a serious issue" and that the country still lacks "a solid track record of investigations into high-level cases of corruption."
Transparency International Georgia has recommended establishment of an independent anticorruption agency. The relevant draft law has already been submitted to the Parliament. We believe that incorporating this recommendation into the National Anticorruption Strategy will facilitate the implementation of this reform.
2. Improving the Whistle-Blowing System
Establishment of an effective anticorruption system in the country requires the existence of a well-functioning and effective mechanism of whistle-blowing and whistle-blower protection. A reform of this system was implemented in Georgia in 2015. However, an analysis of the situation over the past five years has demonstrated that the whistle-blowing mechanism largely exists only on paper and that it is yet to be fully implemented in practice:
- The civil service lacks any sort of common standard or approach for identifying whistle-blowing statements, as well as minimal standards concerning internal procedures and rules.
- Law enforcement agencies (the State Security Service, the Ministry of Internal Affairs, and the Ministry of Defense) are yet to develop special legislation for whistle-blowing and whistle-blower protection. Their employees are therefore unprotected against possible revenge for whistle-blowing.
- There is no responsible body which would: collect and publish the statistics of whistle-blowing cases and the responses to them, as well as data on awareness among civil servants; develop minimal standards for whistle-blowing; monitor the application of these standards in public institutions; provide, via a hotline, consultation to interested individuals on issues concerning whistle-blowing; monitor the process of investigation of whistle-blowing statements; receive and review information on cases of pressure on whistle-blowers.
Transparency International Georgia recommends that, in order to implement the whistle-blowing mechanism in practice:
- law enforcement agencies (the State Security Service, the Ministry of Internal Affairs, and the Ministry of Defense) must develop and adopt special legislation on whistle-blowing and whistle-blower protection;
- minimal standards for internal whistle-blowing mechanisms must be developed and the law must require public institutions to implement these mechanisms;
- a body must be identified which would be responsible for collecting the statistics of whistle-blowing cases and the responses to them, and would publish this information proactively. The possibility of the adoption of a standalone law on whistle-blower protection must also be considered.
3. Improvement and Enforcement of Revolving Door Provisions
Despite the restrictions imposed by the law, there is effectively no management of the risks arising from the movement of former public officials to the private sector. There are no effective mechanisms for the enforcement of the relevant legislative provisions and no body or bodies responsible for enforcement have been identified. Consequently, there has been no response to any of the instances of possible violation of these provisions in recent years.
Transparency International Georgia recommends:
- Adding to the law definitions of the relevant terms (or changing the current wording of the relevant provision), in order to eliminate the ambiguity as to which types of cases the restrictions established by the law apply to.
- Clearly defining by law the institution that will monitor the compliance of former public officials with the requirements of the law.
- Extending the restrictions established by the law to former heads of state-owned enterprises in the cases where the risk of conflict of interest or corruption exists.
4. Transparency of Information About Stockholders of Joint-Stock Companies
Information regarding the owners of joint-stock companies is not currently available publicly in Georgia. The only type of information that is public is the identity of the company's shareholders and the distribution of shares at the time of its establishment (registration in the public registry). The information regarding change of shareholders after the establishment is registered in different ways and by different entities, yet there is no unified and publicly accessible database similar to the business registry.
The lack of access to the information about shareholders of joint-stock companies creates the risk that entrepreneurs or public officials will use this secrecy for dishonest purposes. We also believe that there is no reason why this information should not be made public.
Transparency International Georgia recommends that the information about the shareholders of joint-stock companies be registered in a single place and made available to any interested individuals.
5. Ensuring Transparency of Beneficial Ownership
Transparency of beneficial ownership has been identified on the international stage in recent years as one of the most important anticorruption tools. Both the EU and the United States have now taken legislative steps toward ensuring transparency in this field. There is also an international standard in this area: the Open Ownership Principles. Transparency of beneficial ownership has not been ensured in Georgia despite the fact that offshore companies, for example, are quite active in the country.
Transparency International Georgia recommends that:
- Any legal entity be required to disclose the identity of its beneficial owners and a publicly accessible registry of beneficial owners be established.
- Companies that have not disclosed the identity of their beneficials owners must not be allowed to participate in public procurement, the projects of the Partnership Fund [Georgia's sovereign wealth fund], and other state programs, such as the programs of benefits linked to COVID-19 [pandemic]. The restriction must also apply to the subsidiaries of such companies.
6. Proactive Publication of Complete Privatization Database in Machine-Readable Format
Complete information about the assets privatized by the state is currently not available and is not being published proactively. Information about the property sold via electronic auctions (including the information about the winners of the auctions) is posted on the privatization.ge website but the website only keeps the information for two months.
Transparency International Georgia recommends that, in order to introduce the principles of good governance and open governance in the area of privatization, the National Agency of State Property must proactively publish in a machine-readable format (e.g. Excel) complete information about the state property sold via different procedures of privatization.
Initiatives Concerning Asset Declarations
7. Improving Verification of Asset Declarations
The system of verification of the public officials' asset declarations was launched in 2017. It was a significant positive change. However, a number of shortcomings of the verification process currently make it difficult to achieve the most important goals of verification: prevention of conflict of interest and identification of cases of illegal enrichment. An analysis of the data on the violations detected in recent years through verification indicates that the verification is focused almost entirely on checking the accuracy of the information provided in the declarations, while little attention is devoted to identifying possible cases of conflict of interest and corruption. The Civil Service Bureau reviewed 1,347 declarations in 2017-2019 and found only nine violations that were sent to the investigative bodies.
Transparency International Georgia recommends that the methodology of the verification of asset declarations be expanded to include ways of identifying possible cases of conflict of interest and corruption, and that at least half of the verification resources be devoted to this.
8. Ensuring the Formation of the Independent Commission for Selecting Declarations
The possibility that the commission responsible for selecting the declarations for verification will not be formed is a significant flaw of the system of verification of asset declarations. If a sufficient number of individuals do not apply for commission membership, the Civil Service Bureau can only extend the application deadline by three days. If a sufficient number of applications is still not received, the commission will not be established. Because of this flaw, the commission was not formed on two occasions in the last three years. It is necessary to exclude any possibility that the commission will not be formed. In addition, in case the commission is still not formed, the five percent of the total number of declarations which the commission was to select for verification must be selected randomly. This is not currently being done. Consequently, when the commission was not formed in 2018, for example, only 5 percent of the declarations, which had been selected randomly, were reviewed instead of 10 percent. The commission was not formed in 2020 either.
Transparency International Georgia recommends that:
- The flaws concerning the rules for the selection of the members of the independent commission responsible for selecting the declarations for verification be corrected in order to exclude the possibility that the commission will not be formed.
- If the commission still cannot be formed, the five percent of the declarations, which the commission was to select, should be selected randomly.
9. Fundamental Improvements in Form and Content of Asset Declarations
The experience of monitoring the asset declarations which Transparency International Georgia has accumulated over the years suggests that the information included in the declarations does not provide a complete picture of the finances and the assets of the public officials or their family members. We believe that it is necessary to update the declaration form and to extend its contents. Our organization has prepared a study on this.
Transparency International Georgia recommends that the requirement to file asset declarations be extended to a larger number of public officials, the contents of the declarations be expanded and rendered more detailed, full results of the declarations' verification be made public, the process of completing the declarations be simplified, among other things, through the standardizing of the answers and automation.
10. Publishing Asset Declarations in Open Data Format
The information included in the asset declarations is published in the PDF format, which limits the possibility of automatic processing of this information. It is necessary to have the information included in the declarations collected in a structured way and published in a machine-readable (open data) format, which would make it possible to automatically process the data and make the verification process easier both for the Civil Service Bureau and civil society organizations.
Transparency International Georgia recommends publishing the information included in the asset declarations in a machine-readable open data format (e.g. CSV or Excel).
Proposals Concerning Public Procurement
11. Ensuring Accessibility of Complete Database of Public Procurement in Open Data Format
Georgia's public procurement database is not currently available in open data format. The system became digital 10 years ago, yet interested parties still do not have simple and direct access to aggregate raw data on procurement. Current system only shows the information about individual procurements. It is impossible to get any kind of general statistics or aggregate data from it. This is a huge obstacle for the interested individuals working on public procurement as they have no access to aggregate data on procurement and cannot use it for public, academic, or commercial purposes.
Transparency International Georgia recommends opening up the public procurement system completely and making the information it contains available in an open data format. In order to achieve this goal, the Open Contracting Data Standard, OCDS, must be fully implemented and an application programming interface must be built into the unified electronic system of procurement.
12. Publishing Information on Subcontractors
Although Georgia's public procurement system is highly transparent, subcontractors remain an exception since almost no information about them is published. The use of subcontractors therefore remains an opaque side of public procurement and it is very likely to be a venue for harmful practices which the transparent procurement tenders are supposed to prevent.
Transparency International Georgia recommends extending the transparency standard of the public procurement system fully to subcontractor suppliers and the subcontracts signed with them. Publishing complete information about subcontractors on the public procurement platform must become mandatory.
13. Restricting Access to Public Procurement for Individuals Convicted for Corruption
Although Georgia's public procurement system has many positive elements, it needs further improvement. The insufficiently strict treatment of dishonest companies involved in procurement is one of the significant flaws of the current system. Currently, the only means of addressing this problem is the "black list" as the companies which end up on it are banned from participation in public procurement for a period of one year. However, the owners of the companies on the "black list" can establish other companies and use them to take part in procurement, or use the companies on the "black list" as subcontractors. Another problem is the involvement in public procurement of the companies and the individuals that were previously indicted for corruption.
Transparency International Georgia recommends that:
- a mandatory prohibition be introduced for companies indicted for corruption and the members of the management of such companies;
- the contractors involved in public procurement be prohibited to use as subcontractors the companies whose owners have been indicted for corruption or fraud, as well as the companies that have been included in the "black list."
14. Extending Public Procurement Law to Reserve Funds
The public procurement law currently does not apply to the Georgian president's, the Georgian Government's, and the Tbilisi City Hall's reserve funds. This exception creates higher risk of corruption in the process of management of public resources. We believe that there is no reason that would justify making the reserve funds completely exempt from the law, given that there are multiple flexible procurement mechanisms.
Transparency International Georgia recommends extending the public procurement law to the public procurement carried out with the money from the Georgian Government's, and the Tbilisi City Hall's reserve funds.