The Ministry of Economy and Sustainable Development of Georgia has developed a Draft Law on Postal Service, which introduces unjustified state regulation in this market segment.

The proposed law will have an adverse effect on this market segment in terms of a free, fair and competitive business environment. Regulations in the draft law directly contradict current international practices and the obligations taken under the Georgia-EU Association Agreement. Introduction of these regulations will become a serious formal/bureaucratic obstacle for the activities of international companies operating in this market segment - DHL, TNT, UPS, FEDEX, and up to 40 companies operating currently on the Georgian market. Subsequently, these companies will be forced to abandon the Georgian market. The only similar occasion was reported in Turkmenistan in 2005.

The draft law provides for the following:

• Introduction of unlawful requirements and barriers for the carriers

Under the draft law, only those companies that receive authorization from the regulatory body of this sector will be able to transport cargo and documents, as well as monetary shipments. Further, sending of any parcel (despite its content) for other companies will be impossible. The draft Law names the Georgian National Communications Commission as the sector regulator.

In addition, the draft Law introduces bureaucratic barriers on the activities of any company intending to operate in the field of postal service, which will result in economically unjustified interference by the state in companies' activities, and subsequently lead to an excessive and unjustified state regulation of this sector.

• Market monopolization by the "Georgian Post"

After the adoption of the draft law, the "Georgian Post" will be granted the status of National Operator and will enjoy unjustified benefits that will boost its advantage over other companies. In particular, the "Georgian Post" will be a market monopolist for 20 years and other operators will be able to deliver their services only "under the umbrella" of the "Georgian Post".

• Regulations contradicting the principles of a free market economy

Following the adoption of the draft law, only the "Georgian Post" will be authorized to exclusively receive/send/ship/deliver international parcels up to 30 kg; economic expediency of this is not justified and the principles of a free market economy are violated.

• International legal principles ignored

The draft law contradicts international practice as well, which finds full liberalization of a postal service market, promotion of a free competition (EU Directive 2002/39/EC) and abolition of "postal reserved service areas" (EU Directive 2008/6/EC) as a successful way of reforming this sector.

As noted, the submitted draft law also contradicts obligations taken under the Georgia-EU Association Agreement, which establishes principles for liberalization of postal and currier services and provides for separation of postal and parcel shipment delivery services as well as their separate regulation. Unfortunately, the submitted draft law ignores all above-mentioned principles and offers contrary regulation.

Recommendations:

Prior to submitting the Draft Law on the Postal Service in the Parliament of Georgia, we urge the Ministry of Economy and Sustainable Development of Georgia to ensure that:

• New legal regulations of activities in the postal service sector as defined under the Draft Law on Postal Service are brought in compliance with Georgian legislation and leading international practices;

• The postal service market is liberalized and demonopolized by introducing adequate system of legal regulation of activities in this sector;

• Transparency and impartiality are observed throughout the process of selection of a national operator (pursuant to the Draft Law on Georgian Post) providing universal postal service.