GEO

New report by Transparency International Georgia explores movement of officials between government and business and the resulting corruption risks

04 December, 2013

The report published today, 4 December 2013, by Transparency International Georgia focuses on the process of revolving door:  the movement of officials between government and the private sector and the corruption risks associated with this process.

Revolving door is a relatively new subject in the field of corruption studies, while the report is the first attempt at a complex analysis of the problem in Georgia.

The movement of individuals from business to the public sector (and vice versa) is a natural and inevitable process. For this reason, the goal of regulation, in this case, is not to eliminate the process but rather to minimize the resulting corruption risks by ensuring greatest possible transparency of the process.

Revolving door becomes a problem whenever people who have come from business to public offices abuse their position for the benefit of specific private companies, or when the former officials who engage in business use the contacts and the influence they have retained in the government in order to help their companies gain unfair advantage on the market.

The following are the main findings of the report:

  • There is intensive movement of officials between the government and the private sector in Georgia. A number of wealthy businessmen have been elected to the Georgian Parliament, while some members of the executive branch have direct or indirect ties with business. Similar movement is taking place in the local government bodies and independent regulatory commissions.
  • Davit Bezhuashvili, Gocha Enukidze, and Kakha Okriashvili, wealthy businessmen who were elected to Parliament in 2012 from the United National Movement, left the former ruling party after it was voted out of power. This raises valid questions concerning the reasons why Georgian businessmen engage in politics.
  • A number of companies with connections to Georgian officials have obtained important benefits through their deals with the state in recent years. These benefits include money received through public procurement, tax exemptions, exclusive licenses and rights, legislation designed to suit the interests of specific companies, and the lenience of law enforcement agencies toward specific companies. Some officials have moved to the market sectors that they used to supervise in their official capacity.
    1. Companies connected with former and current Parliament members Kandid Kvitsiani, Archil Gegenava, Temur Kokhodze, and Gocha Enukidze received millions of lari through public procurement (including procurement conducted without open tenders).
    2. Law enforcement agencies did not investigate alleged offences committed by companies connected with Parliament members Rusudan Kervalishvili and Davit Bezhuashvili while they were members of the parliamentary majority.
    3. There are reasons to believe that the law that was adopted by the Georgian Parliament in 2012 and made it possible for companies to avoid sanctions for the damage they had caused to the environment was tailored to suit the interests of the companies connected with Parliament member Koba Naqopia.
    4. Companies connected to former Defense Minister Davit Kezerashvili had a near complete control over the Georgian TV advertising market until 2012. Moreover, companies connected with Kezerashvili held exclusive licenses for outdoor advertising in Tbilisi and national lottery.
    5. The Imedi TV station benefited from a tax amnesty on two occasions while former Economic Development Minister Giorgi Arveladze was its director and co-owner.
    6. Former Deputy Minister of Economic Development Zviad Cheishvili moved to Georgian-Chinese private company Georgia Wood and Industrial Development after leaving the office. During his time in the office, the company was a major recipient of logging licenses from the ministry.
  • The influence of private business interests on officials is also a serious problem in the local government bodies and independent regulatory commissions.
    1. The Greenservice company connected to former high-level officials from the Tbilisi City Hall has received millions of lari through contracts with the Tbilisi City Hall.
    2. The Geo Gold company connected to Tbilisi City Council Member Aleksandre Nikolaishvili was granted a 49-year lease of the city’s Mushtaidi Park without competitive selection.
    3. Irakli Chikovani, former chairman of the Georgian National Communications Commission, retained commercial interests in this sector that he was supposed to oversee while in office.

 

  • Revolving door is also a problem in the new government. The Ministry of Energy merits particular attention in this respect.
    1. Energy Minister Kakha Kaladze had direct and indirect ties with several companies operating in the energy sector prior to his appointment to this position.
    2. Deputy Energy Minister Mariam Valishvili (who has held this position since 2008) was, according to the company registry data, also the director of the TOT Energy company in 2008, which is a direct violation of the law.
  • Georgia’s legal framework contains important mechanisms for the prevention of these problems. However, as a result of the gaps in the law and in practice, no effective regulation of the revolving door process is carried out presently. Because of the lack of effective monitoring, there are cases where violation of existing rules by public officials does not result in any sanctions.
  • Only a formal investigation can determine whether corruption actually occured in in the cases described above. However, given the lack of appropriate regulation and transparency, cases like these reduce the public’s trust in the government and the entire political system, which is a very serious problem by itself.

 

Transparency International Georgia’s recommendations:

 

  • Address the gaps in the law and ensure implementation of the existing rules in practice. This requires identifying the agencies that will be responsible for ensuring the compliance of public officials with different regulations.
  • Implement changes in the system of asset declarations: The list of officials who are required to file the declarations must expand, while the Civil Service Bureau should create a system for the verification of the content of asset declarations.
  • Monitor the activities of former public officials for a certain period of time after their resignation.
  • Establish restrictions on the movement of officials between independent regulatory commissions and private companies operating in the sectors that these commissions oversee.
  • Strengthen the public agencies that can reduce the corruption risks resulting from the interaction of the public and the private sectors. These include the State Audit Office and the Competition Agency.
  • Reduce the scope for subjective decision making in the areas where the government and business interact. This can be achieved, for example, by limiting the possibilities for privatization conducted without competitive selection and procurement conducted without open tenders.