Leadership and Management for Integrity

Budapest, July 5, 2012

The Georgian Case
10:45 12:00 CEU TIGY Room

Between 2004 and 2012 Georgia underwent major transformation. One of the most
corrupt 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 GDP
Per 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 land
known 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 in
the world for registering property and 8
th
position in starting business.
So how did Georgia, the country known for its limited natural resources, manage to
achieve 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 main
allies, the European Union and the United States.

This session will focus on the reality of post Rose Revolution setting and the difficulties
that 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 and
Responsive Governance, Libertarian Vision in Policy Development and Implementation,
Total Deregulation and Complete Privatization leading to total liberalization. The
discussion will focus on anticorruption reforms, crime prevention and law enforcement
improvements, 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.

GEORGIA IN 2003
1. The Regime: Unpopular and Visibly Weak
2. The Electoral Process: Transparently Fraud
3. 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

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
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?
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
VISION / STRATEGY FOR REFORMS
ERADICATING CORRUPTION
ERADICATING CORRUPTION: Getting Rid of Licenses and Permits
ERADICATING CORRUPTION: Property Registration
50,000 policemen fired in one day
Higher requirements and vigorous training
Better salaries and benefits
Permanent undercover operations to identify bribe-takers
82% of population developed trust in police

ERADICATING CORRUPTION: Police Reform
Economic Success
Fiscal and Monetary Performance
REFORMS: Full Privatization
REFORMS: Labor Legislation Reform

SUCCESS: Reform of the Energy Sector Full Privatization

GETTING IT RIGHT: Reforms in Taxation and Trade Policies

IN THE PROCESS: Education Reform A Bumpy Ride from
Deer Leap to Bear Step

FAILURE: Health Sector Reform Does privatization always
work?
REFORMS: Policy Lab
Judiciary reform
Elections
Media pluralism
Monopoly and regulations
EU requirements:
Deep an Comprehensive Free Trade Agreement
Visa Facilitation
REFORMS: Far from Perfect