Le blog du CEPII

Institutional reform and democracy in Georgia 9 years after the “Rose revolution”

On October 2, Mikheil Saakashvili – who has led the “Rose Revolution” in Georgia in 2003 and has been president since 2004 – admitted defeat of his party in Georgia's parliamentary election against Bidzina Ivanishvili.
Par Olena Havrylchyk
 Billet du 4 octobre 2012

This is the first time that Georgia is observing a peaceful transfer of power through elections. And this is another positive outcome of Saakashvili presidency that has overseen an amazing cracking down on corruption and introduction of market reforms, but has been yet accused of monopolizing the power and showing authoritarian tendencies. Indeed, the presidency of Saakashvili could be used as an illustration for those who deem that strong authority is essential for the swift implementation of reforms without much time spent on a democratic process. At the same time, we shouldn’t forget that it was previous authoritarian regime of Shevardnadze that was responsible for the decrepit state of the Georgian economy that has led to the Rose revolution.

When Saakashvili came to power, corruption was at the core of Georgia’s public services and the new government has shown boldness in addressing this problem. The best example is that of the campaign against corruption in the traffic policy. This is how the World Bank (2012) report describes the initial situation: “Police could not survive on the tiny salary they received—when they were paid at all (sometimes they went months without a paycheck). To make ends meet, many worked for organized crime or sold drugs or, as was common among traffic cops, accused citizens of breaking laws (whether they had or not) and then pocketed the fines. People paid as much as $2,000–$20,000 in bribes for jobs as policemen, earning the money back through an internal pyramid scheme funded by illegal pursuits.”
The situation appeared so drastic that the government has decided against a gradual reform and, in a very bold move, has fired 16000 traffic officers. Despite fears to the opposite, many observers believe that roads became safer without corrupt officers stopping drivers randomly to exhort bribes. A new police force was created and subsequent reforms have ensured its credibility, transparency and professionalism (see World Bank (2012) report offers a very detailed description of the reform).
The same boldness has characterized the government’s determination to implement market friendly reforms. According to the 2012 Global competitiveness report, Georgia is now ranked number 2 in terms of number of days to start a business and number 9 in terms of government burden of regulation, total tax burden, as well as hiring and firing practices. In short, the country has become a natural experiment in market reforms. Growth statistics show growth rates of more than 10% in 2006-07, and while GDP growth slowed down following the August 2008 conflict with Russia, and turned negative in 2009, the economy rebounded in 2010-2012 with growth rates above 6% per year.
Nevertheless, the above rankings should be taken with a pinch of salt. Georgia has been ranked number 1 by the World Bank for the speed of registering property, but critics notice that it takes so little time to register property that one can even register the property that one does not own. Overall, property rights, judicial independence and efficiency are very poor. One can even think that it is in the government’s interest to keep them this way, because many reforms would be blocked or slowed down by proper judicial processes. As an example, one could cite the tremendous effort to renovate cities and villages with the intention to make them more attractive for tourism.
When visiting Georgia, one is struck by the fact that the center of the whole city can be renovated simultaneously: every road, every building, every monument and every park. In a market economy with private property, such simultaneity of the renovation zeal would be surprising. In Georgia, it has become a common practice for the authorities to finance the renovation of potential tourist attractions (often with money borrowed from international institutions). Once the target town is chosen, an architect is appointed and property owners are informed that their house is going to be renovated for free. Such present is accompanied by a bitter pill: due to poor property rights and ineffective legal system, de facto, the owners cannot refuse the renovation and have no say in its style and quality. Going to court would be too expensive and slow and, moreover, one cannot rely on the independence of the judicial decision. Yet, the result can be seen by any tourist: renovated cities that are almost too clean and too freshly painted, but which nevertheless disarm you with beauty and hospitality of their inhabitants.
Could one achieve such fast outcomes with stronger property rights and better legal system? Difficult to say, but voters seem to be tired with policies that are well-intentioned but are not based on legal democratic processes.
World Bank. 2012. Fighting corruption in public services: chronicling Georgia's reforms. Directions in development : public sector governance. Washington D.C. - The Worldbank.  
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