EPI Assessment: State Property Management Framework

The management, privatization, and disposal of state property in Georgia is primarily governed by the Law on State Property of 2010 (LSP) and the various pieces of secondary legislation issued under that Law. The LSP did not radically change the framework for management, privatization, and disposal of state property which existed before 2010, and although the LSP has undergone several revisions since it was passed (a new set of amendments is currently being proposed by the Ministry of Economy and Sustainable Development (MoESD)), these relate mainly to the processes by which the Law’s objectives are to be attained and not the underlying principles and methods of management, disposal, and privatization of state property.

This report is an assessment of the Government of Georgia‘s (GoG‘s) privatization process, including the regulatory environment, with recommendations for improvements in that process to bring it into line with international best practice. We are therefore proposing high level recommendations for improvement of the legal and regulatory framework, as well as more specific proposals for the subsidiary (but critically important) process by which the GoG’s privatization goals can be achieved in accordance with international norms in this field. Our review of the framework and the process has identified some considerable gaps between Georgian law and practice, both pre-2010 and since the LSP was passed, and that which is applied in most other countries which have undergone large-scale state property privatization programs. It is recognized that good progress has been made and a substantial amount of state property has already been sold or disposed of in the 20 years since Georgia‘s independence and our focus therefore is primarily on the two key types of state property where there is still much to be done and where many issues remain unresolved– state owned land and state enterprises.

In compiling this report, we have:

  • Interviewed officials at the MoESD, including two deputy ministers
  • Talked to representatives of the private sector with an interest in privatization and to colleagues at EPI with expertise in key areas
  • Met with organizations independent of government with objective views on the privatization process
  • Reviewed all relevant current laws and secondary legislation relating to privatization of state property
  • Reviewed the World Learning/FORECAST E-Government Report Stage II
  • Researched available written and online data and information on privatization and economic matters, generally in Georgia

Obtaining consistent and accurate information on privatization in Georgia is problematic, in particular up-to-date translations of the laws are not available. This is partly because of what has been termed the chaotic and rapidly changing nature of the process of state property management and privatization and also the lack of reliable electronic sources of information. Privatization has, up until recently, been a largely report-based exercise, and recordkeeping and document storage have not been practiced by relevant agencies to the highest standards. This has resulted in a focus in this report on relatively high-level benchmarking in terms of the framework and the process of privatization. However, we are confident that our overall conclusions on that framework and process indicate that there are achievable solutions to making significant improvements in the important areas of policy, decision making, implementation, and process, in relation to:

  • Transparency
  • Public availability of information
  • Clarity of transaction structure and process
  • Higher financial returns for the GoG
  • Greater investor quality and confidence
  • Speedier and more efficient procedures in state bodies responsible for privatization