20 December 2004
Corruption has plagued Georgia — as well as its neighbors Armenia and Azerbaijan — for generations. While it was a problem even during the Soviet regime, ever since the former republics gained their independence in the early 1990s, the degree of corruption has crippled economic development and stifled attempts at reform. The new government in Georgia, which won power on a reformist platform, is widely viewed in the country as Georgia’s last chance to defeat the spread of corruption and create a stable economy and law-abiding society.
Before the peaceful revolution of November 2003, Georgian President Eduard Shevardnadze had been unsuccessful in curbing the rapid growth of corruption throughout Georgian society and the political process. Corruption in Georgia under the leadership of Shevardnadze was so widespread it affected life on nearly every level. Despite very strong laws against corruption, little was done to enforce them. Blatant vote rigging and fraud led to his government’s demise last fall, shortly replaced by younger politicians on a reform platform. Even as Georgians rejoiced Mikhail Saakashvili’s victory, activists stated that the new government would have to prove it was better at fighting corruption than the former president, otherwise Saakashvili would share his fate.
Corruption among the Georgian authorities is so widespread that it consistently affects foreign investments. Investors originally saw Georgia as a land of opportunity as the country is strategically located between Europe and Asia. Plans for new oil and gas pipelines created an economic boom for Azerbaijan in the early 1990s and observers fully expected Georgia to receive part of that wealth. But corrupt officials, coupled with unclear laws and tax policies, continue to frustrate investors.
The foreign investment community was further antagonized by high-level kidnappings and threats for ransom and bribes. The American electricity provider, AES, which took over electricity distribution in Georgia in the late 1990s, was repeatedly taken to court and threatened. In August of 2002, the company’s C.F.O., Nika Lominadze, was murdered. Other high profile cases include the kidnapping of the Welsh banker Peter Shaw in July 2002. Although no ransom was reportedly paid, Shaw escaped his captors after four months of imprisonment. While the Georgian government ascertained Shaw escaped due to a special military operation, speculation continued after Shaw’s release that members of the government were involved in the kidnapping business.
A Turn of the Tide
While the 2003 parliament election might have started like business as usual, protestors and politicians quickly assembled in front of the parliament to protest the voting results. After weeks of protests, Shevardnadze resigned on November 23. Mikhail Saakashvili, a former justice minister in Shevardnadze’s government from 2000-2001, was voted into office January 4, 2004 with 96 percent of the vote. Originally seen as Shevardnadze’s groomed pupil, Saakashvili left his position as the justice minister, citing that he believed it was “immoral” to remain a part of the corrupt government. He became one of the loudest voices of the opposition in the years leading up to his election, and one of the country’s most popular politicians. He was a visible face during the protests and led the charge into parliament the day before Shevardnadze resigned.
Saakashvili started out his presidency with strong words. “We need to introduce in the parliament very drastic anti-corruption legislation that would give vast powers to a new elite, small, honest investigative unit that would really tackle high-level corruption,” he said in January 2004. During his inauguration speech, he pressed, “We must root out corruption. As far as I am concerned, every corrupt official is a traitor who betrays the national interest.” Many hoped the difference would be Saakashvili’s young age, 36, and the Western influence brought through his education in the United States.
With a high popularity rating — and no real opposition — Saakashvili was free to implement any reforms or laws he felt fit. Many supporters were alarmed when one of his first acts, in addition to the high profile arrests of infamous businessmen like Gia Jokhtaberidze, Shevardnadze’s son-in-law, included constitutional amendments to consolidate his power. While the overall response to reforms from the business sector has been positive, Badri Patarkatsishvili, who is the president of the Georgian Federation of Businessmen, has repeatedly stated that businessmen in Georgia should feel secure and know that their rights will be honored. In an interview with the B.B.C. in January 2003, Saakashvili stated that one of his top priorities for Georgia was creating a stable and safe climate for investors.
As early as February, the new government was warned by the Visiting Council of Europe Secretary-General Walter Schwimmer that the country’s fight against corruption should not abuse the law. Critics of the new government also began citing media intimidation and accusing the government of arresting political enemies without adhering to the due process required by law.
Although criticism of the new government continued, culminating in an open letter to the president by prominent civil leaders in Georgia, the new president has not backed down from his system of arrests and has not made any open efforts to compromise with the growing opposition. The open letter, published widely in Georgia, spoke of a growing concern that Saakashvili was actively squashing public debate with nationalist rhetoric, as well as failing to come to terms with his power in a “post-revolution” society. Nevertheless, during his first year in office, Saakashvili has made progress encouraging foreign investment in his country. Georgia was included in the E.U.’s New Neighborhood Initiative and received one billion dollars in pledges to help finance reforms.
Neighboring States Concerned Over the Georgian Example
Neighboring countries throughout the Caucasus and Central Asia are threatened by Saakashvili’s November rise to power and his rhetoric against corruption. A November 25, 2003 emergency meeting of foreign ministers from the Commonwealth of Independent States in Kiev highlighted the fear of neighboring governments that Georgia’s new crusader against corruption would also adversely affect the status quo in their countries.
In both Armenia and Azerbaijan, opposition parties celebrated the resignation of Shevardnadze. Although both Azerbaijani President Ilham Aliyev and Armenian President Robert Kocharian were not openly supportive of Saakashvili in November, the overriding element in their relationship revolves around commerce and trade. Both presidents have conducted high profile trips to Georgia in the past year, and Saakashvili has warmly welcomed them both as “brothers.”
Georgian election observers, however, were not welcome in Ukraine. Despite the chilly official reception, Georgians traveled to Kiev and participated in the protests following the November run-off election. The Georgian Foreign Ministry issued statements on November 28 supporting the call for a Ukrainian revote. Georgian Prime Minister Zurab Zhvania also supported the protestors, wishing Ukraine a “victory of justice and democracy”
Georgia’s relationship with Russia was strained during Shevardnadze’s presidency. Despite a positive beginning, that relationship has rapidly deteriorated under Saakashvili. During the protests calling for Shevardnadze’s resignation, it was widely feared in the country that Russia would strongly back Shevardnadze. However, after some initial support, then Russian Foreign Minister Ivan Ivanov flew to Tbilisi November 22 to help ease tensions, and he has been given credit for helping the country avoid violence.
Warm relations between the countries continued through the summer, highlighted when a large group of potential Russian investors came to Tbilisi in May to discuss joint business projects between the countries. During the convention, Russian businessmen repeatedly emphasized the need for a stable, safe investment climate and tax reforms. Talk of business investment was overshadowed by the growing violence in South Ossetia, however, and Russian involvement in Abkhazia.
Currently, the administration in Georgia is dealing with Moscow’s accusations of anti-Russian militants hiding in the country, near the border between Chechnya and Georgia, and the likelihood that Organization for Security and Cooperation in Europe border patrols will not continue after the mandate expires later this month. Furthermore, an ongoing point of contention between the two governments is the existence of two Russian army bases that still exist within Georgian territory. The Russians use the bases to potentially influence Georgian affairs, explaining why Tbilisi wants them removed. No real progress has been made on this issue.
Georgia’s relationship with the United States has improved under Saakashvili. Although accusations of heavy-handed policies have grown against the current administration, the United States has been a steadfast supporter of Saakashvili and his reforms. In light of the current reforms taking place in the military, the U.S. government has pledged over $15 million to help modernize the Georgian army and Saakashvili has already sent over 150 soldiers to Iraq. Georgian soldiers are involved in peacekeeping missions in Afghanistan as well, and Saakashvili has promised that over Georgian 800 soldiers will eventually be dispatched. While Western powers initially faced a quandary supporting the overthrow of an elected president, once the degree of civil outrage toward the election became obvious, the U.S. issued a strong rebuke against Shevardnadze and his handling of the election.
Conclusion
President Mikhail Saakashvili has had some success fighting corruption through tax reform and large scale arrests that include politicians from the former regime and powerful businessmen. His peaceful acquisition of the semi-autonomous Adjarian republic has given the central government a great opportunity to reform invasive corruption throughout the republic, especially in tax collection. The new tax code, scheduled to begin February 2005, should help the government receive lost revenue as well as prove to potential investors that the new regime is serious about reform.
Criticism of Saakashvili’s policies is not unfounded. By refusing to follow due process, his program of arrests could backfire by turning the accused into victims in the eyes of the public. To date, the arrests have largely been centered on high profile politicians and business leaders. In order to fully eradicate corruption, citizens and low-level civil servants involved in bribery and the black market will also need to be arrested. Once the government starts interfering with the status quo of people’s daily lives, Saakashvili’s popularity might drop and the public could quickly lose taste for strong reforms.
While he has hired supporters of democracy into his government, he has distanced himself from civil leaders outside of his government. Prominent civil leaders in Georgia are giving Saakashvili some leeway as he gains experience in office. However, his success will depend on his ability to compromise heady rhetoric with reasonable public policy to lead his country through difficult and painful reforms.
Report Drafted By:
Molly Corso
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