“Georgian President Saakashvili’s Campaign Against Corruption”

The Power and Interest News Report
Dec 20 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