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Regulatory Reforms in Georgia: Benefits and Challenges

This article explores the benefits and challenges of the regulatory reforms undertaken in Georgia, including improving the business environment, cutting state intervention, and promoting public input in decision making.

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Regulatory Reforms in Georgia: Benefits and Challenges

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  1. Benefits and Challenges of the Regulatory Reforms in GeorgiaZaal Lomtadze, Deputy Minister of Environment11 October 2007, Belgrade

  2. Reform and Development Program of the Government for 2004-2009 Among the government’s reform priorities: • Improving the business environment • Cutting state intervention to a minimum (deregulation) • Establishment of “compact, competent and properly motivated public service” • Cutting bureaucracy in both numbers and influence • Promotion of public input in decision making • Enforcement of high standards for the protection and sustainable use of natural resources Georgia has achieved significant progress in cutting red tape and increasing economic freedom.

  3. Institutional reform (2005–2007) procedural development budget increase obligatory medium-term expenditure framework planning staff training better targeted technical assistance programs of donors & IFIs Reform of instruments of natural resources use (2005–2008) Reform of instruments of environmental protection (2005–2010) MEPNR Medium-term Priorities

  4. Situation before the Reform (2003-2004) • Low authority of the environment ministry within the government • Shortage of resources: budget for little more than salaries • Weak environmental planning and implementation • High turnover of professionals: private sector demand, low wages, low motivation • Management and decision-making processes isolated from other stakeholders • Inefficient monitoring systems • Weak law enforcement • Performance measured by output indicators only: number of new legislative acts adopted, of inspections carried out

  5. MEPNR Staff Optimization

  6. Creation of Environmental Inspectorate 2005 - Established based on the Law “On State Control of Environment Protection” Main responsibilities: • Identification of the regulated community • Compliance monitoring • Registration, enforcement, and analysis of violations of environmental and natural resource regulations • Preparation of proposals for mechanisms to encourage compliance

  7. Is There a Deterrent Against Violations? • Deterrence condition – complete removal of illegal benefit; true if: • D × P × F > B • D – probability of detection of a violation • P – probability of prosecution of a detected violation • F – the amount of fine imposed (and actually paid) • B – benefit from an illegal activity • In Georgia: • D increased sharply, but only in the natural resource sector • P also improved radically • F – some progress, not across the board

  8. Reform Progress as of 2007 • The MEPNR authority has increased, mainly due to the importance attached to natural resources management (government priority) • Much better budget funding: salaries are competitive with the private sector • Mixed progress in reforming the legislation: as enforcement improves, some serious gaps emerge • Stakeholder cooperation has improved but the priorities are dictated by the government’s economic agenda • The use of integrated approaches in permitting and inspection has widened and procedures of inspection were updated and better documented • Increased transparency and reduced corruption • No clear progress in performance measurement

  9. New Risks to Regulatory Reforms • Better, but selective application of rules due to pressure to support economic growth • No place for environment protection in the government’s short-term agenda and no long-term vision • Lowering “barriers to investment” may go too far, resulting in a kind of anti-environmental protectionism?

  10. Key Lessons Learned • It helps when environmental regulatory reforms are part of a bigger package providing institutional and financial support. • It is impractical to attack all problems at once: priority planning is necessary. • There have to be smart ways to minimize damage from interest groups’ lobbying. • A long-term commitment to reform is necessary but is hard to institutionalize in a convincing way (MDGs? PRSPs? SD strategies?) • Although international support can be instrumental in recognizing the need for reforms and partially supporting them… • Reforms have a chance ONLY when domestically driven.

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