The kleptocracy that hinders Georgia’s path to the EU

, by Élise Maréchal

The kleptocracy that hinders Georgia's path to the EU
Tbilisi, Georgia. Credit: Stephen Downes, Flickr.

Even though Georgia received official “European perspective” recognition by the European Commission in June 2022, the country has still to undergo significant reforms and systemic changes in the functioning of state institutions in order to align with European standards. One of the first things to deal with is grand corruption.

What is a kleptocracy?

Some types of political systems are very well-known (or at least we have all heard of them) for their main characteristics, such as oligarchies, military juntas, totalitarianism, dictatorships, liberal democracies, etc. However, the term “kleptocracy” is still quite unused when discussing some countries’ political systems, while they might fall under the scope of its main features. It goes without saying that the political system of a country may correspond to various definitions at the same time (actually it does in most of the cases). Chances are very high for a kleptocratic system to have an authoritarian type of government because there must be a lack of democratic accountability.

There is no official international definition of what is a kleptocracy. However, it is generally described as a political regime whose leaders systemically enrich themselves at the expense of the population, through illegal behaviors such as embezzlement, land grabbing, or extortion. USAID defines it as the “most consolidated form of corruption” since it involves misappropriating domestic wealth “not only for personal gain but also to maintain political power”, especially by the means of patronage networks. What is certain is that the development of global financial transactions during the 1990s and the rise of financial technology have also enabled national elites to hide their stolen loot abroad, especially in tax havens, such as the British Virgin Islands or Switzerland, which offer financial anonymity along with low or even no taxes on bank deposits. The IRI thus defines a “kleptocratic cycle” as a dynamic whereby “funds are misappropriated from jurisdictions with poor rule of law, laundered through offshore secrecy havens, and hidden and enjoyed in major financial centers.”

Patronage network and state-capture in Georgia

When Mikheil Saakashvili came to power in Georgia as a leader of the United National Movement in 2004, following the Rose Revolution, he carried out several significant reforms in the public services, which helped to reduce the level of corruption. In fact, as TI Georgia underlines it, the level of petty corruption (i.e. the “everyday abuse of entrusted power by public officials in their interactions with ordinary citizens”, for basic services such as university or hospital) is very low. This low level of petty bribery explains why Georgia’s Corruption Perception Index (CPI) is not so concerning (56 out of 100 in 2022, the same as Italy) while the scale of the increasing high-level corruption is actually tremendous and recognized both at domestic and international levels. In fact, the Georgian political system is characterized by a total impunity when it comes to fighting grand corruption.

To depict Georgia as a kleptocracy, it is key to understand the informal functioning of the public institutions and its patronage network. This short article won’t go into detail on these matters but rather give a general outlook of the Georgian political situation. The configuration of the political structure in Georgia is very straight forward: the whole system revolves around a patronage network led by the famous billionaire and main Georgian oligarch, Bidzina Ivanishvili, who made its fortune (and still has clear business interests) in post-soviet Russia. Even though Ivanishvili does not assume an official position in a public institution anymore (he used to be Prime Minister back in 2012-2013 and then chairman of the current ruling party, the Georgian Dream) he is clearly recognized as the country’s de facto leader by both local and international actors. He does in fact run a consolidated network of high-level civil servants and businessmen, from different ministries, local governments, the ruling party, law enforcement institutions and even from the judiciary. Georgian public power is thus in the hands of the people that are related in some ways to Ivanishvili, being its relatives, friends, former colleagues, or former employees of its companies. Nepotism is one of the main features of the Georgian political system.

The pervasive functioning of this patronage network is unavoidable in Georgia. This is a situation of state capture by private interests.

Public procurement contracts and state land grabbing

One of the main ways in which the network captures public funds is through public procurement contracts. In fact, many public contracts are awarded to companies linked to Georgian politicians close to the government, or to their relatives, through selection processes whose transparency and objectivity raise serious concern. In particular, there is, in many cases, the doubt that some tenders might be completely tailored to a precise company by the public authority, which explains why in some situations there are no other competitors. For instance, TI Georgia recently reported that Zugdidi municipality awarded several contracts to two companies owned by the city mayor’s friend.

Moreover, Georgian kleptocracy takes the form of land grabbing through the acquisition of state land at an undervalued price. For instance, a journalistic investigation shared by TV Pirveli revealed that the vice Prime Minister’s brother recently acquired a state property land at a price below its market value.

What is more, many public officials, especially high-level ones, fail to properly declare their interests and properties in their asset declarations. In 2022, 52% of the asset declarations showed violations, but none were sent to the Prosecutor’s Office, according to TI Georgia.

An obstacle in its path towards the EU

Within Georgia, there is a very high level of public awareness regarding the large scope of the corruption and thus a significant mistrust of public institutions such as the government, the judiciary, or the Parliament. This is especially true for the younger generation. The latter is in fact fully aware of both the fact that corruption hinders the democratization of the country and its full economic development, but above all that it blocks its path towards European integration, while the majority of Georgian young people advocate for closer relations with the EU. The country’s capture by private interests is hindering its path to EU integration, as the European Commission underlined it multiple times, including in its 12 recommendations for Georgia to get the candidate status when mentioning the emergency to tackle “high-level corruption cases” and the “excessive influence of vested interests in economic, political, and public life”. The Commission will publish a report next October, deciding whether to give the awaited candidate status, but even if it is eventually granted, drastic reforms and a radical change of political system must be carried out for Georgia to actually get closer to the Union.

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