Octopus Interface Conference Corruption and Democracy Strasbourg, 20 œ 21 November 2006

Contribution by

Londa Esadze

Coordinator, Transnational Crime and Corruption Center (TraCCC) Georgia Office

—Anti-Corruption“ or Democracy? Lessons from Post-Communist Georgia

Discussion paper Strasbourg, 26 October 2006

O c t o p u s I n t e r f a c e - C o r r u p t i o n a n d D e m o c r a c y

Contents

1 Georgia‘s —Rose Revolution“: People‘s Anti-Corruption Revolution? ...... 3 2 Systemic Network of Corruption Pyramids ...... 4 3 —Anti-Corruption“ or Democracy? ...... 6 4 Donor Sponsored Anti-Corruption...... 9 5 Conclusion ...... 11

Document prepared by The views expressed in this report do not necessarily reflect official positions of the Dr. Londa Esadze Council of Europe Coordinator, Transnational Crime and Corruption Center (TraCCC) Georgia Office http://www.american.edu/traccc www.traccc.cdn.ge

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—Anti-Corruption“ or Democracy?

Lessons from Post-Communist Georgia

In 1993, when Luciano Violante, then President of the Italian Chamber of Deputies, was the Chairman of the Parliamentary Anti-Mafia Committee, he asked a State witness for information on the investments and money-laundering techniques used by his organization.

—He replied, ”If you have some money to invest, what do you do?‘ —I answered, ”I would ask an expert for advice.‘ —To which he replied, ”And so do we. If investment proves sound what do you do?‘ —”I go back to that same expert,‘ was my reply. —”Exactly like us. And if it turns out to be a bad investment, what do you do?‘ —”I look for another expert, and go to someone else.‘ —”So do we. Except that we first kill the previous expert and make sure the second one knows what we‘ve done. That‘s the difference between you and us.‘“

But the really clever ones do not murder. Murder may remove an obstacle but it makes a lot of noise. Corruption is silent and wins an accomplice.

1 Georgia‘s —Rose Revolution“: People‘s Anti-Corruption Revolution?

The popular uprising in Georgia that led on November 23, 2003 to President Eduard Shevardnadze's resignation was being termed a "Velvet Revolution" or a "Revolution of Roses." Many experts called the Georgian events as the former Soviet Union's first anti-corruption revolution.

Generally speaking Revolution for me is not a positive term, and in reality the Georgian revolution, in legal point of view, was a coup d'etat. But as it has been done so peacefully and without bloodshed, it has created an important precedent and elsewhere have inspired frustrated opposition activists who followed Georgian events closely. The Rose Revolution and the peaceful ouster of Shevardnadze was a signal event in the politics of Eurasia and has had a major impact on the other countries of the former Soviet Union.

After November 2003 it was clear that the next would be the Ukraine. Ukraine followed with —Orange Revolution“ in January 2005, and then Kyrgyzstan with its —Tulip Revolution“ in March 2005. However further developments proved, that no one can guarantee that the political technologies successfully tested in one part of the Post- Soviet space will be as productive in another.

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Why Georgia?

First, a —revolution“ was possible in Georgia because during Eduard Shevardnadze‘s tenure, opposition leaders, parties and society had developed leeway for action which did not exist elsewhere in the Caucasus, not to speak of Central Asia. Since the late 1980s we had free media. Their freedom of maneuver and action, which translated into effective political influence, reflected Shevardnadze‘s own relatively liberal attitudes, the weakness of the Georgian state– i.e., its inability to control and co-opt competing center of power and authority –and Georgians‘ unruly national character. Moreover, international NGOs were deeply involved in Georgian events.

Second, the Georgian state, crippled by corruption, was extremely weak. The worst consequence of this weakness was that criminals and crooked officials did not worry about the possible penalties of breaking the law. But this weakness ultimately made possible November‘s Rose Revolution by dissipating the state‘s ability to resist better organized players. True, international organizations and foreign capitals were urging a peaceful resolution of the showdown and warning Shevardnadze–whom everyone expected to remain in office until 2005–that resorting to violence would end in disaster. But by November 2003, Shevardnadze could no longer command the state‘s coercive apparatus; in the end, nobody was willing to act against crowds peacefully calling, first, for new elections and then for his resignation.

And third, just 1 month before the revolution the US government along with the World Bank and IMF has decided to reduce and in many cases stop their financial assistance as the reforms in Georgia have slowed down.

Three Years after the —Rose Revolution“: Not All Rosy

Revolutions œ starting with France in 1789 and stretching past Russia in 1917 œ invariably reach a stage where those seeking to establish a new order must face the question: Do the ends justify the means? Georgia seems to have reached this point right now: 3 years after.

Were the Georgian events real anti-corruption revolution or just a transformation from one more —pluralistic corruption system“ to another —elite corruption system“?

What are the thorns in anti-corruption roses?

Before answering these questions we should analyze organized nature and political economy of Georgian corruption.

2 Systemic Network of Corruption Pyramids

After gaining independence (1990) and leaving totalitarian space, Georgia started building democratic society. Like other post-Soviet countries, it faced many obstacles, primarily civil war and ethnic conflicts, which was followed by economic collapse.

Georgia, strategically situated between the Black Sea and the oil-rich Caspian, has long been a focus of intrigue and conflict between the great powers: USA and Russia. The geo-political location of Georgia, broadening prospects of Euro-Asian corridor and the agreements on oil and gas pipelines traversing Georgia provide particularly lucrative

4 O c t o p u s I n t e r f a c e - C o r r u p t i o n a n d D e m o c r a c y conditions and environment for the pervasion of the wrongdoings related to corruption, which facilitate the alliance of the corrupt state agencies with organized crime and undermine the security and sovereignty of a state, as well as its economic, political and overall development.

Corruption in Georgia encompassed all forms of illegal exchanges, including large-scale embezzlement by high officials, small-scale extortion of bribes by traffic policemen, and nepotism at all levels of the state structure. Corruption is very well structured from the top down and between various state agencies.

The ties between various sectors of state and government were normally working at the same levels of power and/or official status. Therefore, these ties as horizontal structures of corruption which have been carried over from the old communist system. During the Soviet Union, the Communist Party provided the framework for developing contacts across different state agencies. Moreover, in Georgia, family and friendship relationships strengthened these networks. The political changes since 1989 have not seriously damaged the networks because most officials at the lower and middle levels of the state were not exchanged. The political changes in November 2003, also did not damage the same networks, as new young officials have smoothly been integrated into the system. It should be mentioned that through strengthening law enforcement and the restructuring of public institutions, the current Administration destroyed the network of former corrupt clans and pyramids, but not systemic network. I am afraid that such system never allows possibility to sustain temporary political stability.

Vertical structures of corruption have developed within the same branches of the state and encompassed various administrative levels. They can be characterized as patron- client relationships-- personal relationships in which the superior provides security, jobs, etc for a subordinate in exchange for support, loyalty, work, etc. In this relationship, payoffs and personal benefits are expected. Policemen, judges, tax and customs officials paid huge sums to acquire their official positions which enable them to extract bribes, justifying the prior —investment.“ This investment had two consequences which keep the vertical structures intact. First, they served as ”filters.‘ The very moment an official paid for his/her job it could be assumed that this person will not violate the ”rules of the game‘ because he has already committed a corrupt act at the very beginning of his/her career. Second, in a crisis-ridden economy, like the Georgian one, several thousand dollars is a lot of money which, in most cases, has been borrowed from friends and relatives. Since there was no job protection in Georgia, subordinates were at the mercy of higher officials, and being fired could easily meant financial ruin. Moreover, higher officials were normally not directly involved in corrupt activities. Yet they were well aware of the corrupt activities of their subordinates. This knowledge allowed them to put additional pressure on the lower officials. Accordingly, there was sufficient pressure for public officials to play by the rules of corruption.

The Georgian State was largely degenerated into a vehicle which served the private interests of public officials. This has led to a paradoxical position. On the one hand, the Georgian State had no financial means to play a positive role in the economic and social development of the country. Corruption was mainly responsible for the deplorable situation of the state budget. On the other hand, based on its monopoly over the execution of public services, the bureaucratic apparatus (police, public procuracy, courts, etc.) remained a powerful actor.

It should be mentioned that after the Revolution new leadership has succeeded in 5 O c t o p u s I n t e r f a c e - C o r r u p t i o n a n d D e m o c r a c y reducing petty corruption/bribery in many citizen-Government interactions. But corruption has become more sophisticated and latent and has moved to the spheres where big money and power rest : budgeting, special funds, procurement, and privatization.

Today, political power as a means of control is still paralleled by economic power.

Horizontal and vertical structures of corruption seriously undermine the impact of formal institutions of democratic control. The horizontal ties between various branches of state and government, incorporating economic actors in the private sphere, dissolve the state as an independent arbiter of societal conflict. Society is essentially divided into a few wealthy entrepreneurs with close contacts to state agencies and the higher echelon of public officials, on one hand, and common citizens, on the other.

Georgian corruption is endemic. Practices that westerners view as —corrupt“, many Georgians consider a means of —taking care of one‘s own“ and conducting ordinary business.

In Transparency International's 2003 year‘s ranking of ninety-nine countries for levels of corruption, Georgia was one of the worst. Its rank at eighty-fourth made it comparable in levels of corruption to Uganda, Pakistan, Kazakstan and Russia. The Situation was not significantly changed after —Anti-corruption Revolution“: the country improved its rating under the TI Corruption Perception Index reaching in 2005 the same level that existed in Georgia in 1999 (2.3) after having been at its worst level in 2003 (1.8), and lower than it was in 2002 (2.4).

According to Transparency International's Corruption Perceptions Index 2005, which ranks a record 146 countries, now Georgia has the 139 th position neighbouring with Indonesia, Tajikistan and Cote d‘Ivoire.

3 —Anti-Corruption“ or Democracy?

Anti-corruption is not a novel issue in Georgia. Soon after Shevardnadze was elected as President, he declared fighting corruption as a top agenda of his policy. Like the current Administration, Shevardnadze‘s anti-corruption campaign started from investigating and prosecuting high-profile corruption cases, drafting laws essential to fighting and preventing corruption, introducing reforms in some Governmental institutions, and establishing dedicated anti-corruption institutions. Time passed and reform enthusiasm faded away. Corruption spread widely and rooted deeply in most Governmental institutions. Family and clan members distributed wealth among themselves throughout the country.

Since his January 2004 victory, Mikheil Saakashvili, the youngest president in Europe, has moved to realize his vision for Georgia, which involves institutionalizing anticorruption measures and seeking to reunite South Ossetia and Abkhazia. President- elect has been really swept to power by the people of Georgia expressing their dissatisfaction with the corruption of the old regime and their resolution in demanding system-wide reform. But the first the first —reform“ right after the election, were the constitutional amendments allowing the President to dissolve parliament. The amendments drew criticism from Georgian opposition leaders and NGOs. The Council of Europe and the European Parliament also echoed these concerns.

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In his first months in office, President Saakashvili has struck at corruption by arresting officials and high-profile individuals. People believe that many of them really were corrupt, but all of them were his political opponents, while Saakashvilis‘s supporting corrupt officials from old or/and new government are still at their positions and many of them continue to conduct their —ordinary corrupt“ businesses. By this authorities are applying the law selectively in the on-going anti-corruption drive, arresting and punishing political enemies while leaving supporters untouched.

The government has some kind of propensity to revolutionary justice and in many cases, some efforts justified by the fight against corruption were based on violations of Human Rights, neglecting law, neglecting due procedures and they are accompanied by pressure on courts. With that this young and inexperienced government risks creating new ground for new corruption.

There are significant "gaps" in the Administration's statements on human rights and democracy and its actual practices. The increasing number of cases of torture, inhuman and humiliating treatment, as well as arbitrary detentions also remain matters of deep concern 1. At the same time both the statements and practices are performed under —anti-corruption slogans“.

—Anti-corruption“ was served as main justification for perhaps the biggest institutional failure of the new authorities, which lied in apparent de-facto restrictions on the independence of the judiciary. Observers noted that judges exercise political self- censorship in sensitive cases and lean towards the decisions they think are endorsed by the authorities. President himself repeatedly made statements that could have been seen as prejudicing the court. As a result, in all of the high-profile corruption cases the courts ordered pre-trial detention of the accused, a measure that is to be applied in very limited cases according to a —strict“ interpretation of the Criminal Procedure Code.

The Georgian constitution provides for an independent judiciary, protected by law from the influence of actors within the legislative or executive branch; it also gives judges personal immunity from prosecution without the consent of the head of the Supreme Court. However, the reforms pushed through parliament in February 2004 gave the president sole authority to appoint and dismiss common court judges. According to a Human Rights Watch briefing paper, this amendment has substantially reduced judicial independence by stoking fears among judges that decisions that displease the government may lead to their dismissal. Although few people today believe that judges take bribes, particularly since judicial salaries were significantly raised effective January 1, 2006, the prevailing public view is that the nature of corruption within the judiciary has changed, and, according to Transparency International‘s 2005 report, has even increased. Rather than being improperly influenced by taking bribes, the public believes that judges are forced to succumb to excessive executive pressure, resulting in the same outcome as those who took bribes - judges‘ decisions are compromised.

As in many other post-Communist countries, entry into and promotion in Georgia's civil service remains plagued with nepotism and cronyism. Efforts to combat this trend have been systematized through legislation on public service, which posits that employees

1 Freedom of House, Countries at the Crossroads 2006, Country Report - Georgia

7 O c t o p u s I n t e r f a c e - C o r r u p t i o n a n d D e m o c r a c y must be recruited through an interview process. It has taken some drastic steps to shake up some of the most stagnant and corrupt institutions œ such as the ministry of defense and the traffic police. Nonetheless, critics point out that most appointments at the middle-management level are done based on personal and partisan loyalty. Reform of the civil service is lagging, while merit-based competitions for public positions are still few and far between. As a result, new leadership faces daunting problems as the lack of educated and professional personnel in all walks of governance is apparent.

Georgia has a relatively well-developed framework of laws aimed at preventing conflicts of interest among public officials; however, the main challenge so far has been the implementation of those regulations. The Law on Conflict of Interest and Corruption in Public Service requires financial disclosures for all public servants and their families; the law also prohibits public servants from engaging in economic activities while in office. Starting in February 2004, all public officials have been obligated to submit proof of legality for their property purchases. However, the special bureau that is in charge of monitoring compliance with this and other similar laws does not have the capacity to verify these statements.

After the Rose Revolution, relations between the Georgian government and local media have increasingly caused concern, because the government has attempted to tame the press by administrative measures under the plausible excuse of establishing the rule of law. Consequentially, some Georgian television stations and newspapers, which had gained a following with their relatively freewheeling reports, have significantly toned down their criticism of the government, others just were closed. As a result, The Paris- based press freedom watchdog Reporters Sans Frontieres ranked Georgia 94th among 166 countries for its press freedom record, down from 73 the previous year.

While the Government is getting stronger, a weakened civil society is losing its ability to provide effective public oversight and be an equal partner in the dialogue with the Government. The notion that is widely used by the Government these days towards the public - —Just trust me œ I am doing what is the best for you“ œ cannot be attributed to a democratic society and leads to a further disconnect between the Government and society.

Government‘s highly-publicized fight against corruption is politically motivated and is used to strengthen control over all sectors, and monopolize power. If Corruption was more —pluralistic“ and accessible for everyone before from high-ranking official to traffic policemen, now it has become —elite“ and is concentrated in the hands of a few powerful individuals. —Patron-client“ relations and informal networks created vertical, interrelated corruption pyramids.

The strong emphasis on the prosecution of corruption and radical anti-corruption reforms have led to a growing concern that is shared by a number of experts who believe the Government‘s highly-publicized fight against corruption is politically motivated and is used to suppress opposition, strengthen control over all sectors, and monopolize power. 2

Lack of transparency and communication with the public in explaining reforms has contributed to a growing distrust of the Government and suspicions that corruption has moved to a higher level.

2 USAID, Rule of Law/Anti-Corruption Assessment Georgia Final Report. 2006. 8 O c t o p u s I n t e r f a c e - C o r r u p t i o n a n d D e m o c r a c y

Law enforcement is viewed by the Government as a primary tool in fighting corruption in the country. It could be expressed as —Fear of being caught and a respect for the President should keep people from being involved in corruption.“ Though these two factors œ fear of being caught and respect for the President - might have been effective in a short run they do not contribute to sustainability in the long-term fight against corruption. Enforcement in the hands an overpowering law enforcement system, which is unaccountable to the public, can lead to further human rights abuse.

Thus enforcement is viewed as a main anti-corruption area by the Government while institutionalizing corruption prevention measures is given a smaller role.

Experts point out, that ”Georgia‘s new leadership‘s attempts to establish a mono-opinion and even intellectual dictatorship will not lead the country to rapid reforms, but to authoritarian rule and stagnation again 3.

Developing democracy in post-Soviet republics, it has now become clear over the last 12 years, will be a long, drawn-out process, with no guarantee of success in many of them. Authoritarian traditions remain strong even among the best educated, most Western- oriented leaders, with little or no personal involvement in the Communist Party apparatus or stake in that tradition of governing. Georgian symptoms prove that not all of the western-trained leaders are immune to such temptations of power.

The Schevarnadse‘s regime, was no Stalinist dictatorship, but just a corrupt mixture of clan and mafia mismanagement, which was used to declare every year as a —final year“ to combat corruption in the country.

Those —Anti-corruption Lessons“ are already well learnt.

That‘s why Anti-corruption should not become as the populist, legitimising message of new leaderships regime in Georgia and worldwide.

Precisely for this reason, it is important that Georgian society, as well as international donor institutions continue to track the situation closely and, when needed, offer constructive criticism.

4 Donor Sponsored Anti-Corruption

The globalization of the world‘s economy and small nations, in the name of free markets, have not come without social, political and economic costs and violations of human rights.

A underlining message of this effort is to demonstrates how corruption is endemic to foreign organizations and local non-governmental organizations operating under the auspices of such organizations as the World Bank (WB), European Bank for Reconstruction and Development, United Nations and the United States Agency for International Development (USAID). It should be possible to link an analysis of the relationships between the effectiveness of assistance programs and sustainable

3 Georgia on a Wild Ride to Democracy, By David R. Sands , The Washington Times , November 21, 2004

9 O c t o p u s I n t e r f a c e - C o r r u p t i o n a n d D e m o c r a c y development. Imperfectly realized, the result should make the reader question the utility of international assistance schemes, seeking more effective and responsive ways to work in the developmental context.

Donor organizations operating in the former Soviet Union share the common problem of corruption. Even in textbooks on international development, such problems are discussed as a continuing concern 4.

Corruption in international organizations is a special problem that has been rarely addressed, because the media and host governments are afraid of embarrassing international assistance efforts to which they owe such a debt of gratitude. International Development consists of teaming foreign financial resources and experts in addressing the transition of a country towards democratic reform and economic prosperity.

One of the reasons for the growing criticism of the development intervention in the Caucasus has been the tendency among these organizations to ignore the historic, social and cultural features and differences of the countries that are subjected to either structural adjustment programs or development interventions.

Georgians consider themselves to be experts on the subject of corruption, but when it comes to dealing with this endemic disease, Americans think they know best in what to do. However, they don‘t know what to do when the subject of the corruption is their own organizations and implementing partners.

There are hundreds of organizations involved in the development of Georgia and these organizations are all working with similar objectives. If the ranking of corruption based on the access to international assistance programs were considered, Georgia might move into the top spot as the most corrupt state in the former Soviet Union.

Georgia has been a second largest recipient of the U.S. financial assistance, second only to Israel, for many years. 5

Following the Rose Revolution, Georgia has had an influx of foreign aid estimated at approximately $1 billion. Most recently, the United States signed a package giving Georgia $295 million through the Millennium Challenge Account. Some NGOs claim that these funds are not scrutinized closely enough, as the supervisory board in charge of the money is made up almost exclusively of officials from the ruling party.

It should be also mentioned, that foreign assistance programs in the form of direct projects, international credits and even membership in such organizations such as the World Trade Organization (WTO) have become useful tools of political and economic bullying.

Fighting corruption is considered as the major problem of Georgia and why there has been little success with development assistance programs. Much can be attributed to the problems of transitional economies but one thing seems certain œ corruption appears to be endemic to all aspects of Georgian life.

4 Stiglitz, What I learned at the World Economic Crisis, The Insider, The New Republic, 2000. 5 US Aid Cut: a Political Blow to the Government, http://www.civil.ge/eng/article.php?id=5032

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Considering many strategic plans, foreign states rendering assistance to Georgia and the region, such as USAID, UNDP, World Bank, IMF, Council of Europe and EBRD are increasingly realizing the need to focus more attention to the problem of corruption. However, what works is in theory does not always work well in practice.

International organisations may need countries such as Georgia as showcases for successful anti-corruption reforms. However, according to some experts, although the fight against corruption enjoys a broad international consensus, it is still unclear to what extent anti-corruption measures advocated by international organisations can indeed prove successful in the long term 6.

That‘s why it is very important to study the relationship between foreign assistance and domestic corruption and ensure that —Donor Sponsored Anti-Corruption“ not become an industry.

5 Conclusion

The Georgian government has long been —fighting“ against corruption. Old and new high-ranking officials speak loudly about corruption in the country, but still the fight against this monster doesn‘t progress from merely talk.

I would like to hope that the process of fighting corruption in Georgia and worldwide would not turn into the permanent campaign under the slogan: —Corruption is dead! Long live corruption!“

6 Anti-corruption reforms in Georgia: a few successes and big challenges ahead. http://www.caucaz.com

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