GEO

Intersection of business and politics: Problem of the ‘revolving door’ in Georgia

05 February, 2013

 

What is Revolving Door?

The term ‘revolving door’ refers to the movement of individuals between positions in the private and the public sectors. Such movement has become more frequent throughout the world in recent years as governments and business communities have developed closer ties. This phenomenon can be beneficial when it allows business and government to share experience, knowledge and practice. However, it is a problem wherever it leads to conflict of interest and corruption, and so compromises the integrity of public decision making, policy formation or contracting. These are some of the most common ways this may happen:

  • Using influence and contacts. Former officials may use contacts in government to gain leverage to decision making after they have resigned and joined business. Former colleagues may feel obliged or pressured into granting them favorable decisions.

  • Using insider information. A former government employee may use commercially sensitive information gained while in office to the benefit of his or her new employer or clients, at the unfair expense of competitors who cannot access this information.

  • Representing former interests after taking office. Officials may bring previous loyalties and interests into office, and will support them in a potentially biased way when forming policy, enforcing regulations or awarding contracts.

  • Seeking future employment while in office. An official may try to gain favor with a certain company or industry while in office, with the view to securing a lucrative job offer or directorship upon leaving public service.

Because, as noted above, the movement of people between the private and the public sectors can be beneficial for public administration, the goal of revolving door regulations is not to eliminate such movement but to manage the associated risks. Although very few countries presently have adequate regulations to deal with the problems arising from revolving door, the phenomenon has drawn considerable attention in recent years. Transparency International’s 2011 assessment of the National Integrity Systems of 25 EU member states highlighted revolving door as a major source of corruption risks in Europe.

Revolving Door in Georgia

The issue of revolving door merits a far greater public attention  than it has received in Georgia so far because many individuals have moved from private sector to high level positions in the government or vice-versa.

Four of Georgia’s seven prime ministers in 2004-2012 either joined the government from the private sector or moved to the private sector after their resignation (or both). The same was the case with a considerable number of ministers and deputy ministers during the same period of time, while a number of prominent businessmen have been elected to Parliament and some former MPs have engaged in business after leaving the legislature.

When appropriate rules and regulations are not in place, the revolving door between the public and the private sector creates the risk of corruption as it is possible that public office will be abused for private gain. This should be a matter of concern in Georgia as the country’s current regulations designed to insulate the public administration from private sector influence are incomplete. While the Law on Public Service establishes certain post-employment restrictions for public officials, these are not detailed enough and the establishment of limited blanket regulations for the entire public sector is unlikely to prove a successful approach.  The degree of the risks arising from revolving door vary in different parts of the public administration, suggesting that a differentiated approach may be preferable.

Our belief that Georgia’s current regulations are inadequate is borne out by evidence. There are multiple examples in Georgia of former government officials accumulating sizeable fortunes shortly after leaving the public service, while the companies owned or run by such individuals have been granted important concessions, preferences, or exclusive rights by the government. Former Defense Minister Davit Kezerashvili and his companies are a good example of this. There is also evidence that suggests that members of Parliament continue to be involved in their businesses after assuming their seats in Parliament and there are valid reasons to believe that they have used their capacity as MPs to gain advantage for their companies: The Georgian authorities failed to adequately investigate suspicious activities of the Centre Point construction company at the time when one of its owners served as Parliament deputy speaker. Ties with business have raised suspicion regarding the impartiality of some of the country’s regulators, including Irakli Chikovani, head of the Georgian National Communications Commission. After the October 2012 elections, Kakha Kaladze, who had co-owned a company operating in the energy sector, was appointed minister of energy and natural resources, while a number of individuals from companies owned by Prime Minister Bidzina Ivanishvili moved to high-level positions in the government.

While the individuals mentioned above were not necessarily involved in any wrongdoing, the lack of adequate oversight and transparency of their activities has raised suspicions and could undermine the public’s confidence in the government. It is therefore important to introduce adequate regulations for revolving door, in order to build public trust in the integrity of government officials.

Moving Forward

  1. In 2006 it was found that of the EU member states, 57% regulated the revolving law by law, 21% by ethical codes, 4% by both law and ethical code, and it was unregulated in 25% of states. The revolving door is thus an emerging area of concern within European countries and the OECD, while regulatory responses are relatively new and have yet to become standardized.
  1. The revolving door is also a growing problem in Georgia, as demonstrated by the examples discussed above.
  1. It is therefore important to start raising awareness about this issue within government, the media and society, and to start a public discussion of the subject with the ultimate aim of developing a sound policy for dealing with the revolving door.
  1. Few former Soviet or Eastern European countries currently regulate these practices satisfactorily. Moving to confront the issue by introducing specific regulations to counter the risks associated with the revolving door would be the first such attempt within the region, and would help establish Georgia as a leading force in the good governance reform in the region.

In the near future, TI Georgia will publish a more detailed report on revolving door that will include case studies of the problems that can arise from this phenomenon, as well as a review of regulatory best practices and recommendations.

Author: Transparency International Georgia