DHL, TNT, UPS and up to Forty other companies may leave the Georgian market due to adoption of new law on postal service - საერთაშორისო გამჭვირვალობა - საქართველო
GEO

DHL, TNT, UPS and up to Forty other companies may leave the Georgian market due to adoption of new law on postal service

25 July, 2014

The Ministry of Economy and Sustainable Development prepared the legislative bill on “Postal Union” which entails introducing economically unjustified regulations in the market segment.

Regarding the development of the bill, representatives of international companies (DHL and TNT) operating in the market segment and Transparency International Georgia met with Mr. Dimitri Kumsishvili, first deputy minister of Economy and Sustainable Development, and Ms. Natia Mikeladze on 16 April. The negotiations produced certain agreements regarding a set of issues. Despite the agreements, the Ministry of Economy and Sustainable Development did not reflect them in the revised version [link].

Regulations proposed by the law on "postal service" directly contradict the contemporary international best practice and obligations undertaken by Georgia under the Association Agreement with the EU. The proposed bill will have an adverse effect on a free, fair and competitive business environment in this segment of the market. Adopting the said regulations will create serious formal/bureaucratic barriers for DHL, TNT, UPS and up to forty other companies operating in the market. These companies will have to leave the Georgian market (such case occurred inTurkmenistan in 2005). The world renowned companies leaving the market will have a negative economic effect not only on this concrete area of the market, but also on the entire national economy.

The bill entails:

1. Monopolization of the market by Georgian Post

After adopting the law, Georgian Post will directly (without competition) receive the status of national operator and will be entitled to such privileges that it will be placed in a preferential position with other operators. Specifically, Georgian Post will hold a market monopoly for 5 years and other operators will be able to provide their services only under its “umbrella”.

2. Regulations which Contradict Free Market Economy Principles

After adopting the law, only Georgian Post will be allowed to exclusively receive/send/transport/deliver packages weighing less than 30 kilograms. This is not economically justified and is not consistent with the free market economy principles.

3. Neglecting International Best Practices

The draft law contradicts the international practice as well, where a full liberalization of the market in the field of postal union, encouraging free competition (EU Directive 2002/39/EC) and abolishing the area of “Postal Reserve Services” (EU Directive 2008/6/EC) is considered as a successful path for reforming this field. The draft law on “postal service” also contradicts the obligations undertaken under the EU-Georgia Association Agreement, which provides for the principles of liberalization of postal and courier service markets. It envisages a differentiation between the “universal postal service” and other types of markets and regulates them separately.

Recommendations:

  • We encourage the Ministry of Economy and Sustainable Development, before submitting the draft law on “postal service” to the Parliament, to:
  • Develop the new rule regulating the field of postal services, envisaged under the draft law on “postal service” in accordance with the Georgian legislation and the international best practices;
  • Determine universal postal service (the state obligation) as the only scope of regulation of the bill;
  • Retain liberal market principles, and amend the bill accordingly, in the market segment of the post and courier services which is not covered by the universal postal service;
  • Ensure transparency and objectivity in selecting the national operator carrying out the universal postal services (according to the bill - Georgian Post).
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