Transparency International Georgia has published a new report which examines the questions of transparency, accountability and prevention of corruption in Georgia’s state-owned enterprises.
The problem of corruption risks in state-owned enterprises is the subject of growing attention and interest among the organizations and researchers focusing on corruption and anti-corruption policy throughout the world.
Based on a review of the international experience and the current practice in Georgia, the report offers specific recommendations for the Georgian Government, designed to reduce corruption risks in the state-owned enterprises and improve the effectiveness of the government’s anti-corruption policy.
The following are the study’s main findings:
Georgian legislation on state-owned enterprises contains a number of shortcomings:
The legislation does not establish criteria for the establishment of a state-owned enterprise or legitimate goals of such enterprise.
There is no unified system of transparency and accountability of state-owned enterprises.
Legislation on conflict of interest and corruption (with some exceptions) does not apply to state-owned enterprises.
The legislation does not set transparent rules for the appointment and dismissal of directors and board members of state-owned enterprises, which is a significant flaw in terms of conflict of interest and corruption, as well as the prevention of political interference in the operation of these enterprises.
There is no clear methodology or efficient system for the allocation of the profits of state-owned enterprises.
The National Agency of State Property is unable to effectively coordinate the activities of state-owned enterprises.
The Analysis of the activities of five large state-owned enterprises selected for this report also revealed a number of problems:
The practice of disclosing information, either proactively or upon request, is unsatisfactory.
These enterprises do not have any internal mechanisms for preventing conflict of interest and corruption.
There is an obvious political influence on the management of these enterprises, evidenced by the appointment of persons with close ties to the government to management positions.
The study revealed a number of cases when family members of public officials were employed in state-owned enterprises.
The study also found that heads of state-owned enterprises have made donations to the ruling party.
The following recommendations were elaborated based on the above findings:
Anti-corruption mechanisms must be strengthened through the introduction of standards of transparency, accountability and integrity for state-owned enterprises, and adoption of relevant regulations:
The accountability mechanisms and management model for state-owned enterprises must be improved and Parliament must acquire greater oversight powers vis-à-vis these enterprises.
The principles of Georgian anti-corruption legislation must be fully extended to cover state-owned enterprises. This includes prevention of corruption and conflict of interest, appointments based on fair and transparent competition, and establishment of clear grounds for dismissals.
A code of ethics and mechanisms for whistleblower protection must be elaborated for state-owned enterprises based on international best practices.
Principles of disclosure of information, transparency and accountability must be introduced for all state-owned enterprises on the legislative level based on international best practices. State-owned enterprises must be obligated by law to proactively publish information and respond to freedom of information requests.
State-owned enterprises must develop remuneration-related, social and environmental policies and publish them on their websites.
A high standard of transparent, open and fair competition must be set by law for the selection of the heads of state-owned enterprises. Clear and transparent criteria for the selection of the heads and board members of state-owned enterprises must be established by law.
The practice of political interference in the activities of state-owned enterprises must be eliminated.
