Polish 'Miracle Worker' Faces Uphill Task

Friday, 22 September, 2000

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Mikhail Vignansky

Dubbed an "agent of American imperialism" by Georgia's political opposition, Leshek Baltserovich appears undaunted by the task of revitalising the nation's ailing economy.

On his first visit to Georgia last month, the former Polish premier and the architect of Poland's economic "shock therapy", was demonstratively upbeat. He stated that the former Soviet republic had already taken important steps towards essential reforms, adding that his team would start work in September and that he himself would visit on a quarterly basis.

"We have to support those who demonstrate decisiveness in their attitude to reform," Baltserovich told the Moscow newspaper, Vremya Novostei. He went on to say that he was confident the reforms which had been so successful in Poland would have the same impact in Georgia.

But Baltserovich's appointment has provoked very mixed reactions in Georgian political circles.

Former economics minister Vladimir Papava described the decision as "an insult to Georgian economists". Papava, one of the nation's top economic specialists, said the move had come too late and Shevardnadze would have done better to draw on one of the country's own specialists.

The head of the Georgian parliament's budget department, Roman Gotsiridze, said he was doubtful the new advisor could be effective. But Gotsiridze did welcome the fact that Baltserovich lacks established links in Georgia and is therefore untouched by the country's clannish political system - one factor opponents of the appointment have grudgingly praised.

Gotsiridze, a former economics minister, believes Georgia is in a very different situation to Poland at the time of Baltserovich's "shock therapy". He argues Georgia has already introduced privatisation, relaxation of price controls and decentralisation of the state-managed economy. The problem is not who is appointed advisor, but whether their recommendations are implemented, Gotsiridze said.

Shevardnadze recently announced Georgia was in line for a further $100 million long-term credit, provided the authorities can demonstrate improved tax revenues and effective anti-corruption measures. The president said this foreign cash injection would finally put an end to the country's current crisis.

But, Shevardnadze added, highly qualified specialists were needed as advisors at this crucial stage. Georgian state minister Georgy Arsenishvili said the World Bank had acted as an intermediary in securing Baltserovich for the job. According to Shevardnadze, the US administration is to pay for Baltserovich's services.

On September 20, Shevardnadze presented his National Anti-Corruption Programme, a raft of emergency measures designed to legitimise parts of Georgia's vast shadow economy.

According to the Georgian trade and industry minister, Ivane Chkhartishvili, the "black" economy accounts for almost 50 per cent of Georgia's gross national product. Quoting experts from the World Bank, he said tax revenue in 1999 should have generated 1.7 billion lari. In fact only 667 million lari could be collected with the rest disappearing into the shadow economy.

Chkhartishvili said research suggested every entrepreneur in Georgia pays an average of 233 lari per month in bribes to the authorities, which amounts to over 10 million lari per month for the country as a whole. The situation is hard to control as only 31 per cent of Georgian businesses use banks. Corruption accounts for around 9 per cent of turnover, half of an average company's profits.

The International Monetary Fund, next due to visit in October, has said it will only continue to work in the region if serious measures are taken to counter corruption. The World Bank has taken a similar line.

Shevardnadze's programme aims to reduce the scale of the black economy in stages beginning in October with a series of legislative and institutional reforms. The bulk of the programme should be put in place during the second stage in 2001-2002.

The interruption to foreign financial support forced parliament to amend the year 2000 state budget in July. Revenue was recalculated downwards by 188 million lari and spending cut by 318 million lari. Meanwhile the country is in an ever-deepening economic crisis, exacerbated by a serious drought in the southern Caucasus.

Nevertheless, Baltserovich's appointment has consolidated the Georgian opposition. Chairman of the Georgian Labour Party Shalva Natelashvili said the former Polish prime minister would only ruin his reputation as a reformer by coming to Georgia. During the last 30 years, Natelashvili claimed, Shevardnadze had created a financial and Mafia-style oligarchy, which Baltserovich "couldn't imagine in his worst nightmares".

If Shevardnadze's ministers decide they don't want real change, "they can, if necessary, rub anyone in the dirt, even the most authoritative reformer," Natelashvili added.

Vakhtan Goguadze, former parliamentary speaker and a leader of the leftist People's Patriotic Union of Georgia, claims Baltserovich is "an agent of American imperialism". If the president is successful in appointing Baltserovich, Goguadze said, "it will be another page of shame in the country's history".

Meanwhile, former Georgian prime minister Tengiz Sigua believes the lack of political will within the executive and the legislature to force through the necessary reforms dooms Baltserovich's "shock therapy" in Georgia to failure.

Mikhail Vignansky, the editor-in-chief of the Georgian Prime-Plus news agency and correspondent for the Russian newspaper Sevodnya in Georgia.