Georgia's Actions to Became Integrated into the International Community: An Example of

Reflexive Practice

Ia Natsvlishvili,

Tbilisi State University

Tbilisi Georgia

Georgia’s Reforms-Positive Test

• institutional reforms of transitional countries and integration in to the international community have great importance because successful institutional reforms encourage investment flow.

• Successful institutional reforms in Georgia were based on the concept on the “Washington Consensus”.

• Remarkable actions were also made towards the integration into the European higher education area.

• Georgia’s actions to become integrated in the international community are a positive test of “Washington Consensus” and the“Bologna Process”.

“Washington Consensus”Market fundamentalism

• The “Washington Consensus” (1989 John Williamson) describes a set of ten specific economic policy prescriptions of reform for crisis-wracked developing countries.

• The concept was developed by Washington D.C based institutions such as the IMF, WB and the US Treasury Department

• Critics include George Soros, Nobel Laureate Joseph E. Stiglitz, some Latin American politicians and heterodox economists.

• "Stabilize, privatize, and liberalize" became the mantra of a generation of technocrats who cut their teeth in the developing world and of the political leaders they counseled.” (Dam Rodrik, professor at Harvard university; paper Goodbye Washington Consensus, Hello Washington confusion?,)

• Criticism of the WC has been associated with Socialism and with Anti-Globalizm.

• Following the 2009 G-20 London summit, British Prime Minister Gordon Brown declared "the old Washington Consensus is over".

WC Top Ten recommendations• Fiscal discipline; • Public spending redirection toward broad-based provision of key pro-

growth, pro-poor services like primary education, health care and infrastructure investments;

• Tax Reforms– broadening the tax base and adopting moderate marginal tax rates;

• Interest rates-that are market determined and positive (but moderate) in real terms;

• Competitive exchange rate; • Trade liberalization; • Liberalization of inward foreign direct investment; • Privatization of state enterprises; • Deregulation except for those justified on safety, environmental and

consumer protection grounds, and prudent oversight of financial institutions;

• Legal security for property rights.

Reflection of WC in Georgia’s reform history- reflect and act

• systematic economic reforms• strategic geopolitical location• stable macroeconomic environment• comfortable trading environment • effective tax reform • simplified procedure of licensing and business start

up• aggressive privatization policy• strong efforts to reduce corruption• adequate legal environment

Evidence of success

• World Bank - in 2008 according to speed of economic reforms Georgia moved from 118th place to 11th. By the evaluation of the experts of the same organization, no other country in the world executed so many reforms so fast in 2005-2008 as it did Georgia.

• . In the united researches of World Bank and EBRD "Business environment and industry" it is indicated that in 2004-2008 Georgia executed the greatest corruption decrease among developing countries. According to economic freedom, Georgia took the 21st place among 161 countries and 20th place among 41 European countries.

Evidence of Success • The World Bank and EBRD in their report state that among private

firms corruption decreased from 60% to 15%. According to the data of 2005-2008, the number of firms paying bribes for any reason decreased from 44 to 11%.

• Business freedom 78.9• Trading freedom 61.8• Fiscal freedom 94.2• Government freedom 91.3• Monetary freedom 77.9• Investments freedom 60 • Financial freedom 70• Property freedom 30• Corruption 23• Working force freedom 99.9

Crossroad Between Europe and Asia

• Georgia is located at the crossroad between Europe and Asia. Therefore its transport highways are the bridge, connecting important regions of the world. These are: Europe – 495 million, countries of Black Sea coast – 243 million, Turkey – 73 million, Caucasus region – 16 million people.

Reasons for Attractiveness

• Adequate institutional reforms and a free market oriented economic policy, stable and attractive macroeconomic environment, competitive trade regulations, a liberal tax code, an aggressive privatization policy, a modernized business licensing system, an adequate technical regulation system, a competitive and dynamic banking sector, diverse investments sectors;

• A strategic geographic location, a country of ancient culture and traditions, milestones in Georgia's transformation to a market economy;

• Despite the current global financial crisis and the Russian –Georgian War in 2008 Georgia remains attractive place for investments because of successfully implemented institutional reforms.

The biggest investors in Georgia for

2008 (in thousands of USD) • Source: Department of statistics of Georgia. Tbilisi 2009.

Direct foreign investments in Georgia. Millions of USD. Source: Statistical

department of Georgia. Tbilisi 2009.

Keys of Success: Reflecting and Acting according to the “Bologna Process”

• Integration process toward the European higher education area and international educational community;

• Establishment of European Credit Transfer System and three level degrees (undergraduate, graduate and doctoral);

• Modernization of curricula, support to the mobility of students and professors;

• Developments of field specific national standards according to the Western European experience.

• Georgia is in the process of successful implementation of the recommendations of an ambitious European Project - the “ Bologna Process”

Paper presented at the

Washington Academy of Sciences Conference

Washington D.C.; March 27-28, 2010