Issue 5, 2014. October-November

   

Government, Private Sector Working to Address Concerns Over Proposed Postal Law

The Georgian Ministry of Economy and Sustainable Affairs is working on a law that has raised fears the Georgian Postal Service will have amonopoly in the market, analysts and private shipping companies warn. The ministry, however, believes the new law will help liberalize the market and has been working on a new draft of the law to address concerns.

Heather Yundt


A draft bill designed to regulate Georgia's postal service could end up pushing up to 40 postal service companies out of the Georgian market, critics say.

The bill, currently in its second draft, would re-introduce state regulations on the postal market for the first time since 2005. The government maintains that those regulations would designate a national postal service operator as responsible for providing Georgia's universal postal service, a broadly defined concept that ensures a basic level of affordable postal service to every resident of Georgia.

What's more, certain postal services would be reserved exclusively for that national operator, including money orders, the handling of domestic parcels weighing up to 20 kilograms, and the handling of international parcels of up to 30 kilograms sent by land or sea — essentially granting the national operator a monopoly on almost all mail in Georgia. This would make Georgia the only country in the world to reserve services for a national postal operator to this extent.

While the government is still working on the draft of the law, together with the EU Commission and the European Express Association (EEA) in Brussels, the latest version available has caused concern in the business community.

One of the biggest concerns is the draft law's potential to create unnecessary barriers to the market.

AmCham Georgia, as well as Transparency International Georgia, Georgian banks and businesses involved in the postal sector, has been working with the government to try and ensure the new legislation does not reintroduce a postal monopoly.

AmCham Georgia President Sarah Williamson noted that any measures that reintroduce a monopoly would be "contradictory to the path of Georgia towards a free market economy with a fair and competitive business environment."

Initial versions of the draft included "overbroad and overreaching" definitions that have raised serious concern in the banking community, as well as with express courier services operating in Georgia, Williamson said.

Although there is no move to formally kick competitors of Georgian Post out of the market, Transparency International Georgia Senior Analyst Natia Kutivadze says the wording the ministry's draft law would force them to operate under the umbrella of the state-owned company, which would encourage them to leave the market and ultimately hurt Georgia's business environment.

"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," Transparency International Georgia said in a press release in July. The organization estimates there are about 40 companies providing postal services in Georgia.

Large postal companies and banks are also encouraging the government to further revise the draft postal law.

"If the postal law passes as it is now, it will be hard for DHL to continue operations in the country," said TamtaPapelashvili, a spokesperson for DHL in Georgia. She says DHL will do whatever is necessary to prevent the law from passing before the company's concerns are addressed.

The government appears to have heard the concerns.

The economy ministry has been in close communication with the EU Commission and the European Express Association (EEA), an organization representing the express industry in Europe, which had voiced concern regarding the re-monopolization of many aspects of the postal service.

Deputy Economy Minister NatiaMikeladze told Investor.ge that representatives from the ministry had a video conference with the EU Commission in early October to discuss "all the issues." She said clarifications have been made and amendments have been agreed to. The ministry has sent a draft law to Brussels and, once the government reaches an agreement with the EU, the final draft will be sent to parliament, Mikeladze said.

However she noted that under the government's vision for the law in its current format, companies will only have to undergo an authorization process simpler than that in European countries to be able to continue to provide postal services.

She calls the law necessary and says it serves the important function of ensuring the provision of universal mail services for all residents, as well as of protecting customers. She adds that the final decision on the national operator has not yet been made, despite wording in the draft that indicates otherwise.

"The long-term lack of regulation within the postal system created a false impression that the postal market is liberalized and the new law is nothing but a step backwards," she said in an email.

But market players have reason to be concerned: while Georgia agreed to liberalize its postal service within five years in accordance with this directive when it signed the much-anticipated European Union Association Agreement in June, it has a history of granting the postal service a monopoly.

In a similar case last year, the Ministry of Finance issued a directive adding regulations to the postal carrier market.

After receiving complaints from carrier companies saying that the regulations favored Georgian Post, Transparency International Georgia fought the case and won.

"We recognize that Georgia needs a postal law in general, but this postal law shouldn't be defined in a way to monopolize the market," Kutivadze said.

Now, the business community is requesting that the draft bill be revised in line with international standards of market liberalization and ensure transparency in selecting the national operator.

"We hope that the final draft legislation will accurately reflect the spirit of liberalizing access to trade in postal services in Georgia as per commitments undertaken in the Deep and Comprehensive Free Trade Agreement in a way that best supports Georgia's overall economic development," Williamson said.

Underscoring the ministry's cooperation on the issue, she expressed cautious optimism that the final draft will "best support Georgia's overall economic development."

Investor.ge note: The draft law is still under intense revision, with the economy ministry working closely with the EU Commission on changes. Investor.ge is committed to providing the latest information possible; for updates please check our webpage, www.investor.ge, and our facebook page: facebook.com/investorge.

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