Issue 1, 2019. February-March

   

GOVERNMENT PLANS TO PRIVATIZE POSTAL SERVICE

Economy Minister Giorgi Kobulia announced the intention to privatize the postal service last year. Today, few details are available, and it is unclear when the privatization sale will take place or under what conditions.

Nino Bakradze


The Georgian Post is, reportedly, up for sale. It could have a new, private owner by the end of the year, according to Economy Minister Giorgi Kobulia.

"The new owner of Georgian Post will be responsible for universal service. I mean that letters should be delivered to any citizen of Georgia. We will organize a transparent auction. Participants [in the tender] should be qualified," he said when he announced plans for the sale late last year.

When and under what conditions it will be sold are still unknown, however.

Few other details are available. Both the Georgian Post and the Economy Ministry have declined to speak about the plans.

But local economists have expressed mixed feelings about the idea.

Improving Balance Sheets

The Georgian Post, which operates around the country with branches in nearly every town, traditionally loses money. But its balance sheet has improved in recent years. In 2017, it only lost 326,000 lari in 2017 (approximately $123,000), bringing in two million lari more than it earned the previous year.

In fact, the postal service has been earning more money every year since 2016.

The government has introduced a number of changes to help the postal service grow: while the Saakashvili administration considered privatizing it in 2010, it later started to invest in remodeling branches and promoting postal deliveries.

Over the past several years, the Georgian Post has introduced more services and has even sought to compete with international private delivery companies and re-mailers.

It is hoped that a privatization would provide much needed investment, and the introduction of outside expertise, to allow the postal service grow, improve its service and become a greater contributor to the economy.

Strategic Entity

Concerns about who will be eligible to buy the postal service once it goes on sale have grown since Kobulia announced the government's intention to privatize. Shota Gulbani, the head of the Association of Young Financiers and Businessmen, warns that it's risky to privatize strategic entities, particularly if a Russian company wants to buy it.

"Our non-friendly neighbor has huge financial resources and they could purchase our strategic entities without a problem. And then they could blackmail the government in different ways.

If the government wants to privatize some entity, it is better to keep the majority of its shares as state property and privatize only part of them. The state should have control over the post, the railway and hydropower plants in order to avoid any risky situations," he told Investor.ge.

Kobulia, however, has argued that the postal service would be more profitable and efficient after privatization.

MP Beka Natsvlishvili argues, however, that the Georgian Post was a profitable company even under state management.

"Why should we privatize state-owned properties, rather than simply manage them more efficiently? If certain managers are not good enough, let's change them instead of privatizing. Profitable state-owned companies provide income for the budget and their value is shared among the citizens of Georgia. After such entities are privatized, we will receive one more rich individual instead of a rich society," he said.

New Wave of Privatization

Georgian Post is just one of the state-owned entities reportedly up for privatization. Former Prime Minister Giorgi Kvirikashvili launched the privatization wave in 2015, as part of the government's strategy for dealing with the weak lari.

Over the past four years, the Georgian budget has received over 407 million lari from privatization deals, which included the sale of the Poti Free Industrial Zone, and several other entities. The National Agency of State Property currently manages 100 state-owned properties and plans to receive over 70 million lari in privatization sales this year.

Georgian media have reported that those entities include part of the railway, the Georgian Oil and Gas Corporation and the State Electricity System, but the Economy Ministry has not officially confirmed which state-owned companies are scheduled to be put on sale.