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Georgia: Experiment On Averting Corruption Among State Officials

Following the "Rose Revolution" that toppled President Eduard Shevardnadze, Georgia's new leadership made a solemn pledge to curb endemic corruption in state structures. In a highly disputed move, many former government officials were jailed on suspicion of financial misdeeds. Most of them were released without trial after agreeing to pay fines equal to or higher than the sums they had allegedly embezzled. No less controversial was Georgia's decision to supplement the salaries of its state officials with foreign donations and private money. The government says the initiative has proved a success, but critics argue it may be mere window-dressing.

Prague, 19 January 2005 (RFE/RL) -- The creation of Georgia's Development and Reform Fund was announced a year ago at the World Economic Forum in Davos, Switzerland.

The fund, which became operational in March 2004, aims at helping the government that took over from President Eduard Shevardnadze to reform state administrative bodies with a strong anticorruption focus.

The fund is managed by Konstantine (Kote) Kublashvili, a former deputy of President Mikheil Saakashvili when Saakashvili served as justice minister under Shevardnadze. Its activities are monitored by a supervisory board whose six members -- like Kublashvili -- were appointed by Saakashvili.

Among other things, Georgia's Development and Reform Fund has been supplementing the income of state officials and civil servants, including that of the president, the prime minister, and the speaker of parliament.

Kublashvili told RFE/RL that the purpose of those salary supplements is to dissuade civil servants from seeking illegal sources of income.

"When the new government and president decided to lure young people into the public administration, they were immediately confronted with a problem, namely that official monthly salaries of high-ranking state servants were, on average, 150 to 300 laris ($75 to $150). Such low salaries had been a major reason behind corruption in Georgia. A deal was therefore struck with several international donors and organizations, which agreed to meet the Georgian government's plea for help."

Under the deal, donors agreed on a lump sum to help the new Georgian leadership raise the salaries of all government officials over a three-year period, until depleted state coffers are replenished.

Kublashvili said all of Georgia's civil servants benefited from the fund last year.

"In 2004, the total sum allotted to all 120,000 civil servants amounted to $14 million. [That is to say that] nearly $1.4 million was allotted each month to [an average of] 12,000 people," Kublashvili said. "As for the president, from March 2004 on, he has been drawing an extra $1,500 a month from our fund."

Unofficial estimates put Saakashvili's base 2004 income at around $1,000 a month.

The fund's sponsors include the United Nations Development Program (UNDP), U.S. billionaire George Soros' Open Society Institute (OSI) and Sida (Styrelsen for Internationellt Utvecklingssamarbete), a Swedish government agency that fights poverty worldwide.

UNDP and OSI last year said they would contribute $1 million each. A Sida spokesman told RFE/RL the Stockholm-based agency allotted the equivalent of 1 million euros (8 million Swedish crowns) for the entire duration of the program.

Kublashvili said the remaining contributions come from various Georgian and foreign companies, charities, and individuals.

He also said that targeted budget revenues for 2005 will enable the government to scrap salary supplements not only for the president, the prime minister and the parliament speaker, but also for cabinet ministers and their deputies.
Donors agreed on a lump sum to help the new Georgian leadership raise the salaries of all government officials over a three-year period.

"As it was originally planned, the government in 2005 will assume responsibility for 35 percent of the salary [supplements] paid to civil servants," Kublashvili said. "That was a commitment made already last year when the government, counting on an improvement in the overall situation in Georgia, agreed that more and more salaries would gradually be drawn entirely from the state budget. Already this year, our top leaders will get nothing from our fund because the state can assume responsibility for their total salaries. As for other officials, they will continue to get salary supplements through our fund. But these supplements will represent only 65 percent of those that were allotted last year."

The Development and Reform Fund has sparked controversy in Georgia.

Former Parliament speaker Akaki Asatiani chairs the opposition Traditionalists party, a political grouping that has no seat in the current legislature. He criticizes the government fund as ineffective, saying state money is being spent on a number of high-profile projects while many low-level employees remain grossly underpaid.

"Soros' democratic convictions deserve respect and I am grateful to him for paying the salaries of scientists, or funding social programs in Georgia," Asatiani said. "But that an individual, even out of altruistic considerations, should pay the salaries of our ministers, that goes beyond all understanding. True, the state was able to raise the salaries of its top officials by downsizing the public administration and asking Soros [and others] to make up the difference. But with regard to those civil servants who are employed at lower echelons, the situation remains catastrophic."

Although the activities of the fund are governed by law, Asatiani told RFE/RL he is concerned about their alleged lack of transparency and fears the whole enterprise might achieve a result opposite to its stated objective.

"[This fund] was absolutely not necessary," Asatiani said. "All it does is open new opportunities to legalize state corruption. Who needed such a fund? This initiative was absolutely unjustified. We have a state budget with revenues and spending, and all we needed to do was to make it perfectly transparent."

The Tbilisi-based daily "24 Saati" ("24 Hours") yesterday speculated that the bulk of the fund's contributions may have come from Golden Fleece, a Cyprus-registered charity.

Asked by RFE/RL's Georgian Service to comment on this report, Kublashvili declined to elaborate on Golden Fleece's donations. But he said an investigation had shown there was "no dirty money" involved with the charity.

Kublashvili admited that higher salaries are not a panacea against financial misdeeds. Yet, he said he believes they could significantly contribute to curbing endemic corruption in Georgia.

History, however, offers some examples that appear to prove the opposite.

To cite just one, French scholar Jean-Claude Waquet in the early 1980s researched corruption in 17th-century Florence. He came to the conclusion that there was no causal relation between embezzlement and low salaries and that, in many cases, the salaries of corrupt officials were "far from negligible."

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