New World Bank Study: From Red to Gray

On Thursday, CRRC Georgia participated in the presentation of a new World Bank study on the impact of aging in the former Soviet Union. The authors of this study call this the "third transition", the one from From Red to Gray.


The particular challenge is that aging hits most transition countries while they still are poor (so-called "aging late reformers"). By contrast, many Western European countries age when they are fairly well off, and have fairly mature market institutions.


Yet, the authors argue, early action can make this a smooth transition. In particular, they advocate (and here we are quoting practically verbatim):

• increasing the labor supply (by raising the retirement age, creating more flexible work conditions, and improving health of older workers, as well as allowing migration)
• increasing productivity (investing into education and lifelong learning, completing the restructuring agenda/integrating with competitive markets)

Moreover, they argue that sensible pension systems and health financing can curtail costs to manageable levels. Illustrating this with a salient example, Mukesh Chawla, one of the lead authors, points out that the largest part of spending on health is in the last two years of life, so that an extension of life does not mean proportionally larger spending on health.

Generally, this looks like an exciting study (the website, to advertise it again, is excellent) and the authors, quoting Longfellow, have chosen a good pitch by suggesting that there is as much opportunity in aging as in youth itself. However, at the risk of sounding like a broken record, part of the problem is that early action requires a constructive, sophisticated debate around these issues and much needs to be done to generate the climate in which this debate can take place in the South Caucasus. So far these are niche issues, and we don't even have much data to describe generational change in the region (although we are currently funding one study on this topic) . These presentations seem like a happening at an oasis, when what we need is a much bigger eco-system.

CRRC Georgia did extract a couple of slides from our Data Initiative for our panel presentation. They show that generational change seems less pronounced in Azerbaijan than in the other countries. However, these are just a few snapshots. We're happy to make these available upon request (as well as the Red to Gray book, which we have at CRRC).

The Georgian Tax System in the Context of the European Neighborhood Policy (ENP)

Eurasia Foundation and the Heinrich Böll Stiftung are sponsoring three roundtables on Georgian compliance with the European Neighborhood Policy (ENP), the results of which will be disseminated to Georgian policymakers in the form of an action plan. The most recent roundtable surrounded the lagging updates to the Georgian tax scheme and the major problems plaguing the current system. As it stands currently, there is a 12% income tax and 20% social tax, but Saakashvili claims he will lower the combined tax to 25% in the upcoming year.

According to the roundtable participants, the Georgian tax code as it currently stands is fundamentally flawed and easily lends itself to abuse and manipulation. In the Western context, taxpayers enter into a contract with the government whereby their tax contributions are expected to bear fruit in the forms of social services and infrastructure upkeep. The taxpaying scheme should be a mutually beneficial endeavor. This vision, panel participants argued, has not yet fully arrived in Georgia. Taxpayers still distrust the state and often are unsure where these tax revenues go and tax-dodge by concealing their income streams. To their credit, the Ministry of Finance created a Revenue Office to control the process of tax code reform and the performance of the newly established tax department but their independence and capabilities are questionable.

A major concern of the EU is Georgia’s policy of double taxation. Extra taxes - above and beyond the normal tax percentage - are levied for cleaning up garbage and other miscellaneous governmental responsibilities. It is unclear to many citizens why these services aren’t covered by the initial tax.

Additional complaints center around surprise extrajudicial visits to “audit” private organizations and charge fees for “illegal actions” or fraud without disclosing the details of their investigation. When organizations or individuals appeal to the Revenue Office for clarification over the “investigation” or ambiguous rules, they often don’t get a clear answer. While the tax department is investigating, it will freeze the organizations’ bank accounts indefinitely, effectively paralyzing their operations for no discernable reason. To add insult to injury these organizations are then charged for the tax agencies’ time regardless of whether or not any fraud occurred. All of these behaviors are worsened by governmental intrusion on the tax paying process.

Roundtable participants felt that as long as the Ministry of Finance has the authority to interpret the tax code as they see fit, the human factor and susceptibility to corruption will perpetuate the current inadequacies of the system.

Roundtables Held in Armenia and Nagorno Karabakh on Possible Options for Conflict Resolution

The International Center for Human Development, sponsored by the British Embassy in Yerevan, coordinated a series of town hall meetings to provide a venue for participants to explore possible options for compromise in resolving the conflict over Nagorno Karabakh. There were two roundtables, one held in Armenia and held in Nagorno Karabakh.

Over four hundred people participated from four towns in the Armenian roundtable. The demographics were spread out relatively evenly between men and women and with people from the NGO sector, the public and private sectors, students, the cultural sector, military servants, war participants, pensioners, the education sector, the unemployed and an “other” category. There were smaller numbers of war participants and military servants represented (3% for both as opposed to an approximately 10% representation for the other categories).

For the Armenian roundtables, ICHD designated possible scenarios for the participants to choose from, presented as follows (verbatim):

Scenario I: Status quo
Scenario II: NKR a part of Azerbaijan
Scenario III: NKR: Independent or a part of Armenia
Scenario IV: The issue of status to be discussed in future
Scenario V: Procrastinated resolution- certain warrants
And lastly, “Against all.”

Scenario III appears a bit problematic given that it merges two distinct options (regardless of their respective likelihoods). It is also unclear as to what the difference is between “status quo” and “the issue of status to be discussed in the future,” which implies a status quo.

The data presentation for Armenia is somewhat confusing. While the average percentage for Scenario I (status quo) was about 29%, almost no participants chose Scenario IV (the issue of status to be discussed in the future). To be expected, no one felt that Nagorno Karabakh should become a part of Azerbaijan. The data indicated the following breakdowns (voting results split up by sector or gender were not provided): Scenario I 37%; Scenario II 0%; Scenario III 18%; Scenario IV 0.2%; Scenario V 25% and “Against all” 19%. The fact that 19% chose "against all" brings up the question as to what other scenario is realistically possible? Or is that that "against all" merely represents a deep ambivalence about the future. Your comments are welcome on this.

As for the Nagorno-Karabakh roundtables, unfortunately ICHD’s website did not post any of the data so the makeup of the participants and the outcomes are unknown. Approximately 300 people participated and the roundtables took place in three different towns around Nagorno Karabakh. Scenarios discussed included “Status Quo,” “NKR as an Independent State,” “NKR as Part of Armenia,” “The Issue of Status to be Discussed in the Future: NKR Under International Surveillance,” and “Procrastinated Resolution- Certain Warrants.” Hopefully ICHD will post this data as it would be both useful and interesting to compare the two roundtables’ outcomes.

Gender, Georgia and the “F” Word

Georgian women have a significant history of being politically active and engaged. In fact, more women than men died in the April 1989 massacre by Soviet forces in Tbilisi. During Georgia’s nationalist movement, and indeed through many of its transitions, issues of gender equality were viewed as peripheral, if not irrelevant. Tamar Sabedashvili, commissioned by the Heinrich Böll Foundation, took a retroactive look at Georgia’s democratic developments from 1991-2003 with an emphasis on the post-Rose Revolution period. She sought to explore how these transitions have affected women, if women have an increased presence in politics, or if a robust women’s movement has been spurred.

Much of Sabedashvili’s commentary is predictable. It is not shocking that Georgian women have not made large strides in representation in politics or increased wages and job opportunities. Georgia has de jure gender equality, which is convenient while on the books, but largely immaterial in practice. She articulates two major reasons for this stagnation, one being that women’s groups do not articulate their needs well, and a general lack of political will.

What was particularly interesting was Sabedashvili’s review of the actual wording in the Georgian Constitution, which is replete with institutionalized paternalism. Women are mentioned only twice in the Constitution, in the same class as minors, and contextualized by their roles as mothers and spouses. The Constitution confers responsibility on the state as guarantor of gender equality but the quality of legislation is sorely lacking, and legislation itself is not sufficient to uproot such deeply entrenched attitudes as on the competency of women in politics (a poll found that in general men were believed to be “better politicians” than women) and the traditionalist influence of the Church. The Constitution uses gender-neutral terminology such as “citizen,” “person,” and “individual,” as though it is unnecessary to differentiate citizens on the basis of sex; Sabedashvili reminds us that the “history of legal thought” regarded men as the subjects of law, so terminology should be changed to read “men and women” instead of just “persons.”

Georgian Constitutional Article 6, Paragraph 2 declares that international law – both treaty-based and customary- takes precedence over domestic normative acts. International law however needs first to be implemented in the form of domestic legislation. Georgia cannot complete its treaty obligations on gender equality without first implementing operational corresponding legislation- and then applying that legislation.

In exploring the problems associated with guaranteeing human rights, Sabedashvili referenced the “possession paradox,” the problem that arises when a person has the right to something without the corresponding right (and actual practice) to enforcement of said right.

Sabedashvili’s article brings up many interesting and varied questions on the relevance of Western feminist thought, cultural relativism, and gender equality in Georgia, which can be expanded to include many developing countries and the general international discourse. The influence of the Church in Georgia is immeasurable, and is a great contributing factor in conservative and paternalistic attitudes towards women in Georgia. The passage of October 2000’s UN Security Council Resolution 1325 on women, peace and security put a female representative in the Georgia’s Office of the State Minister for Conflict Resolution but women as of yet not been invited to the formal conflict resolution process.

One of the key propositions Sabedashvili gives is for Georgian women’s groups to identify roadblocks and create strategies to cooperate with each other and better influence policymakers. International development organizations can consult and disseminate aid until there is none left to give, but without an authentic grassroots movement and a targeted Georgian approach to these problems, their actions and roles in Georgian society will be limited.

Sabedashvili's paper can be found here.

Corruption in Education in Armenia

It is not a secret that corruption negatively affects virtually all aspects of political, economic and social life. A recent study conducted by Bagrat Harutyunyan within the framework of CRRC 2005 Fellowship program focused on the problem of corruption in the Armenian education system. The fellow used qualitative methods (expert interviews and focus groups) to gather data on perceptions of corruption and manifestations of corrupt behavior in schools and universities, as well as on the graduate level. The study aimed to identify the main reasons behind corrupt behavior in educational institutions, the structure of corrupt relations and to create a typology of students and lecturers. According to the study, degrees of corruption vary largely depending on universities and faculties within each academic institution.

Armenian male students more often than females prefer to resort to corruption. It is worrisome that only about 20% of focus group and interview participants recognized their behavior as corruption as such. Thus, often academic fraud, use of personal connections, misuse of public property or patronage were not considered a corrupt behavior by respondents. Interestingly, friends and relatives of students and faculty, who are not part of education system, are the main mediators of corruption in academic life.The final report and two scholarly articles in Armenian are available on CRRC-Armenia website here. You can also email CRRC-Armenia for more information.

Bagrat Harutyunyan went a step forward and used the data collected within CRRC Fellowship program to further his PhD thesis defense on the topic of corruption in modern Armenian society will take place on June 13 at 14:00 in the Yerevan State University building.

The World Economic Forum's Tourism Index in the South Caucasus

The Soviet Union was replete with traveler horror stories. So, more than a decade and a half down the road how have the countries of the Caucasus developed when it comes to tourism? The World Economic Form (WEF) has now developed the first comprehensive index to measure travel and tourism competitiveness. The WEF states that its index is not a "beauty contest" but concretely measures the attractiveness of developing a tourism industry in any given country. The scores are based on 15 variables grouped into three major categories -- regulatory framework, business environment and infrastructure, and human, cultural and natural resources. Each variable is ranked from 1-7. A country profile is also developed for each country to attractively display the data.

With a score of 4.13, Georgia ranks 66th in the world but number one in the CIS region -- though it is far outstripped by Estonia, which currently ranks 28th. Armenia and Azerbaijan follow closely on Georgian heels at 74th (3.93) and 75th (3.92) respectively. Tajikistan, not surprisingly, comes in last in the CIS region at 110th.

In the Caucasus, all countries do very well on the availability of human resources and none of the countries score particularly high on their natural and cultural resources (Armenia 78th, Georgia 81st, Azerbaijan 116th). Clearly, the authors of the report have not spent enough time in the region. Either that, or the indicators need to be adapted.

In the Georgia country profile (pdf), Georgia ranks low on all forms of infrastructure and somewhat better on the regulatory framework. Azerbaijan (pdf) does better on infrastructure, but worse on the regulatory framework, as expected. Armenia (pdf) splits the difference in the countries in terms of both infrastructure and regulatory framework issues.