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How Much Regulation Does a Country Need?

From the ISET Economist news (http://www.iset.ge/news/?p=3871)

By Eric Livny

Democracy and Freedom Watch reported October 9, that “Georgia’s controversial new immigration law may be changed”. The law, writes DFW, “has caused a wave of confusion and irritation in the country’s expat community. Prime Minister Irakli Gharibashvili … told journalists that if any defects become apparent after the enactment of the new law, ‘we’ll surely correct it.’”

Just a month earlier, confusion, irritation and public outrage were caused by another piece of Georgian legislation – a law greatly limiting the sales of non-prescription drugs (see Florian Biermann’s post). The outrage was caused by the fact that many of the drugs affected by the new law, e.g. plain painkillers, were in extremely wide use. As a result, less than two weeks after coming into force on September 11, the law was amended by the health minister, Davit Sergeenko, allowing 772 medicines to be sold over the counter, without a prescription.

One could perhaps say, as the Germans do, ende gut, alles gut. But, alles is nicht gut. The fact that such REALLY BIG MISTAKES are allowed to occur in the first place suggests that something is deeply flawed in the Georgian policymaking machine. One obvious concern is the lack of due “public policy” process. Indeed, there was nothing particularly urgent about either piece of legislation; both could have benefited from a proper technical review, “stakeholder consultations” and a public debate.

Second, and very importantly, these grand failures suggest that Georgian lawmakers lack a proper understanding as to the role of regulation in an economy, and how much of it a country like Georgia needs (or can afford).

THE BENEFITS OF PROCRASTINATION AND DEBATE

Any discussion of regulations can easily get politicized, sparking seemingly futile and lengthy political exchanges. Left-wing intellectuals would argue that regulations are there to address market failures (such as drug addiction and overconsumption of antibiotics) or protect the weak and vulnerable (e.g. by securing their jobs and providing income support). The libertarians among us would argue that the market can correct itself, and that, in any case, state paternalism is not a solution to any problem. Rather, it creates unnecessary red tape and leads to unintended consequences such as laziness, corruption, illicit economic activities (“black market”) and smuggling. State failures, according to the enlightened libertarian view, are as much of a problem as market failures.

Such a clash of ideas is quite legitimate, and – if conducted in a civil and constructive manner – should be welcome in any community and polity. For one thing, it would provide legislators with a better understanding of the “problem” they are trying to solve (if there is a problem), such as:

the incidence of antibiotic resistance among Georgians;

immigrants competing with (or creating jobs for) low-skilled Georgian workers;

the extent of land grabbing (as well as investment and job creation) by Punjabi farmers.

Ultimately, whether liberal immigration regime (or free access to medications) is to be recognized as a “problem” is about politics rather than science. Still, having some evidence to consider before rushing with regulatory “solutions” would be a good step forward. It may well be the case that, while generating “killer” headlines, a “problem” is ridiculously small in magnitude or does not even exist.

Secondly, when faced with the need to publicly defend their proposals, proponents of regulations would be forced to analyze alternative solutions while taking into account the cost factor, effectiveness in terms of actually solving the problem at hand, related corruption risks, and other types of collateral damage.

DON’T BITE OFF MORE THAN YOU CAN CHEW!

But perhaps the most ideology-free criterion of evaluating the feasibility of regulations is whether a country has the requisite human capacities and skills. Even a relatively simple regulation, such as traffic lights, may be counterproductive if not properly planned and executed. First, there is the basic question of how to regulate a given intersection (traffic lights are effective only when traffic intensity exceeds a certain threshold level, which is almost never reached at night). Second, traffic lights have to be properly timed to maximize intersection capacity and minimize delays). Poorly planned traffic lights – hello, Tbilisi! – are not only a drag on traffic but also a safety hazard.

What is true about traffic, is equally true for extremely complex regulations such as anti-trust, labor, and food safety, which Georgia has subscribed to as part of the Association Agreement with the EU. For instance, it will take years – maybe even generations – to build the necessary professional capacities within the Georgian parliament and judiciary, the competition watchdog, the economics, legal and management professions in order to implement Swedish-style anti-trust law in the Georgian context. Thankfully, for now Georgia is paying lip service to some its EU-related commitments (e.g. by creating a competition agency and copy-pasting anti-trust legislation without caring to enforce it).

The botched attempts to rewrite immigration and pharmaceuticals laws suggest that professional skills are in extremely scarce supply throughout Georgia’s bureaucracy. After all, the Georgian state is one of the youngest in the world; Georgia’s educated urban elite is a tiny sliver of the population; and even this sliver has been impoverished by many years of brain drain and outmigration. In this situation, the Georgian state should not attempt to bite off more than it can chew. It should avoid complex regulations, even when these are theoretically desirable or required by its international partners. It should certainly avoid thoughtlessly copy-pasting regulations that have been designed for other times and other places.

* * *

A short story by Leo Tolstoy titled “How much land does a man need” describes the fate of a land-hungry Russian peasant, Pakhom, who is promised as much land as he can walk around from sunrise till sunset. One condition is attached: he has to make a full circle and return to the point origin by the end of the day. To maximize his future land holdings, Pakhom sets on a rather ambitious circular route, and is too late to realize that he cannot make it back on time. He runs as fast as he can and, exhausted from the effort, drops dead at the point of origin. His servant buries him in a grave only two meters long, thus ironically answering the question posed in the title.

OTHER NEWS
29/10/2021
J is for Jara

Jara took an honorable place in the Tourism Alphabet of Ajara, a new campaign implemented by the Department of Tourism and Resorts of Ajara AR. The idea is to link all 33 letters of the Georgian alphabet with attractions, locations, food, and activities worth visiting during the whole year. Jara was selected for the letter J.

Letter J will take tourists to Medzibna Village, Keda, where tourists will feel immersed with Jara hives hidden in nature.

'Jara honey is a unique product, it adds cultural value to our region, so it should be a well-packaged tourism product. So far, nothing has been done by the Department of Tourism to promote Jara, travel agencies and guides do not know much about the product, so linking J with Jara will be the first step toward to Jara promotion and awareness raise from our side' -Tinatin Zoidze, chairwoman of the Department of Tourism and Resorts of Ajara.

To boost the promotion, the Department of Tourism and Resorts of Ajara also developed a short video about Jara that will be advertised through their Facebook pageVisit Batumi, tourism information centers and media channels.

05/10/2021
Bulk, Brand and Niche - Georgian Honey Export Begins to Flow

Rebounding in spite of the pandemic, export markets for Georgian honey are beginning to flow and the volume of honey is growing rapidly. In the first eight months of 2021, 117 tonnes of honey were exported to eleven countries; France, Bulgaria, USA, Canada, Hong Kong, Japan, Kazakhstan, Azerbaijan, UAE, Qatar, and Saudi Arabia. Five times more than the  21.7 tonnes of honey, exported to six countries in 2020.

A major recent development has been the establishment of a contract for wholesale bulk honey between Api Geo Ltd in Samtredia and Naturalim France Miel a large honey company in France. In September, forty-three tonnes of honey was shipped to France. A second order is now being prepared for shipment. Strict testing in France and Germany and a new factory and equipment capable of homogenizing 20t of honey at a time mean that the company is the first in Georgia to able to reliably service such a market.

This is just a start; we hope to export at least 100 tonnes of Georgian honey to France this year. We want to supply from smaller-scale beekeepers which will help them with selling their honey, which has been a problem for years in Georgia.’ - Gia Ioseliani, Founder of Api Geo Ltd.

September was also a fortunate month for Kakhetian Traditional Winemaking (KTW) producers of the Nena Honey brand which includes the first Bio-certified Jara honey in Georgia.  The company has just shipped a second large order of six types of Nena honey to Hong Kong, including chestnut, blossom, alpine, linden, Jara and honey with nuts including Bio Jara honey. Nena Bio Jara honey is also on its way to Doha, Qatar. Overall, since January 2021, the company has increased the volume of honey exported by 110%, compared to 2020, to markets in Canada, USA, Hong Kong, Japan, Azerbaijan and Qatar. 

Bio certification of Jara honey in Ajara is receiving considerable governmental backing.

We are proud that export markets for bio-certified Jara honey are growing and now it is being exported to countries like Japan, the USA, and Canada. We started to support Bio-certification of the Jara Beekeepers Association in 2021 to continue to supply diverse export markets for such a flagship product.’ - Giorgi Surmanidze, Minister of Agriculture of Ajara.  

The Jara Beekeepers Association is consolidating its entry into the Japanese market in partnership with MF Company Ltd. In September they exported honey to be shown at an exhibition in Tokyo in October, after which the next order will be placed.

Japanese consumers are loving Jara honey, some of them told us that it helps them with stomach problems. We believe that this exhibition in Tokyo will open up new opportunities for the Jara Beekeepers Association.’ - William Pratt, Co-founder of MF Company Ltd.  

24/08/2021
Fourth Georgian Milk Mark (GMM) Dairy Exports to the USA

Dairy Enterprise Leanka Ltd from Kakheti region sent 837 kg different types of cheese (Sulguni, Smoked Sulguni, Georgian cheese) via the exporter company Geoproduct Ltd for sale in New York and Philadelphia, USA. The dairy is a member of the Georgian Milk Mark the quality assurance label for Georgian natural milk and its products bare the GMM. The company expects further increased orders in the near future.


12/07/2021
Jara Teaching Ready to Go

Eleven Vet colleges with beekeeping programmes have already received Jara equipment from the Georgian Beekeepers Union (GBU) and Jara Beekeepers Association (JBA). These eleven colleges are ready to integrate the Jara materials into their beekeeping programmes some from September this year and others in the spring semester next year.  The Deputy Minister of Education of Georgia, the Minister of Education of Ajara, and the Mayor of Keda visited the Keda VET College and expressed their support to Jara teaching.

‘We received the package of equipment for Jara teaching. The beekeeper students, enrolled last year, are looking forward to getting lessons related to Jara producing; officially, we are starting teaching from a new semester’ – Ilia Kharazishvili, the head of the beekeeping programme at Kachreti College.

The handover of Jara equipment is a follow-up activity of the Training of Trainers in Jara Honey Production for VET Colleges, which was held on May 18th-19th  hosted by the Georgian Beekeepers Union (GBU) and the Jara Beekeepers Association (JBA) in Keda, Medzibna Village. The National Center for Educational Quality Enhancement and sectoral skills organization Agro Duo are supporting the GBU and JBA with Jara teaching integration in the VET colleges.

We started cooperating with the Georgian Beekeepers Union and Jara Beekeepers Association for integrating Jara into our beekeeping programme, however, we are going to involve them in updating the whole beekeeping programme. We need their consultancy to share with us all standards to improve the programme’ - Bela Avalishvili, the head of Opizari VET College in Akhaltsikhe.

These colleges are  VET College at Batumi Shota Rustaveli State University; Black Sea Keda VET College; Black Sea Shuakhevi VET College; VET College Opizari in Akhaltsikhe; VET College Gantiadi in Gori; VET College Aisi in Kachreti; Training Center Farmers' House in Sagarejo, a brunch of Public College Aisi; VET college Iberia in Bagdati; VET College at Shota Meskhia Zugdidi State Teaching University; VET College at Georgian Technical University - Didi Jikhaishi in Imereti; and VET College Horizonti in Guria. 

Last year Akhali Talga VET College in Kobuleti and Khulo integrated the Jara materials into their one-year beekeeping programme, which is attended by twenty-eight beekeeper students. The GBU and JBA also delivered the Jara equipment to these colleges in 2020.

09/07/2021
Georgian Milk Day

On Friday, July 9th, from 10 am until 2 pm, the Business Institute of Georgia (BIG) who manages the Georgian Milk Mark, and the Georgian Milk Federation held a Georgian Milk Day. 

The Georgian Milk Mark which started in 2019 now has twenty one dairies currently using the mark. This B2B (Business to Business) event was to bring together the twenty one dairies who presented their products for show and tasting with invited hospitality and retail sector guests. COVID-19 has taken a toll on both sectors and it is hoped that bringing them together will be advantage to them both, in terms of sales for the dairies and supplying quality Georgian products for the HoReCa and retail sectors.

The Minister of Environmental Protection and Agriculture of Georgia, the Head of the Agrarian Committee of the Parliament, First Deputy Head of Environmental Protection and Natural Resources Committee of the Parliament gave a speech at the opening of the event. The National Food Agency, the State Laboratory of Agriculture, the Rural Development Agency and the Georgian National Tourism Administration participated in the event.  From June 1st 2021 a new regulation requires HoReCa sector actors to become HACCP certified. The NFA had an information desk at the event to answer questions and provide information.Everyone visited the GMM dairies and viewed and tasted their products.

 The event was supported by Alliances Caucasus Programme (ALCP) which is co-financed by the Swiss Agency for Development and Cooperation (SDC) and the Austrian Development Cooperation (ADA) implemented by Mercy Corps Georgia.

Here you can see photos of the event Gallery .

You can see here media reports:

https://bm.ge;

https://www.interpressnews.ge;

https://www.palitranews.ge;

https://mepa.gov.ge;

MEPAGeorgia

https://formula.ge

Businesspartner

07/07/2021
Georgian Honey Export Expands

Georgian Honey under Nena brand has successfully entered the Hong Kong market with a repeat order received soon after the first one. Hong Kong is the new market for Nena honey following USA, Canada, Japan and UAE.

LATEST NEWS
J is for Jara
29/10/2021
Jara took an honorable place in the Tourism Alphabet of Ajara, a new campaign implemented by the Department of Tourism and Resorts of Ajara AR. The idea is to link all 33 letters of the Georgian alphabet with attractions, locations, food, and activities worth visiting during the whole year. Jara was selected for the letter J. Letter J will take tourists to Medzibna Village, Keda, where tourists will feel immersed with Jara hives hidden in nature. 'Jara honey is a unique product, it adds cultural value to our region, so it should be a well-packaged tourism product. So far, nothing has been done by the Department of Tourism to promote Jara, travel agencies and guides do not know much about the product, so linking J with Jara will be the first step toward to Jara promotion and awareness raise from our side' -Tinatin Zoidze, chairwoman of the Department of Tourism and Resorts of Ajara. To boost the promotion, the Department of Tourism and Resorts of Ajara also developed a short video about Jara that will be advertised through their Facebook pageVisit Batumi, tourism information centers and media channels.
Bulk, Brand and Niche - Georgian Honey Export Begins to Flow
05/10/2021
Rebounding in spite of the pandemic, export markets for Georgian honey are beginning to flow and the volume of honey is growing rapidly. In the first eight months of 2021, 117 tonnes of honey were exported to eleven countries; France, Bulgaria, USA, Canada, Hong Kong, Japan, Kazakhstan, Azerbaijan, UAE, Qatar, and Saudi Arabia. Five times more than the  21.7 tonnes of honey, exported to six countries in 2020. A major recent development has been the establishment of a contract for wholesale bulk honey between Api Geo Ltd in Samtredia and Naturalim France Miel a large honey company in France. In September, forty-three tonnes of honey was shipped to France. A second order is now being prepared for shipment. Strict testing in France and Germany and a new factory and equipment capable of homogenizing 20t of honey at a time mean that the company is the first in Georgia to able to reliably service such a market. ‘This is just a start; we hope to export at least 100 tonnes of Georgian honey to France this year. We want to supply from smaller-scale beekeepers which will help them with selling their honey, which has been a problem for years in Georgia.’ - Gia Ioseliani, Founder of Api Geo Ltd. September was also a fortunate month for Kakhetian Traditional Winemaking (KTW) producers of the Nena Honey brand which includes the first Bio-certified Jara honey in Georgia.  The company has just shipped a second large order of six types of Nena honey to Hong Kong, including chestnut, blossom, alpine, linden, Jara and honey with nuts including Bio Jara honey. Nena Bio Jara honey is also on its way to Doha, Qatar. Overall, since January 2021, the company has increased the volume of honey exported by 110%, compared to 2020, to markets in Canada, USA, Hong Kong, Japan, Azerbaijan and Qatar.  Bio certification of Jara honey in Ajara is receiving considerable governmental backing. ‘We are proud that export markets for bio-certified Jara honey are growing and now it is being exported to countries like Japan, the USA, and Canada. We started to support Bio-certification of the Jara Beekeepers Association in 2021 to continue to supply diverse export markets for such a flagship product.’ - Giorgi Surmanidze, Minister of Agriculture of Ajara.   The Jara Beekeepers Association is consolidating its entry into the Japanese market in partnership with MF Company Ltd. In September they exported honey to be shown at an exhibition in Tokyo in October, after which the next order will be placed. ‘Japanese consumers are loving Jara honey, some of them told us that it helps them with stomach problems. We believe that this exhibition in Tokyo will open up new opportunities for the Jara Beekeepers Association.’ - William Pratt, Co-founder of MF Company Ltd.  
Fourth Georgian Milk Mark (GMM) Dairy Exports to the USA
24/08/2021
Dairy Enterprise Leanka Ltd from Kakheti region sent 837 kg different types of cheese (Sulguni, Smoked Sulguni, Georgian cheese) via the exporter company Geoproduct Ltd for sale in New York and Philadelphia, USA. The dairy is a member of the Georgian Milk Mark the quality assurance label for Georgian natural milk and its products bare the GMM. The company expects further increased orders in the near future.
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