The FINANCIAL — It is predicted that new groups will enter Georgia’s oil and pharmacy markets in the first half of 2013.
The FINANCIAL — It is predicted that new groups will enter Georgia’s oil and pharmacy markets in the first half of 2013. While most of Georgian society remains sceptical that anything will really change in regard to the monopolies in these sectors, Revenue Service officials confirmed to The FINANCIAL that there is a clear, growing tendency of new groups trying to register products with Georgian customs.
According to a survey conducted by The FINANCIAL three months ago, the oil and pharmacy sectors are the least competitive markets in Georgia because of the large companies that are controlling the situations on the markets and all acting in similar ways to each other. Telasi, Energo Pro, Georgian Lottery Company, Tbilisi Minibus and Georgian Gas Company are examples of other large monopolies in Georgia.
“A more competitive environment is gradually appearing in Georgia,” said Demur Giorkhelidze, Analyst at Georgian Dream. “These new groups can’t just appear on the market overnight, but changes will be evident by the second half of 2013. Various processes have already begun and we now just need strict regulations at customs.”
The Revenue Service declined to give any additional information about these groups for the time being.
According to The Union of Oil Products Importers, new groups are not only trying to enter the market, but are already importing oil products in Georgia.
“Several new imports have already appeared by non-brand companies from European countries via the Black Sea,” said Vano Mtvralashvili, Chairman of The Union of Oil Products Importers. “Nowadays non-brand groups and filling stations together make up about 5 percent of the entire market and this number could increase further. There is still space in the market for them to develop and grow but this will totally depend on the buying activity of consumers. Small and non-brand companies can sell fuel for better prices for several subjective reasons. As a result they have the ability to compete with the biggest companies.”
“Several international oil brands are trying to enter the market as well. Some companies which used to be present in Georgia but had stopped operating are also trying to restart business here. That being said however, there are no concrete signs yet. We will have to wait for those for a while still,” he added.
In contrast, some economic experts think that the situation is worsening instead of improving. “All the present monopolies on the market are being maintained. In addition to them, the new government intends to create new ones, these will be in the agriculture, healthcare and transit sectors,” said Paata Sheshelidze, economic expert and President at New Economic School – Georgia.
In response to the claim that nothing is changing for the better, Giorkhelidze says that three months is a very short period of time to see any real changes in. “We need to act according to administrative rules. Deprivation of property is not an adequate method for fixing the situation. We need to create a strictly competitive environment and then everything will resolve itself in a short period of time.”
The majority of experts as well as society as a whole still hope that the situation will improve soon. The main reason for this is the Prime Minister’s official announcement about monopolies. Some companies which were known for being lobbied in the past are already losing their previously-leading positions on the market and the investigation service of the Ministry of Finance is already looking into their activities.
“I doubt that the companies which are currently participating in cartel collusion will be able to deal with real competition. It doesn’t matter which companies provide Georgians with products in the end though. The main thing is just for us to have as many companies as possible on the market. The companies which are the leaders now will then either disappear entirely or become ordinary players on the market. This will result in lower prices along with higher quality of products and services,” Giorkhelidze noted.
Transparency International – Georgia is cooperating with the Georgian Parliament with the aim to create a competitive environment in the country. Their recommendation is to create an independent Agency of Competition, which will be allowed to start an independent investigation of any sector in the event that signs of limited competition are observed.
“Nowadays we have exceptions to the legislation which are not corresponding with EU standards,” said Natia Kutivadze, Ph.D. in Economics and Analyst at Transparency International Georgia, author of special report ‘Competition Policy in Georgia’. “Improving these omissions is essential for the completion of negotiations on Deep and Comprehensive Free Trade Area (DCFTA) between Georgia and the EU.”
“Ivanishvili urged businesses to decrease prices,” said Irakli Lekvinadze, Managing Partner at Georgian Business and Political Insight. “Simultaneously he intends to create a strong antimonopoly service which is to start operating in March. But this organ must be a completely objective service and not a structure that is against any business. Initial signs of improvement have been observed in the oil, pharmacy and sugar markets. Further results will be seen after the antimonopoly service starts operating.”
As a result of Ivanishvili’s call to cut prices, oil and pharmacy companies have already reduced them, but there have been no significant changes till now. In the meantime Georgian society is still waiting for there to be a truly competitive market in the country.
