10 minute read
15 Years in the Development Consulting: Delivering Progress and Transformation - Diplomat
Interview with Aleksi Aleksishvili, Chairman and CEO at Policy and Management Consulting Group (PMCG)
What is the history of PMCG and how was it founded?
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We founded PMCG by the end of 2007. We observed the situation in Georgia during that time and saw that international consulting companies were leaving the country following completion of the projects. We saw that the expertise and experience accumulated in successful or unsuccessful initiatives did not remain in Georgia, and people from Georgia who worked on these initiatives were being squandered. In this regard, we saw the need and wanted to institutionalize the process.
Accumulated experience of me and my colleagues was another reason to start consulting company. We were actively involved in the reforms that took place between 2004 and 2008 in Georgia. They were highly valued and recognized by most international organizations, thereby increasing our desire to share this experience.
Hence, it’s a story behind founding PMCG - a consulting company providing policy advising and management consulting, that contributes to the development of both public and private organizations. Our goal is to formulate the policy correctly on the one hand and to implement it properly on the other hand. Those are the two main directions that can be expanded into many different topics, such as infrastructure, public finance, monitoring, and evaluation.
All this has brought us together as an organization and we have been in the market for 15 years. We are always trying to sophisticate our services, gain more knowledge, deepen insights of our services and become even more competitive in the global market, not only in a specific area or region, but across the entire globe.
Where is your primary market, what are your most important sectors, and what services are you providing?
Since, we started our journey from Georgia, it is our main base.
It was impressive how the need for a system to handle the specific issues that we have in Georgia became even more evident there. As an example, the Soviet-style centralized economy, which had to be transformed in Georgia, was even more pronounced in Mozambique. Finally, we’ve realized that the knowledge accumulated here is relevant not only for this region, but also beyond its boundaries. So, we became actively involved in the Middle East region, we are currently implementing very interesting projects in Jordan.
From the very beginning, we have concentrated on two main directions: policy advising services related to economic policy. At first it was public finance management that is quite complex topic, as it comprises of various directions, such as tax and revenue topics, as well as the spending side. Our main aim was to provide advice in the area where we had the most expertise and experience.
Economic policy geared toward deregulation and formation of a free market economy was our second key direction. Bureaucratic systems that create fruitful ground for corruption, licenses, permits, and a variety of other forms of administration that served no purpose other than to slow down economic advancement was a challenge for most post-Soviet countries. Thus, one of the most important goals for us was to get rid of this legacy, escape from this system, in a thoughtful and consistent manner.
Starting with these directions, later we developed other services and refined the sectors according to the needs of our clients and partners, including advancing local governance systems and regional economic topics. Also, introduced projects’ monitoring and evaluation, which was necessary to form the proper project evaluation mechanisms at the company.
Since analytical work is the basis of our work, we use research tools very actively. About 5 years ago, we also began working in the infrastructure sector, social infrastructure, energy, transport, urban services, water systems, waste management systems, etc.
Rather than rely only on knowledge existing in Georgia, our goal is to attract as much international knowledge and experience as possible to create and accumulate experience here, which will benefit not just Georgia, but also many other countries. For example, education is one of the most important and necessary areas of further development.
What are some of the sustainable reforms that have been implemented through your involvement and recognized by the international community?
The fiscal reform, focused on public finance management is one of the most significant and important reforms for me. The specific, tangible results we have achieved are unique and still relevant.
Georgia’s revenue to Gross Domestic Product (GDP) was about 12 percent in 2003. The country’s liabilities and expenditures were so high that both its external debt and expenditures could not be covered. For years, it was a constant social and financial or political problem. Reducing and simplifying the tax system was the core objective of the reform that resulted to the increase of revenue to GDP and in 2007, it was already 26 percent.
This reform was one of the most important successes in Georgia. This case is considered interesting from the perspective of international experience. In most cases, the states are rarely able to reach a point where they can generate income while also using their income to advance further development, and at the same time to reduce pressure on business from the state.
As it turned out, the latter proved to be a pretty good example for the subsequent period as well; despite the change in government and the political environment, it appears fairly sustainable. In 2017, the government made the decision to go even further in this process, allowing companies not to tax retained earnings that gave businesses the opportunity to reinvest in their own operations. There is no doubt that this was a good decision, which is called the Estonian model by some in Georgia, (despite the fact that it does not exactly replicate that model). This reform strengthened business-friendly tax system.
Georgia experienced a change of government in 2012; how can you ensure that such changes do not undermine the sustainability of the reform?
Consulting companies work with governments but cannot make decisions on their behalf. We can help governments analyze decisions and implement them appropriately. There were cases when we did not share the government’s view, and we attempted to explain – why, but at the end of the day, it is the government that makes decisions, and therefore, is responsible for them.
In terms of sustainability of reforms, there were decisions that were consistent with the fundamental decisions made at time. For example, we needed a simple tax system, which was important, but quite difficult to introduce. That attitude hasn’t changed, and that’s a good thing, as well as that we need a favorable business environment to encourage investment and attract foreign investment.
In the beginning of our conversation, you mentioned transformation issues. The PMCG’s role is to contribute to the transformation of an inefficient post-Soviet system by creating a free environment, equal opportunity, etc. What are the current challenges in this regard?
The challenges differ from country to country, as the level of development is different. There is also something called “global development way,” but the level of institutional development and policy-making varies across different countries, even in post-Soviet states. The challenges that Georgia faces today go well beyond what we call the post-Soviet issues; we are now on a different stage of development, at which other issues became more relevant, such as how to make bigger breakthrough in the education sector, create a better environment. Also, how to ensure and provide high-tech systems in Georgia, create a favorable environment for attracting investments, etc.
It is clear that the processes we are facing today are typical of the countries in South-Eastern Europe. They face similar challenges: more integration into the global economy, integration into the EU, stronger state institutions, etc. These issues are obviously different for Central Asia, they have totally different priorities, Soviet legacy is even more evident in some of the states given the active government involvement in the economy, the presence of state-owned banks, inefficient institutions and etc. For example, the transformation of the country began a few years ago, the process is slow but quite successful in Uzbekistan. This, of course, takes time, as transformation is not just a process of technological development, it is also a process of mental change, and the latter requires time and the readiness of a critical mass of the population to receive this transformation.
What is your assessment of security challenges worldwide and regionally in light of the Russia-Ukraine conflict?
Ukraine is the same home base for PMCG as Georgia, and is actually one of the most important locations where we operate. I think this war is an important turning point not just for Ukraine, but also for the world. It affects global security issues. It clearly demonstrates that the current global security architecture represented here by the UN is not sufficient for maintaining security. The war has once again proved how the world was not prepared to deal with one big aggressor to restrain the aggression of a country.
My personal opinion is that the most important aspect is that this war cannot be won by the aggressor and that in the long run, it is impossible to be beneficial to Russia, as it will take several decades for socioeconomic conditions to return to what they were before. Another subsequent important outcome will be a need for a revision of global security systems.
In 2008, Georgia has passed the process that is underway in Ukraine. From global perspective the scale was smaller, but for Georgia it was quite substantial. What is happening in Ukraine did not start now, it started much earlier, and Georgia has experience specific results on its own.
As the ideological foundation for the development of Eastern European countries (including the Western Balkans and the Eastern European “trio” - Georgia, Moldova, Ukraine), the desire to establish European systems is of primary importance.
To achieve this goal, two topics are crucial: transformation of the economic policy and governance systems and the formation of more free space for promoting economic growth. And, another vital area is education and it’s effective and efficient reform. The combination of these two directions will make possible to further develop these countries.
