The FINANCIAL - Management Weakness Elimination in the Georgian Transport Industry

Management Weakness Elimination in the Georgian Transport Industry

The FINANCIAL -- In Georgia, the transport and logistics industry does not in fact have a single person responsible for its entirety. There are a scarce number of independent institutions working on analytics to observe global and regional trends. But who makes the decisions not to carry out any reform, despite the development of creeping and downward trends over the years? Where is the strategy and vision from the transport and logistics policy development department? What do we want to do in the future? Having no responses to those questions, and being in a state of uncertainty, automatically leads the country and sector to reap negative results.

In order to highlight the Georgian transport industry’s challenges and make them more tangible, let’s draw a parallel to the organization of musical art, in order to see easier ways of eliminating management weaknesses.

To illustrate the nature of the problem, let’s look at the following example: A concert hall aims to have a high quality and harmonious musical sound that the audience will enjoy. The following components are therefore required for this: 1. Musicians; 2. Instruments; 3. Technical staff and a sound engineer. The sound engineer is responsible for providing listeners with a pleasant polyphony, and ensures that all the instruments and musicians’ voices are connected through a mixing board, after which the sound engineer performs synthesis and balance, depending on the timbre and function of voices, and significance of the instruments. The harmonious work of these components creates high quality music, which is pleasing to the ear and heart. But let’s propose a similar event where these components are acting separately, as is the case in the Georgian transport industry. In this example: the musicians are separate; instruments and technical personnel are separate; and a sound engineer does not exist. As a result, chaos would be created and the concert hall would lose its audience and listeners annually. Despite this, what if the hall’s management did not make any changes, and lost 50% of viewers over the years. Such inactivity would have a negative impact on the economy of the concert hall, staff, and audience.

A Chinese proverb says that “muddy water makes it easy to catch fish”. Perhaps certain individuals, in order to “warm their hands”, have orchestrated such chaos and ambiguity in the past. Over the years, a large number of fish have been caught by certain groups at the expense of society. That is why it is time for the Government to implement reforms and start thinking about needed changes, integrations, consolidation and development.

In order to be more specific, it is important to define the nature of the challenges in the transport industry of Georgia. In general, the transport industry is divided into 3 main components:

1. Infrastructure (roads, railways, ports, terminals, airports);
2. Vehicles (buses, cars, trains, aircraft, ships);
3. Management (finances, politics, forming legislative base, creation of systems, project planning and coordination);

Two components: infrastructure and vehicles - somehow exist in Georgia nowadays. But the main component that creates systems, regulates and coordinates these two components -management, is not well-formulated and established for the transport industry. The management itself should include planning, organizing, leading, and controlling. The Ministry of Economy has a department that should focus on the development of transport and logistics policy. There is a question on how the organization of the industry itself and the competencies of the departments’ staff can ensure efficiency.

Business can only successfully work on a smooth, strong, and trouble-free platform. Business cannot develop if the Government has not created a free area and systems in which to act. Therefore, it is important to pay attention to the third main component of the transport industry - Management, that is a problem in terms of the way ministries and departments are organized in Georgia. The Ministry of Infrastructure; Roads Department; Railway; Department of Transport and Logistics policy development, are separate units in a small country like Georgia, and have no complex planning for the implementation of projects. Because of this, it is likely that there are problems in coordination, communication, institutional planning, united vision and action, leading and controlling. The result is that Georgia does not have a person singularly responsible for the transport industry, with the ability to negotiate optimal solutions of mutual value in cooperation with the countries being part of corridors passing through Georgia. A person who would be able to negotiate with railways, ports, governments, terminals and ferry carriers to create a unified policy, that would create a barrier-free and smooth basis for business development. This would ultimately lead a trans-Caspian international transport route or belt and road corridors passing through Georgia, in comparison with our rival corridors, to become more effective and competitive.

Adam Smith in his magnum opus “The Wealth of Nations” argues that: “The ‘invisible hand’ works only if the government can contribute to the implementation of the laws of the market economy and the retention of institutions, which is one of the main reasons for the existence of the government. Intervention in economy should be based only on promoting efficiency and equality”.

To ensure the optimal solution of regional, international issues, and form an efficient vision and action plan - it is important to consolidate all components of the transport industry within the country. As for the elimination of barriers - the number of intermediary companies, personal interests, the abuse of administrative power, should be excluded. These actions would create a business-friendly environment, basis and impulse for development. Such a reform would automatically attract freight movement, increase trade and create wealth. The elimination of monopolies, duopolies or preferences for certain groups, and efficient distribution of wealth created by society, will make Georgian people rich and happy.

Jaba Tarimanashvili, Business Administration Doctoral Student, of Batumi Shota Rustaveli State University; Business Analyst and Director of Maritime services and Transportation company Trans Logistic.




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