Profit at all costs: Irish and Spanish multinationals flout international standards in Georgia

ICFTU online, 128/280602/SV-J, 28 June 2002

Brussels, 28 June, 2002 (on-line): With output in the Georgian energy sector in rapid decline due to government corruption and incompetence, wage arrears of 10—15 months have accumulated and the situation for many workers is desperate. In reaction, between 26th to 29th June 2002 the International Confederation of Free Trade Unions (ICFTU) and its affiliate, the Georgian Trade Union Amalgamation (GTUA) are running a campaign culminating in mass demonstrations in front of the National Commission for Energy Regulation and the headquarters of the administration of the “Georgian Energy Market”.

Backed by calls for liberalisation from the International Financial Institutions, the Georgian government has auctioned off swathes of the energy sector to foreign multinational enterprises with scant regard to effects on workers.

In January 2002, the Spanish company “Iberdrola” was granted the right to manage the energy sector in Georgia for five years, and since then wage arrears have grown from 28 to over 30 million Lari (1$ = 2,2 Lari). Despite turning over a profit of 906 Million Euros in 2001, Iberdrola is leaving workers on the verge of starvation in Georgia. Profit has once again come before people.

In another case, in clear breach of the collective agreements in the two companies, the tender to manage the branch of the energy sector that controls “Electrotransfer” and “Electrodispatching” was won by the Irish company, ESB International. The collective agreements in these companies recognized the right of the trade union to be involved in decisions regarding restructuring and mass dismissals.

Yet, the company administrations did not inform the trade union of its negotiations with ESB International and the relevant government institutions and the result of these negotiations was that ESB won the tender. More importantly, an agreement was reached between the administration of “Electrotransfer” and “Electrodispatching” on a restructuring programme, i.e on merging of these companies and mass dismissals. The trade union was informed of this restructuring programme simultaneously with the news regarding the transfer of management, basically post factum.

As such, ESB international is in clear breach of the OECD guidelines which apply to all multinationals which have their headquaters based in OECD countries.

In addition, the National Commission for Energy Regulation has forbidden its own workers to set up a union, claiming that a Georgian law on “Electro energy and natural gas” forbids the formation of trade unions within its structures.

“Of all CIS countries, Georgia has the sad honour to be in the first place regarding wage arrears. Most of the concerned workers make no more than the minimum wage, which does not even secure the most minimal level of subsistence. The situation has been exacerbated by the policies of MNEs whereby profit comes at the expense of all other factors,” explained Vadim Borisov, ICFTU representative for CIS countries.

Government policies have caused an unprecedented decline in the energy sector in recent years. “In the last years the overall energy production has collapsed,” said Irakli Tugushi, president of the GTUA. In the beginning of the ‘90's of the last century Georgia produced 14,2 million KW/hour per year, whereas today we do not manage to produce more than 7 million KW/hour. This situation is outright catastrophic, both for the energy sector and for the future of Georgia and its economic development. No restructuring can be accomplished without energy sources, nor can investments be attracted.

“It is of cardinal importance that the move towards economic disintegration is stopped in Georgia, and that GTUA is involved in future reforms, which can only be successful if the current state of corruption and state robbery is ended,” explained Sandra Vermuyten, ICFTU representative currently in Georgia.