Construction sector of Georgia appeared in critical situation after Georgian-Russian war in Aug-2008.
There were several reasons of almost full collapse of construction sector – world financial crisis, Russian-Georgian war and malfunction of regulative base of the sector. Despite adoption of many legislative and normative acts for improvement of construction sector regulation over the recent years in the country, actually the mechanisms of protection for construction product consumers have not been improved.
Many experts and organizations are advocating establishment of controlling organ in real estate sector. One of such organizations is Association of Developers. The head of the association Irakli Rostomashvili declared that “pyramids” in construction sector and frequent delays of deliveries are the results of absence of correct and strong regulation in construction and banking sectors.
Mr. Rostomashvili said that in the nearest future, Association of Developers will initiate establishment of controlling organ in construction sector. He also noted that for the country developing in such a rapid pace as Georgia, it is necessary to have liberal frameworks in every leading sector, like construction, finances and insurance that would consider concerns of both consumers and state.
Representatives of construction companies seemed to share the conviction of experts. Developer Company Bagebi City Group declared that control of real estate sector should be handled in complex. The company representatives reckon that it is necessary to supervise not only construction quality, but also financial operations of separate companies. Construction standards, norms, quality of building materials should be maximally controlled in order to ensure safety of consumers, says the company. In order to avoid financial pyramids and other doubtful financial operations, contractor banks should control the company’s activities.
The ways of regulation and direction should be strictly defined by the state policy in any sector of economy. In accordance with the constitution of Georgia, every citizen has the right to live in safe and harmless environment. This directly shows that construction sector requires proper regulation. Regulation of construction activity is complicated and multilateral process. Effectiveness of regulation depends on flexibility of regulative organs and on presence of legislative-normative base that should direct construction activities.
Implementation of radical reforms started in construction sector of Georgia in 2004. Ministry of Architecture and Construction has been abrogated and the responsibility of policymaking and management of construction sector has been imposed upon Urbanization and Construction Department of the Ministry of Economic Development of Georgia. Control of construction quality is of special importance in regulation of construction business. This implies imposing of strict supervision on architectural-construction activities coming out from destination and characteristics of construction products, both from state and private sector. Supervision of architectural-construction business as a rule covers every state of construction process. Construction technologies, materials, structures, devices and skills of builders should be under control.
Complex systems of quality control and management are well formed in developed countries. Quality control process covers three-stage system – state supervision, control by local governmental organs and insurances companies.
It is worth of noting that there are different schemes of construction quality control in various countries. For instance, in Belgium, state supervision is obligatory only for construction of the objects of special importance, while in other cases local controlling organs are regulating construction activities. Special regards is paid to insurance companies in the process of construction control in developed countries. Consequently, insurance companies are playing active part in the control of construction quality. Such scheme of supervision is well approved in USA and Japan. While in majority of European countries, like Germany, Dania, Norway, and GB construction quality control is the prerogative of local construction inspectorate.
The law on “State supervision of architectural-construction activities” ensures supervision of constructions in Georgia. Insurance companies are not involved in the supervision process of construction quality in Georgia. There are no legislative mechanisms for this and construction companies rarely insure constructions. Under such conditions, consumers of construction products became extremely vulnerable. They have no guarantees proving construction quality or terms of delivery.
Economic effectiveness of construction, technical progress and safety are the matters that underpin the necessity of ensuring construction sector with proper technical regulations and standards. Engineering-technical and economic decision-making in construction should be based on preliminarily designed and recognized technical parameters. However, today construction sector is using technical regulations of Russia as yet only the part of national technical regulations has been designed in Georgia that is not enough. Moreover, quite often even these technical regulations are for followed in the country. According to the decree (NO 45, 24-Feb-2006) of government of Georgia, until adoption of national technical regulations, designers and builders have the right to use technical regulations of thirty-six countries and technical regulations considered within the framework of Common Wealth agreement. This considerably complicates technical regulation of construction, as specialists have to deal with regulations of thirty-six countries without any coordination and harmonization between them. The issue of adopting common national technical regulations is still open.
Two differing basis of construction technical regulations are distinguished in an international practice. The basis of technical regulations in USA, Europe and some developed Asian countries, is the legislation of a country and national development programs. However, in Russia and Common Wealth countries, technical regulations are based on recommendations designed according to collective agreements made between the member countries, but quite often these recommendations are opposing national legislation of some countries and directions of its development. It is unacceptable to use technical regulations of other countries blindly. At the same time, it is impossible to make them obligatory as various countries have different regulations of the same issue.
Experts are often emphasizing malfunction of regulation base of construction sector. Niko Kakhetelidze, construction sector expert: “There are no standards in construction sector of Georgia and I have spoke about this many times. Construction companies are not following any standards. Norms and regulations operating in Soviet times do not exist anymore, but new ones are not adopted yet. The law on construction sector does not exist in Georgia”.
Due to unadjourned necessity of regulating construction sector, parliament of Georgia adopted a resolution on 26-Oct-2004: Draft bill of Georgia on construction code that covers current modified main resolutions of regulative laws of construction process, which have been adopted in different times and majority of them contradicts each other. ”
The mentioned resolution is passed five years ago, but Construction Code of Georgia has not been adopted yet. However, recently developed events once again prove the necessity of regulation in construction sector.