In September 2025, the Georgian Dream Prime Minister Irakli Kobakhidze stated that the government had made a principled decision and ‘practically fully abandoned’ the practice of direct sale of state-owned immovable property in order to eliminate corruption risks. As it later turned out, this was not about abandoning the practice, but rather about imposing prerequisites. To this end, the government adopted a Resolution On Approving Prerequisites for the Exchange and Direct Privatization of State-Owned Immovable Property, which entered into force on January 12, 2026.

Despite Kobakhidze’s public rhetoric that the new prerequisites serve to prevent corruption, an analysis of the resolution reveals that the new rules fail to achieve their stated objective. Moreover, the resolution may create a legal framework that legitimizes corruption-prone, behind-closed-doors relationships between large businesses and the government and increases the risks of elite corruption.

Context: The Flawed Practice of Direct Privatization and Political Corruption

Multiple studies conducted by Transparency International Georgia confirm that the direct privatization process has carried significant corruption risks in Georgia. Numerous suspicious transactions were identified that were most likely carried out at the expense of public interests, including multiple cases of property privatization benefiting the ruling party’s donors. The scale of this practice is well illustrated by the following trends:

• Symbolic price (1 GEL): Of the 429 direct privatization contracts concluded between 2013 and 2020, 43% were executed at a symbolic price of 1 GEL.
• Links to political donations: 217 individuals connected to 212 companies that received state property donated a total of 19.6 million GEL to the ruling party between 2013 and 2020 – approximately 21% of the party’s total donations (93 million GEL) during this period.
• Concealment of privatization documents: Between 2020 and 2024, the lack of transparency in the direct privatization process was systemic in nature. In late 2020, the Government Administration ceased publishing government decrees, which include decisions on direct privatization, in violation of the legal requirement to publish these documents within 3 days. In 2023 alone, the government reviewed at least 531 draft decrees, none of which have been made public to date. Approximately 23% of these decrees were related to direct privatization of state-owned property. The Government Administration also ignored all public information requests related to government decrees. While the publication of decrees resumed in 2024, hundreds of direct privatization decrees from 2020 to 2024 remain classified.

The government’s new resolution must be assessed precisely in terms of its ability to curb similar political corruption schemes in the direct privatization process.

Three Key Problems with the Government’s New Resolution

Government Resolution No. 639 defines exclusive cases in which the exchange or direct sale of state-owned immovable property is permissible. An analysis of the document reveals three fundamental problems that substantially undermine the anti-corruption effectiveness of the resolution:

1. The GEL 100 Million Barrier and the Encouragement of Elite Deals

Article 2 of the resolution establishes two main economic prerequisites for direct privatization. Specifically, the direct sale of property is permissible:

• If the investor commits to investing at least 100 million GEL in the property to be privatized.
• If the property to be privatized is adjacent to the interested party’s property, on which they have already spent 100 million GEL (confirmed by audit), and the state property is needed for infrastructure expansion.

In the government’s public communications, this barrier is presented as a mechanism exclusively for facilitating particularly large projects that benefit the country. However, in practice, this rule may become a discriminatory and anti-competitive filter.

In Georgia’s economic reality, only a few large, elite business groups have the resources to implement investment projects of 100 million GEL – groups that, as a rule, maintain close ties with the ruling party. The resolution directly implies that this small group is exempt from the obligation to compete in a public auction.

The resolution essentially codifies that the decision-making process, communication between the government and the investor, and the selection of specific property shall all take place entirely behind closed doors.

Furthermore, the requirement to invest 100 million does not mean that state property will be sold at an adequate price. Under EU State Aid rules, the sale of public property must always comply with market principles. When property is not sold through an open tender procedure, European Commission guidelines strictly require that an independent, qualified expert evaluation (Independent Expert Evaluation) be conducted prior to the sale (ex-ante) and that the property be disposed of only at the established market value (with a maximum allowable deviation of 5%).

The government’s new resolution makes no mention whatsoever of the requirement for an independent market valuation. Meanwhile, the Law on State Property and the corresponding resolution adopted on its basis grant the government direct authority to determine the privatization price without the involvement of an independent auditor. This also creates the risk that an investor may invest 100 million GEL in their own business while receiving state property worth millions of GEL at a symbolic price.

2. The Vague Definition of ‘Public Significance’

The second corruption risk lies in those provisions of the resolution that address the so-called ‘public interest’. Specifically, sub-paragraphs c) and e.a) of Article 2, as well as sub-paragraph b) of Article 3 (which regulates property exchanges), grant administrative bodies the authority to advocate for the direct privatization or exchange of property for the purpose of implementing projects of ‘state/public interest’ or ‘state/public significance’.

The problem lies in the extreme vagueness of the terminology. Notably, Article 2 of the Law on State Property, where the terms used in the law are defined, contains no legal definition whatsoever of ‘public significance’ or ‘public interest’. The absence of legal certainty creates broad discretionary space for the government, enabling it to justify any ordinary commercial project (for example, the construction of a hotel complex or a shopping center) on grounds of public interest, provided the investor is a politically desirable figure.

3. The Absence of Anti-Corruption Mechanisms and Transparency

The privatization process, and particularly the disposal of state property through direct sale, inherently carries a high risk of corruption. The weaker the corruption-deterrent mechanisms (e.g., competition, transparency, oversight, response to violations), the greater the likelihood that risk will materialize into concrete harm to the public good.

The greatest shortcoming of the government’s new resolution is what it does not contain. The document is limited to dry economic and infrastructure prerequisites and completely ignores process transparency and anti-corruption control mechanisms.

The OECD’s Policy Maker’s Guide to Privatization clearly states that the key elements in the privatization process are a reliable institutional framework, a clear delineation of roles, and a high level of transparency – all essential for gaining the trust of investors and the public. In Georgia, this standard has not been met. When legislation directly grants the government the right to conceal decisions, and the practice of recent years shows numerous unpublished decrees, any ‘strict’ economic prerequisite loses its meaning and becomes merely a facade for the legalization of elite deals.

Conclusion: Why the New Resolution Fails to Reduce Corruption Risks

In summary, the Georgian Government’s Resolution No. 639, the declared purpose of which was to end the flawed practice of direct privatization, fails to achieve its stated objective for the following reasons:

• The 100-million GEL investment requirement leaves only a few large, elite players on the market, eliminates even the remnants of a competitive environment, and incentivizes closed-door deals with the government.
• The high volume of investment does not preclude the transfer of property at a symbolic price. The legislation grants the government discretion to set the initial property price below market value and does not require an independent valuation in line with EU standards.
• The Law on State Property contains no legal definition of ‘public significance’, leaving open the possibility for any commercial project to be exempted from the public auction requirement.
• The government’s new resolution does not define the procedures for initiating, negotiating, or awarding decisions in the direct privatization process. There is no publicly available rule governing how an interested investor should express their desire to acquire state property or what stages the process involves.
• The resolution does not establish a requirement for investor due diligence, including the identification of ultimate beneficial owners and the exclusion of connections with public officials.

This approach contradicts both EU best practices and OECD principles on the transparent and competitive management of state property. For the process to be genuinely reformed, the legislation must incorporate the obligation for independent valuation, full transparency in the decision-making process, and strict mechanisms for the prevention of conflicts of interest. Otherwise, direct privatization will remain a mechanism carrying high corruption risks, one that fails to ensure the fair management of public resources.