In the previous blog published on 19 April, 2012 Transparency International Georgia spoke about the property sold for symbolic price in Adjarian Autonomous Republic. Often property was sold to unknown companies which did not comply with the contract requirements. Our organization also got interested in immovable property alienated for one GEL in 2009-2011 and 2012 in Adjarian Autonomous Republic.

Legal basis:

Alienation of property in Adjarian Autonomous Republic is regulated by the Law on “Adjarian A/R’s Property Management and Disposal”. According to the legal amendments, which were introduced in 2007, the right of property alienation was given to the Head of Government (unilaterally) on the basis of competitive selection. The Ministry of Economy was obliged to conduct only technical measures and prepare relevant documentation.  According to the current legislation (Law adopted in 2010) the Chairman of the Government of Adjarian A/R was given exclusive right of property disposal, which means that the Chairman can choose the form of selling, means of selling and the subject independently.  That means he/she has a right to choose the form, way and person for alienation of property unilaterally and as a rule this information is not public. 

It should be noted, that the Ministry of Finances and Economy of Adjara, provided us with thelist of privatized properties for One GEL during 2006-2012 in the form of time-tables in which the details of contracts were also indicated. Unfortunately, the copies of contracts were not attached to these tables.

According to the list provided by the Ministry of Finances and Economy of Adjara, Government of Autonomous Republic sold only 2 units for symbolic price in 2009.

On July 29, 2009, Government of Autonomous Republic of Adjara sold Batumi Gora (So-called Leningora) to LTD “Hestoc Batumi”. Investor is obligated to build church in 36 month period, ensure construction and exploitation of rope-way in 45 month period. At the Ananuri Mountain, in 39 months, investor has to build and launch an entertainment center on the basis of architectural project “Argo Batumi”. Investor is obligated to ensure that 90% of employees are Georgian citizens. Even though these obligations should have already been fulfilled, investor could not meet the deadlines. Specifically, Church and Entertainment Center have not been built yet.

According to the Public Registry, above-mentioned company is registered on June 30, 2008 and its 100% shares are owned by LTD “Hestoc Limited” (Great Britain).

In 2010, there were 19 sold units for one GEL. Among them following units should be mentioned:

On February 24, 2010, LTD “Coraxes” was given 847 sq.m. building on 12, Gamsakhurdia street and 268 sq. m. on  20a, Kostava, Batumi. The Investor took the obligation of restoring the building facade, located on 12, Z. Gamsakhurdia Street in 3 months period, ensure exploitation of small apart hotel complex in 5 years period, which has to be consistent with architectural standards set in the “Old Batumi” district. On Kostava street investor has to construct sports stadium. Due date for fulfilling the obligations is February 24, 2015. The façade of the building located on 12 Z. Gamsakhurdia Street is restored, but nothing has started yet on 20a Kostava Street.

LTD “Coraxes” is registered on November 11, 2009 and the director, as well as owner of 100 % share is Konstantine Mkheidze.

On August 24, this year, 348 sq. m. building and 1379 sq. m. land on 12 Ninoshvili Street, Batumi was transferred to LTD “Pazisi Plant”. Investor is obliged to construct a Museum of Tea and Citric Plants on the first floor of the building in 18 months period. Construction works have not been started yet.

Chairman of the Government of Autonomous Republic of Adjara also disposed property this year for one GEL. According to the Ministry of Finances and Economy of Adjara, 17 units have been sold during this year.

On February 3, 2012, 25 000 square meters in Kakhabri settlement were transferrd to Ltd. DH Hotel Batumi. Investor took an obligation to construct 4 star hotel with no less than 300 rooms and a casino. 90 % of employees have to be Georgian citizens. As representative of LTD DH Hotel Batumi told us company has managed only to prepare necessary documents and could not proceed further. Construction works have not been started due to the financial problems.

Ltd. DH Hotel Batumi was registered on August 31, 2010 and 100 % owner of shares is Island Association Limited, company which is registered in Virgin Islands (off-shore zone).  

528 396 sq. m. land in Adjarian Village Baratauli was trasnferred to Jsc Gomarduli on May 2, 2012. Investor has an obligation to build 10 guesthouses, one restaurant, mini-stadium and an extreme park until 20 December, 2013. The amount of investment should be no less than 1 000 000 GEL, 30 new jobs have to be created and 90 % of employees should be Georgian citizens. Jsc Gomarduli is actively doing construction works. 3 cottages have been completed and exploited. It is planned to finish 5 additional cottages in the nearest future.

18 834 sq. m. land in Daba Khelvachauri, Adjara was transferred to Ltd. BTM Textile on May 16, 2012. Investor has to build sewing factory in 18 months and employee 200 Georgian citizens. This company operates in Adjara from 2006 and already has sewing factory in Khelvachauri. The company also owns retail chain named “Brand”.

Ltd. BTM Textile is finalizing construction sewing factory, which probably will be opened in January next year.

25 971 Sq. m.land plotin village Ortabatumi in Khelvachauri da 1 788.7 sq. m. building, were it is going to be a cinema and a stadium designed for 800 spectators, for which 500 000 GEL investment is needed.

LTD “Bakuri” has already lunched construction works in villages Ortabatumi and Winsvla in Khelvachauri, however building of the stadium has not begun yet.

On June 12, 2012 LTD “First Mercantile Infrastructure Development Georgia” was given 21 192 sq. m. land plot located on 17, Abuseridze St., Batumi and 531 sq. m. land on 5, Pirosmani St., Batumi. According to the contract the investor has to construct 50 storied multifunctional building, for which at least 50 Million USD must be invested. 90% of the employees must be Georgian citizens and their number must be at least 200. Investor has been registered in Georgia since February 3, 2012 and its Director and sole founder is citizen of USA Fernando Manozo Sopotia. Construction works on 5, Pirosmani st. have not started.

1500 sq. m. land plot was transferred to Ltd “Stone” on June 13, 2012. The land is located on 2, Abashidze st. in Chaqvi. The investor in 18 months has to built and enterprise that would employee at least 15 people. Total investment should constitute 120 000 GEL. The company was registered on May 25, 2012, 3 weeks before signing the contract. LTD “Stone” has not conducted any works by now.

“Transparency International – Georgia” welcomes investment projects and creation of favorable conditions for investors in Georgia. Providing properties for a symbolic price under certain terms and conditions may be considered as incentive for investing. However the fact that the Government did not effectively monitor investment projects and was abstaining from proper reaction in cases of breach of the agreement, creates the legitimate suspicion about the existence of corruptive deals.

“Transparency International Georgia” calls on the Ministry of Economic to:

• Thoroughly investigate the facts of transferring properties for symbolic prices.
• Monitor fulfillment of commitments by the investors and have proper reaction in case of non-fulfillment.

Our organization will precede research of information related to the assets’ transferring for symbolic prices as well as researching information on the shareholders of investing companies. We will also monitor fulfillment of the obligations of investors.

Information in the blog is based on the materials provided by the Ministry of Finance and Economics of Adjara. “Transparency International Georgia” would like thank the Ministry for Cooperation.