What property of the Autonomous Republic did the Government of Adjara sell in 2019 and how?
Transparency International Georgia prepared a study on the investments made in Adjara in 2019. Specifically, the organisation researched the owners, privatisation prices and size of investments as concerns the property sold by the Government of the Autonomous Republic of Adjara through the direct sales procedure, including for a symbolic price (GEL 1) and through auctions with or without conditionalities attached.
The following circumstances were identified as a result of analysing information requested and received from the Ministry of Finance and Economy of Adjara:
- A rule established by the Government of Adjara on 29 March 2019 can be assessed as a decision supporting the correct investment policy: according to this rule, in the event an investor fails to fulfil the undertaken obligations, in order to avoid a penalty and to defer the fulfilment of the contract obligations, this investor can apply to the Ministry of Finance and Economy and present a bank guarantee for 2 percent of the penalty imposed. According to the Ministry’s information, 26 companies/legal persons have used this possibility.
- In 2019, the number of instances when the property of the Autonomous Republic was sold through direct sales procedure decreased significantly compared to previous years: the total of three properties were sold this way last year (16 properties were sold in 2018 and 17 properties in 2017). The total amount of privatisation fees was GEL 7,660,265, while the amount of expected investments is GEL 225,000,000.
- The largest area of land plots (180 ha) was purchased through direct sales procedure by Green Resort, LLC in Kobuleti. The central and the autonomous governments said at the time that the company would invest GEL 500,000,000 into building the new multifunctional complex Green City, although the amount indicated in the contract was GEL 250,000,000.
- In 2019, the number of auctions with conditionalities attached also decreased; the total of six sales of this kind took place (37 properties were sold this way in 2017-2018). The amount of privatisation fees was GEL 995,700, while the amount of expected investments is GEL 2,800,000.
- Among the four legal persons which purchased properties through auctions with conditionalities attached, three were registered one month prior to signing their contracts (ibamboo, Sakartvelo and Adjara Resorts Development Company).
- The Ministry of Finance and Economy of Adjara has still not reviewed the contract signed with TCF Georgia which has been failing for years to fulfil the obligations to put into operation a citrus sorting plant and invest GEL 3,500,000. Transparency International Georgia made a recommendation concerning this issue. Eventually, the property (a non-agricultural land plot of 23,344 sq. m and six buildings) that the company acquired for a symbolic price of GEL 1 was transferred into the ownership of Cartu Bank, JSC, the company’s mortgage lender, in 2019.
- In 2016, N(N)LP Tanalmoba [founded by] Pati Khalvashi and Koba Nakaidze, single-seat district MPs from Batumi and Kobuleti received real estate from the Government of Adjara in the form of a usufruct with the aim of opening in Kobuleti a day centre for persons with disabilities. However, the MPs failed to open the centre as late as in 2019, submitting to the Government of Adjara yet another request to defer the fulfilment of their obligations.
- From 1 January 2019 until 9 January 2020, amendments were made to 26 contracts signed in previous years. Representatives, shareholders and directors of nine signatory companies have made donations to the ruling party and Salome Zurabishvili. Despite numerous requests, the Ministry of Finance and Economy of Adjara did not provide Transparency International Georgia with [copies of] the updated contracts with conditions of deferrals.
- During the reporting period, contracts with seven companies were terminated on account of their failure to fulfil conditions and pay the penalties. The corresponding orders indicate that the fulfilment of obligations had been deferred for all of them prior to the termination of contracts, however, the companies and the private persons were unable to make the investments after the conditions had been changed either, which eventually became the reason for terminating their contracts.
Conclusion and Recommendations
We call on the Government of the Autonomous Republic of Adjara:
- To establish more safeguards when announcing an auction with conditionalities to dispose the property of the autonomous republic in order to increase the degree of transparency of the process, and to ensure that companies with appropriate experience win the auctions;
- To create equal conditions for all investors, thus promoting the establishment of a healthy investment environment and avoid the situation that has taken shape because TFC Georgia failed to fulfil the obligations it had undertaken. Transparency International Georgia offered the Government of Adjara appropriate recommendations on this issue in 2017 as well;
- To follow the requirements established by the law with regard to releasing public information and to make public the updated contracts with changed conditions signed with 26 legal persons;
- To strictly observe the conditions of contracts regulating disposal of property and, in the event the investors violate the conditions or fail to fulfil the undertaken obligations, to reclaim the property given under the usufruct or other conditions.
 In 2019, the Government of Adjara conducted four direct sales of 1,443.94 sq. m of property for a symbolic price of GEL 1. These include 1,000 sq. m of non-agricultural land plot (cadastre code: 188.8.131.524) in Riketi Settlement of Danisparauli Village in Khulo Municipality was purchased by Energo-Pro Georgia, JSC. The remaining 443.94 sq. m of property was transferred into the ownership of 12 citizens in the form of residential flats in Batumi and the town of Shuakhevi.