Transparency International Georgia has analyzed the official data related to privatization of the state-owned real estate by the central government in 2013-2021 and found that the process of privatization contains significant corruption risks. Extremely low competition, lack of transparency, absence of integrity mechanisms and inadequate response to alleged violations – these are the key challenges that create corruption risks in the process of privatization.

In Georgia, a significant part of land resources is still owned by the state. With the current rate of privatization, the process is expected to last for many more years. Given the above-mentioned challenges and the fact that there are no high-level corruption prevention mechanisms in the country, there is a high probability that the state property will be disposed of in favor of private interests of specific individuals, at the expense of state and public interests, a number of alleged examples of which are provided in this study.  

Key findings:

• In 2013-2021, state property (land and buildings) was sold for a total of GEL 872.8 million through 5,105 public auctions with a starting price of GEL 656.9 million. The highest number of auctions (859) was held in 2021, as a result of which state property was sold for GEL 304.9 million.
• In 2013-2020, more than 1,000 companies received state property (land and buildings) through privatization. A part of these companies, their shareholders and directors (217 persons and 212 companies) donated GEL 19,655,907 to the ruling party during the same period.
• Two-thirds of all privatization auctions (68%) held in 2013-2021 were won by a single bidder, which is an extremely low level of competition. In addition, the share of non-competitive auctions has not been decreasing.
• Number of failed auctions is also high: in 2013-2021, a total of 9,976 auctions were announced on the sale of state-owned real estate. However, 46.7% (4,656) of these auctions failed due to the absence of bidders.   
• Although only a third of all auctions (32%) were competitive, the starting price of privatization in these auctions doubled (99.2% growth) on average from GEL 214.1 million to GEL 426.4 million, which constituted 50% of the total funds received by the state from privatization. 
• 429 direct privatization contracts were concluded in 2013-2020 (the number does not include data from 2015), out of which 43% had a symbolic price (GEL 1). It should be noted that data on direct privatization provided to us was unstructured and incomplete. The state received a total of over GEL 236 million from direct privatization. A large portion of this sum – GEL 157 million was related to the real estate transferred to SOCAR Georgia Gas LLC for gas pipeline construction. 
• The state property privatization process is insufficiently transparent. The information and governmental decrees on direct privatization are not available proactively. The list of auction winners is published only for a short period of time, while the information about other participants of auctions is considered confidential by law.

The analysis of privatization data shows that a lot of suspicious cases have taken place over the years that may point to corrupt deals:

• In 87 cases, privatization auctions were won by newly registered companies, including 78% (68 electronic auctions) faced no competition (with a single bid). In 23 electronic auctions, winning companies were registered after the announcement of the auction. As a result, 751,660 m² of non-agricultural land and 147 buildings were sold to newly registered companies. 
• In 29 cases, a direct privatization contract was obtained by a newly registered company, including in 10 cases the companies received 532,183 m² of non-agricultural land and 46 buildings at a symbolic price of GEL 1. In total, 860,078 m² of non-agricultural land, 4,619,056 m² of agricultural land and 85 buildings were sold to newly registered companies.
• There are several cases, when a direct privatization contract is obtained by a public official or his/her family member, or a company whose shareholder or director is a public official or his/her family member. 50 such cases were identified in 2013-2020 (see the list in the main text of the study) – namely, 328,860 m² of non-agricultural land and 45 buildings were sold. 

• In 26 cases, an electronic auction was won by a public official/family member, including 16 auctions - without competition (with a single bid);
• In 16 cases, electronic auctions were won by the companies directly linked to a public official/family member, including 87.5% of auctions (14 auctions) without competition (with a single bid);
• In three cases, direct privatization contracts were concluded with a public official/family member, including in two cases, the property was transferred to them at a symbolic price of GEL 1;
• In five cases, direct privatization contracts were concluded with the companies directly linked to a public official/family member, including in three cases, the companies received the property at a symbolic price of GEL 1.

• In 42 cases auctions/direct privatization contracts were received by persons or companies which donated to the ruling party shortly before or after the auction/issuance of the governmental decree.

As a result, 454,627 m² of non-agricultural land, 225,666 m² of agricultural land and 45 buildings were sold for GEL 13,374,167. The buyers donated GEL 2,097,000 to the ruling Georgian Dream party at different times.

• The National Agency of State Property has no specific mechanism to prevent corruption and conflict of interests in the process of state property privatization. Moreover, the Agency did not respond to the question whether any corruption-related violations were revealed in the sphere of privatization in 2012-2021. 

Note about methodology:

The study offers the analysis of privatization by LEPL National Agency of State Property of real estate (land and buildings) owned by the central government through both public auction and direct privatization procedure. 

The study does not cover the lease or real estate and disposal of state property other than real estate (for example, forest fund, movable property or state enterprises). The study also does not cover the privatization carried out by municipalities, including the Tbilisi Municipality, which dispose of their immovable property on their own.

In this study, a newly registered company implies a company, which was registered no later than 6 months before the announcement of an auction/issuance of a decree on direct privatization. 

General data

In Georgia, a significant part of land resources is still owned by the state. According to various calculations, 67.5% of agricultural land existing in the country is owned by the state^[1]. These statistical data indicate that the state property privatization process that is mainly used for replenishing the state budget will further continue for many years. Therefore, it is important that the risks that harm the state and its population be minimized in the process of privatization.

The privatization of real estate owned by the central government is carried out using two methods:

1. Through a public electronic auction held via a special website (eauction.ge) created in 2010; and
2. Through a direct sale, during which the government considers the willingness of a specific entity to purchase the property and adopts a decision by issuing a relevant decree. 

In both cases, the National Agency of State Property established in 2012 under the Ministry of Economy and Sustainable Development prepares the property for privatization.

Privatization through auction

Using the open auction method is the best means for ensuring a transparent privatization process. In this view, the launch of www.eauction.ge platform in 2010, which unites all types of state property subject to sale/privatization in one space, proved very important.

5,105 public auctions with the starting price of GEL 656.9 million were successfully held in 2013-2021. As a result, state property (land and buildings) was sold for GEL 872.8 million, which is almost GEL 216 million more compared to the starting price. The highest number of auctions (859) were held in 2021, as a result of which state property was sold for GEL 304.9 million. 

Direct privatization 

More than 429 direct privatization contracts were concluded in 2013-2020 (the number does not include the data from 2015, because the provided information contained shortcomings) with 43% having a symbolic price (GEL 1). The state received a total of over GEL 236 million from direct privatization (excluding the data for 2015). A large portion of this sum – GEL 157 million was related to the real estate transferred to SOCAR Georgia Gas LLC for a gas pipeline construction. 

We received the data on direct privatization from the LEPL National Agency of State Property in an unstructured and flawed form. Due to this, the figures provided in the report may contain some errors. Also, the number of contracts does not include the property transferred to the Georgian Orthodox Church and internally displaced persons at a symbolic price.

*The chart does not include data for 2015.

Privatization is an area with an inherent risk of corruption, because one deals with the disposal of public resources. The weaker the corruption prevention mechanisms (e.g. competition, transparency, oversight, response to violations), the more prominent this inherent risk will be. The following sections of the study provide an overview of these prevention mechanisms.

Low competition

The key mechanism to reduce corruption risks in the context of state property privatization is the creation of an environment that is as competitive as possible. Competition reduces the possibility of covert deals and abuse of power by public officials. 

Although privatization auctions are held online in Georgia, the level of competition is extremely low, which creates a favorable environment for corruption-related violations. Two-thirds of all privatization auctions (68%) held in 2013-2021 were won without competition (with a single bid). In addition, this number has not gone down over the years.

Number of failed auctions is also high: In 2013-2021, a total of 9,976 auctions were announced on the sale of state-owned real estate. However, 46.7% (4,656) of these auctions failed due to the absence of bidders. Such a large number of failed auctions may be caused by lack of trust or awareness about privatization. In any case, more effort is needed to attract as many bidders as possible.    

Besides reducing corruption risks, competition also has significant financial benefits. Although only a third of all auctions (32%) were competitive, the starting price of privatization in these auctions doubled (99.2% growth) on average from GEL 214.1 million to GEL 426.4 million, which constituted 50% of the total funds received by the state from privatization. 

The National Agency of State Property notes in its annual performance reports that one of its goals is to stimulate the sales, to provide potential investors with information regarding the property subject to privatization as well as to create a competitive environment at an auction that is a precondition for increasing state revenues received through privatization. The fact that the level of competition is so low over the years indicates that the Agency’s efforts are not enough and more active work is needed in this direction. 

Unlike the auction, it is difficult to ensure competition in case of direct privatization. However, the law envisages the procedure of direct sale based on competitive selection, during which the information about direct sale of state property should be published at least for a term of one month that aims at increasing the competition. Regrettably, this procedure remains on paper only and the rule of competitive selection had never been used in 2012-2021.

Alleged corruption cases

We tried to clarify in this study whether the National Agency of State Property had any mechanisms to prevent corruption and conflict of interests. Regrettably, we failed to receive any answer to this question from the Agency, indicating that no such mechanisms have been introduced. Moreover, the Agency did not respond to the question whether any corruption-related violations were revealed in the sphere of privatization in 2012-2021. 

Given the absence of corruption prevention mechanisms, as well as low competition and transparency, there is an increased risk of dishonest disposal or misappropriation of state property.

To illustrate this problem, we can bring the example of the so-called Ananov Palace (7,500 m² of land and a historical building thereon) in the village of Vartsikhe of Baghdati Municipality, which was sold through an auction in early 2020. Although the privatization procedure formally passed without violations, there were a number of suspicious circumstances which indicated a possible prior informal agreement regarding who would win the auction. These circumstances were:

• The auction was held during the News Year’s festivities, from December 31, 2019 to January 13, 2020, when the lowest competition is to be anticipated. There were only six working days during that period.
• The winning company was registered in parallel with the announcement of the auction – the auction was announced at 14:00 on December 31, 2019, while the winning company submitted a registration application to the Public Registry at 12:51 and was registered at 15:19 on the same day.
• Only one company participated in the auction, even though 8 individuals/companies had expressed willingness to buy the palace in 2013-2019.

Moreover, persons potentially interested in the auction had received no information from the Ministry of Economy^[2]. The Privatization Department/Sales Unit of the National Agency of State Property did not notify prospective buyers about the auction in any possible form. Neither can a relevant announcement be searched on the Agency’s Facebook page^[3]. One of the companies provided BM.GE, an online media outlet, a letter sent from the National Agency of State Property on Friday, January 10, saying that the property auction the company was interested in years ago would end on January 13, at 17:00. Since January 10 fell on Friday, Georgian Post delivered the letter on January 15 – two days after the end of auction. BM.GE verified the information with two more interested persons and found out that they also received the letters from the Agency with delay.^[4] 

This alleged case of corruption prompted no appropriate response on the part of the investigative bodies. It is not even known whether the investigation has been launched, because the State Security Service does not respond to the official requests for public information, while the Prosecutor’s Office does not disclose information.

Dozens of privatization cases containing suspicious circumstances were revealed during the study:

Public officials or their family members win privatization auctions

• In August 2014, Arsen Oveyan won the electronic auction on privatization of 1,173 m² of non-agricultural land located at the Akhaltsikhe-Akhalkalaki highway in the city of Akhaltsikhe for GEL 30,000. He had no competitors. At that time, Arsen Oveyan’s father, Samvel Oveyan served as the Chairman of the Commission at the Akhaltsikhe City Council.
• In April 2014, Nino Gogolauri won the electronic auction on privatization of 2,259 m² of land plot and two buildings thereon located in the village of Kubriaantkari, Dusheti Municipality for GEL 10,500. She had no competitors. At that time, Nino Gogolauri’s spouse, Giorgi Lomsadze served as the Deputy Head of Dusheti District Police of Mtskheta-Mtianeti Regional Police Department.  
• In August 2016, Mikheil Gedekhauri won the electronic auction on privatization of 5,000 m² of non-agricultural land located in the village of Sartichala of Gardabani Municipality for GEL 13,000. He had no competitors. At that time, Mikheil Gedekhauri served as the Chairman of the Commission at the Gardabani Municipal Council.
• In October 2017, Kakhaber Kvachadze won the electronic auction on privatization of 2,311 m² of non-agricultural land located at Sanapiro Street in the city of Ozurgeti for GEL 17,000. He had no competitors. At that time, Kakhaber Kvachadze served as the Chairman of the Georgian Dream – Democratic Georgia faction at the Ozurgeti Municipal Council. 
• In February 2019, Marika Chitashvili won the electronic auction on privatization of 1,384 m² of non-agricultural land located in the city of Akhaltsikhe for GEL 21,500. She had no competitors. At that time, Marika Chitashvili was a judge of the Akhaltsikhe District Court. 

Companies linked to public officials or their family members win privatization auctions

• In August 2017, Martvili Invest LLC won the electronic auction on privatization of 9,931 m² of non-agricultural land located in the city of Martvili for GEL 122,000. The company had no competitors. At that time, 33.3% of the company’s shares were owned by Giorgi Gegia, whose mother, Irina Gadelia served as the chair of the faction at the Martvili Municipal Council. It is noteworthy that the company was officially registered on August 8, 2017 – three days before the auction was officially announced (August 11, 2017). 
• In February 2018, V.A.G LLC won the electronic auction on privatization of 2,724 m² of non-agricultural land plot and two buildings thereon located at Gorgasali Street 2 in the city of Khashuri, for GEL 29,500. 49% of the company’s shares belonged to Archil Chachanidze, who at the time served as the chairman of the Georgian Dream – Conservatives faction at the Khashuri Municipal Council.   
• In July 2018, Caucasian Metals Terminal LLC won two electronic auctions on privatization of 5,501.00 m² and 3,002.00 m² of non-agricultural land plots located at the left bank of the Rioni River in the city of Poti, respectively, for GEL 388,000 and GEL 214,000. The company had no competitors. 15% of the company’s shares were owned by Gocha Kurdgelia, Mayor of Poti (the shares were transferred to another person with the right of management). Transparency International Georgia has already reported earlier about alleged signs of corruption related to Gocha Kurdgelia’s business interests.^[5] 
• In January 2019, Sioni Lake Resort & Spa LLC won the electronic auction on privatization of three non-agricultural land plots (with a total area of 157,715 m²) and the buildings thereon located in the village of Maliaskhevi of Tianeti Municipality for GEL 382,000 (conditionally). The company had no competitors. At that time, 50% of the company’s shares were owned by Ivliane Tsulaia, who was a Member of the Parliament. It is noteworthy that the company was registered on January 3, 2019, a few days after the auction was announced (December 21, 2018) and won the auction on January 4, 2019 without competition. In addition, Ivliane Tsulaia and Dimitri Adamia (director of the company) donated a total of GEL 120,000 to the ruling party-backed presidential candidate, Salome Zourabichvili on the same day, September 28, 2018.    
• In November 2020, Bluefield LLC won the electronic auction on privatization of 2,049  m² of non-agricultural land located in the village of Maglaki of Tskaltubo Municipality for GEL 19,000. The company had no competitors. 20% of the company’s shares belonged to Romeo Nizharadze who at that time served as the Chairman of the Commission at the Tskaltubo Municipal Council.

Public officials or their family members obtain direct privatization contracts

• In December 2016, two non-agricultural land plots (with a total area of 1,775 m²) located near the road connecting Tbilisi districts of Nutsubidze and Vashlijvari were transferred to Varlam Liparteliani for GEL 379,000 through direct privatization. At that time, Varlam Liparteliani’s spouse, Giuli Chkuaseli served as the Head of Public Internal Control Department at the Ministry of Finance. Under the investment obligations, the buyer had to construct a sports complex, to put it into operation and invest GEL 400,000 until December 15, 2019. Based on the information received from the National Agency of State Property, the status of fulfillment of the investment obligations has been violated, amendments to obligations and excuse from payment of penalties have been requested. The proceedings are underway (a relevant draft decree has been sent to the Ministry of Economy and Sustainable Development).
• In April 2017, 7,500 m² of non-agricultural land plot and the buildings thereon located in Shovi resort of Oni Municipality were transferred to Giorgi Bichashvili for a symbolic price of GEL 1 through direct privatization without investment obligations (6 April 2017, Decree No. 704). At that time, Bichashvili served as the Director of the Interior Ministry’s Public Safety Command Center – 112 Georgia.
• In September 2019, two non-agricultural land plots with a total area of 28,000 m² (13 September 2019, Decree No. 1962) were transferred to Nikoloz Kvezereli for a symbolic price of GEL 1 through direct privatization, without investment obligations. At that time, Nikoloz Kvezereli served as Acting First Deputy Director of LEPL State Service of Veterans Affairs.  

Companies linked with public officials or their family members obtain direct privatization contracts

• In March 2015, 3,526 m² of non-agricultural land plot located adjacent to Akademkalaki in Tbilisi was transferred to Ibercompany LLC for GEL 800,000 through direct privatization (31 December 2014, Decree No. 2620). 100% of the company’s shares, which were transferred to another person with the right of management, belonged to MP Gocha Enukidze. Under the privatization obligation, the company had to invest GEL 4,000,000 until September 25, 2018. According to the information received from the National Agency of State Property, the company did not fulfill its obligations.
• In February 2017, 18,765 m² of non-agricultural land plot and the buildings thereon located at Anna Politkovskaya Str. 30 in Tbilisi (14 November 2016, Decree No. 2386) were transferred to Education Development Group LLC for GEL 500,000 through direct privatization. At the moment of signing the contract (14 February 2017), Giorgi Meladze was the director and a 33.3% shareholder of the company. His spouse, Ketevan Aleksidze served as the Director of the United Airports of Georgia LLC.  
• In March 2018, 6,817 m² of non-agricultural land plot located in the village of Martkopi of Gardabani Municipality was transferred to Partner LLC for a symbolic price of GEL 1 through direct privatization (6 March 2018, Decree No. 518). Zaza Gogichaishvili, who owns 50% of the company, is the spouse of Manana Kobakhidze, member of the Constitutional Court of Georgia.
• In November 2018, 15,512 m² of non-agricultural land plot and the buildings thereon located on the territory adjacent to the Rustavi-Gardabani highway and Mari Arkhi in Rustavi were transferred to Global Enterprise LLC for a symbolic price of GEL 1, through direct privatization, with certain investment obligations (30 October 2018, Decree No. 2022). Levan Gordulava was the director and a 34% shareholder of the company. At that time, his brother, Koba Gordulava served as the Head of Samegrelo-Zemo Svaneti Regional Unit of Operational Support and Monitoring Division under the Military Police Department of Defense Forces of the Ministry of Defense of Georgia. 

Donors of the ruling party win privatization auctions

• On July 15, 2016, Royal Askana LLC won the electronic auction on privatization of 2,029 m² of non-agricultural land and the building thereon located in the village of Askana in Ozurgeti Municipality for GEL 9,500. The company had no competitors. Shortly before winning the auction, on June 8, 2016, Kakhetian Traditional Winemaking LLC, a 100% shareholder of the company, donated GEL 120,000 to the Georgian Dream.
• On August 4, 2016, Lasagro LLC won the electronic auction on privatization of 3,931 m2 of non-agricultural land and the building thereon located in the village of Rachisubani in Bolnisi Municipality for GEL 29,500. The company had no competitors. Shortly after winning the auction, on September 15, 2016, Inveco LLC, a 30% shareholder of the company, donated GEL 20,000 to the Georgian Dream. 
• On October 18, 2017, Gio LLC won the electronic auction on privatization of 40 m² of non-agricultural land located at Pekin Avenue in Tbilisi for GEL 25,500. The company had no competitors. Both shareholders of the company, Grigol Lekveishvili and Temur Lekveishvili donated a total of GEL 115,000 to the Georgian Dream on the same day, September 28, 2017.
• On October 31, 2017, Sakharia LLC won the electronic auction on privatization of 4,743 m2 of non-agricultural land and the buildings thereon located in the village of Chaisubani in Chokhatauri Municipality for GEL 29,000. The company had no competitors. Shortly before winning the auction, on September 15, 2017, Davit Paichadze, the director and a 100% shareholder of the company, donated GEL 30,000 to the Georgian Dream.
• On December 11, 2018, Iberia Distiller LLC won the electronic auction on privatization of 1,746 m² of non-agricultural land and the building thereon located in the village of Ponichala in Tbilisi for GEL 79,000. The company had no competitors. Shortly before winning the auction, on October 11, 2018, Shalva Eristavi, the director of the company, donated GEL 60,000 to Salome Zurabishvili, presidential candidate supported by the Georgian Dream. 
• On July 3, 2020, Iberoil LLC won the electronic auction on privatization of 5,702 m² of non-agricultural land located near Yumashev Street in Tbilisi for GEL 521,000. The company had no competitors. Shortly before the auction was announced, in a period between March 4 and March 6, all the four shareholders of the company – Gocha Chokoshvili, Davit Alibegashvili, Irakli Petriashvili and Simoni Gegelashvili – donated a total of GEL 90,000 to the Georgian Dream.
• On October 1, 2020, Georgia Metal LLC won the electronic auction on privatization of 2,674 m² of non-agricultural land plot located in the village of Kveda Sakara in Zestaponi Municipality for GEL 22,000. The company had no competitors. Shortly after winning the auction, two shareholders of the company donated money to the ruling party – on October 21, 2020, Avtandil Kochadze, a 10% shareholder of the company, donated GEL 40,000, and on November 17, 2020, Zurab Ghibradze, a 85% shareholder, donated GEL 60,000 to the Georgian Dream. 

Donors of the ruling party obtain direct privatization contracts

• On July 4, 2016, a direct privatization contract was concluded with Lazare LLC – non-agricultural land plots (with a total area of 295.27 m2) located near the Istanbul Bazaar in Rustavi were transferred to the company at a symbolic price of GEL 1 (paid amount – GEL 5) without investment obligations (23 June 2016, Decree of the Government No. 1194). Lasha Parastashvili, director of the company, and Giorgi Kutateladze, a 25% shareholder of the company, donated GEL 28,000 and GEL 29,000, respectively, to Georgian Dream on the same day, May 18, 2016. It is noteworthy that the company was officially registered in May 2010; however, Lasha Parastashvili officially became the director from July 4, 2016 – the day of concluding the direct privatization contract. Under the same governmental decree (23 June 2016, Decree of the Government No. 1194), 96 m² of land plot located near the Istanbul Bazaar in Rustavi and 45 m² of land plot located in Rustavi were transferred to Giorgi Kutateladze through direct privatization, at a symbolic price of GEL 1 (paid amount – GEL 2).
• On October 7, 2016, 2,990 m² of non-agricultural land plot and the building thereon located near a plastic factory in the settlement of Kvemo Ponichala in Tbilisi was transferred to Polymer I LLC through direct privatization (29 September 2016, Decree No. 1982), at a symbolic price of GEL 1 (the company fulfilled its investment obligations).  At that time, 100% of Polymer I LLC was owned by Polymer LLC, five shareholders of which – Amiran Adeishvili, Ilia Sepiashvili, Moris Khutsishvili, Zaza Khutsishvili and Revaz Karchava (total amount of shares - 88%) donated a total of GEL 190,000 to Georgian Dream shortly after concluding the direct privatization contract (13.10.2016 and 14.11.2016). Later, on February 1, 2017, Polymer LLC merged with Polymer I LLC.
• On February 24, 2017, 80,000 m² of agricultural (arable) land plot located in the village of Jigaura in Mtskheta Municipality, as well as agricultural (arable) land plots (with a total area of 128,522 m²) located in the village of Saguramo in Mtskheta Municipality (30 December 2016, Decree No. 2739) were transferred to Sevsamora Villa LLC for GEL 104,261, through direct privatization (the company fulfilled the investment obligations). Giorgi Gagua, the director and a 50% shareholder of the company, donated a total of GEL 37,000 to Georgian Dream on September 19-20, 2017.
• On September 6, 2017, 840 m² of non-agricultural land plot located in Telavi Municipality was transferred to Stori LLC for GEL 2,520 through direct privatization. Few days after concluding the contract, Bezhani Anuashvili, who owned 15% of the company at that time, donated GEL 15,000 to Georgian Dream on September 19, 2017. In February 2019, Stori LLC won one more contract on direct privatization of 1,512 m² of non-agricultural land plot located in Telavi Municipality for GEL 4,526 (28 January 2019, Decree No. 81) – in this case, Bezhani Anuashvili donated GEL 10,000 to Georgian Dream on May 1, 2019. In both cases, the company violated the investment obligations.
• On October 6, 2017, 20,366 m² of non-agricultural land plot and the buildings thereon located in the settlement of Mtsvane Kontskhi in Batumi were transferred to Elit Construction Group LLC (presently, Tower Group Green Residence LLC) for GEL 931,000 through direct privatization. The following persons made political donations in favor of Georgian Dream on the same day, October 26, 2017 – Leri Bolkvadze – GEL 5,000 (director of the company at that time), Levan Mzhavanadze – GEL 5,000 (future director of the company) and Giorgi Chkonia – GEL 60,000 (a 100% shareholder of the company since 05.08.2019). It is noteworthy that Elit Construction Group was officially registered on August 21, 2017, about a month before the Government issued the decree on direct privatization (28 September 2017, Decree No. 2039).
• On November 2, 2018, 5,435 m² of non-agricultural land plot and the buildings thereon located at Enukidze Str. 12 in Tbilisi were transferred to Eurodripi LLC at a symbolic price of GEL 1 through direct privatization (30 October 2018, Decree No. 2023). A few days after signing the direct privatization contract, Davit Kapanadze, the director and a 50% shareholder of the company, donated GEL 25,000 to Salome Zurabishvili on November 27, 2018. It is noteworthy that Eurodripi LLC was registered on June 5, 2018, several months before the Government issued the decree on direct privatization.
• On March 28, 2019, 10,034 m² of non-agricultural land plot located near Avtovaz at Kakheti Highway in Tbilisi was transferred to Meama LLC for GEL 300,000 through direct privatization. It is strange that Tamaz Kharaidze, who became a 10% shareholder of the company from February 23, 2021, donated GEL 20,000 to Georgian Dream on March 28, 2019 – the day when the direct privatization contract was concluded with Capsulo LLC. This is the only donation made by Tamaz Kharaidze.
• On November 27, 2020, 145,666 m² of agricultural (arable) land plot located in the village of Akura of Telavi Municipality was transferred to Akura LLC for GEL 223,742 through direct privatization (22 October 2020, Decree No. 2051). On November 12, 2020, a few days before signing the contract, Aleksi Modebadze, who owns 100% of the company, donated GEL 60,000 to Georgian Dream.    

Newly registered companies win privatization auctions

• On December 31, 2013, 3 Lido LLC won the electronic auction without competition for GEL 525,000 on privatization of 467.69 m² of non-residential area, 94.97 m2 of basement and the attached non-agricultural land plot located at Terenti Graneli Str. 2-4 in Tbilisi/Chitaia Str. 1-3 in Tbilisi. The company was registered on December 13, 2013, four days before the auction was announced (December 17, 2013).
• On May 13, 2014, Pargali LLC won the electronic auction without competition for GEL 3,000,000 on privatization of 735 m² of non-agricultural land plot and the buildings thereon (total area of the buildings - 2,465.82 m²) located at Tamar Mepe Avenue 24 in Tbilisi. The company was registered on April 15, 2014, two weeks before the auction was announced (April 29, 2014).
• On September 3, 2015, Gorda LLC won the electronic auction without competition for GEL 518,000 on privatization of 967 m² of non-agricultural land plot and the building thereon located at Moscow Avenue 50 in Tbilisi. The company was registered on August 18, 2015, two days before the auction was announced (August 20, 2015).
• On August 25, 2017, Martvili Invest LLC won the electronic auction without competition for GEL 122,000 on privatization of 9,931 m² of non-agricultural land in Martvili. The company was registered on August 8, 2017, three days before the auction was announced (August 11, 2017).  
• On September 10, 2018, Emerald LLC won two electronic auctions without competition for GEL 161,000 and GEL 96,000 on privatization of non-agricultural land plots (with a total area of 3,128 m²) and the buildings thereon located at Zakaria Paliashvili Street in the settlement of Abastumani, Adigeni Municipality. The company was registered on August 30, 2018, three days before the auction was announced (September 3, 2018).
• On August 12, 2019, Georgian-American Medical University LLC won two electronic auctions without competition for GEL 19,500 and GEL 1,245,000 (conditionally) on privatization of 80 m² and 3,054 m² of non-agricultural land plots (with a total area of 3,134 m²). The company was registered on July 29, 2019, the day of launching the auction, while an application on registration of a new subject was submitted to the National Agency of Public Registry on July 26, 2019.    
• On July 17, 2020, Zizu 2020 LLC won the electronic auction without competition for GEL 1,654,000 on privatization of 21,688.00 m² of non-agricultural land plot and the buildings thereon located at Police Street 7a in Tbilisi. The company Zizu 2020 was registered on July 2, 2020, during the course of the auction. It is noteworthy that Irakli Modebadze, the director and a 100% shareholder of the company, donated GEL 30,000 to Georgian Dream on November 9, 2020. This is the only donation made by Irakli Modebadze in favor of the ruling party.
• In August-November 2020, Otskhe 2020 LLC won three electronic auctions without competition for GEL 64,000, GEL 13,000 and GEL 51,000 in the settlement of Abastumani, Adigeni Municipality. The company was registered on June 30, 2020, about a month before the first auction won by the company was announced (August 7, 2020). Zurab Kiknadze, the director and a 100% shareholder of the company, donated GEL 25,000 to Georgian Dream on March 20, 2020.

Newly registered companies obtain direct privatization contracts

• On July 7, 2014, 15,003 m² of non-agricultural land plot and the buildings thereon located in the settlement of Orkhevi in Tbilisi were transferred to Geokep LLC at a symbolic price of GEL 1, through direct privatization (the company fulfilled the privatization obligations). The company Geokep was registered on June 13, 2014 – 13 days before the Government issued the decree (26 June 2014, Decree No. 1142).
• On May 25, 2016, 30,294 m² of non-agricultural land plot and the buildings thereon located in the village of Dvabzu in Ozurgeti Municipality were transferred to Askangel Alliance LLC at a symbolic price of GEL 1, through direct privatization (the company fulfilled the privatization obligations). The company was registered on April 4, 2016 – a month before the Government issued the decree (5 May 2016, Decree No. 768).
• On June 9, 2016, 1,386 m2 of non-agricultural land plot and the building thereon located in the village of Muskhi in Akhaltsikhe Municipality was transferred to Freco LLC at a symbolic price of GEL 1, through direct privatization (the company fulfilled the privatization obligations). The company was registered on April 28, 2016 – 20 days before the Government issued the decree (18 May 2016, Decree No. 861).
• On June 1, 2018, 9,884 m² of non-agricultural land plot and the buildings thereon (with a total area of 2,155.89 m²) located at Agmashenebeli Str. 95 in Gurjaani were transferred to GM Sweet and Drinks LLC at a symbolic price of GEL 1, through direct privatization (the company fulfilled the privatization obligations). The company was registered on March 5, 2018 – a few months before the Government issued the decree (28 May 2018, Decree No. 1179).
• On July 22, 2019, 5,550 m² of non-agricultural land plot and the building thereon (with a total area of 3,355.17 m²) located at Sukhishvili Str. 2 in Gori was transferred to Eco Georgia LLC at a symbolic price of GEL 1, through direct privatization. The company was registered on May 23, 2019 – a few weeks before the Government issued the decree (16 July 2019, Decree No. 1646).

Problems related to information availability

Several problems related to the availability of information about privatization were identified during the study. Increasing the level of transparency is one of the simplest changes that can yield broader and long-lasting outcomes in terms of reduction of corruption risks, on the one hand, and increasing competition and bringing more financial benefits to the state budget, on the other.

Information is not published proactively

The information about privatization through auction (description of property, dates of an auction, starting and final prices, bid amount, privatization conditions) is available at eauction.ge through which electronic auctions on the disposal of the state property are held. However, this website does not publish information about an individual winning the auction – this information is available at another website (privatization.ge) and only for a limited period of time – the name of the winner is removed from the website after two months. 

The information about direct privatization is not made public unless officially requested. Even if requested, the information provided by the National Agency of State Property is unstructured and sometimes incomplete, which reduces its reliability and complicates its use.

The law also envisages an obligation on publishing privatization-related information proactively.^[6] However, this obligation is not adequately fulfilled at this stage.

Names of auction participants are confidential

According to existing regulations,^[7] only the name of the winner is disclosed after the auction, while the names of other participants remain confidential. The lack of transparency undermines the trust towards privatization and complicates external oversight. 

Decrees of the Government are not available

Access to the relevant governmental decrees on direct privatization is an important problem. The Government’s decision on direct disposal of the state property is issued in the form of a decree. However, no decrees have been available on the government’s official website since March 2020.^[8] Neither does the Administration of the Government provide these documents even if public information is requested, which is a violation of the law. This circumstance undermines effective external oversight on direct privatization.

Lack of information availability at municipal level

This study initially aimed at analyzing municipal privatization as well; however, it failed largely due to significant difficulties related to obtaining information. 15 out of 64 municipalities, including Tbilisi and Batumi City Halls, did not respond to our requests for public information. According to the letter received from the Tbilisi City Hall, the relevant data has not been processed, which is strange, because the Tbilisi City Hall holds privatization auctions online, through a special website that should make it possible to easily retrieve and process information.

Recommendations

In order to reduce the risks of corruption in the process of state property privatization, it is necessary:

1. To increase competition – Reduction of corruption risks identified in the study without increasing the level of competition is hardly imaginable. The following steps should be taken to encourage competition:

• The National Agency of State Property should develop a long-term comprehensive privatization plan, which will be publicly available;
• The Agency should intensify its work with potential buyers to create more competitive environment at auctions;
• It is important to rule out all those circumstances, which make it impossible to dispose of property through auctions;
• It is necessary to minimize the practice of state property privatization at a symbolic price and to encourage direct sale procedures on the basis of competitive selection.

2. To increase transparency – Increasing the level of transparency is a simple and effective means for reducing corruption risks in any sphere. The following steps should be taken in this direction:

• The National Agency of State Property should publish comprehensive information about the state property privatization through various privatization procedures completely, proactively and in a machine-readable format (e.g. Excel);
• The Administration of the Government should reject a harmful practice of not publishing the orders and decrees and instead make these documents public and available;
• The provision, according to which the names of auction participants are confidential except for the winner, should be amended.

3. To create corruption prevention mechanisms – It is important to take a number of steps aimed at reducing corruption risks in the process of state property privatization:

• The National Agency of State Property, with the involvement of external experts, should assess the risks of corruption in the process of privatization and based on the results of this assessment, develop a plan on prevention of corruption in the sphere of privatization;
• As part of this plan, it is important to introduce specific integrity mechanisms, for example, to introduce the procedures for the preliminary assessment of the integrity of persons interested in privatization, to introduce restrictions on conflict of interests and their enforcement mechanisms, to encourage whistleblowing on violations and introduce relevant procedures;
• The necessity to prevent corruption in the sphere of state property privatization should be reflected in the National Anti-Corruption Strategy and Action Plan.

4. Addressing alleged cases of corruption – The investigative and law enforcement bodies should adequately address all those cases of state property disposal, where there are the signs of corruption or other violations, including the suspicious cases identified in this report.