GOG NEEDS STRATEGY FOR THE DEVELOPMENT AND

C O N F I D E N T I A L SECTION 01 OF 03 TBILISI 003046

SIPDIS

SIPDIS

DEPARTMENT FOR EUR DAS BRYZA AND EUR/CARC

E.O. 12958: DECL: 11/19/2016
TAGS: PREL PGOV GG RU
SUBJECT: GOG NEEDS STRATEGY FOR THE DEVELOPMENT AND
INTEGRATION OF AKHALKALAKI


Classified By: Ambassador John F. Tefft for reasons 1.4 (b) and (d).


1. (C) Summary: On November 7-8, PolEcon Chief and Poloff
traveled to the multi-ethnic region of Samstkhe-Javakheti to
meet with newly-elected local officials, NGO leaders, media
representatives, and university students. The purpose of the
visit was to reinforce the USG's commitment to increased
integration of ethnic minorities in Georgia's political and
economic development and to urge the newly-elected officials
to use their increased powers to address the needs of their
constituents. The key obstacle to the development of
Akhalkalaki, the region's most volatile city and home to a
Russian army base which is set to be withdrawn by 2007, is
geographic isolation and pervasive poverty. Despite
promising ideas from newly-elected officials, local
authorities need to do more to coordinate a regional economic
and political development strategy in order to reduce ethnic
tensions in the region, increase investment, and create jobs.
Local authorities also need to identify economic
opportunities that will grow out of the Millennium Challenge
Compact's $100 million road-building project linking the
region with Tbilisi and Armenia and other USG assistance
activities. GOG officials need to spend more time in the
region and appoint a new Presidential Representative for
Civil Integration who can focus government efforts to
incorporate the region's ethnic minorities. The Embassy team
passed the first two messages to the local authorities,
NGOs, and the public, while Ambassador passed the last to
Presidential Chief of Staff Giorgi Arveladze. End Summary.

--------------
USG Message
--------------


2. (C) On November 7-8, PolEcon Chief and Poloff traveled to
the multi-ethnic region of Samstkhe-Javakheti to meet with
newly-elected local officials, NGO leaders, media
representatives, and university students. PolEcon Chief
underlined the USG's commitment to increased integration of
ethnic minorities in the nation's political and economic
development. PolEcon Chief cited the Millennium Challenge
Compact (MCC) road-building project which will link
Akhalkalaki with Tbilisi and Armenia and USAID projects
supporting newly-elected local officials as evidence of the
USG's commitment to the region.


3. (C) PolEcon Chief also urged local government officials to
use their new budgetary and political authority, enacted as
part of this year's local government reforms, to address the
concerns of their constituents. PolEcon Chief advised them
to look at the MCC road project as a catalyst to attract
investment so that once the project is complete investors and
infrastructure would be ready to take advantage of it. In
meetings with NGO leaders, media outlets, and university
students, PolEcon Chief encouraged people to consider how to
make profitable businesses out of the highly prized goods of
Akhalkalaki: cheese, trout, and milk. She urged the
community to work with newly-elected local governments to
develop a strategy for economic growth with a focus on
getting Akhalkalaki's produce to market in Tbilisi, Armenia,
and beyond.

-------------- --------------
Meeting with The President's Rep for Samstkhe-Javakheti
-------------- --------------


4. (C) In a meeting with PolEcon Chief and Poloff, Giorgi
Khachidze described his role as the President's
Representative to Samstkhe-Javakheti as that of a
"supervisor" over local government activities in the region.
He said he has the right to suspend any Sakrebulo (municipal
council) decision but acknowledged that the Sakrebulo could
challenge his suspension in the courts. Khachidze sees his
role as a "motivator" for local governments. He described a
program he proposed to Parliament to increase local
government activity in his region by measuring Sakrebulos
against each other on their success in meeting budgetary
targets and fighting corruption.


5. (C) On minority issues, Khachidze said that elements in
the ethnic-Armenian city of Akhalkalaki play the ethnicity
card to foment tensions and operate outside Government
controls. He said that his Government has had to scale back
tax inspections and unpopular business registration drives in
order to avoid claims that the GOG is "suppressing
minorities." He believes that the "rule of law" will be
easier to establish once the Russian military base in the
city is withdrawn at the end of 2007, but acknowledged that
the withdrawal would also have a negative effect on the local
economy.

TBILISI 00003046 002 OF 003



--------------
Meetings with Akhalkalaki's New Government
--------------


6. (C) The team met with the newly-elected Chairman of the
Akhalkalaki Sakrebulo, Khachatur Aivazian, in his unheated
and sparsely furnished office. Aivazian, an Armenian,
offered a rose-hued assessment of the situation in
Akhalkalaki and lavished praise on the Saakashvili
administration for bringing "democracy to Georgia." Aivazian
described Akhalkalaki's problems as "economic" rather than
"ethnic" identifying agricultural development and
reconstruction of the city's sanitation system as critical
tasks for the Government. He added that his budget was "too
small" and hoped that the central government would contribute
more than the planned 50 percent. PolEcon Chief encouraged
Aivazian to also consider ways that he could increase the tax
base by improving the economy rather than relying only on
subsidies from Tbilisi.


7. (C) Sakrebulo member Artur Yeremian said that the MCC road
would help attract investment in Akhalkalaki as it would link
the region with Tbilisi and Armenia. He said the local
government needs to focus on energy issues in order to
consolidate and capitalize on any investment that develops
out of the MCC project. He said the Government needs to
target the region's potential for hydro-electric power
generation and develop the infrastructure necessary for
gasification. He said the region has historically relied on
agriculture as the dominant feature of the economy. He
believes the Government needs to develop agricultural
technology in the region in order to increase yields and
guarantee the consistency in the region's produce.


8. (C) Opposition Sakrebulo member and former-Mayor of
Akhalkalaki Nair Iritsian known for his inflammatory
rhetoric, told PolEcon Chief that the October 5 local
elections had been "rigged" by the government. He claimed
that his independent group of candidates -- who are linked to
Armenian nationalist groups -- won 70% of the vote while the
National Movement picked up only 30% - the opposite of the
official election results. (Note: We doubt this claim as
Iritsian was unable to provide any clear evidence to support
his assertion and USG and NGO election observer teams in
Akhalkalaki reported no irregularities which would have
completely reversed the results of the election. End Note.)

--------------
The NGO Community
--------------


9. (C) During a meeting with a large group of NGOs in
Akhalkalaki, community leaders expressed the need for
economic development and job growth in the region. The
leaders voiced concerns over recent cuts in public sector
jobs as the numerous local governments consolidated into
regional structures as part of recent local government
reforms. PolEcon Chief delivered the unpopular message that
the Government could no longer build a factory to employ
citizens, as in Soviet times. Rather, the local government,
in concert with civil society groups, need to take steps to
make the region more attractive to investors by re-building
the infrastructure in order to increase investment in the
region. PolEcon Chief described USG assistance projects
which are providing technical assistance to local
governments, civil society, and small businesses to help them
do this. The NGO leaders said that more funds needed to be
allocated to civil society groups from the local budget and
from assistance organizations in order to develop the
capacity of local NGOs to serve as watchdogs on local
government activities.

--------------
Media and University Outreach
--------------


10. (C) In interviews with Akhalkalaki TV and the news
journal Southern Gates, and in a meeting with University
students in Akhaltsike, PolEcon Chief reinforced the USG's
commitment to see the region play a more active role in the
political and economic development of Georgia. PolEcon Chief
emphasized that the October 5 elections were a key step in
the consolidation of democracy in Georgia. PolEcon Chief
also expressed the hope that the newly elected
representatives will use their increased powers, including
budgetary powers, to address the concerns and needs of their
citizens. PolEcon Chief also underscored how U.S. assistance
is helping toward that end and reiterated the importance of
using USG assistance to help build the local economy.

TBILISI 00003046 003 OF 003



--------------
Comment: The Need for Strategy
--------------


11. (C) Comment: Although many promising ideas for economic
development and civil integration were proposed by the local
government and NGO leaders, a clear strategy needs to be
developed in order for residents to make the best use of
economic assistance from abroad and from Tbilisi to rebuild
an economy based on their natural assets - highly prized
produce - rather than an unprofitable factory put their by
the Government. It is also clear that the role of the
appointed Presidential Representative needs to be worked out
in a way that allows local governments to act independently
to achieve locally-defined objectives.


12. (C) The pervasive poverty, isolation, and the withdrawal
of the Russian military base weigh heavily on the minds of
local residents and make them susceptible to Russian efforts
to foment instability in the region. The local government,
the Presidential Representative, and especially central
authorities from Tbilisi, can help to neutralize Russian
efforts by simply meeting with local residents and listening
to their concerns. We are encouraging the GOG to take this
step and also urging them to appoint a new Presidential
Advisor for Civil Integration - preferably from an ethnic
minority community. End Comment.
TEFFT