Georgia Bi-Weekly Update June 1

UNCLAS SECTION 01 OF 02 TBILISI 001298

SIPDIS

SIPDIS

E.O 12958: N/A
TAGS: PREL PGOV PHUM GG
SUBJECT: Georgia Bi-Weekly Update June 1



1. This cable contains current items of political, economic, and
social interest concerning Georgia during the weeks of May 19-June

1.

Government Demolishes Church in Adjara
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2. On May 21, residents of the village of Peria, in the Khelvachauri
region of Adjara, together with opposition politicans and local
clergy, held a protest action against the local government's
demolition of a church under construction. Although local officials
claimed that the construction was illegal, the opposition has seized
on the issue, and especially on reports that the Adjara Governor
Levan Varshalomidze had told church officials that the new church
had to go because President Saakashvili wanted to build an amusement
park on the site, which is on a mountain overlooking Batumi. As the
controversy spread, Saakashvili met with Patriarch Illia II to
discuss the issue, and the President's spokesperson said the
incident was a result of misunderstanding and poor coordination
between church officials and the local government in Adjara. In the
end a compromise was reached: church construction was resumed, but
local government will also build a wedding palace, amusement center,
and other objects in the area. In an ironic postscript, within a
week after the demolition of the church, the Khelvachauri
municipality building collapsed in an unrelated accident.

Accusations against Special Operations Department
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3. On May 24, Embassy representatives attended a screening of a new
documentary backing up charges of abuses committed by the Ministry
of Internal Affairs Special Operations Department (SOD). In a news
conference May 22, Public Defender Sozar Subari demanded that SOD
chief Irakli Kodua be suspended from the office for involvement in
the arrest of innocent men, their torture and fabrication of
evidence. As described by Subari and the documentary, the case
involved three men detained by SOD operative in the Mestia district
in western Georgia in February 2007 for alleged illegal possession
of arms and drugs. Subari said his office had determined that
evidence against the men was fabricated. Kodua allegedly did this
for "personal revenge" after being angered when a friend of one of
the men made a late night phone call to his girlfriend, Nanuka
Zhorzholiani, a former reporter of Rustavi 2 TV and now head of the
NATO Information Center.

Independence Day Celebrations
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4. May 26, Georgia's independence day, was marked by the
largest-ever military parade with the participation of 15,500
soldiers, military hardware, multi-purpose and attack helicopters,
and fighter jets. Addressing the crowd, President Saakashvili
stressed that Georgia was "one nation" made up of different
ethnicities. He said "it is our responsibility to maintain a
Georgia that is multi-ethnic and multi-confessional, which has been
left to us by our ancestors, because multi-ethnicity is a treasure
and religious diversity is a treasure." As in last year's address,
Saakashvili spoke about the responsibility to maintain Georgia's
borders "as our fathers have left to us."

Saakashvili on Tolerance
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5. President Saakashvili participated in an international conference
on "Globalization and Dialogue among Civilizations," held in Tbilisi
May 24. In his speech Saakashvili spoke extensively spoke about
religious tolerance and promotion of a multiethnic culture in
Georgia. "When I was in opposition, I said it and I'll say it again
and again: for those people who hate Armenians in Georgia, I will be
Armenian; for those who hate Azerbaijanis, I will be Azerbaijani.
Recently, someone said I was Ossetian, which I take as a compliment.
Of course, it would be a great honor for me to be Jewish,"
Saakashvili said. Speaking of violations of the rights of the
ethnic groups, Saakashvili expressed frustration that the
international community has been silent about human rights abuses in
Georgia's breakaway regions. He referred specifically to a recent
incident in which Georgian books from schools in Gagra (Abkhazia)
were reportedly burned in the town center.

Russian Embassy to Issue Some Visas
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6. Starting May 29 the Russian Embassy in Georgia resumed the
issuing of visas to a limited number of Georgian citizens. Visa
issuance was suspended in September 2006 during a dispute over the
Georgian arrest of four Russian officers for espionage. Under the
new policy, the Embassy will issue visas on the basis of private
invitations to close relatives (parents, brothers/sisters and
children) of Russian citizens, as well as to Georgian citizens who
have temporary residence status in Russia. Visas will allow a stay
of only 3-4 months. Embassy officials described the change as "a
humane act" that "has nothing to do with politics." Previously,
visas were issued only for medical emergencies.

Saakashvili Visits Jordan
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7. President Saakashvili visited Jordan May 18-21, where he took
part in a World Economic Forum meeting and a summit of the so-called

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G11 countries. Saakashvili gave a speech entitled "Georgia: A
Formula for Success" on his country's reforms. Saakashvili also met
with Jordan's King Abdullah. On the margins of these events Jordan
and Georgia signed a framework agreement that will form the basis
for future cooperation between the two countries. King Abdullah was
quoted as saying he was impressed with the reforms that are being
carried out in Georgia. It was reportedly agreed that Abdullah
would visit Georgia in mid-June.

Public Transportation Costs May Go Up
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8. Following the recent decision of Tbilisi authorities to increase
fares for subway and bus transport, a new resolution is pending that
would double fares for minibuses (commonly called by the Russian
name marshrutkas). Marshrutkas are a preferred means of
transportation for most Georgians because of their flexible routes.
The fare increase would affect a broad portion of the population,
already affected by recent increases in cost of gas, electricity,
water, and other means of public transport, as well as the rising
price of consumer goods.

Batumi Airport Builds Ties to Turkey
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9. Batumi International Airport, on Georgia's Black Sea coast,
opened May 26. The airport is designed to accommodate domestic and
international flights, and (thanks to a special arrangement with
Turkey) flights that are treated as domestic Turkish flights.
President Saakashvili and Turkish Foreign Minister Abdullah Gul
attended the opening ceremony. The airport was constructed by the
Turkish company Tepe-Akfen-Vie (TAV),the same company that built
the Tbilisi International Airport opened earlier this year. TAV has
a management contract with the Georgian government to operate both
airports.

Free Trade Zones May Become Reality Soon
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10. Parliament has passed a draft Law on Free Industrial Zones in
the first reading without major changes. The law was initiated by
President Saakashvili to attract investment and technologies, and
create jobs. It would allow the creation of free economic zones on
territories with an area of at least 10 hectares. The law envisages
0 percent of VAT and property tax on all activities within the zone.
In some cases, companies may be exempt from the profit tax as well.
The law also envisages elimination or simplification of licensing
procedures. Transactions can be carried out in any foreign
currency. Business-related disputes will be referred to
international arbitration courts. Several ministries have requested
clarification of certain clauses in the law before its second
reading. The law will likely receive final passage by the end of
June and be fully in force by September 1, 2007.

IMF Delegation Visits Georgia
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11. An International Monetary Fund mission headed by John
Wakeman-Linn arrived in Tbilisi on May 24 for a one-week visit.
Roman Gotsiridze, President of the National Bank of Georgia (NBG),a
recent target of parliamentary criticism for the increased inflation
rate, announced that the IMF fully supports the fiscal and monetary
policy implemented by the NBG. IMF mission member David Owen said
after meeting Georgian officials that the keys to keeping inflation
below 9 percent were foreign currency reserve accumulation, export
growth, and increasing competitiveness of local production through
continuing structural reforms. He said the NBG should proceed with
capital inflow regulation by means of interventions in the currency
market. The IMF is currently considering giving Georgia a USD
20-million tranche within the framework of the Poverty Reduction and
Growth Facility (PRGF) program.

Reform of Business Dispute Resolution
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12. On May 21, Finance Minister Lexo Alexishvili made a presentation
for the Georgian business community on the GoG's efforts to
facilitate tax and customs dispute resolution with the goal of
improving the business climate. The plan calls for the introduction
of a dispute case management and tracking system, including
statistical analysis, process monitoring and training of the
Georgian government staff. The USAID/Business Climate Reform
Project has invited a former Commissioner from the Department of
Taxation and Finance of New York, Georgian-American Andrew Sidamon
Eristoff, to assist with the reform. In 2006, the Finance
Ministry's Council of Appeals received 78 cases, of which one-third
were resolved in favor of the entrepreneurs. In the first quarter
of 2007, the Council received 44 appeals. Alexishvili said the
increased number of appeals was a sign of the increased credibility
of the Council. He also stressed the importance of strengthening of
the judiciary system, because half of the cases declined by the
Council are eventually filed with the courts.

TEFFT