GEORGIA BI-WEEKLY UPDATE OCTOBER 26

UNCLAS SECTION 01 OF 02 TBILISI 002664 SIPDIS SIPDIS E.O 12958: N/A TAGS: PREL PGOV PHUM ECON GG SUBJECT: GEORGIA BI-WEEKLY UPDATE OCTOBER 26 ¶1. This cable contains current items of political, economic, and social interest concerning Georgia during the weeks of October 13-26. Deputy Governor Resigns, Levels Charges -------------- ¶2. Deputy Governor of the Mtskheta-Mtianeti region Beso Sabashvili announced his resignation October 25 in a press conference at the headquarters of the opposition Labor Party. Sabashvili blasted the government for corruption, charging specifically that two posh villas under construction in the village of Choportia belong to President Saakashvili's uncle Temur Alasania and to Saakashvili's in-laws, the parents of First Lady Sandra Roelofs. Sabashvili displayed photos of the villas and claimed that the construction was taking place illegally within the preserved territory from where the Tbilisi population gets its potable water supply. Sabashvili also alleged that the construction is financed from the state budget and is carried out by a government agency. Members of the Labor Party supported Sabashvili and declared that if any "any damage was inflicted" upon Sabashvili or his family members after his statement, the entire responsibility would be placed personally on Saakashvili. Farmers Complain about Grape Prices -------------- ¶3. Georgian agriculture authorities have reported a record harvest of grapes this year. However, winegrowers all over Georgia were frustrated with the falling price of grapes offered to them by wine producers. The abundant supply of grapes, coupled with the continued loss of the Russian export market, prompted buyers to cut grape prices in half. In the Racha region in western Georgia, which is famous for an expensive variety of grapes used for producing semi-sweet and dry red wine, the number of wine producers accepting grapes went down from seventeen to three and the price offered per kilogram from GEL 2 to 1.5 (around 92 cents). In the Kakheti region of wastern Georgia, which is the main winegrowing area, farmers could collect as little as 40 tetri (25 cents) per kilogram, if they could find a buyer at all. Some of them made a public demonstration of chopping down grape vines, to replace them with other more profitable agricultural plants. The grape harvest has become part of a larger political standoff between the authorities and the opposition, with the latter accusing the government of failing to provide adequate measures to help winegrowers suffering from the Russian embargo. Inflation Raises Concern -------------- ¶4. According to the Statistics Department, consumer prices for food have risen by 6.23 percent within a month (September 20 - October 18). The price increase was particularly notable, in some cases up to 50 percent, for essential food products, such as oil, salt, sugar, and wheat flour. The media is speculating that an increase in bread prices may be in the offing, and emphasizing the negative impact it would have on vulnerable social groups. Twelve-month inflation was officially 9 percent at the end of September 2007. President Saakashvili publicly pinned blame for price increases on importers of consumer goods, who he thinks have monopolized the market and boosted prices artificially. He tasked the Interior Ministry to probe into such monopolies. Cooperation with IMF Wrapping Up -------------- ¶5. The Georgian government is not going to continue cooperation with IMF, Kakha Bendukidze, State Minister in Economic Reforms, said after a government meeting on October 25. Bendukidze noted that IMF will stay in Georgia for one year after completing the Poverty Reduction and Growth Facility (PRGF) program. He added that the Fund's mission will visit Georgia next week. The National Bank of Georgia received a total of USD 149.4 million under terms of the PRGF, which was approved in June 2004. The IMF offered the Georgian government three options for cooperation after ending of this program -- continuing PRGF, the so-called annual stand-by program, and supporting policy instrument. Bidders for Port and Free Economic Zone in Poti -------------- -- ¶6. On October 17, Minister of Economic Development Giorgi Arveladze announced that eleven companies will compete in the tender for concession for 49 years of the Black Sea port of Poti and a new Free Economic Zone adjacent to the port. The following companies are participating in the tender: RAK Investment Authority (UAE),ZIM PORTS (Israel),International Container Terminal Services (Philippines),D P and Jafza (UAE),a consortium established with coordination of the Turkish Exporters' Union (Turkey),ASHTROM International Silk Road Group (Israel),CMA CGM (France),Mark Worldwide (Korea),Hamburger Hafen - Und Logistic Aktiengesellschaft (Germany),Hutchison Westports (Great Britain),and ZER International Holding (Turkey). The deadline for submission of proposals was October 15. According to Arveladze, priority will be given to the company that presents the best proposal for development and operation of the port and the economic zone. The winner will be announced two weeks after the deadline. TBILISI 00002664 002 OF 002 Mayor of Tbilisi Shares Plans with AmCham -------------- ¶7. Mayor of Tbilisi Gigi Ugulava, the key-note speaker at an American Chamber of Commerce Roundtable on October 24, outlined the city's draft development plan for the next 20 years, and identified the key priorities of the municipality as: tourism, education, and the financial sector. Also, Ugulava said his office was working to develop city utilities and infrastructure, including water, sewage, electricity and gas, for multiple new buildings and districts that are under construction. To improve traffic in the city, the Mayor's Office plans to privatize public transportation, including buses and the subway, and to announce a tender for a long-term concession for parking and electronic ticketing. The Mayor's office is also looking to attract a private investor for waste management and water supplies. Ugulava noted the ongoing construction of a new rail link between the airport and the city center, a USD 100-150 million project designed by the Turkish company Nurol, that he said would ease traffic congestion. TEFFT