GEORGIA BI-WEEKLY UPDATE DECEMBER 14

UNCLASSIFIED SECTION 01 OF 02 TBILISI 003096

SIPDIS
SIPDIS
E.O. 12958: N/A
TAGS: PREL PGOV PHUM ECON KDEM GG
SUBJECT: GEORGIA BI-WEEKLY UPDATE DECEMBER 14



1. This cable contains current items of political,
economic, and social interest concerning Georgia during the
weeks of December 1-14.

Georgian Politicians React to Medvedev
--------------

2. Georgian political figures reacted immediately -- and unanimously
-- to Russian President Putin's endorsement of Dmitry Medvedev to be
his successor. Both ruling party and opposition leaders agreed that
Medvedev could not be expected to change Russia's current policy
toward Georgia. While no one predicted a major change in
Georgian-Russian relations, several politicians, and especially
opposition presidential candidates, used the opportunity to call for
improved relations with Russia. Statements from candidates
included:

-- David Gamkrelidze, New Rightist leader, pledged that if elected
he would make an effort to normalize Georgian-Russian relations.
-- Levan Gachechiladze, United Opposition leader, said that under a
new president, Georgian-Russian relations should become respectful,
although Georgia should strictly stick to its principles.

Nino Burjanadze, Acting President of Georgia, gave a typically
balanced statement, saying "Georgia is interested in normal
relations of partnership with Russia. In this case both countries
will win."

Employment Program Backfires
--------------

3. The government was forced to suspend a pre-election plan to
assign people to three-month job training opportunities, because the
number of positions available was far short of the demand. Eleven
registration offices had opened, starting December 5, to register
jobseekers, but the offices could not cope with the number of
applicants who crowded into them, sometimes leading to angry
complaints from would-be applicants. The first day of the program
was also plagued with the death of a 55-year woman, a displaced
person from Abkhazia, who suffered heart attack while jammed in the
crowd. Patrol police were unable to enforce order outside several
of the offices, as the number of applicants exceeded both the number
of positions and the staff's ability to process their paperwork.
Dissatisfied applicants gave critical interviews to journalists on
the scene. Georgia's Minister of Health and Social Security
announced the temporary suspension of the program to allow time for
satisfying the needs of those jobseekers already registered and to
find more vacancies for other applicants.

New Jail Opens in Tbilisi
--------------

4. The government took a step to reduce overcrowding and to improve
conditions in prisons -- in accordance with Council of Europe
recommendations -- when it opened a new jail in the outer Tbilisi
neighborhood of Gldani. The complex comprises five cell blocks, a
hospital and an administrative building and has the capacity to hold
4,000 inmates. The facility is equipped with central heating and
other amenities, including a library and a shop. More than 2,000
inmates have already been moved to the new facility from the more
centrally located but ramshackle Prison #5. At the same time as the
opening of the new jail, public television began airing public
service announcements stressing the rights of prisoners to decent
living conditions.

Prime Minister Predicts FTA with EU
--------------

5. On December 4, Lado Gurgenidze made his first official visit as
Prime Minister to Brussels, where he met with a variety of European
and NATO officials. Commenting on the visit, Gurgenidze told
Georgian media that a comprehensive Free Trade Agreement (FTA) was
expected to be signed between Georgia and EU in 2009. Gurgenidze
predicted progress would be made toward the FTA in 2008, which would
then be finalized the next year. Gurgenidze stressed that Georgia
already had the so-called GSP+ trade system with the EU, covering
over 7,000 products. The new agreement would, however, be a step
forward, "boosting Georgia's exports and encouraging Georgian
companies."

Government's "Cheap Credit" Initiative
--------------

6. On December 11 Prime Minister Lado Gurgenidze met representatives
of commercial banks to discuss the pre-election initiative of
Mikheil Saakashvili to extending "cheap credit" to businesses and
individuals through Georgian commercial banks. According to the
Prime Minister, the government launched a special group, which will
develop rules and procedures for commercial banks to serve and
extend credits within this program starting in early 2008. The goal
of the project is to ease access to the credit resources for
businesses and individuals, to encourage domestic production and
export. Participation of the commercial banks in this project is
voluntary. Reportedly, the government of Georgia will allocate USD
300 million for the project and interest rates of the credit
resources extended by the commercial banks will be fixed at 4-10%
(compared to the present 16% and up for the commercial projects).
The National Bank of Georgia will monitor the project.

TBILISI 00003096 002 OF 002



Patriarchate Warns against "Sect"
--------------

7. According to a report by the Georgian TV company Mze, the
Georgian Orthodox Patriarchate has issued a warning about the
recent intensification of the activities of what it called the
"Moonist Sect," or the Federation for World Peace, founded by
Reverend Sun Myung Moon. The warning was prompted by the poster
released by the organization which displayed the photo of a Georgian
priest, apparently without the priest's knowledge. Mze reported
that supporters of Reverend Moon established the organization in
Georgia in 2005, but became active more recently. The Mze story
alleged that a number of scandals were associated with the
organization, including questionable mass marriages, but provided no
further information.

Georgia's TBC Bank Expands in Azerbaijan
--------------

8. Mamuka Khazaradze, the head of TBC Bank supervision board,
announced on December 11 the acquisition of 75% of the Azeri credit
company SOA Credit, a daughter company of the U.S.-founded Share
Bank, which still holds 25% in SOA Credit. TBC intends to invest
USD 30-50 million next year in SOA Credit to reorganize it into a
serious financial institution, offering a broad range of banking
service to consumers in Azerbaijan. Special attention will be paid
to the retail market and small and medium business credit in
Azerbaijan, with financial resources for SOA Credit to be attracted
from international finance institutions. TBC Bank intends to start
activity in other CIS countries within the next two years as well.
At his stage countries are not specified, but the bank mentions that
the initial volume of investment will be the same $30-50 million in
each country. In terms of assets and liabilities TBC ranks as the
second largest bank in Georgia.

Grants to Support Scientific Innovations
--------------

9. On December 10 Georgia's Research and Development Foundation
(GRDF),a partner organization of the U.S. Civilian Research and
Development Foundation (CRDF),held its third annual grants
competition to support commercialization of scientific innovations.
For the first time the Georgian Government through its National
Science Foundation (GNSF) supported GRDF's initiative and provided
80 percent of funding for the grants. Five winners were chosen out
of twelve short-listed project proposals, and each was awarded with
up to GEL 60,000 (USD 37,500) to develop and market their respective
products. GNSF further singled out three other proposals and
committed to attract additional funding for their implementation.
The initiative is intended to spur scientific development in
Georgia, which due to a lack of funding has suffered considerable
decline and brain-drain. Among the winners institutions were
Tbilisi State Medical University, Institute of Metallurgy and
Material Science, Institute of Medical Biotechnology, Caucasian
Institute of Mineral Resources and Georgia's Technical University.


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