Ruling Georgian Dream Party Reversed its Support for Vital Project,
Wiping Out Economic Benefits for Georgia
TBILISI, GEORGIA, 9 September, 2020 – The Anaklia Development Consortium (ADC), the company originally selected by the Government of Georgia to develop the strategic Anaklia Port Project, today shared additional details of the Government’s campaign, directed by the ruling Georgian Dream party, to undermine the project by dissuading potential project investors, lenders, contractors and suppliers from joining the project in order to kill it.
The following statement is issued on behalf of the ADC Supervisory Board:
“All infrastructure projects of such scale require government support; namely the encouragement of lenders and investors, the assistance in permitting, regulatory approvals and a favorable tax regime, and providing any ancillary support; in this instance, the provision of land and the construction of road and rail infrastructure. For a government to actually oppose an infrastructure project that it had itself approved is highly unusual in the global economy.
“The Georgian Government’s campaign to strangle ADC’s ability to develop the Anaklia Port Project represents a self-inflicted wound for itself and considerable injury to Georgia’s economy and its role in the region.
“Taken together, the Georgian Government's specific actions are part of a deliberate and well-orchestrated campaign to destroy a project which the Government itself originally sponsored and endorsed, but subsequently chose to destroy as a result of what appear to be the political and economic self-interests of the Georgian Dream Party and its principals.
“The Government manufactured all sorts of excuses for not wanting to see various investors, lenders and partners involved in the project, but the Government really only had one purpose: to choke the project to death by scaring away everybody who might have an interest in supporting it.
“Also, is it beyond coincidence that government ministers – including two Prime Ministers -- who voiced support for the project or otherwise expressed concern about the growing controversy with the project were tendering their resignations shortly after such comments were made?
“The damage to Georgia caused by the Government goes well beyond the potential loss of the Anaklia Port and the associated Special Economic Zone. The conduct of the Government is scaring away investors at a time when Georgia cannot afford to lose any more foreign investment. According to the National Statistics Office of Georgia, the amount of foreign direct investment in Georgia has fallen from nearly US$ 2 billion in 2017 to just over US$ 1.3 billion in 2019, and in the first quarter of 2020, stood at only US$ 171.8 million - a catastrophic decrease even before the Covid crisis began to take effect. As Retired U.S. Lt. Gen. Ben Hodges of the Center for European Policy Analysis said, ‘the government only has itself to blame.’”
Some examples of the Government’s efforts to strangle ADC and the Anaklia Port Project include:
- Georgian Dream party leader Bidzina Ivanishvili requested to meet with ADC to discuss the Anaklia Port Project and asserted that the expansion of Poti Port could achieve the same objectives of the Anaklia Port at a far lower cost.
- During a June 12 meeting of the Georgian Dream party, attended by more than 100 party officials, Party Leader Bidzina Ivanishvili personally blamed Prime Minister Giorgi Kvirikashvili for his actions in support of the Anaklia project and for having close ties to ADC investor Mamuka Khazaradze. Mr. Kvirikashvili resigned the day after that meeting.
- In February 2019 ADC learned that during an October 2018 meeting with senior U.S. State Department officials in Tbilisi, Mr. Giorgi Gakharia (then Minister of Interior) advised the U.S. officials that the Anaklia Port project was not in Georgia’s interests.
- SSA Marine, which was selected as the Anaklia Port operator and was a potential investor, alerted ADC of its concerns about what seemed to be the Government’s support of an expansion of the Poti Port. (Following detailed studies sponsored by the Government back in 2013-14, it had been determined that Poti Port could never meet Georgia’s needs for a Deepwater Port, which is why the government itself selected Anaklia for development at that time. The Government’s subsequent expressions of support for expansion at Poti was a clear signal to the lending and investment community that the Government was no longer supportive of Anaklia.)
- A sovereign European development bank advised ADC that it had decided against supporting the project because of the negative actions of the Georgian Government, and the possible shift of support to the Poti Port.
- Another sovereign European development bank advised ADC that it was withdrawing its support because one of its counterparts had just done so (above) due to the state’s apparent shift of support from Anaklia to Poti.
- It has been reported that Infrastructure Minister Maya Tskitishvili, in ministerial hearings before Parliament, undermined SSA Marine as a potential investor and as the port operator, claiming the company lacked experience and financial capacity. These assertions were not true. In the process of her speech, the minister also breached legal obligations of confidentiality that were associated with the investment agreement.
- SSA Marine advised ADC that it was suspending its activities related to the Anaklia Port project.
- Mr. Giorgi Kobulia, Minister of Economy and Sustainable Development, told “Forbes Week” that the negative public discussions and media reports of the Anaklia project were having a negative impact on the business climate within Georgia. He subsequently resigned within days of the interview.
- A major U.S. private equity firm which was in advanced negotiations with ADC to join the project revealed to ADC that Government officials warned the firm to stay away from the project.
- Prime Minister Mamuka Bakhtadze, in a trade visit to the U.S., met separately with SSA Marine, the leadership of the U.S. private equity firm that were interested in investing in the project, and with U.S. Secretary of State Mike Pompeo in Washington, D.C. Secretary Pompeo expressed support for the Anaklia project with the prime minister standing next to him, saying it would “strengthen Georgia’s ties with free economies and not allow Georgia to be under the economic influence of Russia or China.” Upon his return to Georgia, Mr. Bakhtadze resigned, and this again put the project in unchartered waters.
- At a meeting in Tbilisi, a large Hong Kong-based private equity group with significant Central Asian transportation synergies that was considering joining the project was told bluntly by Infrastructure Minister Tskitishvili that the Government did not desire their participation in the project. At this same meeting Ms. Tskitishvili reaffirmed the Government’s seeming opposition to SSA Marine’s involvement in the project.
- Giorgi Volski, Vice Speaker of Parliament, falsely claimed that the Hong Kong private equity group mentioned above is a “Russian” company, with the intention either of disparaging it or sowing further confusion about the government's position in respect of the project.
- In a meeting between Prime Minister Gakharia and an Anaklia Supervisory Board member, Mr. Gakharia stated that “things had to get quiet” before he could reassure the major potential U.S. investor of the state’s support for the Anaklia Project, which the board member understood to be a condition that ADC and Mr. Khazaradze stop criticizing the government publicly on its opposition to the Anaklia Project, and the government would stop criticizing ADC.
- Also, the Supervisory Board was promised a letter of support to a U.S. investor from the highest levels of the Government, but this never materialized, even though ADC did comply with the Government’s request.
- A delegation from the U.S. (in Tbilisi to participate in the 5th annual Tbilisi International Conference sponsored by the McCain Institute) met with new Prime Minister Giorgi Gakharia, and subsequently with Mamuka Khazaradze. Representatives of the delegation told Mr. Khazaradze that Prime Minister Gakharia told them the Anaklia project was not commercially viable when this was patently not the case.
- Fadi Asly, chairman of the International Chamber of Commerce in Georgia, is quoted in the media saying, “No one will invest in Anaklia project as long as Bidzina Ivanishvili wants to destroy it.”
Taken together, these are only a selection of the instances where the Government of Georgia actively undermined the project in an effort to prevent ADC from developing the project. ADC intends to present evidence during the upcoming arbitration proceedings to demonstrate the degree to which the Government took such steps.
Further details of the Anaklia Port project and ADC can be found at http://anakliadevelopment.com
Startup-Friendly, a continuation of the Startup Georgia program to encourage startup businesses, is yet another project seeking to support businesses.
Startup-Friendly will help startups establish relations with large business companies, while enabling representatives of large business to engage in the development of different fields and to make mutually beneficial investments.
The latest, promising, and encouraging product under the Government's Four-Point Agenda, this is how Prime Minister Giorgi Kvirikashvili characterized Startup Georgia after attending today the new project's presentation.
"Startup Georgia in itself is also our Government's startup that has a greater return because it transforms young people's thinking into a newer, dynamic, and future-oriented brand, and this is the greatest outcome of this program. I am happy to see so many young winners in the first round of Startup Georgia. You won in a competitive, transparent competition in which not only local startup experts, but also venture capitalists, CEOs of leading companies from the Silicon Valley and different countries took part. I believe we have launched something great-a brand new phase, a new stage in the development of Georgia's economy," the Prime Minister stated.
The Head of Government believes that startups are the most dynamic and fast-growing parts of the Georgian economy.
According to Giorgi Kvirikashvili, no large business can develop as fast as innovative companies.
"Therefore, our goal is to have as many people as possible join this way of thinking. This is the greatest return ensured by Startup Project, a project presenting Startup-Friendly as its second phase. Startup-Friendly seeks to establish a format for relations between rookie startups and large, established companies and successful businesses. This format is necessary given that every startup needs communication with new technology and large capital. Consequently, this format, which is in the making today, is the very bridge providing young startup businesspersons with access to big business," the Prime Minister stated.
The Head of Government commends those who were once rookie businesspersons but now show goodwill. The TBC Bank was the first to engage in the new project, whose founder Mamuka Khazaradze, according to the Prime Minister, started the bank with 500 USD.
"Such examples shape our economy. Such examples bring about the enthusiasm that pushes the country forward. Startup-Friendly will be a format encouraging friendship with startup companies and turning this friendship into a form of social responsibility assumed by big business. I congratulate you on this day. I am convinced that this step is a necessary component to enable you, startup businesspersons, to become part of large-scale economy. You are the best parts of large-scale economy. One of the main outcomes of this project is that large banks will not look down on startups. This is very important because I also have much experience as a banker, and I am familiar with banking practices. Therefore, we, as a startup economy, need different approaches, friendly attitudes from large companies toward such startup businesspersons with innovative thinking," the Prime Minister stated.
Giorgi Kvirikashvili emphasizes that Startup-Friendly will not be the last step in this direction, and that the Government has very interesting plans that will instill even greater enthusiasm among young people.
Held at the Technology Park, the presentation of the Startup-Friendly project was attended by members of the Georgian Government and representatives of both startup and large businesses.
Government of Georgia and Anaklia Development Consortium will sign the investment contract. The signing ceremony will be held in Anaklia on October 3 at 14:00. Prime Minister of Georgia Giorgi Kvirikashvili alongside with the first Vice Prime Minister, Minister of Economy and Sustainable Development Dimitry Kumsishvili and the founders of Anaklia Development Consortium Mamuka Khazaradze and Kurt Conti as well as regional director of Van Oord Govert van Oord will attend the ceremony.
Construction of Anaklia Deep Sea Port will be broken down into 9 distinct phases. The annual throughput of the port will be 100 million tons. The project is anticipated to create thousands of new workplaces.
The port will encompass about 400 hectares of land and it will cost approximately 2.5 billion USD. The port will open in 2020.
Number of natural gas consumers has reached million. The millionth customer is the family of Mamuka Khazaradze living in the region of Ajara. Subscriber's accession to the gas pipeline in the village of Khutsubani was celebrated today. Prime Minister of Georgia Giorgi Kvirikashvili, alongside with the SOCAR President Rovnag Abdullayev attended the event.
According to the head of the Government, the SOCAR Georgia Gas company has over 65 000 active and potential subscribers across Ajara and by the end of 2017 provision of gas to around 9000 customers is planned. Giorgi Kvirikashvili thanked SOCAR Company for its contribution to the friendly relations and strategic partnership between Georgia and Azerbaijan.
"Provision of gas and water to the population is among the Government's top priorities. This is vitally important in terms of preserving our environment and provision of gas to our villages, including those located in highland Ajara will eliminate the need for deforestation. We have comprehensive infrastructure development plans and construction of Khulo-Adigeni highway will launch in the near future to make the Batumi-Khulo destination compatible with the European standards. We have water supply related projects to ensure that Ajara, including highland area has a modern technology. This will include creation of modern, comfortable conditions for each of the Ajarian families. This is a duty of our Government that we perform with a great pleasure and responsibility. I would like to congratulate you, thank Mr. Rovnag Abdullayev - a true friend of Georgia and the SOCAR Company for reinforcing friendly and cooperative relations between Georgia and Azerbaijan," - Giorgi Kvirikashvili noted.
Prime Minister congratulated Mamuka Khazaradze on becoming the customer of natural gas and symbolically lit a stove in his house. SOCAR Gas Georgia Company gifted the millionth customer off the gas.
SOCAR Company intends to construct 360 km long pioeline and provide gas to more 8 935 customers by the end of 2017.