Georgia loses GEL 2 million as a result of a deal with Davit Khidasheli
Transparency International Georgia has been sounding the alarm about the increasing problem of high-level corruption in the country for years. One of the manifestations of high-level corruption is when businessmen close to the political elite receive various benefits in return for rendering certain services.
A good recent example of this phenomenon is Davit Khidasheli, a businessman of Georgian origin with Russian connections, whose involvement in the politically motivated Cartographers’ Case can be evaluated as rendering a service for the ruling party; using this case, it became possible to mobilize voters in favor of the ruling party in the parliamentary elections of 2020.
As for receiving a benefit, as it turned out, one and a half year after the launching of the case, a decision was made for the benefit of Davit Khidasheli which has caused a concrete financial damage to the State.
The decision in question
A few months ago, the online news outlet Mountain Stories found out that the State had issued a 49-year license to a company for the arrangement of a hunting farm on 104,712 hectares of forest (a third of the territory of Racha and 1.4% of the country’s territory) and that the final beneficial owner of the company was Davit Khidasheli.
The dissemination of information on the real identity of the recipient of the license and about the deal in general was followed by a negative public reaction, because this was a surprise both for environmental advocates and locals residents of the Racha region. The deal contains a number of problems in terms of forest management and violation of environmental regulations, due to which environmental advocates have filed a lawsuit in court, while the local population is collecting signatures with a demand to revoke the license.
However, the fact that Georgia sustained a concrete financial damage as a result of this deal didn’t receive proper attention – due to the issuance of the license for the arrangement of a hunting farm on a third of the territory of Racha, it is no longer possible to create a relatively large protected area, which would bring more revenue. According to our calculations, in this way, the State has lost direct revenue of about GEL 2,057,593 (USD 619,757).
The circumstances of the case indicate that the decision was made contrary to the State’s financial interests and for the benefit of a specific businessman with Russian connections, which may have been the result of a corrupt deal or improper fulfillment of official duties on the part of the public officials who made the decision.
Hunting farm vs. protected area
On February 10, 2022, LEPL National Forestry Agency announced an auction to sell a license for the arrangement of a private hunting farm in a forest with an area of 104,712 hectares in the Racha-Lechkhumi and Kvemo Svaneti Region for a period of 49 years. Only one company, HG Capra Caucasica LLC, took part in the auction. It was precisely on the basis of the application of this company that the Forestry Agency had developed the idea of arranging a hunting farm and announced the auction.
The winning company paid GEL 1,151,832 as the price of the license and took an obligation to invest an additional GEL 5 million during five years. Thus, the company paid GEL 11 per hectare and took an obligation to invest an additional GEL 47.7 per hectare.
The company that won the auction is owned by Global Victory Georgia LLC, which, in turn, is owned by Global Victory Investments Limited, a company registered in the United Arab Emirates. Mountain Stories found out that the final beneficial owner of these companies is Davit Khidasheli, a businessman with Russian ties of Georgian origin.
Several circumstances indicate that Davit Khidasheli is not an ordinary businessman and that he is close to Bidzina Ivanishvili and Prime Minister Irakli Garibashvili:
In parallel, work has also been underway for several years on the idea of creation of a protected area in Racha. In September 2021, the Caucasus Nature Fund (CNF) reached a landmark agreement with Wyss Foundation. The Government of Georgia (the Ministry of Environmental Protection and Agriculture) signed a corresponding Memorandum of Understanding on September 21, 2021. According to the agreement, CNF and Wyss Foundation were to allocate a maximum of USD 14 million for the creation of five new protected areas in Georgia (in Shida Kartli, Racha, Svaneti, Samegrelo, and Guria – none of these regions has a national park today), provided that certain international environmental standards (IUCN), such as the ban on hunting, were observed.
According to the agreement, the volume of funding depends on the area of the created protected area. CNF will allocate USD 15 per hectare, while Wyss Foundation will allocate USD 30 per hectare; accordingly, with this offer, the State receives USD 45 or about GEL 149.2 per hectare.
In the case of Racha, the discussion was about a territory of a minimum of 46,972 hectares – in which case the funding would be USD 2,113,740, and a maximum of 65,761 hectares – in which case the funding would reach USD 2,959,245. The funding is to be allocated during the first five years after the creation of the protected area and will be spent on the infrastructure of the national park and the salaries of employees
CNF is a nature conservation trust fund. The organization has been helping the governments of the three countries of the South Caucasus in creating protected areas for many years. It has been operating in Georgia since 2009. During this period, the organization has provided co-funding of EUR 8.5 million for seven protected areas of the country.As a rule, CNF operates with the principle of 50% co-funding, however, in the case of the protected area of Racha, better terms were being proposed – the country will not have to provide any co-funding for the creation of the national park in the first four years. It’s difficult to imagine the creation of a protected area with better terms with regard to financial benefit.
On July 18, two days after TV Pirveli aired an investigative story about the deal with Davit Khidasheli, the government announced that a protected area of 50,894 hectares would be created in Racha. A protected area of this size is to receive a funding of USD 2,290,230 from CNF.
However, this leaves 14,867 hectares that could have been added to the protected area, in which case the funding would have increased by USD 619,757 or by about GEL 2,057,593. By the government’s decision, this territory will be a part of Davit Khidasheli’s hunting farm, for which he will pay 13 times less.
Even considering the investment obligation of GEL 5 million taken by Khidasheli, the State still loses GEL 1,348,437 (the investment amount for 14,867 hectares amounts to GEL 709,155.9). However, of note here is the fact that Davit Khidasheli is not a reliable investor – he has yet to fulfill the investment obligation of GEL 12 million which he took in 2018 by purchasing Akhtala resort in Gurjaani.
In other words, in the period from September 2021 to March 2022, certain state decision-makers had two concrete proposals on the table regarding the forest in Racha:
- The first proposal came from a businessman with Russian ties who has not fulfilled his previous obligations to the State and who offered to pay GEL 11 per hectare (GEL 58.7 if we count the investment obligation);
- The second proposal came from a reputable international fund that has previously invested EUR 8.5 million in the conservation of Georgia’s nature and is paying a guaranteed USD 45 (about GEL 149.2) per hectare, or 13 times as much as the first proposal.
Considering this context, it should have been simple to make a decision that would bring the State the maximum benefit – specifically, the creation of a protected area with maximum territory and, only after this, the issuance of a hunting license for the remaining territory. With the decision that was made, the State has lost a revenue of about GEL 2,057,593.
Due to the above decision related to the management of the forest in Racha, the State has sustained a concrete financial damage. Considering that the aforementioned might be caused by a corrupt deal or improper fulfillment of official duties on the part of public officials who made this decision, we call on the Office of the Prosecutor General of Georgia to launch an investigation and to establish whether the decisions related to the management of the forest in Racha contain signs of corruption.
Publication of this report was made possible with the support of the Open Society Foundations. The views expressed in this publication are those of Transparency International Georgia and do not necessarily reflect the views of the donors.
 We have taken the official exchange rate (3.32) of March 11, 2022 (the date when the auction on the hunting farm license was completed).