TI Georgia has studied the process of privatization conducted by the Government of the Autonomous Republic of Adjara in the years 2020-2021. The examination of the sale and purchase agreements requested from the Ministry of Finance and Economy and the Public Registry and of the auctions conducted has revealed 33 cases of alienation of property in a non-competitive environment, as well as political donations of up to GEL 1 m for the benefit of the ruling party by the buyers of property in such an environment, which raises doubts regarding alleged corrupt deals and should become an object of interest of the relevant investigative bodies.

The organization last released [1] a similar study in 2020, which evaluated the process of privatization in 2019.  

The present study has identified the following noteworthy facts and trends:

• The Government of the Autonomous Republic of Adjara conducted 39 electronic auctions to alienate property, 84% of which were conducted in a non-competitive environment. They involved a single bidder, and the properties put on the auction were sold with a single bid;
• The stake owners, business partners of stake owners, and directors of 8 companies that won the auctions and of 1 company that signed a sale and purchase agreement donated GEL 966,000 to the Georgian Dream and the presidential candidate supported by the Georgian Dream, Salome Zurabishvili, in recent years;
• 7 entities that made political donations won the auctions without competition and with a minimum markup;     
• The times of founding/registration of 4 companies that won the auctions and those of announcement of the auctions coincided;   
• Of the properties purchased through the direct sale method, a land plot bought by Burak Bashlilar, a citizen of Georgia, deserves special mention. The Government of Adjara sold him – with vague terms – a land plot with the value of GEL 613,130 for GEL 5,226, while Bashlilar sold the land plot to Gonio 2020 LLC for USD 138,300 a day after the land plot was registered as his property. 
• The Government of the Autonomous Republic of Adjara continues the practice of selling land plots and buildings owned by the autonomy for GEL 1. Gonio 2020 LLC was given the land plot with unspecified obligations; Saba Construction LLC is supposed to build a new training base for weightlifters at the site of dismantling of the property purchased through the direct sale method for GEL 2, and for this purpose, the company was also allowed to win, without competition, in a tender worth more than GEL 4 m that had been announced by Adjara Project Management Company LLC, which is owned by the Autonomous Republic of Adjara. 

General statistics of the years 2020-2021

In the years studied, the Ministry of Finance and Economy of Adjara and the buyers concluded 48 sale and purchase agreements in total to alienate immovable property, including 9 agreements based on the direct sale method, 6 – through an electronic auction without conditions attached, and 33 – through an electronic auction with conditions attached:  

Who are the individuals who received property for GEL 1? 

The budget of the Autonomous Republic of Adjara has received a revenue of GEL 5,234 in total from the privatization of immovable property using the direct sale method. 

On the basis of the direct sale method, Saba Construction LLC was given 5 buildings owned by the Autonomous Republic of Adjara which were subject to dismantling. For this deal, the parties concluded 2 sale and purchase agreements, each with a value of GEL 1. By these agreements, Saba Construction LLC took the obligation to dismantle the buildings and remove the secondary construction materials/waste obtained as a result of dismantling. One of these buildings was located in the settlement of Chakvi – on Migineishvili Street – for which Adjara Project Management Company LLC announced an electronic tender worth more than GEL 4 m at the time of conclusion of the sale and purchase agreements with the aim of procuring construction works of the training base for weight lifters. Saba Construction LLC won [2] the tender without competition. Up to now, the agreement had been amended six times: according to the first wording of the agreement, the company was supposed to complete the construction of the training base in December 2021, although this deadline was first extended to April 2022 and finally to December 30, 2022. 

Gonio 2020 LLC was given – through the direct sale method – a land plot with an area of 600 sq. m in the settlement of Gonio in the City of Batumi for GEL 1. According to the property appraisal report submitted by the seller, the market value of the land plot amounted to GEL 373,800. On the basis of the sale and purchase agreement, the buyer took the obligation, in agreement with the Batumi City Hall, to carry out the greening works in the territory between the land plot (with the cadastral code 05.36.24.827) and the Batumi Boulevard, but it is unclear what is meant by greening of the territory, how many square meters is supposed to be greened, and what amount of money the company is obligated to spend on the said works.  

The physical person Burak Bashlilar was given, through the direct sale method, a land plot with an area 922 sq. m in the settlement of Gonio in the City of Batumi for GEL 5,226. According to the property appraisal report submitted by the seller, the market value of the land plot amounted to GEL 613,130. Burak Bashlilar sold this piece of immovable property to Gonio 2020 LLC for USD 138,300 1 day [3] after it was registered as his property.

This sale and purchase agreement contains one more interesting detail, to which the document refers to as a “special condition of the agreement”: the buyer took the obligation that it will have no claim in the future regarding an overlapping land plot (with the cadastral code 05.36.24.608) that the government of the autonomous republic considers as disputed. The agreement does not specify the dispute or the risks. Due to the scarce description, we can only assume that the Tustas Industrial Plants Co.incorporation company had a claim on the ownership of the land plot registered with the said cadastral code and that by concluding the agreement, Bashlilar took the obligation to conduct all possible property disputes with this company rather than with the government of the autonomous republic.

JSC Energo-PRO Georgia also received 29 land plots with a total area of 2,753 sq. m and with a total value of GEL 262,426 for a token price (GEL 1) for arranging a new 110 kW power transmission line from the station Batumi 220 to the station Batumi 4 not later than February 2023. The buyer also took the obligation to free the territory occupied by the Charnali power transmission line until February 2023.

In addition to the properties listed above, the Government of the Autonomous Republic of Adjara transferred, through the direct sale method, residential spaces/apartments in the City of Batumi to four socially vulnerable and/or ecomigrant families for a token price of GEL 1. Their right to alienate and/or dispose of this property was restricted for a certain period of time.  

Auctions conducted in a non-competitive environment

Out of the 39 electronic auctions with and without conditions attached, 33 auctions were conducted in a non-competitive environment: they only involved 1 bidder and, accordingly, the auctioned properties were sold with a single bid. Individuals with links to the 7 entities that won the non-competitive electronic auctions are active donors of the Georgian Dream. One more non-competitive electronic auction was won, with a single bid, by Iona Tsiteladze, the First Deputy Minister of Finance and Economy of Adjara in the years 2014 [4]-2015 [5]. 

From the 6 competitive auctions, in 1 case, the winner was identified as a result of making 23 bids.

The total initial privatization price of the properties placed on auctions with and without conditions attached amounted to GEL 37,214,900, which increased by GEL 895,350 as a result of bids made by bidders taking part in electronic trade. Accordingly, the budget of Adjara received a total revenue of GEL 38,446,400 from the sale of properties at electronic auctions with and without conditions attached.

The total volume of investments to be made in the framework of privatization obligations has reached GEL 79,400,000.

Donations of recipients of property and their business partners to the ruling party

The stake owners of 1 company that has signed a sale and purchase agreement on the basis of direct sale and those of 8 companies that have won electronic auctions, their business partners, and/or directors of the companies are large donors of the ruling Georgian Dream – Democratic Georgia party and the presidential candidate Salome Zurabishvili – they have donated a total of GEL 966,000 at different times.  

It is noteworthy that 7 of the entities listed above had no competitors in the electronic auctions and that they won the auctions as a result of one bid, with a minimum markup above the starting privatization price. 

The dates of founding/registration of 4 companies that won the electronic auctions also merit attention, specifically:

• Mtsvane Tba LLC [6], which won an electronic auction without competition and as a result of making one bid, was founded only one month before the conclusion of the sale and purchase agreement;
• Ecostorage LLC [7], which won 2 electronic auctions without competition and as a result of making one bid, was founded only two months before the conclusion of the sale and purchase agreements;
• Ecostorage 1 LLC [8], which won an electronic auction without competition and as a result of making one bid, was founded only one month before the conclusion of the sale and purchase agreement;
• New Technic Group LLC [9], which won 3 electronic auctions, including 2 auctions without competition, was founded only 5 months before the conclusion of the sale and purchase agreements.

Conclusion and recommendations 

• We call on the investigative agencies to:
  • study the sale and purchase agreements concluded with the physical person Burak Bashlilar and with Gonio 2020 LLC with the aim of identifying alleged corrupt deals;
  • study the agreements concluded with those companies that were founded several weeks before the auctions. 
• We call on the Government of Adjara to:
  • ensure an active information campaign about the list of privatization objects and terms of privatization before announcing electronic auctions;
  • ensure close and transparent communication with potential investors at the regional and national, as well as international, levels.