VZCZCXRO1953
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHSI #0894/01 1101156
ZNR UUUUU ZZH
R 201156Z APR 07
FM AMEMBASSY TBILISI
TO RUEHC/SECSTATE WASHDC 6133
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 TBILISI 000894 
 
SIPDIS 
 
SIPDIS 
 
E.O 12958: N/A 
TAGS: PREL PGOV GG
SUBJECT: Georgia Bi-Weekly Update April 20 
 
REF: 06 TBILISI 3144 
 
¶1. This cable contains current items of political, economic, and 
social interest concerning Georgia during the weeks of April 7-20. 
 
Controversy over Border Monastery 
--------------------------------- 
¶2. A longstanding controversy over the border with Azerbaijan -- and 
specifically over the David Gareji cave monastery complex on the 
Georgian side -- came to the fore during the past week, following 
controversial statements by officials in both countries. 
Azerbaijani Deputy Foreign Minister Khalap Khalapov was quoted 
referring to David Gareji as an Albanian monastery that "Baku would 
not give up."  Then Georgian Minister of Culture Goka Gabashvili 
proposed establishing a "free tourist zone" on the territory of the 
monastery to be shared by both sides.  Khalapov's statement produced 
an angry response from Georgian Foreign Minister Gela Bezhuashvili, 
who said Khalapov should "read up on world history."  Gabashvili's 
initiative triggered an equally angry reaction from the Georgian 
Orthodox Church, and led some opposition figures to accuse the 
government of trading a Georgian monument for Azerbaijani gas. 
 
Armenian Language and Election Draw Crowds 
------------------------------------------ 
¶3. Protesters in Akhalkalaki, an area with a large ethnic Armenian 
population, called April 14 for the Armenian language to receive the 
status of administrative language of the Samtskhe-Javakheti region, 
which would permit all official business to be conducted in 
Armenian.  The protest was reportedly organized by local nationalist 
parties Javakhk and Virk.  At the same time, several candidates in 
May's Armenian parliamentary elections visited Akhalkalaki to 
underline their family roots in the area and to promote their 
candidacies among locals with relatives in Armenia. 
 
Conservative Party Calls for New National Day 
--------------------------------------------- 
¶4. Conservative Party leader Zviad Dzidziguri called for April 9 to 
be designated Georgian independence day, replacing the current date 
of May 26 -- the day Georgia proclaimed its independence in 1918. 
April 9 is the date of Georgia's 1991 independence declaration, 
under Zviad Gamsakhurdia, and was also the date of a 1989 massacre 
in which Russian troops killed 20 demonstrators in Tbilisi.  The 
date is associated with Gamsakhurdia in the public mind, and 
Dzidziguri, a former Gamsakhurdia ally, may have been appealing to 
residual public support for Georgia's first president.  In response 
to the proposal, Speaker Burjanadze noted that people are accustomed 
to celebrating on May 26. 
 
Batumi Booming 
-------------- 
¶5. Economic development in Batumi continues to boom.  During an 
April 6-9 visit, Poloff stayed in the comfortable and renovated 
Intourist Hotel, noted the opening of many new restaurants and cafes 
in the last year, and saw an increased use of the newly refurbished 
boardwalk along the coast -- which was peppered with walkers, 
joggers, and tourists.  The improvement continues with the visible 
construction of a line of hotels along the coast as well as freshly 
(and colorfully) painted buildings in town.  As Poloff heard from a 
local artist working on a mural at the hotel, employment remains an 
issue, but the signs of improvement and economic growth seem more 
visible here than any other part of the country except perhaps 
Tbilisi. 
 
Foreign Direct Investment Skyrockets 
------------------------------------ 
¶6. According to the government's newly released foreign direct 
investment (FDI) statistics, Georgia made impressive progress over 
the past year.  FDI more than doubled in 2006, reaching USD 1.14 
billion, up from USD 450 million in 2005.  The U.K., the U.S. and 
Kazakhstan were the top three investors with USD 182 million, USD 
181.9 million and USD 152 million respectively, followed by Turkey, 
Norway and Azerbaijan.  Russia with USD 27.8 took eleventh place in 
the list, much lower than in 2005 (USD 38.7).  Prime Minister Zurab 
Noghaideli said FDI was expected to reach USD 1.5-1.7 billion in 
¶2007.  The new figures raised the eyebrows of many analysts, who 
questioned the reliability of the data, especially with regard to 
the U.S. and U.K. numbers.  In fact, we understand that the U.S. 
investment figures were inflated by the USD 130 million stock 
offering by the Bank of Georgia on the London Stock Exchange.  The 
market maker for the stock was a New York bank, hence the investment 
was counted in favor of the United States. 
 
Products from the Conflict Zone 
------------------------------- 
¶7. On April 17, the Parliamentary Commission on Territorial 
Integrity, chaired by MP Shota Malashkhia, gave a presentation on 
the current status of a proposal to spur economic develop in the 
South Ossetia conflict zone (reftel).  The project, called "Product 
from the Conflict Zone," envisages support for income-generating 
activities in the conflict zone and creation of a special market 
both inside and outside the zone for manufactured products.   The 
overall goal is to promote peaceful resolution of the conflict 
through economic cooperation between the Georgian and Ossetian 
 
TBILISI 00000894  002 OF 002 
 
 
sides.  According to Malashkhia, the program would be piloted in the 
Georgian-controlled territories, where specially designed small 
plants could process raw material -- fruit, timber, mineral water -- 
into a finished product. 
 
Energy Regulator to be Abolished 
-------------------------------- 
¶8. Acting on the recommendation of State Minister for Economic 
Reforms Kakha Bendukidze, the government has submitted legislation 
to Parliament that would transform the independent State Agency for 
Regulation of Oil and Gas Resources (SAROGR) into a sub-departmental 
body under the Energy Ministry.  The Agency was set up in 1999 with 
USAID support to administer oil and gas legislation and to exercise 
authority in the granting and enforcement of agreements with 
investors.  Under the draft law, responsibility for agreements would 
be assigned to Georgia's Oil and Gas Corporation, and other 
functions would be allotted to different governmental structures. 
 
New Head of Georgian National Investment Agency 
--------------------------------------------- -- 
¶9. Irakli Beraia, the new head of the Georgian National Investment 
Agency (GNIA), told us April 19 that he plans to restructure the 
agency to attract foreign investors to local industrial, tourism, 
agriculture and forestry sectors.  Beraia admitted that, in some 
cases, foreign investors face unfair treatment due to the lack of an 
independent judiciary.  He believes that foreign investors in 
Georgia should have stronger guarantees for their rights and should 
enjoy equal opportunities during privatization process.  Beraia 
expressed readiness to support the development and implementation of 
the Trade and Investment Framework Agreement (TIFA), and was quite 
interested in U.S. programs administered by OPIC, USTDA, and Ex-Im 
Bank.  Prior to his appointment, Beraia worked as a head of the 
Western Georgian Office of the Red Cross and then completed studies 
at a diplomatic academy in the U.K. 
 
TEFFT