Friday, October 26, 2007, #205 (1472)

Controversial Georgian Railways concession called off
By Nino Mumladze

Who will get Georgia’s railroads now?

A secretive off-shore company won’t be getting management rights for the country’s rail network after all, Tbilisi officials confirmed on October 24.

A deal announced earlier this summer is off, Economic Development Minister Giorgi Arveladze said, and the state will start from scratch in its effort to privatize Georgian Railways.

“In principle we hadn’t concluded [the] agreement. This was worked over extensively, and we’ll take all decisions in the best interest of our country’s economic development,” Arveladze said on October 24.
The minister announced on August 16 that Georgian Railways’ management rights would be leased for 99 years to the off-shore company Parkfield Investments Limited, registered with anonymous backers specifically for the railway deal.

The concession would have nominally preserve state ownership of the railways, with Parkfield Investments obliged to invest USD 1 billion within the first ten years of its contract.
Despite those assurances, the deal was not without controversy. Georgian Railways went from being legally barred from sale as a ‘state strategic asset’ to seeing its management fielded out to private, unknown hands for nearly a century.

Three months later, however, the railroad is again fully within state control.
The government is now rethinking how best to deal with the railway, said State Minister for Reforms Coordination Kakha Bendukidze. Selling it off entirely is now a possibility, he suggested.
Arveladze, speaking in August, categorically denied that the government was considering selling the railway in full.

“Presently discussion is underway in the government on the most correct form [of privatization]—whether to privatize 100 percent or just part of the railway, versus 100 percent or partial handing over of management rights,” Bendukidze commented on Wednesday.

The state minister left open the possibility of selling some of the state rail company’s shares on the public stock exchange.

Bendukidze, explaining the reasons for deal’s failure, implied the state was too hasty in shaking hands with the newly-formed company. Parkfield would not have been able make some of the infrastructural changes the government required, he added.

Parkfield refused to comment. Spokeswoman Sarah Kendall, speaking after the agreement was first announced in August, said the investors’ identities would be revealed only after the deal was formalized. That now looks unlikely to ever happen.

The secretive nature of the deal bred rumors.

Some suggested that business tycoon and possible political entrant Badri Patarkatsishvili was behind Parkfield, taking the railway in exchange for giving up his Imedi media holding.

Earlier this month, as he was embroiled in the political turmoil surrounding the arrest of ex-minister Irakli Okruashvili, Patarkatsishvili claimed the government had offered lucrative proposals aimed taking control of the Imedi media group. He vowed to never give up Imedi.

Imedi TV is one of the two most watched networks in Georgia, and widely considered to be less friendly to the government than its main competitor, Rustavi 2.

Okruashvili, however, in a series of grave anti-government accusations two days before his arrest, claimed that Parkfield was a front for a businessman with close ties to President Mikheil Saakashvili.
Okruashvili, now awaiting trial on corruption charges, retracted all of his allegations in a videotaped prison testimony.

“This issue was politicized because the railway is a significant part of Georgia’s economy,” Bendukidze noted on Wednesday.



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