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Kaladze on Georgia’s Political Changes and Prospects

01/09/2013 20:00 (227 Day 22:33 minutes ago)


The FINANCIAL -- “It is very important for Georgian Dream to get into politics 100 percent,” Kakha Kaladze, Deputy Prime Minister and Minister of Energy of Georgia, told The FINANCIAL in an exclusive interview. "I do not like to make predictions. When I used to play football I was often asked what I thought the outcome of a game would be. However, I would always refrain from making a forecast as no one ever knows for sure what’s going to happen", he said.


Q. Where do you see yourself in the Georgian Dream party after Bidzina Ivanishvili leaves politics?

A. I do not know how likely it is that the Prime Minister will leave politics. Although he has made several announcements about this, that does not mean that he will leave the country in an irresponsible way. All of his promises will be kept. It is more likely that Ivanishvili will leave his post, rather than politics altogether.

I do not like to make predictions. When I used to play football I was often asked what I thought the outcome of a game would be. However, I would always refrain from making a forecast as no one ever knows for sure what’s going to happen.

As for me, I will remain in this position. After I finish my political activities I will stay in Georgia and continue with my business activities here. At the moment I have been elected for a term of four years and I will stay in my position for this time. After that, how long I stay in politics will depend on the voters and on what I’m doing as well.

When my candidature was first announced for the position of Minister of Energy, I was criticized a great deal. Such a reaction from people did not surprise me as I knew I was coming in to politics from a completely different field, that of football. It was logical for many people to doubt whether I could handle the new position. But in politics it is important to be a good manager and leader, and to create a strong team. To be honest, at first it was difficult for me to run the Ministry as I had to work on clarifying many issues in great detail. I and my team worked nights over a period of months. We found out everything that had been done over the years up till then, and if we compare the current situation to that of the ‘90s we will see that many things have been accomplished in this sector. I would single out the building of hydro-electric power stations and the provision of uninterrupted power supply to the population as the most significant achievements thus far. There have been problems too, but it is logical that those who work also encounter mistakes.

Q. What do you think about close relations with Russia and the expected investments from the country? It has been said that GEL 8 billion will be invested from Russia if Margvelashvili wins the elections.

A. I do not think that Russian investments in Georgia are somehow dependent on the results of the elections. Generally Georgian Dream is trying to regulate relations with the country, but this does not affect Georgia’s European aspirations. For us it is very important for Georgia to become a valuable member of the European family soon. To achieve this we are doing our absolute best, which means implementing those reforms that are required by the European Union.

One of the requirements is specifically to regulate the country’s relations with Russia. Our allied countries in Europe and America have advised us to find a common language with Russia. Work in this direction has started and we have already had some achievements such as the return of the Russian market and export of Georgian products there. Politically, it is harder to solve the problem and this is a long-term process. We will try to create a normal relationship with Russia as one which two civil neighbours should have with each other.

Russia was always interested in investing in Georgia. In the direction of the energy sector there is big interest in building new hydro electric stations. RusHydro is interested in investing in this sector. Of course, when there is political and economic stability in the country, then interest in investing here is always high.

Q. You said that the energy sector is one of the most interesting fields for Russia to invest in. But then there is the case of the Khudoni Hydro Power Plant, which has been a matter of political interest for 20 years already. It is speculated that Russia is in fact not interested in this hydro power plant getting built. How would you explain these two contradictory facts?

A. We are not dependent on Russia for building the Khudoni Hydro Power Plant. There is an Indian company with which a contract was signed in 2011. According to this the company should invest millions in building the Khudoni Hydro Power Plant. Russia has no connections with this project. There is only one problem which is hampering the building process of the hydro power plant. This problem is the local population, which is against the building of the hydro power plant there. We have to create a suitable resettlement plan, to be accepted by the population, so that they agree to leave the place. Implementing the Khudoni Hydro Power Plant project is vital for the sake of our energy independence.

Q. And is it in Russia’s interests for Georgia to become energy independent?

A. Russia has no leverage to hamper the project’s development with. Maybe Russia does not want Georgia to be an energy independent country, as we import energy from Russia during the winter. However, if we compare prices in the region, it is evident that Russia gives energy to Georgia at the best price.

Q. Why did Tata Group not take on the project of the Khudoni Hydro Power Plant?

A. Tata Group was interested in this project at first, but there was already another Indian company - Trans Electrica, involved in the Khudoni Hydro Power Plant project. We could not take the project from this company and give it to Tata Group. If Trans Electrica cannot handle the running of this project, as stipulated by the memorandum signed between the two sides, then the company will in turn be divested of its rights. As for Tata Group, it is investing GEL 600 million in Adjara.

Q. After leaving your football career , did your capital increase or decrease, and by how much?

A. I was one of the highest paid footballers. Therefore when I left that career my income was obviously affected by the loss of this capital. But I was not solely dependent on sports. I had businesses in Georgia, Ukraine and Italy. I am not running my business in Italy anymore. Considering all of these facts my income has decreased, but not drastically so.

Q. What businesses do you own abroad and in Georgia today?

A. In Georgia I am involved in the banking sector. I own 75 percent of Progress Bank. This is the only business that I run in Georgia. This is a small bank and cannot compete with other banks operating in Georgia. The capital of Progress Bank did not increase and nothing changed after I became a politician. In Ukraine I own a hotel chain as well as a very large restaurant chain.

Q. Why did you choose to go in to the banking sector?

A. It was one of the safest sectors. I wanted to invest in other directions as well. I started investing in the Arsenali project, which would have been one of the largest projects in Georgia, but the war in 2008 and financial crisis disrupted the development of this project. After a misunderstanding with the government this project in effect “died”. Since my criticism of the previous government, the relationship between me and Saakashvili has been strained.

The then-government and Saakashvili did nothing but try to disrupt the development of the Arsenali project. This did not only happen to me, but I think that almost every businessman had the same problems with the government at that time. The reason was that the government started becoming involved in the private sector, which was a big blow for business. That is why I made the decision in 2011 to leave this project, with very big losses. The people who were my partners are continuing to work on the Arsenali project. As far as I am aware, they are currently negotiating with the Ministry of Economy and the final decision will be known in the nearest future.

Q. You are often criticized for there being a conflict between your current position and your business interests. I am referring to Kala-Capital’s interest in a hydro building company specifically. How has this issue been clarified so far?

A. I left the company. It was quite a problematic company in terms of having debts. It was a construction company which was one of the oldest companies building hydroelectric stations. During Soviet times it took part in building the Enguri station. Within 10 days of my appointment as Minister of Energy I had cut ties with this company.

Q. At one stage you wanted to get Ukrainian citizenship and waive your Georgian citizenship. Do you think that this might become a possibility again?

A. No, because the only reason I wanted to get Ukrainian citizenship was due to the tragedy in my family. I did it to speed up the investigation process. Because of my country I left the guarantee of my wellbeing in Italy. The love of my country made me leave all that behind in Italy and come here. So no, I will never consider waiving my Georgian citizenship again.

Q. Many people remember how you were once a supporter of Mikheil Saakashvili . I am referring to the time when you supported him in public and in that way he was able to win over your fans. How have things changed since then?

A. The deterioration of our relationship was caused by my criticism of things that were happening in Georgia over time. My criticism was not appreciated by Saakashvili . Arbitrary arrests and detentions, youth killings, doubts surrounding the Girgvliani murder case - these are the issues that I was criticizing. Because of this our relationship was ruined. There was no personal disagreement between us. When you are a real friend I think that you should be able to tell the other person the mistakes that you perceive them to be making. But such frankness simply offended Saakashvili . The statements which caused the first cracks to appear in our relationship were about the Girgvliani case. I had said that it was an un-investigated case. This turned out to be too frank a statement for Saakashvili to bear it seems.

Q. How would you evaluate Saakashvili ’s role in Georgia’s recent past?

A. I would say that it has caused great suffering for the country. This man has expressed such huge hatred for his people that it will take many years for people to forget it. A police regime was established in the country. People could not openly express their opinions. People were being monitored, and so on. I would evaluate Saakashvili ’s role as having been a very negative one for the country. Despite that, when he first came into politics the reforms he was making were right. But then, unfortunately, his government’s activities went in the direction of elite corruption and other bad areas.

Q. How favourable is the business environment in Georgia?

A. Business in the country is now free of pressure from the state. Over the years businessmen were forced to finance concerts or to build different buildings and structures etc, whereas now they are free, the current government is not involved in their activities.

Starting a business was always easy. There is no bureaucracy in the country so registering a business in Georgia was very easy. The previous government was supporting people in starting up business, and then observing whether the business was working well or not, and in the event of positive results they were taking a share of the profits.

Of course when there are elections in the country and a period of transition then this can result in some problems. But the business and economic development in the country are going positively now.

Q. As you were one of the businessmen in Georgia, were you put under pressure by the previous government at any stage?

A. No, they could not dare to do the same with me. I was always open and honest and did not have anything outrageous happen to my business. They could not find anything incorrect in my activities so they could not catch me out and make me obligated to them.

Q. What do you think about the economic strategy of Georgia?

A. There were some problems in the economy due to the elections and governmental changes. I see big potential in the economic growth of Georgia. 6 percent growth has been projected for the economy. I think that Georgia will end this year with 4 percent growth which is quite a good result for our country. The future years will be much better I believe.

Q. How do you see the country in three years’ time?

A. I think that Georgia will be an economically strong country in three years’ time. Georgia will have strong villages, which means having strong regions and ultimately, strong cities. A large amount of money will be spent on developing agriculture in Georgia, which will result in the export of Georgian products abroad and as a result, growth of the economy. Many social problems in the country will be solved. More job places will be created for the population and we will have more employed people in the country as a result. While implementing the infrastructural projects in Georgia it has already been stated in the contracts that 70 percent of all the people employed must be locals.



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