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Reference ID Created Released Classification Origin
07TBILISI2393 2007-09-21 10:55 2011-08-30 01:44 CONFIDENTIAL Embassy Tbilisi

DE RUEHSI #2393/01 2641055
R 211055Z SEP 07

C O N F I D E N T I A L SECTION 01 OF 03 TBILISI 002393 
E.O. 12958: DECL: 09/14/2017 
Classified By: Charge d'Affaires Mark X. Perry for reasons 1.4 (b) and 
1. (C) Summary: On August 7-9 an Embassy team traveled to 
Western Georgia to assess the development of local 
governance.  Government of Autonomous Republic of Adjara 
Chairman Levan Varshalomidze reaffirmed his support for the 
USAID-funded Public Administration Reform program, which is 
working to professionalize his executive staff.  At 
USAID-funded working retreats, local officials from Kutaisi, 
Poti, and Batumi discussed their local situations, pointing 
out that they needed more money to fund necessary local 
services.  David Melua, Executive Director of the National 
Association of Local Authorities (NALA), said local 
government's relationship with the central government 
continues to grow, slowly.  End Summary. 
NALA, Local Government Organization, 
and the State of Decentralization 
2. (U) On 9 August, Poloff met David Melua, Executive 
Director of NALA.  Melua briefed Poloff on NALA's history and 
the relationship between the local and central governments. 
In Georgia, there are 5 semi-independent cities (Tbilisi, 
Kutaisi, Rustavi, Batumi, and Poti.)  These five cities have 
their own city councils (Sakrebulos).  In the rest of the 
country, there are 69 municipalities, or Sakrebulos (4 are 
non-functioning in Abkhazia and South Ossetia), which 
represent all the villages and towns within their borders. 
Each village has a paid Trustee, who represents the village's 
needs before the Sakrebulo.  Each Sakrebulo has a mayor, or 
gamgebeli, who is a professional administrator (similar to a 
city manager), appointed by and answering to the Sakrebulo. 
Each Sakrebulo also has a chairman, elected by the Sakrebulo 
council members.  Additionally, there are nine appointed 
representatives of the President (Governors) who serve in an 
advisory capacity to the Sakrebulos and cities throughout the 
country.  There is no residential requirement for mayors, 
gamgebelis, Sakrebulo chairmen, or Governors in Georgia. 
Consequently, carpet-bagging does take place on the local 
level.  The Sakrebulo members were all elected in the local 
elections of 2006.  These elections were dominated by the 
ruling National Movement (UNM) party.  All mayors, 
gamgebelis, and Sakrebulo chairmen can participate in NALA. 
3. (SBU) NALA is funded by dues from the Sakrebulos. 
Currently about one-half of NALA's members pay their dues. 
NALA was created in response to Georgia signing the COE's 
Charter on Local Self-Governance, as a professional 
organization was a requirement of the charter.  Melua advised 
that in moving from 1000 districts (prior to the 2006 
elections) to the 69 Sakrebulos, local government has become 
much more manageable.  However, the Governor positions and 
their authority are questionable, because the government is 
currently run by one party, the UNM.  Most of the tension the 
Sakrebulos face with the central government is now taking 
place with the Ministry of Finance (MOF) over decentralizing 
the MOF's power regarding budgets.  A proposed equalization 
formula, supported by the COE, would allocate set percentages 
of tax to the municipalities for their budgets.  However, 
this is not supported by the MOF, which prefers an 
alternative per capita distribution formula, which Melua said 
does not meet the COE's standards.  He said that the IMF is 
also concerned about the formula, as it would create a large 
amount of money with uncertain local control. 
4. (SBU) In 2010, the local government system will change so 
that mayors will be elected from the Sakrebulo Council 
members, and then they will hire/appoint a professional city 
manager.  At that time, a new Ministry of Local Affairs will 
be formalized and the Governors will report to this ministry. 
 The GOG will have to report to the COE on the progress of 
decentralization in May 2008, most likely with a presentation 
by Deputy Speaker Mikheil Machavariani.  On the larger 
question of decentralization, Melua said that the growing 
pains between the central and local governments bode well for 
the future.  Eventually, he said, local government will have 
to succeed.  The only questions are what time, forum, and 
tools it will require. 
On PAR with Varshalomidze 
5. (C) In an August 8 meeting with Emboffs, Adjara Governor 
Levan Varshalomidze expressed strong support for ongoing 
USAID-funded efforts to improve public administration in 
TBILISI 00002393  002 OF 003 
Adjara.  He also promised to personally participate in the 
Management Training component.  Varshalomidze stressed that 
tourism development is a priority for the region, and he 
invited USAID to assist with public administration reform in 
his Tourism Department as well. 
--------------------------------------------- -- 
USAID Promotes Self Government with MPs, Locals 
--------------------------------------------- -- 
6. (U) On 8 and 9 August, USAID grantee Urban
 Institute (UI) 
sponsored two local self-governance retreats.  The first was 
held in Batumi for members of Parliament's Committee on 
Regional Policy, Self Government and Mountainous Regions. 
The other was held in nearby Kobuleti for local 
administrators including mayors, municipal council 
(Sakrebulo) members, and professional municipal employees. 
The MPs focused on Parliamentary priorities and the 
development of self-governance in the Adjara region.  Working 
with regional Adjaran officials, they agreed to create a 
working group to reconcile the Organic Law on Local 
Self-Governments and the Adjaran Government with legislation 
this fall.  The local administrators focused on service 
improvement in local government.  The Embassy team presented 
USAID-funded computers for service improvement to 5 of the 
local municipalities, including Abasha, Lanchkhuti, 
Chokhatauri, Tsageri, and Mestia. 
Municipal Government and Economic Conditions 
In Kutaisi, Poti, and Batumi 
7. (C) On 7 August, Poloff met new Mayor Niko 
Kachkachishvili, Deputy Mayor Giga Shushania, and Sakrebulo 
Chairman Amiran Khvadagiani of the city government in 
Kutaisi.  Kutaisi is the second-largest city in Georgia, with 
a population of approximately 180,000.  Kachkachishvili 
participated in an Open World visit to the US in 2007.  The 
city is working with a USAID implementer to increase the 
transparency of their budget process.  He said that it is 
difficult to manage the city with the current budget.  Their 
draft budget is due in September, but they often do not know 
how much money will be allocated to the city by the Ministry 
of Finance until February.  Most city services are 
out-sourced and the city is not fully versed in public 
procurement.  The city has little in the way of revenue 
streams (some small user fees) and lacks a financing 
capability (i.e. public bonds).  300 new businesses were 
registered in the city within the last year.  The city is 
hoping for donors to help establish information service 
centers and a tourism development strategy.  (Note: Local 
media and the NGO community are monitoring the city for signs 
of corruption, as two months earlier 24 local officials were 
arrested in Kutaisi for embezzlement of public funds 
(reftel).  End note.)  The Sakrebulo Chairman asked for USG 
assistance in acquiring used/depreciated garbage trucks, 
streetsweepers, and fire engines from U.S. cities. 
8. (C) On 7 August, Poloff met Sakrebulo Chairman David 
Shurghaia and Deputy Chairman Gocha Tughushi in the city of 
Poti.  Poti's population is approximately 50,000, and it is 
home to the largest Georgian port on the Black Sea.  It lies 
on a sandy delta surrounded by the Rioni river, making it 
vulnerable to floods and a nightmare for community water and 
sewer systems.  Although the water system will be repaired 
via an MCC grant, serious problems will remain.  Currently 
all of the city's sewage runs to the sea.  The landfill sits 
on the flood-prone banks of the river, and also sends much 
trash to the sea.  Chairman Shurghaia described in detail a 
$35 million USD plan for a seawall, reinforcing the river 
banks, and creating a drainage system for the city.  The city 
is looking for donors for the project.  They currently have 
good relations with the Governor of Samegrelo, but they do 
not like their tax money leaving the city to support lesser 
populated regions.  Shurghaia sees Poti as a unique city and 
should be treated so, similar to Tbilisi.  Poti officials 
would like to form a bloc with the other four independent 
cities (Tbilisi, Kutaisi, Rustavi, and Batumi) to represent 
the cities' interest before the central government.  They do 
not currently see NALA as a strong proponent of their local 
interests.  The city is optimistic that the coming free 
economic trade zone will benefit the local economy.  UI 
recently helped the city develop an economic development 
plan, which now needs implementation. 
9. (C) Amid rumors that Mayor Irakli Tavartkiladze was about 
to be replaced, Poloff met with Batumi's Deputy Mayor, Robert 
Chkhaidze, August 9 to discuss self-governance in that city. 
(Note: The rumors proved true as Tavartkiladze resigned 
August 14.  Chkhaidze was elected the new mayor September 14, 
TBILISI 00002393  003 OF 003 
being the only nominee (of 6) presented for consideration by 
the city assembly.  Tavartkiladze has been appointed Georgian 
Ambassador to Greece.  End note.)  Batumi is home to a large 
port on the Black Sea, which continues to ship massive 
quantities of oil brought from Azerbaijan on rail.  It sits 
astride the country's primary overland trucking route on the 
Turkish border.  Armenians and Georgians alike come to enjoy 
the beach and sub-tropical climate.  The city retains much of 
its pre-Soviet architecture, and it is beautifully 
illuminated at night.  Numerous new hotels and apartments are 
under construction, reportedly by Kazakh and Turkish firms. 
Consequently, there is more visible economic activity here 
than in the other cities visited.  Echoing Varshalomidze, 
Chkhaidze confirmed that tourism is the city's key economic 
development goal.  Officials are currently looking for an 
investor to explore building a ski resort in the nearby 
Shuakhevi mountains.  Chkhaidze approximated the city's 
population at around 115,000. 
10. (C) Batumi is the heart of Adjara, and it experiences 
significantly more autonomy from the Ministry of Finance than 
the other cities and regions of Western Georgia.  Due to its 
political structure, the city retains much of its internal 
revenue and has spent a great deal of money since 2003 on 
infrastructure.  Its budget of GEL 52 million (31.2 million 
USD) is three times what it was before the revolution. 
Unique among the cities visited, Batumi plans to arrange its 
own financing for infrastructure repair directly with the 
EBRD, without needing the central government to serve as 
guarantor.  As with the others, Batumi's waterworks are in 
poor repair.  MCC will fund temporary repairs, but the city 
signed a EUR 93 mil deal with German firm KFW to completely 
rehabilitate the water, sewer, and drainage systems of the 
city by 2015.  Chkhaidze cautioned that the city is not 
completely autonomous.  It currently receives funding from 
the Adjaran and central governments, but he hopes the city 
may be financially self-sufficient in a few years.  Chkhaidze 
said that Batumi's city government will improve once an 
accurate property inventory is completed.  Although Batumi is 
an independent city (not a regional Sakrebulo, but it has its 
own city council), Chkhaidze championed the recent structural 
changes which formed the Sakrebulos into a manageable number 
(69 nationwide.)  Still, he mentioned that it is difficult 
for many Adjaran villages to be adequately represented in the 
other Adjaran Sakrebulos (outside of Batumi) with only a 
single trustee. 
A;11. (C) Comment: The GOG's effort to decentralize the 
formerly top-down, federal structure are showing some signs 
of success.  Batumi is a case in point.  With a strong 
potential for tourism and forward-thinking leadership, this 
once shabby Black Sea resort town has now become an 
attractive destination for Western tourists.  But other parts 
of the country lack some of these natural qualities.  A 
record of strong, local public administration does not exist, 
while a history of corruption does.  All cities said that 
they need more money and better information regarding their 
budgets.  Only Batumi has significant local revenue sources, 
and all cities acknowledged that a lack of financing options 
is a problem.  Some were more outspoken about needing the 
central government to be more responsive, but few see NALA as 
a strong proponent toward the central Government at this 
time.  We will need to keep encouraging the government to be 
responsive to the needs of local authorities, while at the 
same time working to ensure local authorities have the 
training and the checks and balances to properly carry out 
their duty to represent and address local concerns and needs. 
 End comment. 


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