Burjanadze Calls for Caution on Railway Deal

Parliament is watching closely developments related to the possible privatization of Georgia’s state-owned railway network, Parliamentary Chairperson Nino Burjanadze said on February 12.

“Relevant parliamentary committees and individual lawmakers will hold consultations with the government to make sure that all decisions are made in agreement with Parliament. Parliament should be fully informed about the future of the [railway], which is of real strategic importance for Georgia,” Burjanadze said.

Her comments followed a statement by independent lawmaker Lado Papava, who warned that privatization of the railway might pose a threat to Georgia’s strategic role as a regional transportation route, given the fact that the Russian state-run railway operator had already signed a 30-year management deal of Armenia’s rail network.

“Any action, either handing over management rights or selling the entire network, would endanger our role as a transport hub. It is quite obvious who will have the most interest today in controlling Georgia’s railway, especially after Russia has already taken over Armenia’s rail network,” MP Papava told lawmakers in Parliament.

Last year Parliament passed an amendment to the law on privatization, which removed the rail network from the list of “strategic facilities” not to be privatized.

The Georgian Economy Ministry invited interested parties to express an interest in Georgian Railway last October after a deal to hand over the management rights of the network for 99 years with a mysterious company, Parkfield Investment, had fallen through.

Five companies have expressed an interest in buying the network:

• Stratton Holdings, which the Economy Ministry said was a U.S.-based firm, but no other information is available;
  
• Centr Invest Capital Partners – the Economy Ministry said it was a Russian company, but no other information is available;
  
• Capital Investment Group AG – the Economy Ministry said it was a Swiss company; no other information is available; 
  
• East Capital – the Economy Ministry said it was a U.S. company; an internet search, however, produced a company with the same name based in Stockholm and specializing in asset management with a focus on Eastern European markets;
  
• Silk Road Group – a company with diversified business interests in transportation, real estate, financial services; the holding operates a fleet of about 3,000 rail tank cars.

Submitting a proposal, the details of which still remain confidential, does not necessarily mean that the country’s railway network will be sold, the Economy Ministry said. It also said it still hadn’t even decided whether the network would be privatized or the management rights handed over. A share issue was also an option, officials have said.

An expression of interest by a potential investor, according to the Economy Ministry, does not oblige the Georgian side to sell any entity. The Economy Ministry said it reserves the right at any time to withdraw from the purchasing procedures; or suspend or change or exclude any interested party from the purchasing procedure.

The opposition New Rights Party demanded last month that the authorities not privatize the railway before the parliamentary elections. The party also called on potential investors not to enter into any major privatization deal with the current authorities.