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Inevitable Schedule of Tender-Only Insiders Take Part in It

July 10, 2008

“24 Hours” the interested parties purchased the entire press run of that issue.Although the tender for hospitals were announced in the newspaper

Nona Suvariani
Eka Kevanishvili

A small business group somehow managed to get hold of almost every hospital in Georgia. How was the tender carried out and why did one of the winner investor refuse to buy the hospital and told how the tender action was on the same level as robbery? He was concerned as how an investor is not protected from the government and that later a new government  might later take the hospital back after has been repaired and renovated by the same investor?

As it was already mentioned, private investors purchased hospitals according on direct purchase agreements at symbolic rockbottom prices of just 1,000 GELS. It was claimed that the winners were identified through an open and fair tender and this would bring about reform in the health sector.

Nonetheless, as a result of the tender, several investors were able to take full ownership of all Georgian hospitals. These companies include the following: “Bloc-Georgia Ltd”, “Aword Capital Ltd”. “PSP Parma Ltd”, “Meridiani Ltd”, “Medimex Ltd” “Aversi Parma Ltd”, “New Style,” “GPC Ltd”, “New Hospital Ltd” and MGI Ltd”.

PSP and Aversi became the owners of all hospitals that are located in Western Georgia. In some cases these companies shared their shares with “GPC” and Company “Vilagio”, a branch of “Wissol”. In almost every instance the investor companies acted in tandem with construction companies and those vested interests that are close with the current government.

Representatives of the Trade Union of Medical Workers state that only three companies “PSP”, “Aversi” and Insurance Company “Imedi L” actually work in the Georgian health system. “PSP” is represented by New Hospital; Aversi is represented by Bloc Georgia and the Imedi L is acting with the support of New Style.

Davit Saganelidze, former MP and representative of the Health Committee of the Parliament told such deals are most profitable for all parties involved.

“Maybe Aversi did not want to invest money in construction business but if they were able to take control of inexpensive properties and that is why they should pass over such a wonderful opportunity. Don’t you know what kind of competition is in Georgia now? A long queue of medical firms are standing in front of doctor’s offices. It is clear that when you have your own hospital you are part of the most important market and this allows you to be able to sell your product line, and in this instance, “medicines.” Under such circumstances companies have become monopolists in this sphere and they work closely with construction companies that are interested in building new buildings for the financially well-off hospital and newly installed hospital management.”

Kakhi Gelashvili is one of those who participated in the so-called announced tender in cooperation with the firm “Unimsheni”. He also asserted that the main companies involved include Bloc Georgia, Aversi and PSP.

“I do not know who is standing behind them but I can logically assume that the person who was responsible for assigning the Zugdidi hospital to Bloc Georgia and without any tender is standing behind those very same companies. That person also assigned Kutaisi Intervention Hospital to Bloc Georgia though the hospital did not need any new investment. The person must have trusted the Bloc Georgia as it then ordered it to repair the Tbilisi Central Hospital.”

Kakha Gelashvili thinks that these companies are pure monopolists. He added that similar PR programs that supposedly aim to invite investors are false and misleading. No investments are carried out in this way.

“Current situation in the field resembles such everyday situation when a person has a hangover and wants to drink “Borjomi”, Georgia mineral water, to recover from a hangover, and he is even willing to pay 10 GEL for a bottle instead of 1 GEL, which is its actual price. However, in this case, getting over the hangout costs 2-3 million USD but the actual price of the property assigned to each of these companies is valued at least 50 million USD. In short, the investors received a nice gift of 5 billion USD. And to make the arrangement even more interesting and to sweeten the deal, it was not even necessary for these investors  to have to spend even one tetri on the new properties.”

Generally, within the project, an investor is presented with several hospitals instead of one modern hospital that must be repaired or reconstructed by the them. In addition, those hospitals are located in some of the most prestigious regions of Tbilisi or in regional towns.

Kakha Gelashvili is the owner of the gynecological clinic “Gineka” at Tbilisi Hospital # 8 and when he first learned about the state program he decided to privatize the space that he had been occupying  in the hospital for his clinic. However, today he is ordinary leaser of the space and his practice occupies only one floor of the facility.

“I was waiting a long time for the project to start; I had wanted to privatize the space where I had been working for so many years. Although I was attentive not to miss the opportunity, the hospitals was sold off without any proper notification. As later I found out, the announcement had only been placed on an official website and a small advertisement appeared in the newspaper “24 Hours”.

It was clear that what had transpired served only a front to somehow show the procedure for the tender was legal. We all know now understand how this mechanism operates. Although an advertisement was published in the newspaper this did not mean in itself that anyone other than close and interested parties were position to benefit. In this case the entire press run of 24 Hours was purchased to make sure it did not have wider distribution and people would be could take part. One had to pass through such complicated mazes that only a determined person, someone like me, would be able to manage the process. However, when I appeared at the tender process, everybody was taken by surprise; they could not understand who I was and how I had found my way to the tender.  Nobody had expected me to show up. I only wanted to see from the inside what alll was going on. The winners were selected based on two criteria: the maximum amount of the financial guarantee letter and minimal amount of time that would have been required for construction. I had prepared the project and the total expense for the construction and this was just 5 million USD.

It was five minutes to six o’clock when I arrived at the tender with the package and opened it. I had presented the best set of conditions. None of the investors had offered the guarantee for more than 15 million USD and I offered 16 million USD.”

The point is that it was not necessary to produce guarantee letter at the tender. However, the agreement could be also be verbal. Thus, Kakha Gelashvili promised to get the guarantee letter for 16 million USD. He had to provide the actual letter later. Although Gelashvili won the tender and even presented the letter of guarantee, he still efused to purchase the transferred hospital and sold it to another company for 1,000 USD (so he claims).

“People might think that I am crazy because I declined to purchase the property. I refused because I soon realized that I had to spend money on the construction and in the end it would be possible that I would lose everything as the tender program and mechanism was unreasonable. It is impossible that the state presented such property to an individual. The government of Georgia will change and the state will be forced to take the property back as this was public property and the way the tender was designed was done a way that that was designed to rob the state.”

Evidently, Kakha Gelashvili was lucky because participation of outsiders in such tenders ended with negative results. Davit Saganelidze stated that this particular tender was much the same as previous tenders and the schedule was determined in the same manner

“You are advised to apply for the tender but your conditions must not be better than the person who first advised you to apply. But when a stranger applied for the tender he was taken from his house at 4:00 AM because they did not know what conditions he had in his project proposal. The tenders were conducted through threatening and blackmailing, and under such conditions whereas it is impossible for an outsider to participate.”

Saganelidze claimed that well-connected governmental officials are standing behind all the winning companies. “The tender results had already been agreed to behind closed doors; they were whispering secrets to each other as what to do and all this happened in the offices of Kakha Bendukidze, former Minister of Economic Development and Lado Chipashvili, former Health Care Minister. Only they knew which hospital was next on the list to be sold off and the exact conditions.”

Kakha Gelashvili refused to take the hospital because he concluded it was absurd to assume such responsibilities. He stated the agreement had an article that could not be relied on: Article 5.7 of the purchase contract stipulated. “Repeated violation of the assumed responsibilities and unpaid taxes within estimated deadline shall be assessed by the seller as the initiative for canceling the contract. Thus, the seller can receive the property assigned to the purchaser. The guarantee sum remains with the seller and the purchaser shall not be reimbursed for the expenses that they had spent on the property.”

“That means if the state does not carry out its responsibilities properly it can take back the property from me. But where do I have any guarantee that the state will consider my activities as being totally acceptable.”

Kakha Gelashvili is sure that the principle of the conducted tender contradicts acting Georgian legislation. More precisely, the Georgian Law on Free Trade and Competition.

“Articles 7, 8 and 9 of the law state that the state should not grant any of the competing company with any kind of privileges and shall not create the program that will create unequal conditions for economical agents, and in this particular case - between me and Bloc Georgia. I, Kakha Gelashvili rented 848 sq. meters of space in Gineka Ltd and invested 1 million USD within a period of 6 months. Now the state ceased the space from and assigned it to Bloc Georgia. But I invested one million USD and I am not an investor? It is uncertain whether Bloc Georgia invest anything in it or not, but the state still assigned the property to them.”

The director of the “Gineka: stated that every person who leased some space in the hospital # 8 will receive land in Dighomi district at a normative price for compensation.

“The state assigns hospital the value of 50 million USD in order to attract investments but if I would have to start the construction of a new hospital, I will have to buy land as well.”

Thus, Kakha Gelashvili claims that the resolution is illegal because the conditions for investors were unequal.

Another important issue is that the Ministry did not demand to provide well-arranged action plan during the tender. They did not care what time will it take the investor to construct new hospital or repair the old one. The deadline was the same for all investors. However, some of investors might need just cosmetic repair works while others had to start construction from the basement and work up.  Nonetheless, officials of the Ministry of Economic Development have admitted their mistakes and assert that the winners of the remaining 5 tender rounds will definitely have conditions based on them having presented an action plan.

The next part of the investigation report will provide you with information about those doctors who lost jobs as a result of such schemes.  Now we will also learn about what is really going on at hospitals where the investors entered with great plans and how this may be at the actual expense of public health.
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