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Georgian resort sparkles on the Black Sea, but for how long?

New Western hotels have helped transform Batumi into a holiday destination. But President Mikheil Saakashvili’s personal project faces uncertainty after his rival took power last year.

Batumi tourismEnlarge
Batumi's new five-star Sheraton hotel. (Vano Shlamov/AFP/Getty Images)

BATUMI, Georgia — The casual visitor wouldn’t be able to tell this city was recently a shabby mafia haven in a hidden and impoverished corner of the former Soviet Union.

Sparkling skyscrapers, flashing neon lights and a booming gambling industry draw hundreds of thousands of tourists to what’s now dubbed the Las Vegas of the Black Sea.

Lili Sharapidze witnessed the transformation from her stall at Batumi’s main market, where she sells the local gooey cheese used for a celebrated local bread dish called Adjarian khachapuri.

“It’s much safer and more beautiful than it was 10 years ago,” she says. “There was so much theft before, but now the streets are quieter and I’m not afraid to leave my car outside.”

She attributes the change to one man: President Mikheil Saakashvili.

Located in the once quasi-independent Autonomous Republic of Adjara, Batumi’s potential lay in its location on a beautiful coastline with a subtropical climate. Attracting foreign investment and tourism to turn the dilapidated former Soviet port with intermittent electricity into a dynamic regional capital was his brainchild.

The $500 million project has restored the old town and seen the construction of cafes, upscale hotels and hip nightclubs and restaurants.

However, the development’s bright future became cloudy with the defeat of Saakashvili’s party in parliamentary elections last year.

They were won by the Georgian Dream coalition of billionaire Bidzina Ivanishvili. He’s now prime minister under a new law that’s weakened the once-powerful president, and has arrested a number of Saakashvili allies in his drive to assert power.

What will happen to Batumi and the economic reforms that enabled its rise remains unclear — not least because the resort’s rebuilding carried political overtones.

When Saakashvili came to power after the Rose Revolution of 2003, Adjara was virtually independent of the government’s control under the autocratic rule of strongman Aslan Abashidze. Like much of the country, the region was plagued by corruption, dominated by the black market economy and run largely by organized criminals.

After months of escalating political brinksmanship, thousands took to the streets of Batumi in May 2004 to urge Abashidze to resign. He fled to Moscow in what became known as the Second Rose Revolution.

With his rival out of the way and his own authority strengthened, Saakashvili focused on a series of reforms, including zero tolerance for crime and corruption, to turn Batumi into a showcase for his reforms.

Across the country, Saakashvili instituted a liberal tax code and deregulated the labor market. Relaxing onerous business regulations gave entrepreneurs freedom and improved competitiveness in global markets. Georgia is now one of the world’s most tax friendly countries.

The reforms have borne fruit. Despite a brief but disastrous war with Russia in 2008, the government says Georgia’s GDP has grown around 7 percent a year. In 2012, the World Bank ranked it among the top 10 out of 185 countries for ease of doing business.

International publicity campaigns promoting business and leisure opportunities in Batumi helped bring foreign investment that continues today as construction companies rush to get a piece of the action.

Nearly 800,000 foreign tourists visited Adjara between January and September 2012, compared to just 27,000 in 2005.

The glittering new skyscrapers have transformed the city’s skyline. A vibrant, landscaped boulevard lined with fancy cafes runs parallel to the shore, where tourists stroll and local pensioners play chess. Children ride tricycles amid the scent of jasmine and the sea.

Sheraton, Radisson and other companies have built hotels here to cater to the influx of visitors. Construction cranes are now as much part of the cityscape as the old cobblestoned streets and palm trees.

More than a million square meters are under construction at any one time, according to the city’s former chief architect David Zoidze. But it’s not clear whether that will continue after Ivanishvili’s victory last October.

Saakashvili’s opponents accuse him of authoritarian tendencies and lavishing money on pet projects, such as the building of an ostentatious presidential palace in Tbilisi, while much of the country remains desperately poor.

Ivanishvili has criticized the large number of casinos and gaming clubs to have opened in the last few years. They’ve attracted a stream of tourists from neighboring countries where gambling is banned, such as Turkey, Iran and Azerbaijan. While they may bring in money, Ivanishvili says gambling does more harm than good.

“Casinos damage the reputation of the country,” he said recently in an interview with a Turkish newspaper, adding that he aims to close all gambling businesses and brothels in Adjara.

Critics also point out that far from everyone has benefited from the recent boom.

Poverty remains high: Only 39 percent of Batumi’s residents said they were employed in a survey last year, partly because some of the foreign companies here bring their own personnel.

Back at her cheese stall, Lili Sharapidze says that although Batumi looks prettier, life remains hard.

“Although my three children have university degrees, they’re unemployed,” she said, saying supporters of Saakashvili’s opponents have had an especially hard time. “These new buildings may be beautiful, but buying a house is too expensive.”

At Batumi’s fish market, venders hawk their products in the salty, humid air. They also complain about rising prices for electricity, gas and basic staples.

“We can’t afford water and electricity,” one said. Another said she sometimes eats food half-uncooked to save on gas bills.

Giorgi Masalkin, a regional legislator from the Georgian deam coalition, praises Ivanishvili’s new government for making those issues as a priority.

He also wants to return more autonomy to the region.

“During the Saakashvili years, there was as little autonomy, as in Soviet times,” he said. “Everything was dictated from a small circle of people in his entourage. We want to strengthen self-government, to manage Adjara’s economic, social and cultural issues from here.”

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Although the new government will continue to invest in tourism, he says, it has other priorities, too.

“We can’t rely solely on the tourism sector,” Masalkin said. “It’s an important source of income for any economy, but it can’t be the main one. Otherwise we risk ending up like Greece: with a well-developed tourism industry and nearly bankrupt.”

http://www.globalpost.com/dispatch/news/business/emerging-markets/130111/georgia-batumi-resort-black-sea