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CNN Wire Staff

(CNN) -- Georgian President Mikheil Saakashvili conceded his party's defeat Tuesday, setting the stage for the nation's first peaceful, democratic transition through election since the breakup of the Soviet Union.

The results of Monday's election means Georgia will have a multi-party parliament, boosting democracy in the nation, observers say. The vote is also a reflection of how the people feel about Saakashvili. He took power in 2004 after the Rose Revolution, the name given to widespread protests over disputed parliamentary elections.

Saakashvili is credited with have changed the country by moving toward integration with the West, with steps such as seeking membership in the European Union and NATO. He also revamped the nation's economy, retooling it to reflect a free market system.

But critics said that underneath, his government was dominated by Soviet-style "administrative measures."

CNN iReporter Andro Kiknadze, a 31-year-old who works in IT, shot video of jubilant opposition voters waving flags and honking car horns near Freedom Square in the Georgian capital, Tbilisi.

He voted for Saakashvili because he thought the president stabilized the country.

"Many things have changed since he came to power," Kiknadze said. We are more stable and peaceful than before."

Saakashvili conceded his party's loss to a coalition headed by billionaire businessman Bidzina Ivanishvili, said Sergi Kapanadze, Georgia's deputy foreign minister.

The vote in the parliamentary election has not been fully tallied. Georgia's Central Electoral Commission is continuing to count.

The commission's performance has been lauded as professional and independent, said Lorne Craner, president of the International Republican Institute, a U.S. Congress-funded democracy support organization. "There's no question in my mind ... the election commission can be relied upon."

"The question is will everyone stay calm when the results come out," said Craner, speaking from the Georgian capital, Tbilisi.

iReporter Jonathan Hackett, an American teacher living in the Imereti region in central Georgia, said the scene was calm Monday night and Tuesday morning, despite the large amount of support for Saakashvili in the region.

"It turns out the election was considered free and fair, at least in our little village," he said. "People were gathered outside the local convenience store discussing the outcome."

Kapanadze said Saakashvili promises his party, the United National Movement, will work with Ivanishvili's Georgian Dream alliance, which won a majority of seats in the 150-member parliament.

Money was a major issue during the campaign, experts said.

The government tried to regulate how much could be spent on, for example, corporate contributions, and that effected how much Ivanishvili could spend.

"I think that the government, at times, overstepped when it created an entity called the Chamber of Control and Fines to watch over these new regulations," said Stephen Nix, the director of Eurasia at the International Republican Institute. He's an expert on Georgia and was in Tbilisi Tuesday.

"This means, overall, that there is a closer approach to democracy which will be felt about one year from now, in October 2013, when a presidential election happens," Nix added.

The new system will shift power from the president to a prime minister, according to Thomas de Waal, an expert on Georgia and a senior associate at the Carnegie Endowment for International Peace in Washington.

"The prime minister will be chosen by parliament, which thus hands important powers to whichever political force obtains a majority in parliament in the ... elections," de Waal said.

Until recently, Saakashvili and the United National Movement have controlled much of political life in this country of 4.5 million people. Saakashvili has been praised by U.S. and European officials for making progress in the fight against corruption and for continuing economic reform.

But critics, who coalesced behind Ivanishvili, said reform was only skin-deep, and charged that Saakashvili has been pulling all the levers of Soviet-style "administrative measures."

During the election campaign they raised concerns about a level playing field for the opposition, alleging harassment and limitations on access to the media.

For his part, Saakashvili has referred to the opposition leader Ivanishvili as that "big money guy."

The president accuses Ivanishvili of wanting to "buy the whole system," and sees behind him the hand of Russia, with which Georgia fought a brief but bitter war four years ago.

The president said he was concerned with the amount of wealth that Ivanishvili made in Russia, and whether that money was used to influence the elections.

"We know what Russian money is all about," he said. "How it was made, what kind of methods were used, and certainly it is a source of concern," he said.

Those charges are false stereotypes, Ivanishvili told CNN in a phone interview from Tbilisi.

A self-made businessman who made his money in Russia after the fall of the Soviet Union, Ivanishvili left Russia shortly after Vladimir Putin came to power.

His staff confirms his status as Georgia's richest man, with a fortune estimated at approximately $6.4 billion, equal to almost half of Georgia's economic output.

But, he said, "it's not money and wealth which is my capital. It's trust from the people toward me. Money has nothing to do with this."

The billionaire said he has sold all his Russian assets, and defended his reputation.

But the president insisted that not only the opposition leader but Putin himself is trying to undermine Georgia.

"Vladimir Putin said clearly that he is interested in the Georgian election outcome. He clearly said that he wanted the Georgian government out. He clearly said that he wanted me to be physically destroyed, he said it publicly," Saakashvili said.

Georgia's electoral waters have been roiled by a shocking video that emerged last month showing abuse in a Georgian prison, including one male prisoner being sexually assaulted. The opposition claims the video is proof of a repressive system put in place by Saakashvili and his government.

Saakashvili said his government acted quickly and decisively to the video, citing an investigation that has led to arrests.

"Not only were the immediate perpetrators arrested," he said, "but two government ministers resigned because they shared political responsibility for allowing the system to fail."

The torture shown on the video is no accident, but part of a system that is in shame, Ivanishvili said.

De Waal said the video is significant, as the prison population has quadrupled over the past eight or nine years.

"I do think it (the video) supports the opposition narrative that the government is arrogant and unaccountable. And this is obviously a war of two narratives over Georgia that we're seeing in this election," he said.

CNN's Jill Dougherty, Stephanie Halasz and Joyce Joseph, along with Journalist Elene Gotsadze, contributed to this report.

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