Issue #810 Business

facebook.com/ georgiatoday

www.georgiatoday.ge

Issue IIs ssu ue no: 810/10

• JANUARY 19 - 21, 2016

• PUBLIS PUBLISHED TWICE WEEKLY

FOCUS ON CHANGING THE SYSTEM

New Prime Minister Giorgi Kvirikashvili discusses gambling reformation for social welfare

PAGE 2

PRICE: GEL 2.50

In this week’s issue...

US Ambassador: Georgia Needs Energy Diversification PAGE 2

Georgia’s PM Meets Businessmen, Promises ‘Interesting’ Offers PAGE 3

Men are rational, women are adaptive?

ISET PAGE 4

Georgia to Introduce Estonian Model of Corporate Income Tax

BY TAMAR SVANIDZE

T

he Head of the Georgian Government has announced that the State is actively working to establish in Georgia a tax system similar to the Estonian corporate income tax model.

The Prime Minister of Georgia, Giorgi Kvirikashvili, revealed that consultations about this issue are ongoing with representatives of the International Monetary Fund and the majority of the Georgian Parliament.

“The Government has begun work regarding tax liberalization. This means corporate income taxation only in the case of profit sharing. Earnings will be created within the company and will be taxed only if considered as distributed dividend. If companies reinvest their income they will be free from tax.

This will help to attract potential investment resources existing on the local market,” Kvirikashvili stated.

Estonia’s current system of corporate earnings taxation is a unique system which shifts the momentum of corporate taxation from the moment of earning the profit to the moment of its distribution.

Giorgi Kvirikashvili Discusses Infrastructural Projects with Governors PAGE 5

Changes in Composition of Board of Directors of JSC PASHA Bank Georgia PAGE 6

Mexico’s Healthcare Reform GALT & TAGGART PAGE 7 Prepared for Georgia Today Business by

Markets As of 15ͲJanͲ2016

STOCKS

w/w

m/m

BONDS

Price

w/w

m/m

GBP 16.95

Ͳ5,8%

Ͳ9,1%

GEOROG 05/17

100.31 (YTM 6.61%)

Ͳ0,4%

Ͳ0,6%

GBP 1.65

+1,9%

Ͳ0,9%

GEORG 04/21

102.93 (YTM 6.21%)

Ͳ0,6%

Ͳ2,3%

TBC Bank (TBCB LI)

US$ 9

Ͳ17,4%

Ͳ7,0%

GRAIL 07/22

100.88 (YTM 7.58%)

Ͳ0,7%

Ͳ2,2%

GEBGG 07/17

103.06 (YTM 5.53%)

Ͳ0,4%

Ͳ0,8%

COMMODITIES

Price

w/w

m/m

28,94

Ͳ13,7%

Ͳ24,7%

1 088,88

Ͳ1,4%

+2,6%

Bank of Georgia (BGEO LN) GHG (GHG LN)

Crude Oil, Brent (US$/bbl) Gold Spot (US$/OZ)

INDICES

Price

Price

w/w

GEL / USD

2,4250

+0,4%

+1,5%

GEL / EUR

CURRENCIES

2,6198

Ͳ0,6%

+0,4%

m/m

Price

w/w

m/m

GEL / GBP

3,4573

Ͳ1,4%

Ͳ3,9%

FTSE 100

5 804,10

Ͳ1,8%

Ͳ3,6%

GEL / CHF

2,4227

Ͳ0,3%

+0,6%

FTSE 250

16 160,60

Ͳ3,4%

Ͳ4,9%

GEL / RUB

0,0312

Ͳ3,4%

DAX DOW JONES NASDAQ

Ͳ8,5%

9 545,27

Ͳ3,1%

Ͳ8,7%

GEL / TRY

0,7960

Ͳ0,7%

Ͳ1,2%

15 988,08

Ͳ2,2%

Ͳ8,8%

GEL / AZN

1,5225

+3,6%

Ͳ33,3%

4 488,42

Ͳ3,3%

Ͳ10,1%

GEL / AMD

0,0050

Ͳ

+2,0%

97,08

Ͳ7,6%

Ͳ12,2%

GEL / UAH

0,0994

Ͳ4,3%

Ͳ0,5%

709,19

Ͳ4,2%

Ͳ9,0%

EUR / USD

0,9163

+0,1%

+0,2%

SP 500

1 880,33

Ͳ2,2%

Ͳ8,0%

GBP / USD

0,7015

+1,8%

+5,5%

MICEX

1 608,36

MSCI FM

MSCI EM EE MSCI EM

Ͳ8,0%

Ͳ7,7%

CHF / USD

1,0012

+0,6%

+1,0%

2 153,53

Ͳ4,5%

Ͳ5,9%

RUB / USD

77,7049

+4,0%

+11,1%

GT Index (GEL)

885,86

Ͳ

Ͳ

TRY / USD

3,0470

+0,9%

+2,8%

GT Index (USD)

721,35

Ͳ0,3%

Ͳ1,0%

AZN / USD

1,5704

+0,2%

+50,1%

2

BUSINESS

GEORGIA TODAY

JANUARY 19 - 21, 2016

Government Turns its Attention to Online Casinos

BY EKA KARSAULIDZE

T

he Parliament of Georgia once again raised the issue of the dangerous impact of online casinos and the question of their closure. This time the initiative belongs to new Prime Minister of Georgia, Giorgi Kvirikashvili. At present there are no specific details about future regulations, but the government intends to study the issue in detail.

According to PM Kvirikashvili, the absence of any regulations for the online casino business has

resulted in serious negative consequences for the population of Georgia. The authorities plan to thoroughly explore the online casinos market in the near future and then begin to work out the necessary regulations. The PM claimed that if the regulations are not entirely effective, the government would consider more stringent measures.

However, it is unknown whether, by this, PM Kvirikashvili was referring to the possibility of their complete shut down or not.

“I want to figure out what options we have and how far it’s possible to implement them in Georgia.

If it’s physically impossible, then we’ll think about more stringent measures,” he said. “By all means we must prevent further destructive impact on

Online casinos are used by around 85% of all players in the gambling industry, 70% of which are minors

citizens by the online casino market.”

Despite the fact that gambling in general is recognized as one of the most pernicious and intractable addictions, the PM highlighted that future regulations will concern only online casinos. “In this issue we separate offline casinos. New regulations will not touch them, as their existence is important for the tourism and hospitality industry,” noted Kvirikashvili.

The main reason for the creation of the regulations named the easy availability for juveniles to online games and casinos. According to some reports, the number of people using online casinos in Georgia is increasing by the year. They are used by around 85% of all players in the gambling indus-

try, 70% of which are minors.

The majority of the population of Georgia actively supports the Prime Minister’s proposal, which indicates that there are serious problems in this area.

On the other hand, if the closure of the online casinos becomes a reality, it will be considered by some as a hard interference in business by the Government. However, the main task of the Government to look after the welfare of its citizens will most likely be the saving grace in such an argument.

The initiative to restrict access to online casinos was first sounded at the beginning of 2015, though at the time the Government did not support it, arguing that gambling makes a significant contribution to the budget.

Saburtalo to Be Freed from Traffic Jams

BY EKA KARSAULIDZE

S

aburtalo district in Tbilisi is considered by many as a place where traffic jams occur most often. To solve this problem, five options for the improvement of onsite traffic have been presented to Tbilisi City Hall. To date the government has tended to focus more on traffic regulation and street infra-

Five options for the improvement of on-site traffic have been presented to Tbilisi City Hall by Germany Company ‘A+ S Consult GmbH Forschung und Entwicklung’

structure improvements than large-scale construction. The restriction of vehicles, not only in Saburtalo but in other districts of the capital, need to be a part of the unified traffic Master Plan of Georgia.

“To study the most challenging aspects of transportation in Tbilisi, we chose a foreign company which has been engaged in the field for many years,” said Vice-Mayor of Tbilisi, Lasha Abashidze. “We intend to make future decisions based on the information and recommendations they presented to us.”

Germany Company ‘A+ S Consult GmbH Forschung und Entwicklung’ studied in detail the traffic flow in the Saakadze Square and 26 May Square areas, as well as along Pekini, Kandelaki and others surrounding streets. Following this, they presented the State with five alternative ways to solve the problem which includes better regulation of traffic, as well as large-scale infrastructure projects.

According to the company’s research, Saburtalo exceeds the allowable capacity of flow, as a result of which it experiences reduced speed of movement, traffic jams, noise and polluted air.

“We have proposed five options,” said Christian

Boettger, Head of Transport Department of ‘A+S Consult GmbH Forschung und Entwicklung’ Company. “It is essential to solve the major problems with the establishment of new traffic lights at various points in the studied areas. In addition, to solve the problem of traffic jams in Tbilisi overall, the government should create new pedestrianized areas. We have presented our vision of problems and a number of solutions and now it is up to the heads of the capital to decide which version is more suitable for them.”

Tbilisi City Hall had already announced that they are leaning towards one version which includes the establishment of new ‘smart’ traffic lights, safety islands, public transport development and he introduction of a number of other systems for traffic regulation.

“I was satisfied that the studies paid attention to the large area opposite the Holiday Inn Hotel on 26 May Square,” said Shalva Ogbaidze, member of the City Council. “In the past there were suggestions to install a tunnel there, but I’m pleased to see that this option has now been excluded and this area will simply be released to movement in other ways.”

Government officials, representatives of NGOs and experts point out that it was important for the State to abandon large-scale infrastructure projects in favor of traffic regulation, the changing of traffic flow and even the limitation of that flow in some areas – options suggested by foreign experts. Moreover, co-director of Georgia’s traffic Master Plan, Merab Bolkvadze, highlighted that although the work on the Plan is at an early stage of development, they fully support such a system and believe that it is possible to solve problems on the roads with the correct regulations.

US Ambassador: Georgia Needs Energy Diversification

BY ZVIAD ADZINBAIA

U

S Ambassador to Georgia, Ian C. Kelly, told reporters that Georgia should not become dependent on one source of energy alone.

The Ambassador says Georgia needs to take care of its energy diversification.

“We have expressed our concern over the fact that Georgia should not become dependent on one source of energy and should maintain diversification,” Kelly was quoted as saying.

According to the Ambassador, he is satisfied with the explanations of the Georgian government. “I think Georgia does have a short-term energy need and it should talk to all potential energy suppliers,”

the Ambassador said, adding that the government must be transparent about its energy policy.

When asked how normal it is for Georgia to have relations with Gazprom, as its territories are occupied by Russia, the Ambassador replied, “The Georgian government can well realize the existent challenges.”

A public protest was held on Saturday near the governmental administration building to rail against the ‘hidden negotiations’ of the government with Russia’s energy giant Gazprom. The protesters accused the government of working against the state and national interests of Georgia.

BUSINESS

GEORGIA TODAY JANUARY 19 - 21, 2016

3

Georgia’s PM Meets Businessmen, Promises “Interesting” Offers

BY TAMAR SVANIDZE

G

eorgia’s Prime Minister, Giorgi Kvirikashvili, has met with representatives of the Business Association.

It was his first meeting with the Business Association members as Head of

the Georgian Government.

Before the meeting, the President of Associations of Banks, Zurab Gvasalia, told reporters that he intended to raise the issue of amendments to the law on police eviction at the meeting.

“This a public problem,” he said, “As it concerns private property.” He added that the Estonian model of profit taxes would also be discussed at the meeting.

According to PM Kvirikashvili, the Government has very interesting offers for the business sector in Georgia.

“Now we are going through a very interesting process,” he said. “Every day we meet with our ministers. We review projects and prioritize portfolios in order to reveal the main priorities. We believe that the involvement of the Business Association in this process should be active. We have

very interesting offers for businesses,” he said.

He went on to speak of his personal interest in the opinions of those present on the direction of the processes, emphasizing that ensuring proper communication with the business sector and engaging the business community in the decision-making process is his priority. “The main aim of today’s meeting is communication with the

business sector and the engagement of businessmen in the economic-profile decision-making process. I would like to thank you for what you are doing for our country,” he said.

The PM also expressed his interest in learning of the strategy and longterm plans of the Business Association. “I want each of you to feel that you are important in the decisionmaking process,” Kvirikashvili added.

Georgia-Germany Relations Discussed at MFA

BY ZVIAD ADZINBAIA

G

Minister Janelidze underlined the need to make maximum use of economic co-operation potential

eorgian Foreign Minister Mikheil Janelidze met the Ambassador Extraordinary and Plenipotentiary of the Federal Republic of Germany to Georgia, Bettina Cadenbach.

The Minister is said to have positively assessed the existing close partnership between Georgia and Germany in the political, trade and economic, cultural

and other spheres.

Minister Janelidze also underlined the need to make maximum use of economic co-operation potential, which means increased interest of the German business communities in Georgia and a greater volume of German investments in the country. “In this context, Minister Janelidze welcomed the efforts of the German Federal Government to promote the intensification of economic relations, and underlined the need to share Germany’s experience in certain spheres,” the MFA stated.

Ambassador Cadenbach once again

expressed the readiness of the German Government to facilitate the further enhancement of bilateral co-operation with Georgia, particularly in the economic sector. “The Ambassador once again reaffirmed Germany’s strong support for the reforms carried out by the Government of Georgia as well as for Georgia’s European integration and territorial integrity,” the MFA said.

The talks also included the celebration of the Germany-Georgia Friendship Year in 2017 and Georgia’s participation as Guest of Honor in the Frankfurt Book Fair 2018.

4

BUSINESS

GEORGIA TODAY

JANUARY 19 - 21, 2016

THE ISET ECONOMIST A BLOG ABOUT ECONOMICS AND THE SOUTH CAUCAUS

www.iset-pi.ge/blog

The ISET Policy Institute (ISET-PI, www.iset-pi.ge) is an independent think-tank associated with the International School of Economics at TSU (ISET). Our blog carries economic analysis of current events and policies in Georgia and the South Caucasus region ranging from agriculture, to economic growth, energy, labor markets and the nexus of economics, culture and religion. Thought-provoking and fun to read, our blog posts are written by international faculty teaching at ISET and recent graduates representing the new generation of Georgian, Azerbaijani and Armenian economists.

Men are Rational, Women are Adaptive?

Insights From Georgia’s Consumer Confidence Index

BY YAROSLAVA BABYCH

F

or over three and a half years, the ISET Policy Institute has been tracing the trends in the Georgian consumer sentiments. Every month a team of callers dial randomly generated telephone numbers to interview around 330 people from all over Georgia. The interviewer first asks the basic questions about the respondent’s age, level of education, place of residence, and then follows up with questions about the current financial situation of the household and the person’s expectations about the future economic situation in the country.

The answers form the basis of CCI the Consumer Confidence Index. The CCI is a very important indicator for economists. Very low consumer sentiment, for example, means that people

10 Galaktion Street

are likely to spend less, thus depressing the overall economy.

Few people realize that behind a single CCI number there is a great deal of useful and sometimes surprising information. The CCI data can be used to informally test some important economic theories. For instance, the theories of rational and adaptive expectations.

Here I must disappoint the readers – the terms “rational” and “adaptive” in economics don’t mean the same thing as in our everyday language. Rational has nothing to do with being sensible or logical, and adaptive doesn’t mean that someone is easily adjusting to change.

Without digging deep into theory, let’s just say that in trying to predict the future, people with rational expectations are using all the relevant information available to them at the time. What this means, is that people will not be always right about the future, but on average and over time people’s predictions will be right.

So says the rational expectations theory.

What about adaptive expectations?

People with adaptive expectations form their predictions of the future based on the information about the past. To put it simply, if it has been raining for the last 10 days, you will expect a rainy day tomorrow as well.

So what can we say about the expectations of the Georgian consumers? The CCI index can offer some interesting insights.

First, let’s look at the correlation between the CCI expectations index (which asks questions about what people expect from the economy in the next 12 months) and the actual average GDP growth 12 months into the future. We can observe that the overall correlation is not very strong (the correlation coefficient is 0.36. This is on the low side. Consider that a coefficient of 1 means perfect correlation, while 0 means no correlation at all).

This, however, is not true for every group of people. For men, for example, the expectations about the future and the actual future growth seem to be more strongly correlated (correlation coeffi-

*indicates significance of the coefficient on 10% level; CC =1 indicates perfect positive correlation between two variables; CC = -1 indicates perfectly negative correlation between two variables; CC = 0 indicates no correlation between two variables.

Tel: (995 32) 2 45 08 08 E-mail: info@peoplescafe.ge

cient 0.55). For women, this correlation is almost non-existent.

For insights on adaptive expectations, we correlate the CCI expectations index with the actual GDP growth in that month. A strong correlation could imply that people are using the current month’s economic situation to predict what will will happen in the future.

The correlation seems to be rather strong for almost all groups, but the strongest correlation we observe in women over 35 years old - the coefficient value is 0.64. (Interestingly, women younger than 35 demonstrate the lowest correlation coefficients in both categories).

Does this prove that Georgian men conform to rational expectations hypothesis, while Georgian women to the adaptive expectations? Not really. The simple correlations are by no means a formal test, much less the proof of the rational and adaptive expectations hypotheses.

Nevertheless, the results, and especially the differences between the samples of men and women are interesting, don’t you think?

BUSINESS

GEORGIA TODAY JANUARY 19 - 21, 2016

5

Georgian Glass to Be Exported To Italy

BY ANA AKHALAIA

T

hirteen different types of glass produced in Georgia are to be exported to Italy.

A Georgian glass company in Ksani has signed agreements with the three largest mineral water-producers in Italy.

The Georgian glass factory was visited

by the experts of the Italian company Societa di Santa Aerallba in order to carry out quality control and monitoring of the production process.

At the initial stage, in total, 25 million bottles are scheduled to be transported to the Italian market, and this figure is planned to increase in the future.

Bottles for export were created with a special form and material, exclusively made for the Italian mineral water company, which targets the high-income

segment. Both international and local professionals developed the design of the bottle.

Deputy Minister of Economy and Sustainable Development, Ketevan Bochorishvili, stated that the signing of the Association Agreement with the EU has contributed to this new export deal.

“Within the framework of the Association Agreement we have a free and comprehensive trade regime with Europe.

This is an example of the results we

The JSC “Mina” Ksani Glass Factory, 2014

expect. More entrepreneurs will be able to get their products onto the EU market after meeting the appropriate quality standards,” said Bochorishvili.

Georgian glass products are currently

exported to Turkey and Azerbaijan. The Ksani glass works company is currently employing 280 people and producing more than 60 thousand tons of glass products for the local and export market.

Giorgi Kvirikashvili Discusses Infrastructural Projects with Governors

BY ANA AKHALAIA

P

rime Minister of Georgia, Giorgi Kvirikashvili, and the governors met at a working meeting held in the Government Administration to discuss problems within the regions and current and planned infrastructure projects.

As the Government Administration revealed, highlighted topics at the meeting were the investment potential of each region, regional development prospects, and ways of attracting investments to provide for the country’s economic development. The discussions also focused on the needs of the

PM Kvirikashvili said that the government’s goal is to provide safe drinking water for all families and significant

steps should be carried out in this direction. He also emphasized the importance of looking after the country’s youth and

NEW YEAR SALES!

577 22 02 20 577 23 02 30

FROM 800$

www.redco.ge sales@redco.ge

regional populations, including gasification, roads and drinking water network rehabilitation projects.

the need for youth involvement in the country’s development processes.

At the Administration meeting, the PM heard the opinions and suggestions of the governors about the future plans and working format, as well as about the necessary strengthening of communication with the many branches of government.

The meeting was attended by the Minister of Economy and Sustainable Development, Minister of Energy, Minister of Environment and Natural Resources, Minister of Regional Development and Infrastructure, Secretary of Economic Council, Head of Government Administration and the Head of the Department for Relations with Regions and Local Self-Government Units.

FULLY RENOVATED FLATS IN BAKURIANI!

OPEN YOUR DOORS!

6

BUSINESS

GEORGIA TODAY

JANUARY 19 - 21, 2016

Partnership Fund Discussing Construction of Energy Efficient Block Factory

BY ANA AKHALAIA

P

lans for an energy efficient block factory are being discussed by the Partnership Fund which is working on the project with Georgian company Ytong Caucasus and German company Xella.

Construction of the factory is planned in Tbilisi. According to the project, construction of the factory should be com-

pleted by the end of 2016, while the first certified production is scheduled for early 2017.

The Ytong energy efficient Air-Bloc is produced for construction purposes. It is a high-tech innovative product which meets international standards of construction and is completely environmentally friendly, as proven by certificates received from various European institutions.

According to the obtained license, products will be sold in Georgia and also exported to Azerbaijan, Armenia and

southern Russia.

According to Chief Investment Officer of the Partnership Fund’s Investment Department, Nino Cholokashvili, the Ytong energy efficient block has a number of advantages compared to other construction materials. The thermal conductivity is five times better than the concrete block and it is also much lighter which makes it possible to significantly reduce the number of fittings used in the construction of buildings and significantly speed up the process of construction.

“The important factor is that the necessary raw materials for production of the Ytong Air-Bloc are available in Georgia. The project is also attractive in terms of the high heat-insulation of buildings built, through which it is possible to sig-

nificantly reduce the utility costs for heating and cooling,” Cholokashvili said.

The project investment is worth USD 13.5 million. The project is currently under discussion and negotiations are ongoing between the partners.

Handcrafted Georgian natural wines and tapas style food 6, Erekle II str (old town) 0322 93 21 21

Every Wednesday 20% off on special Georgian artisan wine!

Georgian Tapas Menu at g.Vino 0322 93 21 21 fb: g.vinotbilisi

6, Erekle II str (old town)

Changes in Georgian ‘Livo’ Natural Juices Composition of Presented at Berlin Exhibition Board of Directors of JSC PASHA Bank Georgia

BY ANA AKHALAIA

G

eorgian natural juices company ‘Livo’ is taking part in the Grüne Woche international exhibition in Berlin. Grüne Woche (International Green Week) was opened on 16 January.

With the support of the Ministry of Agriculture, various Georgian companies are presenting their products, includng wine, Chacha (Georgian pomace brandy), beer, lemonades, juices, tea, churchkhela, jam, and more, at the exhibition.

Also on show at the exhibition are classic examples of traditional Georgian cuisine with dishes like Khachapuri, Chvishtari, and Phkhali. To compliment the tasty offerings, Georgian ensemble Shvidkatsa will perform polyphonic folk songs for the guests.

P

ASHA Bank Georgia is pleased to announce the appointment of Mr. Chingiz Abdullayev as Member of the Board of Directors and Chief Financial Officer of the Board of Directors as of January 13th, 2016. He is in charge of supervising Financial Management, Treasury as well as Administration and Procurement Departments.

Chingiz Abdullayev started his career at Baku Stock Exchange as the Head of Listing Division in 2000. In 2003 he joined Assurance & Advisory Service of Deloitte and for the following 10 years worked at senior positions with KPMG Russia, Moore Stephens CIS and RSM Georgia with major focus on financial institutions, energy, trade and other industry sectors.

Chingiz Abdullayev joined JSC PASHA Bank Georgia in 2014 as Head of the Financial Management Department. He became a Member of the Board of Directors on January 13th, 2016.

The Board of Directors of JSC PASHA Bank Georgia consists of three Executive Directors, involved in day-to-day management of the Bank. Its current composition is as follows: Chairman of the Board of Directors: Shahin Mammadov

International Green Week (IGW) is taking place for the 81st time in 2016; a one-of-a-kind international exhibition for the food, agricultural and horticultural industries. Producers from all over

FOR RENT

Member of the Board of Directors: George (Goga) Japaridze Member of the Board of Directors: Chingiz Abdullayev PASHA Bank is a Baku-based financial institution operating in Azerbaijan, Georgia and Turkey, providing a full range of corporate and investment banking services to large and medium-sized enterprises.

Apartment in Vake (behind the Vake Swimming Pool) in an ecologically clean environment with beautiful views.

The 120 sq. m. duplex apartment on the th 10 floor, newly renovated, with a new kitchen, fireplace, balconies.

Price: 900 USD Tel: 577521020 Tekla (English); 597000109 Dato (Georgian)

the world come to IGW to test market food and luxury items and reinforce their brand image.

The opening of the exhibition was attended by the Georgian Minister of Agriculture, Otar Danelia, the Ambassador Extraordinary and Plenipotentiary of Germany, Lado Chanturia, and the Georgian delegation.

‘Livo’ was founded by the Sales Management Company in 2013. Their natural juices are produced in their ‘Citro’ factory in Adjara.

The juices are made from local citrus and raw fruit by direct squeezing, which preserves the aromatic taste and the healthy qualities of the juice.

According to Quality Lab laboratory, ‘Livo’ juices do not contain any genetically modified organisms.

‘Livo’ lemon juice was awarded a gold medal at the World Food Ukraine international exhibition in Kiev in 2014.

The company’s juices are also sold in Russia and Estonia.

BUSINESS

GEORGIA TODAY JANUARY 19 - 21, 2016

7

The Galt & Taggart Research team comprises Georgian and Azerbaijani finance and economic experts who have broad experience of covering the macro and corporate sectors of the two countries. Our current product offering includes Georgian and Azerbaijan macroeconomic research, Georgian sector research, and fixed income corporate research.

For free access to Galt & Taggart Research, please visit gtresearch.ge or contact us at gt@gt.ge.

Mexico’s Healthcare Reform FOR GEORGIA TODAY BY DAVID NINIKELASHVILI

S

ector research is one of the key directions of Galt & Taggart Research. We currently provide coverage of Energy, Tourism, Real Estate, Agriculture, and Wine sectors in Georgia. Healthcare is our latest addition, with the full report to be released in the near future.

We are featuring two cases from the report for Georgia Today. Today’s article will provide an overview of Mexico’s healthcare reform and our next article will cover Turkey. These two countries have become global benchmarks for building universal healthcare (UHC) systems.

Every government in the world faces five major healthcare issues: aging population, chronic diseases, rising costs, quality of and access to healthcare, and insufficient infrastructure and technology. Mexico has been one of the global leaders in healthcare reform and has made a huge leap forward over the last few years with its UHC system - a healthcare system which provides access to healthcare for all citizens of a country.

Economic disparity among the population is a problem in Mexico, despite having the world’s 15th largest economy (US$ 1.3tn as of 2014) and one of the highest GDP per capita in Latin America (US$ 10,230 as of 2014). In 2012, more than half of the 113mn population lived below the poverty line, compared with 9.7% of Georgia’s 4.5mn population.

In the early 2000s, half of the Mexican population was uninsured. Although the uninsured had access to services offered by public health facility networks, the distribution of public funds among population groups and states was inefficient and inequitable. The uninsured half of the population received only 1/3 of federal funding for health and there was a 5 to 1 difference in spending per capita across states in 2003. Every year, 2-4mn households (9-18% of all households) suffered from catastrophic healthcare payments. Public healthcare spending was below the Latin American average and was too low to address even the basic healthcare needs. Out-of-pocket spending accounted for more than half of healthcare spending in Mexico, above that of Brazil, Chile, and Colombia. The share of private spending was even larger in Georgia (4.6-5.7x that of public spending) and around 65.0% of medical care in Georgia was either self-treatment or provided free of charge from relatives or neighbourhood doctors.

In response, in 2003 Mexico designed structural reforms to protect families from impoverishing health spending and to completely cover the country’s roughly 12mn uninsured families (about 55% of all households). Similar to Georgia, the main challenge for Mexico was the disparity in the allocation of healthcare financing as well as services among population groups and states. The Seguro Popular, the new publicly funded insurance plan, took over in 2004 (Geor-

gia started its insurance reform in 2007) with the goal of achieving 100% coverage in 7 years (Georgia introduced it in 6 years). The program was implemented in stages, taking into account the states’ individual characteristics, and enrolment was first targeted at the poorest segment of the population. The Seguro Popular was financed by both state and federal governments as well as by beneficiary families. The federal government contributed a uniform amount for all families. Each enrolled state contributed an equal amount for every insured family and family-level contribution was deter-

mined by disposable income. From 2002 to 2013, Mexico’s healthcare spending per capita increased from US$ 396 to US$ 664. Over 2002-13, public health expenditure more than doubled from US$ 18.3bn to US$ 40.7bn.

Due to improved access to and quality of care, life expectancy in Mexico increased over the last decade to 79.8 for females and 75.1 for males as of 2013, up from 77.2 and 72.3 in 2002, respectively. Mexico also improved its health resources and by 2013, it had 2.2 physicians and 2.6 nurses per 1,000 persons (compared to 1.5 and 2.2 in 2002, respec-

tively). However, as of 2013, Mexico had the lowest number of hospital beds per 1,000 persons among OECD countries - 1.5 compared to an average of 5.0.

Despite these strides, Mexico’s public healthcare system faces considerable challenges, including insufficient infrastructure, poor distribution of resources among federal entities, and limited public-private partnerships for infrastructure development. There is also little focus on wellness and prevention - only 0.6% of budget disbursements for the health sector are used for the promotion of health and prevention and

control of communicable and degenerative diseases and injury. The private healthcare system has challenges as well, including a deficit of nurses, since wages and benefits are lower than those offered by the public sector.

The inefficiency of the system was the main problem hindering the development of Mexico’s healthcare system.

Mexico’s case shows that increased government funding, equality in funding allocation, proper timing, and efficient management were the key contributors to the turnaround of the country’s healthcare system.

8

BUSINESS

GEORGIA TODAY

JANUARY 19 - 21, 2016

Diaspora Money Transfers Down

by USD 360 Million

BY ANA AKHALAIA

M

oney transfers from abroad in 2015, compared to 2014, decreased

by USD 360 million, (25%) and amounted USD 1 billion 80 million.

According to eugeorgia.info, the biggest share of transfers (40%), due to the numerous diaspora there, came first and foremost from Russia, where trans-

fers decreased by USD 277 million (39%) last year compared to 2014 amounting to USD 433 million.

It should be noted that, in recent years, the share of remittances from Russia has shown a tendency of decline. In 2014 it accounted for half of all transfers.

Greece is in second place in remittances, from where the Georgian diaspora transferred just USD 118 million, USD 87 million less than 2014, last year due to the financial crisis.

In third place is Italy, from where money

transfers reduced by USD 12 million and amounted to USD 109 million.

However, transfers from the US have increased by USD 18 million, amounting to USD 100 million; by USD 4 million from Turkey (USD 69 million); by USD 9 million from Israel (USD 33 million) due to the visa facilitation; and by USD 2 million from Germany (USD 27 million).

Remittances from Spain have decreased by almost USD 2 million (USD 27 million), and by USD 10 million from Ukraine (USD 21 million).

ProCredit Bank Offers Best Interest Earnings, +1% for Deposits in GEL

G

ood news for ProCredit Bank customers in 2016: a higher interest rate paid on term deposit accounts in GEL. In order to make it more attractive to save in the local currency, the top interest rate earned by private clients on term deposit accounts is now 12%; or you can make regular payments into a savings

plan account and earn 11.5% interest.

ProCredit Bank is also offering the top

interest rate of 12% on child deposit accounts.

The increased interest on these accounts gives you an incentive to save as your deposit will earn more interest and grow faster.

Open a deposit account in local currency and earn an extra 1% from ProCredit Bank!

The German bank for your savings!

BUSINESS

GEORGIA TODAY JANUARY 19 - 21, 2016

Hotel Intourist Palace - For Those Who Know and Appreciate the Best!

BY MERI TALIASHVILI

H

otel Intourist Palace is located in the heart of Batumi city, on the Black Sea coast, just in front of the wellloved evergreen boulevard and only 100 meters away from the beach. In its 76 years of existence, more than one million foreign travelers, businessmen, politicians, diplomats, artists and athletes have visited Intourist Palace. If you want to feel the splendor and luxury of the hotel, visit one of Georgia’s most wonderful resort cities, Batumi. Georgia Today met General Manager of Hotel Intourist Palace, Mrs. Tugce Turk Ayag, to speak about this fabulous hotel.

MRS. TUGCE, THE HOTEL INTOURIST PALACE HAS A VERY LONG AND INTERESTING HISTORY. WHEN AND HOW WAS IT FOUNDED? The 5-storey Hotel Intourist Palace was constructed in 1939 by famous Soviet period architect Alexey Shchusev. Where the Hotel now stands was once the unique St. Alexander Nevsky state cathedral which belonged to the world’s most famous houses of worship for its architectural significance and rare beauty. It is known that the church was founded on September 25th in 1888 and Russian Emperor Alexander III and his family were present at the ceremony. The cathedral was a functioning building from the beginning of the 19th century to 1936, when it was destroyed by Soviet atheists. The foundation of the cathedral became the basis of a new building, Hotel Intourist. The Hotel was chosen as a meeting place for the three allied heads of government, but at the last moment the meeting place was transferred to Yalta. During the hotel’s 70-year existence it has undergone a major overhaul and was redesigned twice in 1979-1980 and 2005-2006. The hotel’s distinctive feature is its original semicircular facade with the view of boulevard and alley which leads to the main colonnades of Batumi boulevard.

WHAT DISTINGUISHES HOTEL INTOURIST PALACE FROM OTHER EXISTING HOTELS IN BATUMI? Hotel Intourist Palace is a top-class hotel and an ideal choice for guests of good taste. Here, one will relax in an elegant and luxurious atmosphere.

Additionally, you will be provided with the most modern amenities, sports and fitness center. The hotel’s classic rooms are furnished with wooden furniture. All rooms are equipped with air conditioning, a mini bar, a safe, a TV and free internet.

The Hotel has an indoor and outdoor pool, sauna, restaurant, terrace, night club and casino. I cannot say that other hotels have less service, but the fact that we are an international brand already means an advantage.

competition, the amount of work has not decreased but is in fact unusually high. So, the demand for the Intourist Palace is high, which is an incentive for all of us.

IN YOUR OPINION, WHY SHOULD A VACATIONER CHOOSE HOTEL INTOURIST? Because each visitor receives special attention and high quality service. This approach to our guests makes our hotel a postcard of Batumi. That is why the majority of tourists in Batumi express their satisfaction with Hotel Intourist service the most.

Visitors say this: “Intourist is still Intourist.” Our goal is to offer comfort, luxury and elegance. The hotel has 145 rooms. In addition to the standard rooms, we have the highest standard improved design and luxury categories- premieres and presidential apartments. In order for you to spend a pleasant evening or more, our hotel offers a wide choice of restaurants and bars. Restaurant ‘Tbilisi’ offers delicious dishes in a pleasing and high-class environment. Banquets, parties, weddings and other celebrations can also be organized; in cafe-bar ‘Bakuriani’ you will find a beautiful, comfortable atmosphere and live music. If you want to feel the rhythm and energy of life, then you can visit our night club. We provide two conference halls for any kind of conference and meetings, as ideal for private negotiations as for large meetings.

MRS. TUGCE, SOME MONTHS AGO HOTEL INTOURIST PALACE MOVED TO METRO HOLDING MANAGEMENT. WHAT INNOVATIONS WILL THIS CHANGE BRING?

THE SUCCESS OF ANY COMPANY OR ORGANIZATION DEPENDS ON THE SERVICE. WHAT DO YOU DO TO IMPROVE THE QUALITY OF SERVICE YOU OFFER?

We have gradually rehabilitated and renovated the hotel inventory, the rooms and the hotel’s restaurants. As I mentioned above, highly skilled trainers are retraining our staff. We are preparing a new menu and for the summer season we will offer new services to our guests, both half board and full board packages, as well as a variety of tours. Our great attention is paid to charity: we make a modest contribution to the development of sports and the arts in Adjara.

We look forward to welcoming you to come and see for yourself the wonders Intourist Palace can offer you.

Our service is different. Here, trainers take care of our personnel’s professional skills, teaching them with international standards, not local. It is very important to us that the competition has increased.

Several top hotels have already opened in Adjara.

Intourist Palace welcomes competition if it will be based on the right principles. Our Hotel by meaning works for the business segment. We have absolutely everything a person could possibly need for valuable and comfortable relaxation. Despite high

24-hour room service; 24-hour banking service; Currency Exchange; Cable TV; Minibar; Restaurant Tbilisi; Winter Garden “Bakuriani”; Georgian Wine House; Bar on Swimming Pool; Swedish Breakfast; Catering; Conference and banquet halls; Fitness Center; Beauty Salon; Sauna; Hamam – Turkish Bath; Jacuzzi; Spa Center; Indoor and Outdoor Pools; Transportation Services; Wireless high-speed internet; Night Club “Discorium”; 24-hour Casino.

9

10

BUSINESS

GEORGIA TODAY

JANUARY 19 - 21, 2016

Georgia Takes Part in New York Times Travel Show

BY ANA AKHALAIA

T

he Georgian National Tourism Administration (GNTA), under the Mini s t r y o f E c o n o m y, recently took part in the New York Times Travel Show. Several

Georgian companies were also represented at North America’s largest fair-exhibition.

The international exhibition in New York was attended by more than 280 tourism professionals from 150 countries. More than 500 companies were represented at the Show.

Along with the exhibition, Head of the National Tourism Administration,

Government to Decriminalize Economic Crimes SOURCE: GEORGIANJOURNAL.GE

T

hegovernmentplans to decriminalize economic crimes.

This is one of the reforms planned by the executive branch of the government for economic development. The issue was considered at a meeting between representatives of the business sector and Prime Minister Giorgi Kvirikashvili.

“You define our country’s economic development. That is why we want to discuss the government’s major trends with you. We have identified four main areas. One of them is the creation of jobs

Giorgi Chogovadze, met with the heads of the world’s tourism companies and associations, a number of whom expressed an interest in the Georgian tourism market.

The United States is an important tourism market for Georgia. According to statistics 31,143 tourists visited Georgia from the US in 2015. This was a 10% increase compared to 2014.

ICANN Approves ‘.გე’ Web Addresses SOURCE: GEORGIANJOURNAL.GE

and economic development. In this regard, we have to carry out tax reforms.

Decriminalization of economic crimes is also very important in order to prevent imprisonments,” said the PM. He added that his economic team is working to promote the development of start-up businesses and to create a funding mechanism.

T

hrough the decision of the Internet Corporation for Assigned Names and Numbers (ICANN), Georgia has officially been given the right to write web addresses in Georgian by means of the modern alphabet (Mkhedruli), allowing for local web addresses to end with ‘.გე’ (.ge).

The “.ge” domains coordinator, IT Development Center will hold a press-conference at 14:00 on January 20 in Tbilisi Marriot at which the procedures carried out by Georgia before the privilege was granted will be presented.

The Internet Corporation for Assigned Names and Numbers (ICANN) is a US based non-profit organization, created in 1998, that is responsible for coordinating the maintenance and methodologies of databases, with unique identifiers, related to the namespaces of the Internet in order to ensure the network’s stable and secure operation.

BUSINESS

GEORGIA TODAY JANUARY 19 - 21, 2016

11

Georgia May be Added to Germany’s Safe Countries List

Foreign Minister: European Integration Part of National Identity

BY ZVIAD ADZINBAIA

G

eorgian Foreign Minister Mikheil Janelidze received representatives of the diplomatic corps accredited in Georgia and spoke about the importance of Georgia’s integration with the European Union.

“It is not just a core foreign policy priority of Georgia, but it has become a part of our national identity because of the sense of belonging to the European system of values,” the Minister said of the integration process.

According to the Minister, the Georgian people believe that secure, stable and democratic development of the country can only be assured within the European and Trans-Atlantic area.

The MFA says special attention was paid to the restoration of Georgia’s territorial integrity as the main challenge facing the Georgian Government, and, in this context, the importance of Georgia’s constructive participation in the Geneva International Discussions. The Minister also spoke about the need of confidence-building and engagement of the international community in the process of reconciliation with Abkhazians and Ossetians.

During the meeting, Minister Janelidze highlighted the successes achieved in the course of 2015, including the Association Agreement signed with the EU, which involves the Deep and Comprehensive Free Trade Agreement (DCFTA), the European Commission’s positive assessment of the Visa Liberalization

Action Plan of Georgia in its final progress report, and the NATO-Georgia Joint Training and Evaluation Center, all a significant step forward.

He went on to identify economic diplomacy as one of the Ministry’s top priorities. He emphasized that Georgia has the potential of being turned into a hub linking Europe with growing East Asian markets. In this context the Minister spoke about the importance of the revi-

I

n order to decrease migrant flow to Germany, a local government in Bavaria has requested that the federal Government expand its so-called ‘safe countries’ list.

Georgian news agency Interpressnews released this information based on news from German publication Süddeutsche Zeitung.

The initiative means that those arriv-

ing in Germany from Georgia will be refused asylum as Georgia is now considered to be a safe country.

According to the article, a country where there is no political persecution is assessed as safe.

According to Bavaria’s Interior Minister, Joachim Herrman, the list will assist the Government to make decisions over asylum-seekers faster.

He added that Armenia, Moldova, Ukraine, India, Mali, Mongolia, Algeria, Gambia and Bangladesh should also be on the list.

It is not just a core foreign policy priority of Georgia, but it has become a part of our national identity because of the sense of belonging to the European system of values

PUBLISHER & GM

George Sharashidze COMMERCIAL DEPARTMENT

Commercial Director: Iva Merabishvili Marketing Manager: Mako Burduli

GEORGIA TODAY

talization of the historic ‘Silk Road’. The Silk Road Forum held in Tbilisi in 2015 served this very goal, contributing to the deepening of cooperation of the Silk Road countries in the fields of transport, communication, infrastructure, trade, energy and industry.

BY TAMAR SVANIDZE

EDITORIAL DEPARTMENT:

Editor-In-Chief: Katie Ruth Davies

Journalists: Tony Hanmer, Tamar Svanidze, Zviad Adzinbaia, Beqa Kirtava, Meri Taliashvili, Eka Karsaulidze, Zaza Jgharkava, Maka Bibilashvili, Nina Ioseliani, Karen Tovmasyan, Dimitri Dolaberidze, Maka Lomadze, Tim Ogden, Ana Akhalaia, Robert Isaf, Joseph Larsen

Photographer: Zviad Nikolaishvili Layout: Misha Mchedlishvili Webmaster: Sergey Gevenov Circulation Managers: David Kerdikashvili, David Djandjgava

ADDRESS

1 Melikishvili Str. Tbilisi, 0179, Georgia Tel.: +995 32 229 59 19 E: info@georgiatoday.ge F: GeorgiaToday ADVERTISING & SUBSCRIPTION

+995 595 279997 E-mail: marketing@ georgiatoday.ge

Reproducing material, photos and advertisements without prior editorial permission is strictly forbidden.

The author is responsible for all material. Rights of authors are preserved. The newspaper is registered in Mtatsminda district court.

Reg. # 06/4-309