Issue #812 Business

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Issue no: 812/11

• JANUARY 26 - 28, 2016

• PUBLISHED TWICE WEEKLY

Recognizing the Value of the Arts

PRICE: GEL 2.50

In this week’s issue...

Tech Park Accepting Applications for Start-ups PAGE 2

Most Georgians ‘Don’t Know” What Visa Liberalization Actually Means PAGE 3

FOCUS ON THE ECONOMY Sir John Tusa on the Creative Sector as a tool for growth

PAGE 5

Georgian PM Promotes Georgia at the Davos World Economic Forum

BY ZVIAD ADZINBAIA

P

rime Minister of Georgia Giorgi Kvirikashvili Addressed the Davos World Economic Forum Session ‘Eurasia and the Modern Silk Road’ last week.

The PM underlined reconstruction of the economic Silk Road, ‘One Belt, One Road’ initiative that brings new momentum for developing economic ties on the Eurasian continent.

PM Kvirikashvili mentioned that Europe indeed needs dynamism from China and Asian countries and Asian countries need new technologies and know-how from Europe.

Continued on page 2

Georgian Prime Minister Giorgi Kvirikashvili participates in the panel at the Davos World Economic Forum

If Moscow Can Beat The Traffic, So Can Tbilisi!

ISET PAGE 4

Meeting the Standards: Establishing Georgian Honey on the European Market PAGE 6

In Demand: Green Budapest’s Unprecedented Campaign Prolonged until January 31st PAGE 8

Dechert OnPoint: Workplace Privacy in Georgia PAGE 11 Prepared for Georgia Today Business by

Markets As of 22ͲJanͲ2016

Price

w/w

m/m

w/w

m/m

Bank of Georgia (BGEO LN)

GBP 17.20

+1,5%

Ͳ13,0%

99.44 (YTM 7.32%)

Ͳ0,9%

Ͳ1,9%

GHG (GHG LN)

STOCKS

GBP 1.725

+4,5%

+5,2%

GEORG 04/21

103.17 (YTM 6.15%)

+0,2%

Ͳ1,0%

US$ 9.04

+0,4%

Ͳ10,5%

GRAIL 07/22

101.19 (YTM 7.51%)

+0,3%

Ͳ0,7%

GEBGG 07/17

103.00 (YTM 5.55%)

Ͳ0,1%

Ͳ0,8%

Price

w/w

m/m

32,18 +11,2%

Ͳ10,9%

TBC Bank (TBCB LI)

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

INDICES

1 097,95

+0,8%

+2,4%

BONDS GEOROG 05/17

CURRENCIES

Price

Price

w/w

m/m

GEL / USD

2,4700

+1,9%

+2,9%

GEL / EUR

2,6668

+1,8%

+1,4% Ͳ1,0%

Price

w/w

m/m

GEL / GBP

3,5235

+1,9%

FTSE 100

5 900,01

+1,7%

Ͳ3,0%

GEL / CHF

2,4334

+0,4%

FTSE 250

16 127,99

Ͳ0,2%

Ͳ6,0%

GEL / RUB

0,0317

+1,6%

Ͳ5,9%

9 764,88

+2,3%

Ͳ6,9%

GEL / TRY

0,8230

+3,4%

+0,5%

16 093,51

+0,7%

Ͳ7,6%

GEL / AZN

1,5462

+1,6%

+0,1%

DAX DOW JONES NASDAQ

4 591,18

+2,3%

Ͳ8,2%

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0,0051

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MSCI EM EE

100,21

+3,2%

Ͳ9,6%

GEL / UAH

0,1006

+1,2%

Ͳ4,0%

MSCI EM

710,66

+0,2%

Ͳ10,6%

EUR / USD

0,9261

+1,1%

+1,5%

SP 500

1 906,90

+1,4%

Ͳ6,5%

GBP / USD

0,7011

Ͳ0,1%

+4,0%

MICEX

1 717,98

MSCI FM

+6,8%

Ͳ0,3%

CHF / USD

1,0161

+1,5%

2 121,34

Ͳ1,5%

Ͳ8,9%

RUB / USD

78,1145

+0,5%

+9,6%

GT Index (GEL)

885,86

Ͳ

Ͳ

TRY / USD

3,0011

Ͳ1,5%

+2,4%

GT Index (USD)

715,71

Ͳ0,8%

Ͳ1,9%

AZN / USD

1,5974

+1,7%

+2,8%

+2,9%

2

BUSINESS

GEORGIA TODAY

JANUARY 26 - 28, 2016

Tech Park Accepting Applications for Start-ups

BY EKA KARSAULIDZE

T

wo weeks ago the first Technology Park (Tech Park) was launched by Georgia’s Innovation and Technology Agency, the main aim being to support start-ups and make young peoples’ ideas a reality. Tech Park has now begun accepting applications for work in the Business Incubator. The deadline is January 29 and everyone is welcome to try their hand at innovation there.

Tech Park has now begun accepting applications for work in the Business Incubator. All services will be available to the ten winners free of charge at the first stage, including accounting, legal and training components, as well as access to the latest equipment and technology

Despite the recent opening, Tech Park has already started full operation, conducting master classes and workshops, and now it is ready to realize one of its main objectives – to implement people’s ideas and projects. According to the application form, people of any age can join the project if they have at least one innovative idea, create a working group (number of participants unlimited) and complete a form on the Tech Park’s website.

At the first stage, a specially formed qualified Commission will select 10 winning projects based on their application forms and interviews before February 15 and, throughout the year, will provide

the 10 with financial and any other support necessary to implement their projects.

“We welcome everyone who wants to create a company and make it global, who could transform his/her idea into a successful business.

Tech Park will provide all the conditions for it,” said Irakli Kashibadze, Chairman of the Georgia’s Innovation and Technology Agency. “All services that we have here will be available to participants free of charge at the first stage, including accounting, legal and training components, as well as access to the latest equipment and technology.”

Besides the above mentioned, Tech Park will provide Business Incubator participants with expert consultation in the field of management, marketing, financial management and more, as well as connect them with necessary personnel and investors. International company showrooms, space with test equipment, FabLab and equipment from leading companies like Intel, Samsung, HP, Cisco, Autodesk, and Epson also will be available to winners.

Additional information can be found at the Tech Park’s official website: techpark.ge

Georgian PM Promotes Georgia at the Davos World Economic Forum Continued from page 1 The Prime Minister discussed infrastructural projects implemented in the recent years in Georgia and steps taken to modernize the railway system.

“We are completing highway construction and are working very closely with our neighbors in order to develop a holistic approach in managing the South Caucasus corridor together with

Kazakhstan and central Asian countries,” the PM said.

He highlighted the momentous event in December when direct trains passed from China’s Xinjiang province, through Kazakhstan, Azerbaijan, and Georgia, toward Europe through the Black Sea and Turkey. “The project is developing fast and we see increasing demand. The direct train from Xinjiang province to Tbilisi took 7 days, which means that in about 10-11 days a train can travel from China to Europe,” the PM said.

In an interview with CNBC News during the Forum, the PM said, “The Silk Road Project brings a new dynamic from Europe to Asia and vice versa.

Europe needs new drives for growth and Georgia is definitely the place to link the two continents.”

PM Kvirikashvili also underscored some important projects in Georgia, such as infrastructure modernization, including the Baku-Tbilisi-Kars railway project, deep Sea Port construction in Anaklia (Western Georgia) and some large scale projects in the hydropower sector.

He emphasized that Georgia is among the leaders in terms of ease of doing business, and has one of the lowest tax rates in the world. “Liberalization of tax administration is ongoing, and profound changes derived from the Free Trade Agreement with the European Union are being introduced.”

During the address, the Prime Minister also put emphasis on Free Trade Agreements with the neighboring countries in the region, with the European Union, and the recently launched free trade negotiations with China. “We are becoming one of the most open economies in the region, with very liberal regulations and relatively low energy costs, with relatively low labor costs and an educated workforce. We believe that in this partnership pic-

ture Georgia will play a very important role,” PM Kvirikashvili stated.

In his speech, the Prime Minister’s message also concerned Georgia’s attempt to deepen its relations with the European Union and countries within the region and decrease political tensions with the Russian Federation. “We need to decrease political tensions and allow ourselves and all other countries to develop in a less tense environment.”

During the Forum, the Georgian PM met Suma Chakrabarti, the President of the European Bank for Reconstruction and Development (EBRD).

Chakrabarti told the Georgian Premier that the EBRD will continue close cooperation with Georgia in the future and the volume of investment and financial aid will be increased in 2016.

The parties discussed prospects of growth of investments, and stimulating the private sector and developing business environment in Georgia.

Also within the frames of the Forum, a meeting between the heads of an Emirati holding company based in Dubai, Majid Al Futtaim Group, and Prime Minister of Georgia was held. The Company expressed its willingness to increase the volume of its investments in Georgia. In particular, Majid Al Futtaim is interested in the construction of hotels and trade centers in Georgia. Further details are to be discussed with the leaders of the Georgian Co-Investment Fund.

The Georgian Prime Minister also met with the Assistant US Secretary of State, Victoria Nuland, the President of the European Investment Bank, Werner Hoyer, and the President of the Swiss Confederation, Johann Schneider-Ammann. In addition, discussions were held with Azerbaijani President Ilham Aliyev and NATO Secretary General, Jens Stoltenberg.

BUSINESS

GEORGIA TODAY JANUARY 26 - 28, 2016

Most Georgians ‘Don’t Know” What Visa Liberalization Actually Means

BY TAMAR SVANIDZE

T

he Caucasus Research Resource Center (CRRC) has published a survey about the attitude and awareness of Georgians of the expected visa liberalisation process.

The Caucasus Barometer Survey was held in October 2015, two months before the European Commission’s progressive report about Georgia’s Visa liberalization was announced. The survey highlighted that most Georgian’s do not have proper information and knowledge about the visa liberalization process, as 56% of interviewees answered “Don’t know” or “Don’t know what the visa liberalisation process is” (26% and 28%, respectively), with a small share refusing to answer the question.

To the question “Will successful completion of the visa liberalization process benefit ordinary people living in Georgia?” only 12% responded “No” while 32% answered they believed it would benefit ordinary Georgians, the survey

reports. The findings showcased a major misunderstanding of what visa liberalization is and people’s expectation of working and living prospects in the Schengen zone. According to the survey, 42% of this group incorrectly thinks that visa liberalization will allow Georgian citizens who have already emigrated gain living and work permits in EU countries, without having to apply for additional residency documents.

The findings showcased a major misunderstanding of what visa liberalization is

The findings strongly suggest that an awareness-raising campaign about what the visa liberalization process with the EU actually implies is crucial.

Photo: goodnews.on.ge

With regards the technical part of the Visa Liberalization Process, only just over half (53%) of this group knows that only those Georgian citizens who possess biometric passports will be able to benefit from visa liberalization, with 28% answering “Don’t know.” Even fewer (45%) are aware that the conditions of the visa liberalization agreement will be effective only if the length of stay in EU countries does not exceed three months; this question resulted in the highest share (37% of the eligible group) answering “Don’t know.”

The survey highlighted that those living in Tbilisi have slightly better knowledge about visa liberalization with the EU compared to people living in the regions of the country. “The difference is not striking, and it cannot be claimed that the Tbilisi population is very well informed about specific aspects of visa liberalization,” the survey reads. “These findings strongly suggest that an awareness-raising campaign about what the visa liberalization process with the EU actually implies is crucial. A successful campaign will help to ensure that the population of Georgia has adequate

expectations of it and makes informed migratory decisions to the EU countries once visa liberalization enters into force,” the survey concludes.

The visa liberalization agreement between Georgia and the EU was launched in June, 2012, and is expected to enter in force in summer 2016, allowing Georgian citizens holding biometric passports to enter and stay in Schengen area countries without a visa for up to 90 days in a 180-day period. In February 2013, the Visa Liberalization Action Plan (VLAP) was presented to Georgian authorities. The European Commission’s December 2015 progress report stated that “given the outcome of the continuous monitoring and reporting carried out since the launch of the EU-Georgia Visa Liberalization Dialogue, the Commission considers that Georgia meets all the benchmarks set in respect of the four blocks of the second phase of the VLAP.” Visa liberalization, however, in no way gives Georgians the right to work, study or become residents of Schengen area countries – for these purposes, a labor, study or immigration visa will be needed.

3

Depreciation of GEL against USD Exceeds Historical Minimum

BY ANA AKHALAIA

T

he official exchange rate of the Georgian Lari (GEL) against the United States Dollar (USD) exceeded the historical minimum when it reached 2.4694, rising above the previous day’s fixed rate by 0.0249.

The National Bank of Georgia sold USD 20 million at the National Bank’s foreign exchange auction on January 22nd.

The official exchange rate of GEL against USD reached a maximum on February 23rd, 1999 when 1 USD equalled 2.45 GEL. However, this figure dropped to 2.39 in two days, to 2.35 on February 27th, and had stabilized at 1.93 by the end of the year.

4

BUSINESS

GEORGIA TODAY

JANUARY 26 - 28, 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.

If Moscow Can Beat The Traffic, So Can Tbilisi!

BY ERIC LIVNY

W

hen I left Russia back in late 2006, attempting to cross a busy Moscow street bordered on suicide. Instead of slowing down before a zebra crossing, Russian drivers were in the habit of accelerating so as to signal their intention NOT to stop. Understandably, pedestrians had no choice but to adjust their street crossing strategies accordingly. The result was what an economist might call a “bad” equilibrium. Instead of slowing down, Moscow drivers would not even consider letting pedestrians cross. And pedestrians would not even try.

When visiting Moscow for the New Year holidays just a few weeks ago, I was astonished by the dramatic makeover of traffic arrangements and the culture of walking and driving in Moscow’s city center. To make sure this was not some kind of Fata Morgana, I asked my 11 year old son Jan to repeatedly cross the three-lane Moscow boulevard ring with me shooting him on video.

My son Jan safely crossing the boulevard ring in Moscow. (Video by Eric Livny) Now, if Moscow can, why cannot Tbilisi achieve the same feat given its fantastic record in other reform areas? Georgia was the first country in the

former Soviet space (other than the Baltic countries) to clean up its police and bureaucracy from corruption. Why cannot we transform the hell that are Tbilisi traffic “arrangements” into something more civilized, something befitting a country aspiring to be a part of Europe?

The answer is very simple. What has been absent so far is political will and/or civic action. Georgia has lots and lots of civil society “organizations” generously supported by EU and US funds. What it lacks, however, is genuine civil society activism at the grassroots level. Georgia has exceptionally well-trained, professional and clean police force.

What it lacks is the political will engage this police force in actually enforcing the law.

The entire city center of Moscow within the Garden Ring has been remodeled over the past several years with the purpose of increasing the space available for pedestrians (at the expense of drivers) and, believe it or not, bike routes. (Photo by Eric Livny) Things finally appear to be changing in Georgia.

The Georgian government is preparing a series of measures to improve the road safety situation. In parallel, an excellent social movement, Iare Pekhit (“move on foot”) was launched in 2012 to bring together Georgian and expat activists who care for Tbilisi city’s pedestrian issues, and in this way to drive the change we all desperately need and want.

On January 26, 2016, ISET will be hosting a meeting among Iare Pekhit and our students, faculty and staff. This meeting is a part of a string of lectures, debates, and video screenings through which Iare Pekhit is trying to inform and mobilize the community to see what we can do to reclaim our urban space, and what the City Hall has to offer us, Tbilisi’s inhabitants.

One option to be considered by Tbilisi, and which is already implemented in Moscow, is to “green” Georgia’s urban transport. Among other things (e.g. electrical vehicles), this is also about creating better possibilities for walking and … biking around Tbilisi. For instance, Uli Kindermann who will be speaking at ISET on behalf of Iare Pekhit this week, is promoting an initiative to map, mark and improve cycling routes as part of a larger national program to promote “sustainable urban mobility”. Such a program would go a long way in improving our fitness and the quality of air we are breathing.

While getting Georgian “khinkali men” to bike to work may be a real uphill battle, getting them to stop at pedestrian crossings should be a piece of cake. As Moscow’s experience shows, it should not take more than a month of rigorous enforcement complemented by an awareness campaign. Stopping at red lights and zebra crossing is not a matter of reckless “dzhigit” culture, but of shifting from a “bad” equilibrium (in which Moscow had been stuck until a few years ago, and in which Tbilisi still is) to a “good” one in which pedestrian rights are fully respected.

Not convinced? Read the next section.

GAME THEORETICAL INSIGHTS INTO ROAD CROSSING The first relevant insight from Game Theory is that the behavior of traffic participants is determined by their expectations about the behavior of

other actors. For instance, if pedestrians do NOT expect drivers to stop at a zebra crossing, they will hesitate to cross until they are 120% sure that the car approaching them is actually going to stop.

Given the very steep price for making a judgment mistake, it would take intensive hand waving and actual stopping by the polite German drivers among us for a typical Georgian pedestrian to understand our intentions and adjust their expectations accordingly.

The same logic applies to the behavior of drivers.

Any driver familiar with the Tbilisi rules of the game would not slow down before a zebra crossing because it makes no sense. Pedestrians would in any case not trust his/her intentions and would patiently wait for the car to pass (or stop, in the rare case it is driven by a foreigner like myself).

Moreover, it makes sense for a Tbilisi driver to speed up whenever he or she observes a group of pedestrians getting ready to cross the road on a zebra. Why? Because by speeding up s/he sends a clear signal about his/her behavior – hey, I am not going to stop, don’t even try crossing!

The second key insight from Game Theory is that this kind of “uncivilized” outcome (drivers not giving way and pedestrians not even trying to cross on a zebra) is stable. In other words, it does not make sense for drivers and pedestrians to change their “strategy” (behavior) given what they know about the other party’s strategy. The implication is that to get out of this “bad” equilibrium, someone (the policymaker and/or a coalition of civic activists) has to change the rules of the game and reset expectations.

The third relevant insight from Game Theory is that the “civilized” equilibrium – now observed in Moscow and very common in most European and North American cities – is not only possible, but is quite stable as well. If drivers expect pedestrians to cross on a zebra, they will start slowing down well before the first pedestrian sets his/her foot on the road. Expecting this type of behavior, pedestrians will not hesitate to cross. This outcome is stable because it makes no sense for German drivers to start behaving Tbilisi-style (they will quickly find themselves behind bars) and there is no point for the German pedestrians to hesitate before crossing.

Thus, what Georgia has to do is implement the obvious and very simple policy solution that has been tried in many places around the world: introduce tougher regulations, higher fines and stricter enforcement. Understandably, enforcement would have to be particularly strict during a relatively short transition period to allow all traffic participants to properly reset their expectations and behavior. Once expectations are reset, however, the intensity of enforcement (and related costs) could go down quite dramatically because the new equilibrium will be able to sustain itself. At least according to insights from Game Theory.

The author is President at the International School of Economics at Tbilisi State University.

BUSINESS

GEORGIA TODAY JANUARY 26 - 28, 2016

5

Recognizing the Value of the Arts: Sir John Tusa on the Creative Sector

BY KATIE RUTH DAVIES

T

he Creative Industry (CI) makes up 7% of the world’s GDP and is forecast to grow 10% per year. It is growing faster than the manufacture and service industries and is the leading sector for growth and employment in the EU, currently providing 8.3 million jobs and EUR 558 billion revenue.

Late last week the EU-Eastern Partnership Culture and Creativity Programme, with the British Council Georgia, held a seminar for media representatives and prominent members of society to meet with Sir John Tusa, a British arts administrator, radio and television journalist, and former managing director of the BBC World Service.

Sir John began his talk by giving his definition of culture. “The culture of a nation can be divided into many things: It is partly what the nation was, partly what the nation is and it is also what the nation will be. Culture is about all areas of life which are not directly to do with the economy, though there may be connections. Culture would exist even if there was no economy.”

WE DON’T HAVE TIME FOR CULTURE, WE ARE AT WAR Culture, he added, is the spirit, heart and mind of a nation. Its many elements are part of national identity.

“It is not something which is ‘quite useful,’” Sir John said. “It is an essential part of a nation’s sense of itself. During World War Two, Great Britain said that our culture, our identity, is what we are fighting for. It is a key part of why the nation fought for its independence. Cul-

START FROM SCHOOL In the UK, what is taught in the public (state) school system often ultimately ends up in the commercial sector.

Sir John gave two examples of this: “The almost seamless connection between the Arts and the commercial sector have only been truly recognized in the past 20 years. The West End theatres, for example, are a commercial success and most actors, directors and producers working there trained in publicly funded schools. Commercial theatre productions begin with the National Theatre (state funded), the Royal Shakespeare Company (state funded) and other smaller theaters either partly or completely funded by the public.

“At the opening of the 2012 Olympic Games in London the two directors were trained in state funded drama schools.

And they created an internationally successful event. The world-renowned Olympic Flame Cauldron was designed

by Thomas Heatherwick, who trained in art college.”

There is, as you can see from these examples, a very clear and natural connection between what is funded by the state and what ends up in the public commercial sector.

WHO SHOULD PAY? “There are essentially four systems for funding the Arts: 1) Complete top-down funding, such as that enjoyed by Georgia under the Soviets.

2) The US model- private, corporate funding with very little input from State organizations.

3) The EU system of private funding,

such as that used in Germany and France, where there is a strong sense of socialpolitical responsibility.

4) And my favorite- the British system, which has four sources of funding: State Private / Corporate Box office (ticket sales) Commercial exploitation- capital raised, for example, by theaters renting out their own space.

“In the British system the State will sometimes have its own view of how money might be spent, or the system will consider what audiences or sponsors want. It is democratic to have such dispersed funding,” Sir John said.

“In the UK in the last 50 years, the proportion of funding indirectly from the State has gone down, the amount of funding derived from box office sales, private individuals and corporations has gone up enormously, and the way concert halls are using their spaces [to earn income] has also changed- there has been a big revolution of behaviour and how organizations are run over last 20 years.

“Two months ago, the British Finance Minister and Conservative MP, George Osborne, also known as the Chancellor of the Exchequer, did not cut the Arts Budget. ‘It’s not worth cutting’, he said.

‘Of every pound the Government puts into the Arts, perhaps 8 pounds comes back through employment and taxes.’ It was the first time a Chancellor recognized the real financial value and success of the Arts,” Sir John said.

DEFINING THE CREATIVE SECTOR The Creative Industries are activities involving: advertising, architecture, the art and antiques market, crafts, design, designer fashion, film, interactive leisure software (ie. video games), music, the

Sir John Tusa was in Tbilisi last week to highlight the need for Creative Industry

performing arts, publishing, software, and television and radio. Because it was the first definition offered by a government, this original UK definition has been widely adopted by other countries, with sectors adapted based on local commercial and cultural importance.

“I know of no artist who does not want to make money from his work,” said Sir John. “But does that make him part of the creative sector? Well-known English artist Damien Hirst, for example, is an industry. Before the financial crash, Hirst employed 230 people in a factory making ‘original’ Damien Hirst artwork- people paid tens of thousands of pounds for the ‘original’ works of art from the Hirst factory, each signed by him. Was he part of the creative sector? Yes.”

SO HOW DID CI DEVELOP? “A definition of Creative Industry was formed only very recently. Even in the UK, the most successful developing country in this sector, awareness of

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Creative Industry didn’t really exist until 1990. It’s less than 25 years old. A government minister said: ‘I think there is a lot of creative activity going on,’ and went on to commission a survey to find out more. The Government were amazed by just how much activity was found and it was then the British Government accepted Creativity as a sector of the economy. Now, 10% of employment in the UK is in the creative sector and that number continues to grow.”

There is a plethora of activity happening in modern Georgia. One can see it in the theaters, fashion shows, designer hotels (such as Rooms) and art galleries. Yet some compare the Georgia of today to the UK of the 1990s. In the UK, the Creative Industry is now one of the largest single sectors of employment. To make a change in Georgia, the government needs recognize a part of reality of society and the economy: it needs to stand up and recognize that the Creative Sector exists and do everything it can to develop it.

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6

BUSINESS

GEORGIA TODAY

JANUARY 26 - 28, 2016

Meeting the Standards: Establishing Georgian Honey on the European Market

BY ANA AKHALAIA

T

he Georgian National Food Agency (GNFA) has released a statement regarding activities carried out in 2015 for the development of beekeeping and exporting Georgian honey to the European market.

Legislative changes have been prepared according to EU requirements which implies drawing closer to European legislation. In particular, a monitoring plan for veterinary drugs, pollutants and waste substances has been approved. Additionally a honey technical regulation was prepared which entered into force in July, 2015.

The honey technical regulation sets

tions have been found in 20 of the 104 samples sent in 2015.

In 2013 the percentage of violations in examined honey samples was 37%, while in 2015 this figure was reduced to 19%.

The Laboratory of the Ministry of Agriculture was granted accreditation of ISO 17 025 standard, which means its research results are recognized internationally.

The same laboratory also holds an ISO 9001: 2008 quality management certificate, which will enable local farmers to carry out on-site research on samples.

In order to develop beekeeping and increase export potential of the Georgian products on the European market, the GNFA, along with other agencies of the Ministry of Agriculture, has been meeting with beekeepers regularly in order to introduce them to the European market requirements and legislative changes.

out requirements for honey whereby a business operator shall produce honey and put it on the market according to the requirements of the regulation. Honey technical regulations will contribute to improvement of the local market, fraud protection and promotion of Georgian honey export.

The GNFA sent Georgian honey samples to the Food Safety, Animal Health and Environment Institute BIOR in Riga, Latvia, to promote the export of Georgian honey on the European market.

Study of whether the Georgian honey samples conform to European standards needs three years.

So far various viola-

No Fear in Beeline-Caucasus Online Case, Say Authorities

BY EKA KARSAULIDZE

A

t the beginning of the year it was announced that Beeline would acquire a part of Caucasus Online, resulting in concern among the general population. The companies have since confirmed that there are no talks about one company’s complete absorption by another. Recently, Prime Minister of Georgia, Giorgi Kvirikashvili, also

commented on the situation regarding the future of the two companies.

While at the Davos World Economic Forum, the Georgian Prime Minister stated that he does not see any misgivings in Beeline’s future acquisition of part of Caucasus Online. “That does not refer to the selling of the backbone infrastructure; Caucasus Online is going to sell only its domestic distribution network. I am sure that the process will be maximally transparent and in the near future the issue will be resolved,” said PM Kvirikashvili.

The Georgian Prime Minister stated that he does not see any misgivings in Beeline’s future acquisition of part of Caucasus Online

10 Galaktion Street

Russian mobile operator Beeline and Georgian internet provider Caucasus Online filed a joint application to the Georgian National Communications Commission (GNCC) on November 15, 2015, according to which Beeline became the provider of cable television, the Internet and the telephone network by Caucasus Online. Beeline, which has operated in Georgia since 2007 and became one of the leaders on the market, aims to expand their service and quality of service following the sale. However, Caucasus Online will remain the backbone network, including the owner of the Black Sea binder fiber-cell cable, which cannot be sold.

The GNCC began administrative proceedings on the issue on January 5, 2016 and the first hearing will take place on February 9.

Both companies are obliged to provide all necessary documents and clearly indicate their goals this month, after which the GNCC will examine possible changes following the transaction and whether any risks exist to the competitive environment. According to the law, the case could be under review for three months.

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

The GNCC do not exclude that the final decision will be announced on February 9. However, in case of a positive reply, the companies will have to continue negotiations with each other.

In the past, Silknet and MagtiCom were also interested in purchasing assets of Caucasus Online.

BUSINESS

GEORGIA TODAY JANUARY 26 - 28, 2016

7

Tskaltubo Resorts as New Investment Field

BY EKA KARSAULIDZE

C

ompany KBP Tbilisi has announced the construction of a new 5 star hotel on the site of the famous sanatorium Meshakhte in Tskaltubo. Indian investors such as Unique Mercantile India and Apna Punjab Resorts also showed their interest in the construction of hotels in different parts of Georgia, including Tskaltubo.

The Georgian Government actively talks about the importance of the return to Tskaltubo the rank of main health resort, which it had previously.

The town of Tskaltubo, which is located in western Georgia, 7 km from Kutaisi and 250 km from Tbilisi, was one of the most popular resorts in the former Soviet Union. Its thermal waters are still used to treat diseases like asthma, angina pectoris, hypertensive disease, and pneumonia Neurosis. A number of sanatoriums continue to operate today, yet there are still many large Soviet complexes which are in need of restoration to preserve the unique architecture, ideal for investors and developers.

During a tour in Tskaltubo in April 2015, former Prime Minister of Georgia

Irakli Garibashvili highlighted the uniqueness of the town, claiming it incomparable even to well-known resorts such as Baden-Baden and Karlovy Vary.

“Tskaltubo needs huge investment and the Partnership Fund has already studied Tskaltubo’s development plan. Several foreign companies are already interested in it. I’m sure it has all possibilities to become one of the best health resorts, not only in our region but also in Europe,” noted Garibashvili.

The World Bank (WB) also assessed the potential of Tskaltubo positively, in its 2012 Second Regional Development Project for Georgia funding that potential with USD 37.50 million. The WB paid attention to infrastructure, services and institutional improvement capacity to support the increased tourism in the local economy of the Imereti region, and Tskaltubo in particular.

The former government of Georgia made the first steps in development and, during their time, several sanatoriums began to be transformed into new hotels; however, the constructions were stopped. One of them was the Meshakhte sanatorium, which now belongs to KBP Tbilisi, and in December 2015, they announced the construction of a new 5 star hotel there.

Although it is as yet unknown which

The former Government of Georgia started development of Tskaltubo, with the transformation of a number of sanatoriums into new hotels; however, the constructions were stopped. One of them was the Meshakhte sanatorium, which now belongs to KBP Tbilisi and is set to become a 100-room 5-star hotel by 2018. Cartoon: factckeck.ge

The Meshakhte sanatorium will be designed for 100 rooms, and its halls, amphitheatre and library will be fully restored

world brand will operate the hotel, the Company assures that the building will retain its original façade. It will be designed for 100 rooms, and its halls, amphitheater and library will be fully

restored. The investment will total approximately USD 40 million and all repair work will be completed in 2018.

“This sanatorium was first opened in 1951 and was considered as one of the

most beautiful buildings in the world,” Zviad Zviadadze, London-based owner of KBP Tbilisi, told GDS TV. “Naturally, we will keep its unique architecture and we want it to be not only a hotel, but also regain the function of a cultural center.”

Tskaltubo as a whole has the potential to become a new cultural and tourist center of Georgia. Nearby are the International Airport in Kutaisi, which receives a large number of international flights every day; important tourist sites like Sataplia with dinosaur footprints, and the Prometheus Cave, rated one of the best in Europe.

Moreover, next to Meshakhte another famous sanatorium Iveria was put up for sale – the Ministry of Economy and Sustainable Development of Georgia entered it for auction on January 25 with a starting price of 250 thousand Lari. According to the terms, the new owner will have to transfer the building into an at least 160-room hotel, which will include a minimum of two conference halls and a restaurant, within 24 months.

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BUSINESS

In Demand: Green Budapest’s Unprecedented Campaign Prolonged until January 31st

T

heunprecedentedcampaign of international holding Maqro Construction for those who want to buy an apartment in Green Budapest residential complex has, due to popular demand, been extended. Initially planned to end on December 31, 2015, the company, taking into consideration high demand from customers, decided to prolong it until January 31. The effective and client-friendly campaign has received unprecedented feedback from customers.

Construction company Maqro Construction offers flexible payment terms for purchasing apartments in the residential complex Green Budapest. The conditions are affordable for all who wish to move to a new apartment and improve their lives.

Various terms and payment plans are available. When paying the total cost of the apartment, however, the customer will receive a 15% discount, or a balcony or parking place free of charge.

Another option is a five-year interestfree payment by installments, which allows the client to purchase an apartment with a primary contribution of 30% and to pay the rest of the cost without any interest rate for 5 years.

A third option allows the client to purchase an apartment without any preliminary deposit. “0% initial deposit is hard

to believe, but it’s true. You can make your dream a reality today. You may pay the cost of the apartment with annual 7% interest rate,” says the company.

Green Budapest is a residential complex covering 11,700 square meters in a green and healthy environment in the center of the city, on Panjikidze Street.

It offers residents 351 fully renovated apartments of European standard: fitted bathroom, kitchen furniture and built-in appliances.

The multi-profile infrastructure, green area, basketball court, skateboard ramp, running tracks, indoor and outdoor parking places and more are the main advantages of the residential complex.

Situated in the center of the city, the residential complex is surrounded by 3,500 square meters of recreation area, which is a guarantee of ecological health and coziness.

According to Maqro Construction, construction is quick and will be completed ahead of the scheduled time, meaning that the owners of apartments will be able to settle in the complex in May instead of September 2016, however, they will have until September to cover the cost of apartments.

The campaign, with unprecedented payment terms, ends this month. So, you still have time to grab your chance to make a new start in life.

Contact: 2001010.

GEORGIA TODAY

JANUARY 26 - 28, 2016

BUSINESS

GEORGIA TODAY JANUARY 26 - 28, 2016

Thinking outside the (Cardboard) Box: Greenpack Ltd. to Increase Production for Export

BY ANA AKHALAIA

U

nder the government program Invest in Georgia, yet another company has been enabled to increase production capacity and create new jobs. With the support of the Entrepreneurship Development Agency of the Ministry of Economy and Sustainable Development, Greenpack Ltd. will start working with new strength from 2016.

Founded in 2014, Greenpack Ltd. is oriented on paper and cardboard production (paper bags, cups, plates, various types of cardboard boxes and packaging products), also making non-knitted fabrics (sacks, bags, decorative and other fabrics).

At this stage the construction process of the factory is ongoing in Tbilisi, where 15 people are employed. After launching the factory, the number of employed people will reach 35-40. Total investment in the project under the state program is USD 2.5 million.

The company plans to export its products to Azerbaijan, Armenia and the Middle East.

With the support of the Entrepreneurship Development Agency of the Ministry of Economy and Sustainable Development, Greenpack Ltd. will start working with new strength from 2016

From June 2014 to date, under the Produce in Georgia program and with the support of the Ministry of Economy and Sustainable Development and the Ministry of Agriculture, 146 enterprise projects have been approved the total investment of which is USD 366 million and more than 7000 people employed.

Eco Green City Project Discussed with Slovakian Investors

Mayor of Tbilisi Davit Narmania discussed the new Eco Green City project with members of the Slovakian business community, representatives from international architecture organisations and the banking and financial sectors on an official visit to Bratislava, Slovakia

BY ANA AKHALAIA

M

ayor of Tbilisi Davit Narmania discussed the new Eco Green City project with investors on an official visit to Bratislava, Slovakia. Narmania met members of the Slovakian business community, representatives from international architecture organisations and the banking and financial sectors.

Davit Saganelidze, Head of Georgia’s state-owned shareholding company the Partnership Fund also participated in the meetings.

“We met with potential design organizations and financial institutions to be actively involved in implementation of the project as supported by the Mayor of Bratislava and the Chief Architect of the city,” said Saganelidze.

The meeting in Bratislava focused on the future

content of the project, its prospects and the role of the Georgian side in the implementation process of Slovakian investments.

Alexander Nalbandov, Ambassador Extraordinary and Plenipotentiary of Georgia in Slovakia, said that the project will contribute to the development of the city, and that the strengthening of economic ties between Georgia and Slovakia will further deepen relations between the two countries.

The Eco Green City is a 200-250 hectare territory located in the area surrounding Tbilisi Sea. The project will include medical centers, schools, trade districts, an ecologically friendly housing area and more.

90% of the energy used by all facilities in the Eco Green City will be generated from solar, wind, hydro power and bio gas.

About USD 100 million will be invested in the first stage of development of a total one billion USD allocated for the project.

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BUSINESS

GEORGIA TODAY

JANUARY 26 - 28, 2016

Enticing the Lithuanians: Adjara Tourism Department at Vilnius International Exhibition

BY ANA AKHALAIA

T

he Department of Tourism and Resorts of Adjara took part in the Vilnius International Exhibition ‘Adventure 2016’ where it had a separate stand presenting the region’s

tourism potential at which guests could also taste Georgian wine, churchkhelas and sweets.

The Department of Tourism of Adjara, within the frames of the exhibition, held a presentation of the region’s tourism potential for Lithuanian tour agencies, the media and representatives of the diplomatic corps.

In addition, a raffle was held with the

prize of a week-long stay in Adjara with travel, hotel and meals included.

The Department has been carrying out marketing and PR campaigns in Lithuania since 2013, resulting in an increased number of visitors from Lithuania from year to year. In 2015, compared to 2014, 2.8% more visitors came to Adjara from Lithuania.

To promote the region’s tourism poten-

The Department of Tourism and Resorts of Adjara took part in the Vilnius International Exhibition ‘Adventure 2016’ where it had a separate stand presenting the region’s tourism potential

tial and attract visitors, the Department of Tourism and Resorts of Adjara is planning to participate in 16 international exhibitions in the current year, including

those in Germany, Dubai, China, Japan and South Korea.

The exhibition was opened on January 22nd and ended on January 24th.

Right Hand Drive Car Importers Ask to Postpone New Restrictions

BY ANA AKHALAIA

Postponing the regulation enactment date to June 1st will be positive only for those who want to buy a car and will have no positive effect for importers

T

he importers of Japanese used cars are asking the government to postpone the deadline of banning right hand drive vehicles by at least a year.

On the initiative of the Ministry of Internal Affairs, due to heightened security measures, registration of right hand drive vehicles was to be banned from March, 2016. However, the Chairman of Parliament’s Legal Affairs Commit-

tee, Vakhtang Khmaladze, recognized that citizens and dealers might not have yet completed the process of importation and may suffer loss by having the law enforced on them from March 1.

Prohibiting provision is scheduled to enter into force on June 1st.

Dealer of the company Beforward, Nikoloz Arushinov, stated that postponing the regulation enactment date to June 1st will be positive only for those who want to buy a car and that it will have no positive effect for importers.

He said that it is a very short period for a business to be able to reset in.

Deputy Chairman of the Sector Econ-

omy and Economic Policy Committee, Temur Maisuradze, stated that importer’s interests have been taken into consideration in that they will be allowed to fulfill their prior agreements. According to Maisuradze, this regulation does not apply to anyone who has paid money for a car, or is now conducting negotiations. In the future, they will have to import cars with left steering components.

The Deputy Chairman added that there are political risks in banning right hand drive vehicles because it is an unpopular issue for the voters. “However, it still needs to be done,” he said.

BUSINESS

GEORGIA TODAY JANUARY 26 - 28, 2016

11

Dechert OnPoint: Workplace Privacy in Georgia

D

echert Georgia, through the contribution of partners Archil Giorgadze and Nicola Mariani, joined by senior associates Ruslan Akhalaia and Irakli Sokolovski, as well as Ana Kostava and Ana Kochiashvili, is partnering with Georgia Today on a regular section of the paper which will provide updated information regarding significant legal changes and developments in Georgia. In particular, we will highlight significant issues which may impact businesses operating in Georgia.

Dechert’s Tbilisi office combines local service and full corporate, tax and finance support with the global knowledge that comes with being part of a worldwide legal practice.

Dechert Georgia is the Tbilisi branch of Dechert LLP, a global specialist law firm that focuses on core transactional and litigation practices, providing worldclass services to major corporations, financial institutions and private funds worldwide. With more than 900 Lawyers in our global practice groups working in 27 offices across Europe, the CIS, Asia, the Middle East and the United States, Dechert has the resources to deliver seamless, high quality legal services to clients worldwide. For more information, please visit www.dechert.com or contact Nicola Mariani at nicola.mariani@dechert.com.

INTRODUCTION The European Court of Human Rights (the “ECHR”) 12 January 2016 judgment on the case Barbulescu v. Romania (#61496/08) promptly became a subject of discussion in the Georgian press, mainly due to misleading interpretations of the ruling. The ECHR held that in certain circumstances employers may monitor employee activity in the workplace for the purpose of establishing whether employees are fulfilling their duties; this can and must be done without breaching the right to privacy in the workplace.

This edition of OnPoint brings light to the workplace privacy issue from a Georgian law perspective, providing an overview of the controversial judgment, the European Union framework in view of protection of personal data, regulation of workplace privacy in Georgia and related Georgian case law.

EUROPEAN UNION FRAMEWORK Generally, protection of personal data in the European Union (the “EU”) is guaranteed by Directive 95/46/EC adopted on 24 October 1995 (the “Directive”). The main purpose of the Directive is to balance the protection and free movement of personal data within the EU and to protect the right to privacy as recognized by Article 8 of the European Convention on Human Rights (“Article 8”) and the general principles of EU law. The Directive restricts the collection, storage and usage of personal data and obliges EU member states to establish an independent national entity for the purposes of personal data protection. The Directive does not specifi-

cally define the responsibilities of the employer. However, general principles of data protection do apply.

BARBULESCU V. ROMANIA JUDGMENT The ECHR judgment dated 12 December 2016 (the “Judgment”) was issued in relation to application #61496/08 originated by a Romanian applicant (the “Applicant”) against Romania (the “Government”). The Applicant was employed by a private company (the “Employer”).

At the Employer’s request, the Applicant created a Yahoo Messenger account for the purpose of responding to client enquiries. On 13 July 2007, the Employer informed the Applicant that his Yahoo Messenger communications had been monitored for the past nine days and records showed he had used the internet for personal purposes, contrary to internal regulations. The Applicant replied that he had only used the account for professional purposes. In response, the Employer presented a forty-five-page transcript of his communications on Yahoo Messenger containing transcripts of all messages related to personal matters the applicant had exchanged during the nine-day period, including messages exchanged between the Applicant and his fiancée using a personal Yahoo Messenger account. These messages did not disclose any intimate information.

The Employer terminated the Applicant’s employment contract for breach of the company’s internal regulations forbidding the use of office appliances for personal purposes. The Applicant challenged the Employer’s decision before the domestic courts and later the ECHR, complaining that the decision had been based on a breach of his right to respect of his private life and correspondence, and that the domestic courts had failed to protect his rights guaranteed under Article 8.

The ECHR held that, by accessing the Applicant’s communication and using it in proceedings before domestic courts, the case concerned the Applicant’s “private life” and “correspondence” under the definitions of Article 8. However, the ECHR noted that the Employer’s monitoring was both limited in scope and proportionate, and that the domestic authorities succeeded in striking a fair balance between the Applicant’s right to respect of his private life under Article 8 and the Employer’s disciplinary powers. Accordingly, no violation of Article 8 had occurred.

of presenting e-mail correspondence as evidence in court. The Inspector underlined two important criteria for the legality of such interference: (1) separation of private and work-related correspondence; and (2) the employee’s awareness about the possibility of monitoring.

While Georgian case law remains silent regarding workplace privacy, the Supreme Court of Georgia issued a ruling in line with the approach adopted above in its decision on case #ას-1155-1101-2014, dated 4 May 2015. In particular, the Supreme Court held that all individuals shall have the right to hold personal communications without fear that the records will be used without or contrary to their consent. However, the privacy of personal communications is not subject to absolute protection and may be limited in cases prescribed by legislation to constitute a legitimate purpose and prevailing public interest.

CONCLUSION As a final note, it can be observed that both Georgian and EU legislation fail to provide any specific regulations regarding workplace privacy. However, general principles of personal data protection apply. The above analysis of Georgian legislation demonstrates that an employee’s private correspondence shall be protected by ensuring their awareness and requiring their consent to potential monitoring and by limiting the employer’s right to process personal data only to the extent necessary to achieve legitimate interests. *** Note: this article does not constitute legal advice. You are responsible for consulting with your own professional legal advisors concerning specific circumstances for your business.

GEORGIAN APPROACH The Constitution of Georgia and the Law of Georgia on Personal Data Protection (the “Law”) are the main tools regulating the collection, storage and usage of personal data in Georgia. For the purposes of the Law, personal data means any information connected to an identified or identifiable natural person. Data processing is any operation performed in relation to such data by automated, semi-automatic or non-automatic means; in particular the collection, recording, photographing, audio recording, video recording, organization, storage, alteration, restoration, request for access to, use or disclosure, grouping or combina-

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Commercial Director: Iva Merabishvili Marketing Manager: Mako Burduli

GEORGIA TODAY

tion, locking, deletion or destruction of such data.

An employer’s request for access to an employee’s personal communications is regarded as data processing under the Law. Such processing is only permissible if the grounds for data processing envisaged in the Law exist. These include the employee’s consent and protection of the legitimate interests of the data processor or relevant third party, etc.

It is required that an employer protect the general principles of data protection. In particular, the processing of data for purposes incompatible with the original purpose is not allowed. Furthermore, the data processed by the employer must be adequate and proportionate for the purpose for which it is processed.

Neither the Labor Code of Georgia nor the Law of Georgia on Public Service provide for any specific regulations for employers. However, the Office of the Personal Data Protection Inspector (the “Office of the Inspector”) has adopted recommendations regarding protection of personal data in labor relations (the “Recommendation”). The Recommendation notes that in certain circumstances the employer is entitled to monitor an employee’s e-mail correspondence and the employee shall be informed of such activity. The Office of the Inspector states that the employer is responsible for separating private and work-related correspondence and only the latter may be subject to monitoring.

In addition to the Recommendation, the Personal Data Protection Inspector (the “Inspector”) delivered a decision on 8 May 2015 regarding workplace privacy (the “Decision”). The Decision states that monitoring of workplace e-mail is legally justified for the purpose

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