Caucasian Business Week #102

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June 8, 2015 #102

June 8, 2015, Issue 102

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George Kvirikashvili: We’ve Experienced an Important Breakthrough in the Number of VisitorsPg. 7

BE INFORMED, DO BUSINESS

GEORGIA BUREAUCRACY STILL A PROBLEM FOR BUSINESS

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epresentatives of the Georgian business consider excessive bureaucracy, various regulations imposed by the government as well as the devaluation of the national currency the most serious problem in their work. Pg. 3

FOREIGN REAL ESTATE INVESTMENT IS ON GEORGIA’S MIND

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rime Minister Irakli Garibashvili spoke with the International Monetary Fund about Georgia’s economy, which is projected to rise 2% in 2015 and 3% in 2016 and the Pg. 5 stabilisation of the Lari.

BREWERS WAITING FOR LIFTING THE BAN IMPOSED BY INTERIOR MINISTRY

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epresentatives of the brewing companies expect the lifting of the ban of the Ministry of Internal Affairs on drinking spirits in public places. Pg. 6

MAY RECORDS 3.5% UPTURN IN ANNUAL INFLATION

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nflation pace is accelerated in Georgia. Inflation level has made up 3,5% in May, 2015 comparing to the same period of 2014. Pg. 7

MAMUKA KHAZARADZE TO REPRESENT GEORGIA ON “WORLD ENTREPRENEUR OF THE YEAR” AWARD

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amuka Khazaradze will represent Georgia on “World Entrepreneur Of The Year” Award in Monte Carlo (on June 2-7, Monte Carlo). Pg. 9

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THE WAY THE FINANCIAL SUPERVISION AGENCY WILL OPERATE

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he Financial Supervision Agency of Georgia, as a legal entity of public law, will be an only state body to supervise the financial sector, while the financial sector supervision committee at the National Bank of Georgia (NBG) will be abolished. On July 1, 2015 the Financial Supervision Agency of Georgia will be set up at NBG, according to

the amendments to the law on the National Bank that was developed by the parliament’s finance and budget committee chairman Tamaz Mechiuri and his first assistant Nodar Ebanoidze. The Agency will promote financial stability and transparency of the finance sector and protect the consumer rights and investors’ interests. The agency will be accountable before the agency board. The agency board will lead the agency operation.

Banks Participate in Impoverishing Population?Pg. 4

onstruction of a new deep-water port in Anaklia will play an important role in the development of Georgia. Pg. 7

GEORGIAN WINEMAKERS WAITING FOR ENACTMENT OF GEORGIACHINA FREE TRADE AGREEMENT

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eorgian wine companies engaged in export of their products to China are waiting for entering into force the Free Trade Agreement between the two countries. Pg. 4

Research

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DIET AND TBILISI CITIZENS

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Pg. 8 “METRO ATLAS GEORGIA” WILL INVEST Givi Korinteli: Do IN NEW BOULEVARD Pg. 11

ANAKLIA PORT TO INCREASE THE TRANSIT POTENTIAL OF GEORGIA

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David Saganelidze: Chinese Investors Request to Set up State Financial Institution to Develop Economic Relations Fadi Asli: Georgian Government Looks like an Alcoholic in Need of Rehab Pg. 8 Ilya Eloshvili: The State Can Become a 20% Shareholder of Khudoni HPP

Irakli Gilauri: Economic Situation of the Country should not be WHERE DOES THE GEORGIAN BANK SYSTEM Politicized Pg. 4

LEAD THE GEORGIAN ECONOMY TO?

Attractive physical appearance and diet become especially prevalent as summer and beach season approaches. Consequently, ACT was interested, how concerned residents of Tbilisi are with extra weight and which methods do they use to get rid of it.

PASHA BANK ISSUES THE TERM LOAN FACILITIES TO GWP AND RUSTAVI WATER COMPANY WITH THE COMBINED Pg. 9 PRINCIPAL OF GEL 22.5 MILLION

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Currency

FX UPDATE: NFP IS DEAD AHEAD BUT IS THE EURO SQUEEZE DONE?

CRUCIAL EVENTS ON CARDS TO CONTINUE FUELING FOREX MARKET VOLATILITY

PHILIPPINES – GEORGIA FRIENDSHIP MINI-PARK PARK TO RISE IN TBILISI ZOO Pg. 10


2 MAIN EVENTS GEORGIA-SWEDEN DIPLOMATIC HISTORY ON DISPLAY IN STOCKHOLM

GOVERNMENT NEWS

GEORGIA WORKS HAND-IN-HAND WITH GLOBAL PLAYERS TO DEVELOP OPEN GOVERNANCE Usupashvili said several activities had been carried out within Georgia’s legislative body to make governance more open and transparent, while more activities were planned in this direction in the future.

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id you know that Georgia as the independent Republic opened its first Embassy in Sweden in 1918. Unique historic materials illustrating this period of time are now on display in Georgia’s Embassy in Stockholm in occasion of the celebration of Georgia’s Independence Day. Black and white photos and unique documentary documents are dating back to the years 19181921 describing the period when Georgia gained the independence from the Russian empire and established the first independence state.

OPEN GOVERNANCE AND GEORGIA’S COURT SYSTEM Georgia’s Supreme Court chairperson Nino Gvenetadze said the primary goal of the court reform was to establish an independent, impartial court system and gain public confidence. “I think the third stage of the court reform, which is being implemented with the support of Georgia’s Ministry of Justice, will be very successful for Georgian justice. We understand labour-consuming activities should be done but this requires the resources and time. But we want the court system to ensure each citizen’s rights are protected,” Gvenetadze said.

GEORGIA CELEBRATES THE BIRTHDAY OF BRITAIN’S QUEEN ELIZABETH II

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eorgia is celebrating the birthday of the Queen of the United Kingdom and Commonwealth nations, Her Majesty Queen Elizabeth II. A festive event was hosted by the British Embassy in Georgia yesterday that commemorated the 62ndbirthday of Queen Elizabeth II. The celebration was attended by Georgian officials and friends of the British state, as well as President Giorgi Margvelashvili and Defence Minister Tinatin Khidasheli, who were jointly named as the guests of honour.

GEORGIAN SOLDIERS PARTICIPATE IN NATO BALTIC SEA DRILLS Alongside with 17 countries Georgian soldiers are participating in United States-led NATO naval exercise at the Baltic Sea. This year with fourteen NATO allies Georgia, Finland and Sweden are debut to the Baltic Sea naval drills as part of exercise BALTOPS taking place on June 5-19.

GERMAN AMBASSADOR: “GEORGIA WAS THE MOST INTERESTING PLACE WHERE I’VE WORKED”

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eorgia was the most interesting place where I’ve worked during my career,” said Ambassador of Germany in Georgia Ortwin Hennig to the Prime Minister of Georgia while reviewing his five-year tenure. Hennig, who has been the Ambassador of Germany in Georgia since 2010, has completed his five-year term of duty in Georgia.

PM EXAMINES 15 NEW MILITARY GADGETS PRODUCED IN GEORGIA

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multi-functional unmanned aerial vehicle, an armored medical evacuation vehicle, an armored vehicle for desert conditions, anti-hail systems and 11 other defensive mechanisms were exhibited today at Georgia’s State Military Scientific Centre DELTA. Georgian Prime Minister Irakli Garibashvili visited the scientific centre with Cabinet Ministers today and became personally acquainted with 15 new products produced by DELTA.

GEORGIA CONGRATULATES NEWLY ELECTED PRESIDENT OF LATVIA

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eorgia’s high officials are congratulating Raimonds Vejonis on being elected as the new President of Latvia. The elections in Latvia were held yesterday, where Vejonis was officially chosen as the Baltic state’s new president after he won the secret ballot in which 55 out of 100 legislators backed him. This result saw Vejonis become the 28-member European Union’s first Green Party head of state. Vejonis, 48, replaced Andris Berzins as President of Latvia. Georgia’s President Giorgi Margvelashvili released an official statement today congratulating Vejonis on his election victory.

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EUROPEAN INVESTMENT BANK PRESIDENT REVIEWS GEORGIA’S ONE-STOP SERVICE

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e are constantly improving the governance culture in Georgia as open governance is an essential part of our Government” – with these words Georgia’s Prime Minister Irakli Garibashvili opened the first ever European Region Government Point of Contact (POC) conference Georgia’s capital Tbilisi. Judicial, legislative and executive branches of the Georgian Government gathered to host government representatives from dozens of countries who came to capital Tbilisi to participate in the international conference about open governance. At the two-day conference Georgia, as host country, will demonstrate the progress it has made in developing an open and transparent government. While addressing the audience Garibashvili highlighted that Georgia had been ranked first of 13 countries in Eastern Europe and Central Asia region and 29th in the world in terms of open governance. He said Georgia had improved its transparency and openness, and citizens in Tbilisi now had better access to public services than ever before. He stressed citizens in Georgia’s regions should also be able to access the services that had been recently implemented by the Government. For this purpose, the EGovernment Coordination Department was created in the Prime Minister office. “To establish a new culture of open governance means public participation at all stages of decisionmaking. For this reason the community centres the Ministry of Justice is building in Georgia’s smaller settlements is extremely important. These centres intend to offer citizens a one-stop place where they can access private and public services. People should have access to in-demand state services, key private sector services, free internet, a library and a

conference room,” said Georgia’s Prime Minister. Garibashvili also said he was glad to see Georgia’s court system had become an “open institution”. GEORGIA AND FRANCE SIGN COOPERATION CONTRACTS Today within the European Region Government Point of Contact (POC) conference, Georgia and France signed three cooperation documents; the first will see state agencies share their experience about electronic documents, the second will focus on offering access to state services to rural areas, and the third was about how to publicise court decisions in a way that protects personal data. Georgia Minister of Justice Thea Tsulukiani signed the documents on behalf of Georgia while France’s State Minister for State Reform and Simplification Thierry Mandon signed it on France’s behalf. Garibashvili welcomed the Open Government Partnership initiative between Georgia and France – two member countries of the Steering Committee – which would allow countries to share with their best practices with the other country, and said the Georgian Government would support this initiative. OPEN GOVERNANCE IN GEORGIA’S LEGISLATION When Georgia’s Parliament Speaker David Usupashvili took to the stage to speak today, he recalled Georgia’s General Administrative Code and its paragraph about Freedom of Information, which was adopted in 2000. He said this was the beginning of a new era in the country’s governance system, which intended to inform the society about the Government’s activities and involve them in its processes.

The second-in-charge of the European Investment Bank (EIB) spoke of Georgia’s highly functioning Justice House. In an interview with Austrian newspaper WirtschaftsBlatt, EIB vice president Wilhelm Molterer said “Georgia stands at the best path to get closer to the European standards and in some cases Georgia is ahead of the EU”. “If you want to know how the one-stop service works, you should travel to Georgia where there are Justice Houses in almost every big city. In Justice Houses you can get all services – driving license, passport or a document about establishing a company – in the shortest time,” Molterer said. He believed Georgia had made significant progress in using latest information technologies. Molterer added Georgia had benefited from signing an Association Agreement with the EU, where the country’s exports to the EU had increased by 18 percent. #OGPGEORGIA 2015 The European Region Government Point of Contact (POC) conference started today and will finish tomorrow. It has brought together more than 50 public servants from 21 Open Government Partnership (OGP) participating countries, and offered delegates the opportunity to share their successes and challenges regarding achieving open governance in their home countries with partner nations. Georgia is the first country in Eastern Europe to host this high-level forum. Before Georgia was announced as the host of this year’s OGP regional conference, the country was elected as an OGP Steering Committee member. Agenda.ge

GOV’T-LED GROUP SUGGESTS WAYS TO DEVELOP GEORGIA’S CAPITAL MARKET

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he Georgian Government, the National Bank of Georgia (NBG) and the country’s private sector should team up to develop Georgia’s capital market. This was one recommendation offered in a draft report by the Georgian Capital Market Diagnostic Study, which aimed to investigate how the country can better develop its capital market. The Study was prepared by the Capital Markets Working Group, appointed by the Government of Georgia. The Working Group was chaired by Vice Prime Minister and Minister of Economy and Sustainable Development, Giorgi Kvirikashvili. Georgia has all the conditions to have a healthy capital market and it is not necessary to create new institutions for achieving this goal. However, it is possible to add certain functions to existing institutions,” – this was the main conclusion of the Georgian Capital Market Diagnostic Study. Other of the Working Group’s main conclusions from this Study included reversal of several policy missteps made in 2007. The experts said this should

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be done to revive the corporate securities market. However they noted amendments to the law should be done very rarely. Also, it should be decided who will regulate the securities – NBG or a Commission that will be specifically created for this purpose. At the same time, certain aspects of the Tax Code should be adjusted to create a “level playing field” between treasury securities, bank deposits and corporate securities as investment instruments, said the Study. One of the recommendations was to revise the legal and regulatory system in order to provide a more supportive environment and also to migrate it towards EU (European Union) approaches. There must be a strong focus on building viable content (issued securities) for the system and issuer transparency must be improved, said the Study. The Working Group said there were steps the private sector could take to promote centrality of trading, obtain better price discovery and streamlined trading. And there were steps the Georgian Stock Exchange (GSE), Georgian Securities Central De-

pository (GSCD) and NBG could take to integrate existing infrastructure and link it to cross-border systems. The Study stressed it was necessary to issue corporate obligations for developing Georgia’s capital market. This process started last year when several donor organisations issued bonds in the Georgian national currency, the Lari. Since 2014 Asian Development Bank, European Bank for Reconstruction and Development (EBRD) and International Finance Corporation issued Georgia Lari bonds equivalent to 205 million GEL. However, none of them were placed on the Stock Exchange. In total, the Study offered 43 specific recommendations to achieve certain goals, stated which parties were responsible for implementation of action and set deadlines. The terms of implementing the recommendations will be determined after private and public consultations are held and both sides agree on the tasks and deadlines. Agenda.ge

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Editor: Nino Gojiashvili. Mobile phone: 595 050404 Reporters: Nutsa Galumashvili; Lazare Gvimradze

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June 8, 2015 #102

ECONOMIX

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THE WAY THE FINANCIAL SUPERVISION AGENCY WILL OPERATE

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If the National Bank’s Main Responsibility is to Reach the Target Inflation, it should not Institutionally Control Commercial Banks

he Financial Supervision Agency of Georgia, as a legal entity of public law, will be an only state body to supervise the financial sector, while the financial sector supervision committee at the National Bank of Georgia (NBG) will be abolished. On July 1, 2015 the Financial Supervision Agency of Georgia will be set up at NBG, according to the amendments to the law on the National Bank that was developed by the parliament’s finance and budget committee chairman Tamaz Mechiuri and his first assistant Nodar Ebanoidze. The Agency will promote financial stability and transparency of the finance sector and protect the consumer rights and investors’ interests. The agency will be accountable before the agency board. The agency board will lead the agency operation. The agency board will include 7 members, including the NBG President, while the remaining part will be staffed by Georgian and foreign citizens with significant experience of operation in the finance sector. The agency board will elect the board chairman by a majority of votes. The NBG President cannot be elected the agency board chairman. Under the bill, two members will be presented by the parliament’s chairman, a parliamentary faction, a group of 6 MPs. The board members will be elected by the parliament’s majority of votes for a period of 7 years. The parliament is authorized to elect some members of the board for a less period. Under the bill, the agency will supervise the

finance sector, regulate qualified crediting institutes, register and supervise the tax system operator and tax service provider, supervise commercial banks and nonbank deposits institutions, microfinance organizations, money transfer providers and currency exchange booths, securities market. Amendments will be made to 13 laws. Finance Minister Nodar Khaduri has abstained to make comments on legislative amendments that call for separation of the bank sector supervision department from the NBG. The parliament is developing the issue and the legislative body will make the decision, the Finance Minister said. Economic Expert Roman Gotsiridze says the separation of the bank sector supervisory function from the NBG will destroy the NBG. “This does not concern only the supervision service. There are many functions that will be redirected to the supervision agency, that under the bill, will be a legal entity of public law and politicians are able to bring them under their control. This body is not protected by immunity, like the NBG, and the main thing is that motives for its creation are unclear. All these changes are being carried out in a rush. All financial monitoring functions have moved to the Government. This step, in practice, abolishes the NBG and only technical functions will be maintained to the NBG”, Gotsiridze said. Economic expert Levan Kalandadze offers a different consideration – the main thing is a political will and the bank sector supervisory services successfully operate both under and outside the national banks. “According to my information, the new regula-

tions call for implementing system changes and no additional regulations will be introduced. We should wait for the process, we should listen to the arguments of both sides and finally something compromise variant should be adopted. As a result, the decision should ensure the transparency of the sector and make focus on the result. I imply a formation of optimal monetary policy and pre-implementation conditions in the country”, Levan Kalandadze said. Business groups associated with the United National Movement (UNM) are also expressing protests against the currency changes in the NBG. The Government plans to impose control over com-

mercial banks, these groups assert. It is interesting what these groups were thinking about when the previous Authorities carried out similar reforms?! The more interesting issue is the National Bank lost the duty to control activities of commercial banks on currency markets after the 2009 reforms. In 2009 the NBG became an instrument to reach a target inflation rate and lost the responsibility for the national currency stability. No one protested these changes in 2009 and what is the problem today?! If the NBG bears no responsibility for the national currency, why should not it concede the control over commercial banks?! bfm.ge

BUREAUCRACY STILL A PROBLEM FOR BUSINESS

R TURNOVER OF GEORGIA’S BUSINESS REACHES 11 BILLION GEL

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n the first quarter of 2015 the total turnover of enterprises in Georgia reached 11 billion GEL, while the production value amounted to 5.6 billion GEL, says Georgia’s National Statistics Office (Geostat). Large businesses made up the majority of total turnover (82.8 percent), followed by small businesses (9.3 percent) then medium-sized businesses (7.9 percent). Additionally large businesses made up 81.8 percent of total production value, small businesses made up 9.8 percent and medium-sized businesses generated 8.4 percent of total production value. About 545,400 people were employed in Georgian businesses, of which 59.9 percent were men and 40.1 percent were women. The majority of people (60.6 percent) were employed in large businesses, noted Geostat. The total value of salaries for all businesses in Georgia for the first four months of 2015 reached 1.350 billion GEL. The average monthly salary in the business sector was 851.7 GEL. The average monthly salary for women was 641.1 GEL. The average monthly income for businesses

ranged depending on the size of the enterprise. Large businesses generated an average monthly income of 1,018.5 GEL, medium-sized businesses earned 692.8 GEL and small business gained 470 GEL. The main sectors of employment were trade and repair of vehicles, consumer products and personal care. On another note, the Geostat data also showed at the end of 2014 the unemployment rate in Georgia was 12.4 percent – the lowest it has been in 11 years. The 2014 unemployment rate was a decline of 2.2 percent on 2013 figures, when the country experienced 14.6 percent unemployment. Since 2006 unemployment in Georgia went from 13.6 percent, peaked in 2009 at 16.9 percent and has continuously dropped each year since then. Meanwhile, one of America’s largest accounting and advisory firms, Grant Thornton revealed women were now occupying more senior management positions in Georgia than in previous years. Grant Thornton’s research revealed that 38 percent of senior business roles in Georgia were occupied by women.

epresentatives of the Georgian business consider excessive bureaucracy, various regulations imposed by the government as well as the devaluation of the national currency the most serious problem in their work. At the end of 2014, these same businessmen focused on the growth of bureaucracy in the country. After their critical statements, Prime Minister of Georgia Irakli Garibashvili demanded from government officials not to interfere in the work of the business and threatened severe punishment to all those who will do it. This announcement was made during Prime Minister’s meeting with entrepreneurs. After that Minister of Economy George Kvirikashvili promised to reduce bureaucracy in the country in 2015. What is the situation in this regard to date, and has anything changed for the business? According to the Vice-president of the Business Association of Georgia Lasha Papashvili, despite promises, the bureaucracy is still one of the most acute problems for the business class in the country. “Perhaps ordinary citizens feel any improvement, but the business – not yet. The situation has improved for ordinary citizens in terms of state structures’ response. It is good that citizens feel protected, but it is also necessarily to quickly and efficiently make decisions regarding the busi-

ness,”- he says. Unlike his colleague, President of the Business Association of Georgia George Chirakadze does not think bureaucracy is the most serious problem. “Bureaucracy is a challenge for any country. There will always be a desire to cut it even more. We often talk about the problem of bureaucracy, but I do not think that at this stage it is the most serious problem, “- he notes. At the same time Ilya Tsulaia, CEO at the construction company “Archi”, believes that the situation with the bureaucracy, on the contrary, has improved in recent years. “In recent years, a positive trend is evident. Employees of government agencies are trying to work faster and more effectively minimizing bureaucratic procedures. For example, my company had problems in the Tbilisi Mayor’s Office, but after new Vice-mayors were appointed, the situation has changed for the better,”- he notes. According to him, officials of government agencies should take responsibility. “For business it is always better bureaucracy was as little as possible. But we understand that the state officials bear responsibility in making decisions. They try as much as possible to help the business, but it does not always succeed. Now, after the change of several deputy prime ministers, the situation has improved, “- says Ilya Tsulaia.

IMF FOCUSES ON GEORGIA’S ECONOMY WITH PM GARIBASHVILI

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eorgia’s developing agricultural sector, growing export trends and reputation as a top tourism destination is having a positive effect on the country’s growing economy, says the country’s Prime Minister. Today Prime Minister Irakli Garibashvili spoke with world financial experts from the International Monetary Fund about Georgia’s economic process and macroeconomic forecast issues. The team of experts has closely examined Georgia’s economy for the past two weeks while on a reporting mission for IMF. Today IMF mission chief Marc Griffiths spoke with PM Garibashvili about the group’s findings. PM Garibashvili not-

ed the positive trends in the country’s hospitality sector, agriculture and export dynamic. He also mentioned the increased number of tourists visiting Georgia and that the Government has been “working constantly” to generate more foreign investments. The sides also highlighted the tense situation in the region and noted that external factors had negatively affected Georgia’s national currency, the Lari, as well as inflow of foreign currency. The same factors also affected the country’s export and economic growth rates. Garibashvili and Griffiths expressed hope that the processes relating to economic growth and export growth rates would be regulated in the future.


4 HEADLINES COOPERATIVES STRENGTHEN BUSINESS AND FRIENDSHIP

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n agricultural cooperative will not only bring economic benefit to a country but it can also save a long-time friendship. When two women from Abasha in western Georgia gathered their passports before planning to illegally immigrate to Europe due to ongoing financial difficulties, their friends came up with the novel idea to create a cooperative and use the financial assistance of the European Neighbourhood Programme for Agriculture and Rural Development (ENPARD) to develop their business idea.

INTERVIEW

CHINESE INVESTORS REQUEST TO SET UP STATE FINANCIAL INSTITUTION TO DEVELOP ECONOMIC RELATIONS An interview with the parlimentary majority leader David Saganelidze

GEORGIA’S NATIONAL INVESTMENT AGENCY NOW UNDER STATE LEADERSHIP

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he Georgian National Investment Agency will be under the command of Georgia’s Prime Minister Irakli Garibashvili, so he can effectively coordinate attracting Foreign Direct Investments (FDI) to the country. Today Garibashvili met the representatives of diplomatic corps, international financial and consulting organisations and business associations, introduced himself this decision. Garibashvili said Georgia was a country with “a unique cultural and historical heritage”. It was also unique in its flexibility.

NOVOSIBIRSK – EIGHTH RUSSIAN CITY WHERE GEORGIA WILL PERFORM FLIGHTS

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eorgian Airways is starting multiple charter flights to Russia. Georgia’s national carrier will link capital Tbilisi to Russia’s third largest city Novosibirsk from June 14. Novosibirsk is the eighth Russian city where flights will be carried out from Georgia, announced Georgia’s Ministry of Economy. Negotiations to resume a flight service between the two countries resulted in Georgian Airways being allowed to perform flights to seven Russian cities two months ago.

GEORGIAN NUTS WILL BECOME A GLOBALLY RECOGNISED BRAND

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eorgian nuts will soon become a globally recognised brand – this is the main goal of the Nut Production State Program which is launching today. The Program was initiated by Georgia’s Ministry of Agriculture. Creating a legislative base, developing infrastructure, improving farmers’ education and establishing a brand of Georgian nuts was on the Ministry’s to-do list. Within the Nut Production State Program, a new nut factory will be created in Georgia. “Our goal is for Georgian nuts to conquer the world market and establish second place after Turkey” said Deputy Minister of Agriculture Davit Giligashvili.

- A few days ago you paid an official visit to China? How would you assess this visit? - China’s visit was very interesting. During the week we observed two provinces. We had meetings with provincial governors, the ruling party officials, business and bank representatives. A very big economic forum was held in Siena. Siena is the hometown of China’s President and a symbolic China Silk Road, that’s a place where economic zone starts. Consequently, it hosted a great forum attended by prime ministers and deputy prime ministers from more than 30 countries where I delivered speeches and held meetings. In addition, I held meetings in the field of agriculture. I saw a giant agricultural research center, as well as the university. We talked with the

representatives of the Ministry of Agriculture of China about Georgia - China relations. In particular, development of the vineyards, tea plantations, production of new adapted varieties, maintenance and restoration of tea production. In Beijing, at the Ministry of Agriculture we discussed a detailed project with working groups which will arrive in Georgia within 1 month. A work schedule of relations between the two countries will be specified within several months. It is also important that in recent years more than a million bottles of wine have been sold in China. But we will have to work a lot in this direction anyway. - At what stage is the establishment of the Georgia Development Corporation? A few months ago you told you that the German Development Bank (KFW) had allocated approximately 350 000 euro to conduct a survey. Research results will be handed over to the government. What is happening now in this direction? -I had a meeting with the President of the Asian Infrastructure and Development Bank. This bank is now being created with the authorized capital of $ 110 billion. In the first phase the Bank plans to invest $ 4 trillion in various infrastructure projects in the countries of the Great Silk Road. - How will Georgia use this bank’s resources? - We, first of all, should ratify the founding treaty of the bank. We cannot make money in the bank, but we will act as a recipient. The interest is huge and it is essential that the bank’s resources will be spent on the mega infrastructure projects in Georgia, such as ports, railways and highways. The bank’s President directly asked about financial institutions the bank will be able to work with. Unfortunately, a state institution of this type does not exist in Georgia. Therefore, the issue of the establishment of the Development Corporation has been raised by the bank. - Has the German Development Bank (KFW)

completed a survey? -As far as I know, the survey had to be completed by the end of May. Perhaps they will make its presentation in the near future. Then the Prime Minister and the financial team will review their opinion on this issue again. -Israel- based businessman Alexander Mashkevich set up a working group in Georgia which was engaged in planning his investment in the country. As we know, at this point the businessman interested in health field. A few months ago you told “Commersant” that the project in Georgia might be co- financed from the budget. What’s going on in this regard? -Several days ago the group arrived in Georgia, Mashkevich also visited the country. The project was presented in narrow circle, in a working situation. As they say, the project will be launched very soon. As you mentioned, we are talking about health care projects. The state-owned bank or institution similar to the Development Corporation should be engaged in this process. We do not have a similar institution. They are looking for partners in the country and it cannot be the Ministry of Finance or the Ministry of Economy. -In these circumstances can the Partnership Fund be involved in the project? - Yes, but the Partnership Fund does not have the powers, the scope which is desirable to have. I always said that the mere existence of the Partnership Fund is very good, but funds cannot participate in such projects because of their scale, their rights and obligations, regulations especially when we talk about the entry of giant banks and projects into Georgia.Therefore, we need a major reorganization of our financial institutions. -When will Georgia’s share in Mashkevich’s projects be known? -I cannot say, the government, the executive branch will decide it.

DO BANKS PARTICIPATE IN IMPOVERISHING POPULATION? An interview with CEO at First Credit Union Givi Korinteli

GEORGIA’S VASHLOVANI PROTECTED AREA GRANTED EUROPEAN CONSERVATION AWARD

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ne of the most beautiful landscapes of Georgia which presents remarkable cliffs and canyons and a variety of animals, has been granted with a prestigious award from the European Council. Vashlovani Protected Areas in eastern Georgia has joined more than 70 protected areas in several European countries to receive the European Diploma for Protected Areas for its preservation of biological, geological and landscape diversity.

MICROSOFT HELPS PROVIDE BETTER ACCESS TO PUBLIC SERVICES IN GEORGIA

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he Financial Analytical Service (FAS) of Georgia’s Ministry of Finance is planning to become a cloud service provider, allowing its services to be accessed by customers from a remote facility via an Internet connection. This initiative, which will offer Windows Azure IaaS (Infrastructure-as-a-Service) to its customers, was part of the Premier Support, which FAS has been receiving from Microsoft since the country signed an Enterprise Agreement in 2012. Premier Support aimed to improve the country’s IT infrastructure and allow locals to gain the most intellectual benefit from Microsoft experts.

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caucasian business week

- Why does Georgia still remain a poor country, and whatshould be done to get out of this situation? - This is a very complex topic. First we need to define what is meant by poverty. A person with financial problems is one thing, the poor - the other, and the beggar - the third. There are certain criteria that determine the level of poverty.

To overcome the economic difficulties, economic growth is required that will allow the state gradually, using its capabilities, improve the social situation of those citizens who are unable to work. As for those who are poor because of lack of work, of course, a priority for the government should be jobs creation that will allow people to get a stable salary. For all this, we need the right economic policies, identification of priorities. The causes of poverty are complex as well as an answer to it. - Many businessmen in recent years are increasingly talking about the growth of bureaucratic barriers from the government, the creation of unwanted and unnecessary regulations that hinder development. Do you see the problem? - All depends on the sectors of economy. Also it depends on the size of the business - large business has one problem, small and medium - other. Of course, the postulate that there should be as less regulations as possible is right. The less regulations, the more incentives for business development there will be. But to date the regulations is not the biggest problem for the economy. A low level of access to finance is much more important. We are talking about large commercial structures, which are really interested in investing in Georgia, in particular, large international funds. In general, due to regional characteristics, political risks, which are evaluated fairly high, play a very important role, so it does not matter how good is the business climate in the country.

External threats can have a critical value that to negotiate with these funds in the current environment is a very difficult task. - Recently, the President of the National Bank said that Georgians like to waste money so they often find themselves in a credit trap. Can this factor be one of the causes of poverty? - All depends on the sum. If we talk about the people who spend more than earn from month to month, this is not an unambiguous indicator of propensity to excessive expenditure of money. Perhaps the point is that incomes of the population in Georgia are low, so to survive people are forced to take debts. Though of course, I agree with the President of the National Bank that we have low financial culture. That is why various online credit organizations make loans at exorbitant interest rates and receive very large incomes. The reason for this is that our citizens are not able to plan their costs. They have the wrong expectations about the future. - There are talks that banks make citizens bankrupt. What can you say about this? - I strongly disagree with this approach. Anyone’s enrichment or vice versa, impoverishment is not the bank’s function. When clients come to the bank, they know for what they take money. It turns out nonsense - some citizens complain that the banks do not give money, others – that banks make people bankrupt. Many simply confuse notions and call any financial institution, such as MFIs - banks.


June 8, 2015 #102

ECONOMIX

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caucasian business week

TOP STORY

FOREIGN REAL ESTATE INVESTMENT IS ON GEORGIA’S MIND

P WHERE DOES THE GEORGIAN BANK SYSTEM LEAD THE GEORGIAN ECONOMY TO?

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he role of bank systems in various economies grows every day, but analysts assert the bank system advancement may bring dangerous outcomes. The finance sector’s role in developed economies of the USA, Japan and other countries has considerably grown. This process includes certain hazards. In the course of time, banks and other financial institutions will become a considerable part of economies, but their contribution to economic growth falls, because after a certain stage of financial development, a positive effect on the economy shrinks, while economic and financial volatility grows. Many specialists assert the domination of the finance sector has become an obstacle against development of other sectors. The Financial Development Index developed by the International Monetary Fund (IMF) explores various indicators of the bank sector’s financial stability and an access of various sectors of the economy to bank and other financial products. The IMF report shows the finance sectors of such economies as Ireland, Japan and the USA have already crossed the line, when the finance sector enlargement brings less effect for economic growth. It should be noted many developing countries have not reached this verge, under the report. What about Georgia? How dominating positions does the Georgian finance sector occupy? What is its contribution to developing other sectors of the economy and how does it supply financial resources to the real sectors of the economy? GEORGIA’S BANK SECTOR As of December 31, 2014 the Georgian bank sector registered 21 commercial banks. The ratio of nonresidents’ participation was 87% in the sector’s assets and 84% in the sector’s stock capital. According to the National Bank of Georgia (NBG), the bank sector’s total credit portfolio exceeded 13 billion GEL. Without the exchange rate effect, the year on year growth marked 18.6%. In 2013 and 2014 the retail loans segment recorded a major upturn, including auto loans, consumer loans, urgent installment schemes, credit cards, loans for apartment repairs and mortgage loans. The ratio of these loans in total loans portfolio is 38.6%. This signifies commercial banks issue a major part of loans to the noncommercial sector and this does not increase the economic productivity. Besides retail products, a major ratio in the loans portfolio is recorded for the trade sector – about 13%, while only 3.2% is recorded for the energy sector, the most important field for the economic development. The agriculture sector ratio makes up 4.6%, the production sector – 1.2%, hotels and

tourism – 3.5%, real estate development, management and buildings companies – 7.9%. Unlike other sectors the Georgian bank sector’s profitability continues stable growth. According to the NBG report, the 2014 return on average assets and capital marked 2.6% and 14.8%. The bank sector’s profitability indicators are stable for the last years. According to the NBG report, an upturn in assets and efficiency of scales have positively affected the bank systems’ profitability. Moreover, for the last years the number of assets appropriated by the bank sector grows on permanent basis. STRUCTURE OF GEORGIA’S FINANCIAL SECTOR In 2013 the Georgian National Statistics Service has conducted a research for evaluation of pawshop assets. Under the report, in 2013 total assets in pawn-shops marked 340 million GEL, including 91.5% in terms of loans and 4% in terms of cash. The remaining part of assets was preserved at commercial banks and in other types of assets. This signifies pawn-shops have issued 310 million GEL loans. Evaluation of the volume of assets at pawn-shops has outlined the volume and structure of the total financial sector. The finance sector’s total assets (according to the 2013 indicators) marked 19 billion GEL, of which commercial banks recorded 91%, microfinance sector – 4%, insurance sector – 3% and pawn-shops – about 2%. The correlation of the finance sector assets to GDP, one of the indicators of the finance sector development, makes up 71%, including 64.4% is recorded for assets of commercial banks. In practice, the finance sector on the Georgian market has become a monopolist. Over 90% of the assets in the finance sector are registered for the bank sector. According to the European Central Bank, the ratio of commercial banks in the Eurozone finance sector’s total assets is 60%. According to the statistics of the Federal Reserve System, the same indicators in the USA makes up 23.4%, that is, commercial banks hold less than 25% in the finance sector. Moreover, even the interbank competition is very low. Small commercial banks that make up a majority in the system cannot make essential effect on the market ratio. As to the major bank institutions, they have got huge potential. Namely, they can draw cheaper and longer-term credit resources, including from abroad. They are able to issue comparatively large credits with flexible terms, efficiently manage risks and so on. All these factors narrow market space for small commercial banks and shrink their competitive capacity. The fact is today the Georgian finance system entirely consists of the bank sector

and this grows the quality of dependence of the economy on commercial banks. This also grows risk factors. If the world is afraid of domination of the finance sector, there is the worse situation in Georgia, where not only the finance system, but only one segment of commercial banks has got dominating positions on the market. IMF experts recommend tightening regulations to minimize the existing risks. The finance sector regulation issue became relevant after the 2008 financial crisis. The world is seeking for new approaches of regulations. A major part of new economic theories backs complex regulations, because the borders between economic fields disappear every day. Complex methods will not work in Georgia because of undeveloped market. Only the finance sector has been developed in terms of commercial banks. This factor creates specific risks to the Georgian economy. The world is trying to resolve the problem with regulating deeply integrated sectors, while in Georgia the finance sector regulatory legislation promotes the development of only one sector and this is a dangerous tendency. Because of deficiency of domestic resources for financing the transient economies, foreign capital inflow is an inevitable necessity. The domestic stock exchange performs a function of organized market to ensure this process. To ensure the normal operation of the stock exchange, it is necessary to adopt legislative amendments. Due steps were taken in 2012 in this direction after the parliament initiated the bill to separate securities regulations from the National Bank and to direct these regulations to the securities national commission. Despite the bill was developed, it had not been discussed yet. Public skepticism and public unawareness in this field are one of the reasons the securities market has not been developed in Georgia. The government should develop a strategic plan and legislative amendments for developing the securities market. The government should promote making investments in the corporate securities to create grounds for the state economic development. The reforms package should outline such priorities that will ensure the market transparency, stimulate a wide range of financial instruments, encourage a growth in number of brokerage companies and create municipal and project-supported securities. But today we have a dominant bank system and its healthiness largely depends on the finance and economic stability of the country and its profitability grows every year. At the same time, their credit policy implies an issuance of loans that do not promote the real sector of the Georgian economy. geoeconomics.ge

POTI PORT PROVIDES TWO NEW DEEP WATER BERTHS

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fter the Inland Container Terminal was successfully completed in Poti Port last year, international company APM Terminals is taking the first step toward expanding the port further. The next phase of the Poti Port expansion plan includes building two new deep water berths. This phase is projected to be completed in 2018. When finished, the fully fitted mega-port will have an annual cargo throughput capacity of 50 million tonnes and two million TEUs (a unit of cargo capacity).

With a water depth of up to 16 metres, the port will be able to accommodate the largest vessels sailing on the Black Sea. “While recent World Bank economic growth forecasts for the broader Caucasus region have been reduced, APM Terminals is committed to our ongoing investment in Poti Seaport to anticipate and satisfy the future demand potential,” said APM Terminals Poti Deputy Managing Director Joseph Crowley while speaking at the 4th Annual Black Sea Ports and Shipping Conference 2015. Crowley discussed the advantages of Poti Port as the “prominent gateway” for Black Sea, Mediter-

ranean and Central Asian trade. “This infrastructure investment into the port will help make future gateway volume growth possible, [which is] a major factor in Georgia’s growing presence as a global trading partner,” Crowley added. APM Terminals purchased Poti Port, the largest port in Georgia uniting 15 berths, in April 2011. APM Terminals has invested more than $70 million USD to upgrade the outdated port infrastructure and service facilities, including the construction of a new Customs Centre, new rail and truck facilities.

rime Minister Irakli Garibashvili spoke with the International Monetary Fund about Georgia’s economy, which is projected to rise 2% in 2015 and 3% in 2016 and the stabilisation of the Lari, which has lost 30% of its value against the US dollar since November. Economic activity in the region is due to be weakened, partly because economic crisis in Russia and reduced oil prices, according to the IMF. They also discussed growing tourism and how the Government has been “working constantly” to generate more foreign investment. The meeting at the Palace of Westminster was attended by more than 20 of the most prominent Georgian businesses as well as more than 100 UK private investors and equity funds top developers and agents. Tom Day, Regional Director of Hospitality Services & Investor Services for Cushman & Wakefield Veritas Brown, which helped to organise the meeting, says there is strong and growing interest in real estate in Georgia from Western European investors. At the same time, legislation has been passed in Georgia for new visas aimed at making it easier for property owners to stay in the country. The Georgian parliament has just amended legislation regarding the legal status of foreigners that looks to create a short-term residence permit for foreigners who own Georgian real estate, except agricultural land, worth more than US$35,000. Once sanctioned by President Giorgi Margvelashvili, the government will draw up a list of countries whose citizens will be eligible for 360day visa-free stay, AzerNews reports. Visa regulations were tightened in more than a dozen countries in September last year with citizens allowed to stay in Georgia without a visa for up to 90 days in any 180 days rather than the previous 360 days. The government hopes the new visa will encourage foreigners to come to Georgia and invest in real estate. In fact, over the last few years, the number of transactions in Tbilisi has been growing steadily. Since 2009 the average annual growth rate has been 5% and in 2012, the residential real estate transaction volume was US$774million. In 2013 it grew by 7% and in 2014 it rose 6% to US$882million. Tom Day explains, “Demand for real estate in Georgia is strongest from Turkey, Azerbaijan and China with stronger demand seen during 2014 and 2015 from the GCC region and Western European countries.” The visa plans closely match the arrangements that were previously, he says. “Georgia understands the importance of strong border security and reconciling this with the ease of doing business and the need for FDI. The IFC recently ranked Georgia as the eighth place in the Ease of Doing Business and Starting a Business global index as of 2014.” The Invest in Georgian Real Estate event at London focused on the real estate and hotel development sector and gave participants the opportunity to learn about upcoming Georgian residential, commercial and mixed-use large-scale projects, make new contacts and network. It was co-organised by Cushman & Wakefield | Veritas Brown and supported by the Embassy of Georgia in the UK and the British Embassy in Georgia and networking reception was hosted by JSC m2 Real Estate, a subsidiary of Bank of Georgia Holdings. The event was so successful that an Invest in Georgian Real Estate forum is being held in Tbilisi, Georgia, on 24 and 25 September. Despite the tensions with Russia, Georgia is a politically stable country, says Mr Day. “At the end of June 2014, Georgia and the European Union signed the EU Association Agreement, including Deep and Comprehensive Free Trade Area (DCFTA), and this reflects Georgia’s continued look towards increased trade and FDI with its European neighbours.” Are real estate investors still interested in buying? “In one word, ‘Yes’”, he concludes. “In terms of FDI, Georgia has seen growth of over 100% in FDI since 2009, standing at $1.27billion in 2014.”


BUSINESS

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caucasian business week

June 8, 2015 #102

BREWERS WAITING FOR LIFTING THE BAN IMPOSED BY INTERIOR MINISTRY

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epresentatives of the brewing companies expect the lifting of the ban of the Ministry of Internal Affairs on drinking spirits in public places. The business ombudsman addressed the law enforcement agencies with a similar request. According to the business ombudsman’s office, at this stage the Interior Ministry does not intend to revise its position and plans to keep the ban in force, but the office tries to convince the leadership of the Ministry that the consumption of beer in the parks and squares does not violate public order. At the same time the regulations cause a great damage to the brewing industry. Consultations are underway, and if the Interior Ministry changes its position, it is possible the procedure for canceling law will start, which will take about two weeks. According to the Deputy Business Ombudsman Zurab Dznelashvili, monitoring showed that after the introduction of the ban on drinking beverages in public places, beer consumption in Georgia is significantly reduced. “Beer is a low alcohol drink, and its consumption in public places does not bear a risk such as drinking alcoholic beverages. Accordingly, the regulations are unnecessary, moreover, they deal a blow on the business, “- he says. According to him, the brewing industry carries serious losses, despite the fact that the season of beer consumption has started. The businessmen are dissatisfied with the regulations. According to the founder of “Castel - Georgia” Temur Chkonia, the brewing business suffered losses due to the increase of excise duties, not taking this regulation. “Representatives of the brewing business are

waiting for clarity from the Ombudsman and the Parliament for more than three months. We had a meeting on this issue in the Committee on Sector Economy, we were told that everything had been agreed, but after that there was no reaction. Because of the regulations, the budget has already lost GEL 1.7 million and will lose even more in the beer season, which has just begun. By the end of the year it will amount to tens of millions. Restrictions are too stringent. People are afraid to drink beer even in the yards. The worst thing is that criterion by which the size of the fine, which ranges from GEL 50 to 150, is determined is not clear, “- he says. According to Temur Chkonia, the parliamentarians were not able to calculate all the possible consequences of their decisions, including the economic effect. In addition, he notes that the priorities for the deputies are political issues rather than economic problems. “This decision is a good example of how to create artificial bureaucratic barriers that prevent business development and how decisions concerning business are taken without any consultation with the entrepreneurs,” – a founder of “Castel - Georgia” notes. All representatives of the brewing industry of Georgia unanimously declare that the decision to ban the drinking of beverages in public places has caused serious damage to the industry. Zurab Tkemaladze, the Head of the Parliamentary Committee on Sector Economy, agreed with this opinion and said that the decision was too harsh, as in European countries it is allowed to drink even wine on the street, not to mention the much weaker drink which is the beer. However, Parliament is not taking the initiative of revising regulations.

GEORGIAN TOMATOES CONQUER LOCAL MARKET

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eorgian tomatoes might be one of the first vegetables to replace imported vegetables in Georgia. Already one local enterprise has harvested 150 tonnes of tomatoes, which are now selling in local markets as well as being exported abroad. Today Georgia’s Prime Minister Irakli Garibashvili visited Tsaishi village in Georgia’s Samegrelo region to see a tomato greenhouse which has produced 150 tonnes of tomatoes. The greenhouse is located on land spanning 5.5 hectares. About three hectares of this land was currently being used to grow tomatoes. The rest of the land is under construction to expand the existing greenhouse. Expansion works are due to be completed by the end of 2015. The company behind the greenhouse venture is local business STIMOR Associates. The company established the greenhouse after it received $2 million USD co-financing from the Government. A

NUMBER OF VISITORS HAS INCREASED IN MAY, BUT THE FIVEMONTH TREND LOOKS DIFFERENT

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isitors of 454 545 have crossed the boarder of the country in May, which increased by 15% comparing to April (04/15 – 394 634 growth-2,3%). However, the annual increase has amounted to 14,7%, statistics published by Ministry of Internal Affairs reports. It should be noted, that annual reduction of 2,5% has been fixed in the same period of 2014.

PM EXPECTS GEORGIAN VEGETABLES TO REPLACE IMPORTS IN 2-3 YEARS

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nvestment of 8 million USD and new greenhouse industry on 5.5 ha in Tsaishi, - Premier Irakli Garibashvili has visited STIMOR Associate, plant funded within the frame of “Produce in Georgia” pro-

gram. STIMOR Associate has received funding of 2 million USD within the frame of state program. “The enterprise has been established with state funding, this is Georgian investment. Over 10 t of tomato is daily harvested in the greenhouse, which is very important for this region. Our main goal is development of Georgian production. It is the most important, that Georgian tomato gradually replaces low-quality imported tomato. The resource is developed in 3 stages. Gazer waters and resource has been unused during these years.

Our government got interested in this resource. I can say that, we will replace imported vegetables within 2-3 years, which is national affair”, - the Premier has declared. Tomato harvest of 150 t is already received on 3 ha of the plant, equipped with modern technologies. The product is exported on the local as well as on the foreign markets. Irakli Garibashvili has congratulated to the investors successful implementation of the project and noted, that they are patriot businessmen, who have made investment of several million USD in their own home country. Construction is carried out on the remained area, which should be finished before the end of the year. The operating greenhouse employees – 45, while the constructing area -120 residents.

WINE EXPORT REDUCED IN MAY

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xport sales of wine declined by 19,3% in May comparing to the previous month. According to National Wine Agency, 2, 477 million bottles (0,75 l), cost of $6,7 million) is exported in 31 courtiers through May, while 2 880 000 bottles of $8,3 million – in 26 countries through April. Export of JanuaryMay has amounted to 10,5 million bottles, cost of $30,2 million and this figure is less by 54% comparing to January-May, 2014. National Wine Agency links this reduction to the negative trend of two biggest exporting markets –

Russia (-70%) and Ukraine (-57%). The Agency makes a note about the positive results of marketing campaign. However, there is a significant annual growth on the strategic markets: China (43%), Japan (20%), Latvia (5%), Estonia (16%), Germany (5%), the US (28%), Canada (149%). Therefore, 45,5% of export - 4 760 721 bottles accounts for Russia through January-May. To note, 70% of the total export i.e. 13,3 million bottles has accounted for Russia as of 5 month data of 2014, whereas 2 515 727 million bottles wine have been exported in Ukraine through 5 months in the last year.

total of $8 million USD was invested in the greenhouse project, which officially opened within the Governmental program Produce in Georgia. “This is a Georgian investment. We set a goal to develop Georgian production. It is very important to see that Georgian tomatoes will gradually replace exported ones,” said Georgia’s Prime Minister Irakli Garibashvili after he saw the greenhouse today. The Georgian official said in two to three years it would be possible for Georgia to grow its own vegetables, and these could replace imported vegetables. In Tsaishi village, Garibashvili congratulated STIMOR Associates for successfully establishing the investment project, which would contribute greatly to developing the country’s agricultural industry. About 50 people are employed in the greenhouse while 120 locals are currently employed to complete the facility’s construction works.

Visitors’ number amounts to 1,836 million in January-May. Therefore, 656 068 are tourism visits, the figure is declined by 3% comparing to the same period of the previous year (2014 – growth 10%; 2013 – increase 25%). To note, 405 208 visits are transits (decline in May), annul increase – 21% (01/06/2014 – growth – 11%). Most of the visitors have come from Turkey in May (increase – 0,5%).

VAT TAXPAYERS’ ANNUAL GROWTH PACE SHRINKS

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nnual growth pace of VAT tax payers’ turnover is declined in April. According to “Sakstat”, VAT tax payers’ turnover has amounted to 3,811 billion GEL, which exceeds by 4,9% to the same period of the previous year.

It should be noted, that VAT tax payers’ turnover increase has made up 9,9% in March, while 13,1% - in February and 1,9% - in January. However, 3 422 enterprises have been registered in April, which is less by 12,9% comparing to the index fixed in April of the previous year.

BITFURY TO BUILD TECHNOLOGY PARK AND DATA CENTER IN GLDANI

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itFury decided to make investment in Georgia due to the attractive investment environment. Eprem Urushashvili, partner of legal company “Nodia, Urushashvili and Partners” has informed CBW about the launch of new investment project in Georgia. BitFury Group is the client of the company. According to this news, BitFury plans to construct Technology Park in Tbilisi. Ease of doing business in Georgia, low energy cost and competitive labor market have also played big part in the decision-making. “We are pleased to commence our new project in the Republic of Georgia which envisages the development of the special technology zone with the aim of attracting international technology players, as well as building our latest mega data center. Our investment decision was made based on our previous experience of doing business in the Republic of Georgia. Our current data center located in Gori in Georgia, which was developed in cooperation with Georgian Co-Investment Fund, proved to be a major success, and as a result, we saw further potential in continuing doing business and investing in this country”, - The

CEO of BitFury Valery Vavilov declares. BitFury will build Technology Park and a mega data center with up to 100 MW energy capacity to process transactions using its latest generation 28 nm and the upcoming 16 nm ASIC at the area of former “Tarza” in Gldani district, Tbilisi. The new project will take full advantage of the proprietary immersion cooling technology enabled by Allied Control which BitFury has acquired earlier this year. The company has developed its third generation immersion cooling system to create energy-saving data center cooling systems for high performance computing applications. Georgian government announced a decree today, which envisages acquiring a privatized 185,000 sq. m land plot located in Gldani District in Tbilisi from the Georgian National Agency of State Property and delivery of the land plot to “Georgia Technology Park” at 1 GEL to develop the Georgian Technology Park project However, “Georgia Technology Park” takes commitments to establish data processing center within 8 months (including: construction, equipping, exploitation) and make investment of not less than 11,110 million USD (equivalent in GEL).


June 8, 2015 #102

ECONOMY

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caucasian business week

EU INCREASES GEORGIA’S FINANCIAL ASSISTANCE TO €100 MILLION

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uropean and Georgian officials gathered in Tbilisi today to discuss the country’s relationship with the European Union, after which the European side pledged to increase its financial assistance to Georgia from €65 million to €100 million. Georgia’s capital city hosted the first session of the Georgia-EU Association Committee, to discuss current issues and priorities of GeorgiaEU cooperation. On the agenda was Georgia’s implantation of the EU-Georgia Association Agreement (AA), the country’s visa liberalisation process and reforms undertaken to improve democracy, strengthen the rule of law, improve the election environment and better protection of human rights. The Georgia- EU Association Committee, which represents a temporary link of institutional cooperation between Georgia and the EU, convenes once a year at the level of high officials. The meeting was attended by several Georgian officials, representatives of the European External Action Service (EEAS), the European Commission, the EU Monitoring Mission (EUMM) and the EU Delegation to Georgia. It was cochaired by Georgia’s Deputy Foreign Minister Gigi Gigiadze and by Gunnar Wiegand of the EEAS, director for Russia, Eastern Partnership, Central Asia, Regional Cooperation and OSCE. At a media conference afterwards, Wiegand announced the EU wanted to deepen its relationship with Georgia and to do this, the EU would increase its financial assistance to Georgia from €65 million to €100 million. A new program has been established to support justice reforms, secondly to support small and medium enterprisers to make best use of the free trade area and third for developing of agriculture,” he said. The EEAS Director stressed the EU-Georgia AA deal, signed in June 2014, had raised the Georgia-EU partnership “to a new level”. We have a situation where many people are questioning the value of political association and economic integration with the EU, and I can say this is the most visible and the clearest commitment of the European Union for the territorial integrity of Georgia, for its democracy and for a functioning market economy and rule of law, said Wiegand. With regard to the democratic rule in the country, we have discussed today local elections and we

have discussed the necessity to have recommendation of the OSCE …. implemented for the next elections in 2016.” When it comes to rule of law, Wiegand said the sides discussed the reform of the judiciary, the reform of the Prosecutor’s Office and the way criminal investigations and prosecutions are carried out. He praised the country’s new National Strategy on Human Rights, and its Action Plan, which now included anti-discrimination legislation, and stressed the EU would do “everything” to help maintain better connections between all citizens of Georgia, including those who lived in breakaway regions Abkhazia and Tskhinvali (South Ossetia). We discussed the situation in the breakaway entities Abkhazia and South Ossetia and the signature of so-called treaties [between Russia and the de facto regions] and we have reassured Georgia that we will do everything to pursue our efforts to bring this conflict to a settlement and to better support contacts and connections between citizens of Georgia, whether they live on this side or the other side of the administrative boundary line,” he said. The EU official then announced the EU Monitoring Mission (EUMM) will extend its mandate in Georgia for another year, until the end of 2016. Following this Georgia’s Deputy Foreign Minister said this session followed on from an earlier session held at the Eastern Partnership Summit in Riga last month. Georgia’s progress was also assessed last year and new action steps had been put in pace considering the results of the May Summit. Today we focused on the visa liberalisation issue. We thoroughly discussed all the work which remains to be implemented by the country in this direction” he said. The Georgian side expressed hope that the EU Assessment Mission will pay a visit to Georgia in autumn on the basis of results compiled in a European Commission report, after which we hope the EU will begin to work on lifting of visa requirements for Georgian nationals,” Gigiadze said. In addition, today the sides also discussed economic cooperation and prospects of enhancing collaboration in transport, energy, environment, agriculture, health protection and regional development sectors.

MAY RECORDS 3.5% UPTURN IN ANNUAL INFLATION

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nflation pace is accelerated in Georgia. Inflation level has made up 3,5% in May, 2015 comparing to the same period of 2014. However, prices have been increased by 0,6% on consumer products through the last month, while average inflation level is 2,7%. Annual inflation has totaled to 2,5% in April. To note, annual inflation of May is the highest from September, 2014. Accoridng to Sakstat, prices are increased by 3,9% on food staff and beverages through 12-month term. Including, fruit and grape is grown in price by 27,1%, oil and fat – by 9,1%, coffee, tea and cocoa – by 8,3%; sugar, jam and other sweet – by 5,9%, fish – by 4,5%, meat and meat products – by 4%. However, price reduction has been fixed on dairy, cheese and egg group (1,6%).

Prices are grown in the healthcare group by 6,6%. Costs are increased on sub-groups of medical products, devices and apparatus (13,1%), outpatient treatment service (4,9%) and inpatient treatment (3,7%). It should be noted, that prices are grown on alcohol beverages and tobacco by 11,9% through a year, whereas costs are reduced in transport group by 3,2%. As for the price change on consumer basket, prices are grown by 0,6% through the last month. Costs are grown by 3% in transport subgroup, lubricants (5,8%); healthcare group (1,3%), price increase has been fixed on sub-group of medical products, devices and apparatus (3,9%) as well. It should be noted, that prices are reduced by 0,6% in the group of food staff and non-alcohol beverages.

GEORGE KVIRIKASHVILI – WE’VE EXPERIENCED AN IMPORTANT BREAKTHROUGH IN THE NUMBER OF VISITORS

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e’ve experienced an important breakthrough in the number of visitors. The Economic Development Minister George Kvirikashvili said at today’s government meeting. According to him, in May the number of visitors who are staying in Georgia for more than 24 hours increased by 5% compared to the same month of the previous year. Kvirikashvili notes that this is very important and this trend should continue. He also spoke about the activities that took place in order to attract tourists and that are scheduled in Georgia during the summer. “A special advertising campaign was held in nine target markets , more than 200 representatives of international agencies and journalists have been brought to Georgia. We organized special tours, representatives of more than 70 leading travel agencies have been invited, special tours and an information campaign have been also arranged, all this led to a breakthrough in the number of visitors by 14. 7% in spite of the fact that the economic situation in the neighboring countries has not changed, “- said Minister of Economy.

According to him, the increase in the number of visitors is observed, particularly in the old parts of the city. Kvirikashvili hopes that this season will be successful in terms of tourism. The Minister also made announcement about the upcoming winter season and noted that at the end of the summer special campaigns would be launched to make a winter season successful as well.

GEORGIA’S GOVERNMENT REVIEWS JANUARY-MAY 2015 BUDGET ANAKLIA PORT TO INCREASE THE eorgia’s Finance Minister has GEL from the state budget, which was 44 percent outlined the January-May budget more compared to last year’s figures. TRANSIT POTENTIAL OF GEORGIA achievements at today’s Govern- Budget spending for regional development and in-

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ment meeting, saying the situation is “promising” in the country. From January-May 2015, consolidate budget tax revenues amounted to 3,150,000,000 GEL, which was 85 percent of what was allocated in the Government’s six month plan and 40 percent of the annual plan. This figure exceeded 360 GEL compared to the same period of 2014. As for expenditure, in the first five months of 2015 budget spending reached 3.6 billion GEL, which was 80 percent of the six month plan and almost 40 percent of the annual plan. So far this year 428 million GEL more was spent than in the same time in 2014. Capital project spending acquired 360 million

frastructure costs amounted to about 270 million GEL, which was 91 million more than last year. Georgia’s Finance Minister Nodar Khaduri said export figures had not changed in the reporting period. He was directed by Georgia’s Prime Minister to introduce a corrected version of the state budget before June 10, 2015. Today after listening to the budget report, Prime Minister Irakli Garibashvili called on Governmental bodies to activate their spending. Under the instruction of Garibashvili, Vice Prime Minister and Economy Minister Giorgi Kvirikashvili will strictly control state agencies’ and regional budget expenditures.

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onstruction of a new deep-water port in Anaklia will play an important role in the development of Georgia – Minister of Economy George Kvirikashvili states. According to him, a contest for expression of interest has been announced and a “short list” includes two large consortiums. The winner of the tender will be revealed in September, and the construction work will begin in 2016. “This is an important project for Georgia. It can seriously change the whole transport infrastructure of the country and will increase its transport capacity. The port will be able to create a large number of jobs not only in the surrounding region, but also

throughout Georgia. This port will play a big role in the economic development of the country,”the Minister notes. In his words, today the scale of the project of the port in Anaklia has changed, as it takes into account the interest of China to use transit potential of Georgia. “At the first stage the capacity of the country’s transit corridor will be doubled, and after the implementation of all three phases of the project, it will reach 20 million tons per year. A relevant research will be carried out regarding the further development of the port and if extension is deemed appropriate, it will be recorded in the form of obligations to investors, “- the Minister adds.


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ANALYTICS

QUOTES

TBILISI – WAREHOUSE MARKET OVERVIEW

“The State Can Become a 20% Shareholder of Khudoni HPP”

ILYA ELOSHVILI Deputy Energy Minister Today many talk about the visible decrease in investments in the energy sector of Georgia. Howevere, direct investments are not a measure of investment activity of the country in general. Investments may be internal and portfolio, and they do not fall into the statistics of direct investment.Georgian banks have become very active, for instance, only TBC Bank has invested in energy projects $ 40 million, Bank of Georgia created its own foundation, which also carries out energy projects.

Although of course, foreign direct investment is also very important because they show the country’s business climate. Moreover, the country cannot rely only on its own inner resources. There is another point - some direct investments did not reflect in the statistics, moreover, means are also spent - in the form of losses or received dividends. The fluctuations of the national currency have also caused losses for many companies. However, all this does not mean that the flow of investments in hydropower has decreased - in 2014 direct investments in hydroelectric power plants were almost the same as in 2013. We hope that in 2015 this figure will grow. A very attractive business climate has been created in the energy sector, and this is reflected in the boom of small and medium-sized hydropower plants. Two years ago, this area was virtually frozen - we had to explain that a hydroelectric power station is not a natural disaster; that we do not do anything terrible. We implement energy projects with total capacity of 700 MW, in 2016 the construction of the hydropower plant will be launched with total capacity of 2 000 MW. Within 5-6 years investment volume will amount to $ 4.5 bln. This will also lead to the development of infrastructure, power lines, substations, etc. This is such a large-scale sector that one ministry will not be able to cope with it. All governments should be involved in energy development. In regard to Khudoni HPP – the negotiations are underway and we came to the conclusion that the state if desired, can join the project by 20%. Whether it will be the Partnership Fund, or anything else - will be decided in autumn.

“Georgian Government Looks like an Alcoholic in Need of Rehab”

FADI ASLI President of the International Chamber of Commerce “We lost the balanced business environment two years ago and are starting to return to it slowly now,” – Fadi Asli, President of the International Chamber of Commerce says. According to Mr Asli, Georgia’s government made many mistakes that it has already started fixing. With regard to the national currency, he says that along with other circumstances, the decisive role should be attributed to the internal factors The government has to necessarily create a safe business environment, upon which one can make reliable prognosis and shed judgment. This means that each and every investor coming to Georgia should know what

will happen in 5 to 10 years from now – there should be a visibility and these processes have to be transparent. Thus, the government has to create a favorable environment to offer the investors such conditions that competing countries will not have. We had a balanced business environment that we lost two years ago. The government has started to take action to regain that environment. There should not be anything that scares off the investors and it is up to the government to regulate this. I believe that if the government had not scared off the investors, the current crisis would not be so dire. The foreign investors are unsure when they are faced with a situation from twenty years ago in the country. I think that this had much more effect than any external or global factors in creating the current crisis. It is up to the government to regulate this situation. First and foremost the government has to accept and rethink its mistakes. When an alcoholic is on his way to rehab, he has to acknowledge that he is an alcoholic first and that he admits it. The Georgian government has to undergo precisely such a rehabilitation and rethinking process. The government has to admit that it made mistakes and that it will fix them. For now, unfortunately, there still are government representatives who say that have not made any mistakes. As long as such a situation persists, there will be no viable way-out from the current situation; there will be no development. There has been a lot of criticism toward the National Bank of Georgia. The Parliament even discussed the possibility of creating an investigative committee. However, we, at the International Chamber of Commerce support Kadagidze and the National Bank. No committee is needed, because we know what is going on in the country as is. The Parliament just wants to win some time by going through such procedures.

“Economic Situation of the Country should not be Politicized”

IRAKLI GILAURI General Director of Bank of Georgia “The devaluation of the national currency is fully a consequence of the situation in the region, and therefore

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this topic should not be politicized,” - said General Director of “Bank of Georgia” Irakli Gilauri, responding to accusations of complicity of banks in the process of devaluation of GEL. According to him, in a situation when the region lost more than a trillion dollars, the national currency could not remain at the same level. “It’s physically impossible, when the ruble, the hryvnia, the Turkish lira, the Armenian dram, the Azerbaijani manat and finally the euro lose value against the dollar. In this case, there is probably a tendency of strengthening of the dollar, rather than weakening of the lari. Accordingly, the Georgian economy has already experienced fundamental changes - exports fell, imports fell and, accordingly, the pressure on the lari dropped. In addition, a good tendency is observed in terms of tourism, which is growing. Accordingly, there is every reason to believe that the lari will begin to strengthen, “- noted the banker. In his words, the trade deficit decreased by 18%, the number of tourists is growing as well as foreign exchange inflows, respectively; all macroeconomic factors prove that the Georgian lari should begin strengthening.

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he total amount of warehouse space in Tbilisi amounts to 1.3 million sqm, of which 910,000 sqm (70%) is owner-occupied and 380,000 sqm is leasable area. Modern European standard warehouse and logistics space did not exist until, in 2013, Austrian provider Gebrüder Weiss delivered 10,000 sqm of A class warehouse near Tbilisi Airport. BREAKDOWN BY TYPES 89% of total leasable stock is dry storage and 11% cold storage. The total capacity of cold warehouses in Tbilisi is around 170,000 tons. The biggest portion of dry storage is B class warehouses and the least portion A class warehouses. ANALYSIS OF RENTAL RATE BY TYPES The average rent in A class dry storage stands at USD 11.4 per sqm, in B class it equates to USD 4.7 and in C class – USD 2.4. The rent price in cold type storage is around USD 15.9 per ton for B class and USD 14 per ton in C class. A class cold storage is not available in Tbilisi. VACANCY RATE BY TYPES The average vacancy rate in dry warehouses in Tbilisi stands at around 23% and for cold storage around 51%. The high vacancy of cold storage is mainly caused by seasonality. The average vacancy rate of A class warehouses in Tbilisi stands at 0%, B and C classes have 26% and 40% of vacancy respectively. KEY PLAYERS Gebrüder Weiss is the only supplier of A class warehousing in Tbilisi. A big proportion of supply is provided by local companies, which own recently built or refurbished buildings with additional warehouse facilities. Lilo 1, Zahesi 2007 and Transservice are some of the larger local suppliers. CONSUMER BREAKDOWN BY CATEGORIES The highest share of occupied space in listed warehouses in Tbilisi comes from F&B companies and hypermarkets (48%), for example: Smart, Furchet Georgia, Carrefour, Natakhtari and Tolia. Another big proportion of demand comes from importers of auto parts, building materials and construction tools – 16% and 14% respectively. Among them should be mentioned Bosch, which recently opened its first large scale regional warehouse in Southern Caucasus at Gebrüder Weiss. Third and fourth place is occupied by local providers of consumer goods & appliances and pharmaceutical companies such as Aversi, PSP and GPC. ISSUED CONSTRUCTION PERMITS According to the National Statistics Office of Georgia, in 2010-H1 2014 around 500 permits were issued for the construction of warehouse buildings in Tbilisi, totalling 653,000 sqm. The majority of these permits represent small sized (<

3,000 sqm) buildings which are predominantly owner-occupied. During 2014, 91 construction permits were issued, of which the majority is owner-occupied or small-sized. None of them were suspended. In the next two years, six new leasable warehouses will be added to the market with total leasable area of 57,000 sqm.


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BANKING NEWS

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IMF MISSION HAS ACQUAINTED WITH PARTNERSHIP FUND’S ACTIVITY

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ission of International Monetary Fund has acquainted with Partnership Fund’s activity. Representatives of International Monetary Fund and Mark Griffith, head of the mission were attending the working meeting. The mission got interested in the projects, lunched by the Fund, including with development concept of Tskaltubo resort zone. According to the Fund, the matter also concerned to Neskra HES project and management of Partnership Fund provided International Monetary

Fund mission with information about the participation of financial organizations, including EBRD. Representatives of the mission listened to the report about the establishment of Export Promotion Agency, which formation is carried out jointly with Italian Export Credit Agency “SACE”. To remind, IMF visits Georgia from may 19 and holds meetings with finance economy institutions of the country. International financial organization prepares the corresponding report for the second review within the frame of the mission program.

PRESIDENT AND IMF MISSION DISCUSS ECONOMIC CHALLENGES AND NBG’S INDEPENDENCE

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he economic challenges in the country’s economy, currency crisis and the importance of NBG’s independence has been discussed in Avlabari Residence of the President on Monday. According to the President’s press office, President George Margvelashvili and his economic advisor Giorgi Gabashvili have met IMF mission head Mark Griffiths and Azim Sadikov, IMF Resident Representative in Georgia. The Fund has arrived in Georgia on May 19 and their visit finishes on June 2. The sides have disused activity of International Monetary Fund in Georgia. The matter also concerned to those challenges in economy, which the

country faces today. However, currency crisis of the country and economic growth has been discussed in details as well. The sides have considered the issue of National Bank of Georgia and noted, that the bank’s independence is important to be sustained. To remind, parliament members Tamaz Mechiauri and Nodar Ebanoidze have prepared a draft bill, which envisages separation of Financial Supervisory from NBG. Discussion of the mentioned code is not started yet. The president has declared to the representative of business associations, that justification of the authors is insufficient, as the aim of the bill is merely sharing of international experience. The President has noted, that he is going to veto the bill.

MAMUKA KHAZARADZE TO REPRESENT GEORGIA ON “WORLD ENTREPRENEUR OF THE YEAR” AWARD

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amuka Khazaradze will represent Georgia on “World Entrepreneur Of The Year” Award in Monte Carlo (on June 2-7, Monte Carlo). TBC Bank has announced about the high interest of international media towards Georgian businessman. Khazaradze’s interview is already planned with the leading media means, including: BBC, CNBC, Financial Times. However, Ruslan Khoroshvili (managing partner of EY Georgia), Ketevan Bochorishvili (deputy minister of Georgian Economy and Sustainable Development and jury member of “Entrepreneur of the Year 2014”) will travel to Monaco jointly with Khazaradze. The meetings are planned with world’s leading businessmen within the visit frame. EY Georgia (Ernst & Young group member firm)

named Mamuka Khazaradze (TBC Group) as Entrepreneur Of The Year in November, 2014. The competition EY Entrepreneur Of The Year has been carried out for the first time in Georgia. The award is 29 years old and it is held in 60 countries. “Participation in this prestigious business award with Georgia’s name is very important personally for me, as well as for TBC Group and our country. The competition is new opportunities, which will move Georgian business on the new stage”, - Mamuka Khazaradze declares. “The ceremony is attended with many guests, including founder of Starbucks besides the participants. Monaco - will be the springboard for all the participants, establishment of partnership relations, which is one of the aims of the competition”, - Ruslan Khoroshvili declares.

USD/GEL TURNOVER SHRINKS BY 25%, INTERBANK TRANSACTIONS FALL BY 36%

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otal trade circulation (without NBG’s interventions) of USD/GEL on the interbank market has made up 41.2 million USD, which is less by 13.6 million USD (25%) comparing to the circulation of the previous month. This is noted in April month review published by NBG on Monday. However, the central bank has carried out 1 currency auction in April and sold 40 million USD. Therefore, effective exchange rate of GEL has been depreciated by 5.0 percentage, while the nominal effective exchange rate – 3.8 percentage. The real exchange rate has been changed from 2.2275 to 2.3093 towards USD, i.e. the rate has been devaluated by 3.67 percentage. As for the interbank currency market, the number of commercial banks’ deals has been reduced by 36 percentage. Concentration of currency market has been increased in April. To note, 64 percentage (the mentioned index has made up 57 percentage in the previous month) of the whole sum of currency transaction has been accounted for 5 banks

out of 20. The active 5 banks, in order of transactions, hold 64 percentage of the market (previous month index has been 56 percentage). Herpindal – Hirshman Index rose by 3 percentage point and the figure has amounted to 12 percentage, which is a lower index and indicates to the competitiveness of currency market. Real effective exchange rate has been devaluated by 5.6 percentage in April, 2015 comparing to April, 2014, while the nominal effective exchange rate has been strengthened by 0,2 percentage. Annual inflation with trade partners has been more than the fixed 2.5 percentage in Georgia. However, 7.9 percentage – in Turkey, Azerbaijan - 4.1 percent, Ukraine - 60.9 percent, Russia - 16.4 percent, Armenia - 4.8 percent. The lowest inflation has been fixed in Euro zone comparing to Georgia - 0 percent, the USA - 0.2 percent. Real effective exchange rate has been depreciated by 9.7 percentage, while the nominal effective exchange rate has been strengthened by 2.4 percentage in April, 2015 comparing to December, 2011.

PASHA BANK ISSUES THE TERM LOAN FACILITIES TO GWP AND RUSTAVI WATER COMPANY WITH THE COMBINED PRINCIPAL OF GEL 22.5 MILLION

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ASHA Bank issued term loan facilities to Georgian Water & Power and Rustavi Water Company of GEL 12.5 million and GEL 10 million respectively. Combined exposure of the Bank to the borrower’s parent company, Georgian Global Utilities, amounts to GEL 22.5 million. The borrowers are regulated water utilities serving Tbilisi and its environs and the city of Rustavi. They regularly carry out water supply and sewage networks rehabilitation works, replacing old underground facilities with new more efficient systems. Loans in foreign currency taken out by borrowers at the earlier date that are now being refinanced by GEL denominated facilities extended by PASHA Bank will contribute to the successful implementation of these projects. “We are very glad to have started partnership with GWP & Rustavi Water. This transaction once again shows that PASHA Bank, being focused on serving large and medium enterprises, has both institutional capability as well as appetite to take on transaction of such large a scale. In a light of the current market climate, the fact that these facilities were issued in GEL deserves a special mention too,” commented the CEO of PASHA Bank, Shahin Mammadov. “Georgian Water & Power’s strategy calls for the gradual reduction of its foreign currency expo-

sures and this deal is a large step in that direction. We are glad that PASHA Bank agreed to provide us with medium term GEL funding at a fixed rate. I would like to hereby express our satisfaction regarding the cooperation with PASHA Bank. The process of structuring the deal was completed promptly and in an efficient manner, which is especially important considering the size of the deal,” said CFO of Georgian Water and Power, George Vakhtangishvili. “Recent GEL/USD exchange rate volatility sparked tangible increase of interest in local currency funding. We are happy to be able to provide such a key player - with the mutually beneficial financing terms,” added Commercial Director of PASHA Bank, Goga Japaridze. Georgian Water and Power (GWP) is a leading water utility in Georgia. It ensures stable supply of drinking water to Tbilisi. GWP also provides wastewater services and generates electricity. Power is generated by Zhinvali Hydro and Tetrikhevi Hydro plants. Biggest share of the electricity generated is used for the Company’s own needs. PASHA Bank is a Baku-based financial institution operating in Azerbaijan, Georgia and Turkey – providing full range of corporate and investment banking services to large and medium-sized enterprises.

MARGVELASHVILI - “ I HOPE WE WILL NOT SEE THE LAW THE PRESIDENT WILL HAVE TO VETO”

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eorge Margvelashvili, President of Georgia, paid a special attention to the possible deprivation of supervisory function from the National Bank at the ICC WCF 9th World Chambers Congress. “We believe that a healthy and strong business climate exists in the country when there is less political involvement and participation in the business. We must provide secure, stable, predictable and favorable environment for business. Unexpected, uncoordinated decisions based only on political will and rapid changes will not create favorable conditions to ensure the process. In this regard, I would like to touch on the issue of changes to the function of the central bank and note that there are a lot of reasons why we should not do it and there are no concrete, specific reasons why we should change the law and the environment. We have not heard a single argument in favor of this change except for comments that

this system operates in some countries. Maybe it is so, but such a system is not enacted in many countries and in a situation when we’re trying to stabilize and create an economy, economic forecasting system and an environment that will promote economic development, including foreign exchange stabilization, I think such decision do not serve our main goal - economic strengthening support, “- says the President.

THE BANKING SECTOR’S TOTAL OUTPUT DECLINED IN APRIL

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ccording to preliminary data of Sakstat, private banks’ total output has been 87,1 million GEL in April of this year, the figure is less by 20,1 million comparing to March. As for the total output of National Bank of Georgia, the figure has been decreased by 3,9

million GEL. As a result, the sector’s output has been 91 million. As for 4 months data, the biggest amount of banking sector’s total output has been fixed in March. The total output of the sector has made up 118,3 million GEL, including commercial banks – 107,3 million, while NBG – 11 million GEL.


FRIENDSHIP 10 PHILIPPINES – GEORGIA FRIENDSHIP MINI-PARK PARK TO RISE IN TBILISI ZOO caucasian business week

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he Philippines – Georgia Friendship Mini-Park will be built in the Tbilisi Zoological Park. This was announced on June 1st by Honorary Consul of Georgia to the Philippines Thelmo Cunanan Jr at an event at Tbilisi Zoo, in celebration of International Children’s Day. The project, which is being spearheaded by Consul Cunanan, in partnership and close cooperation with Zoo Director Zurab Gurielidze and Honorary Consul General of the Philippines in Georgia Teimuraz Chichinadze, is being funded Batumi International Container Terminal LLC (BICT), the Philippines’ largest investor in Georgia and the operator of the container terminal of the port of Batumi. BICT is a wholly-owned subsidiary of Philippine multinational company International Container Terminal Services Inc (ICTSI). The Philippines – Georgia Friendship Mini-Park is the first park in the country that will officially celebrate the friendship of Georgia and another

the project. “As a Georgian, it has been an honor to serve the Philippines and Filipino people,” said Consul General Chichinadze. “I am very proud and happy about Consul Cunanan’s initiative to build this park. We will support this 100%.” Director Gurielidze, likewise, expressed elation. “It is a challenge to develop Tbilisi Zoo. We have worked for many years to give Georgians a wonderful place to learn about wildlife and enjoy this with their families,” he said. “I am so happy that our brothers and sisters from the Philippines have reached out to us with this beautiful gesture. I am very touched. God bless the Philippines. God bless Georgia.” Aside from the mini-park, Consul Cunanan and Director Gurielidze are also working on the Philippines’ donation to Georgia of two reticulated pythons. The reptiles, the first Philippines species to be included in the zoo’s collection, are expectcountry. It will contain eco-friendly structures such as wooden houses, mazes, slides, benches and tables that will provide leisure, fun, and enjoyment for families who visit Tbilisi Zoo. The park is scheduled to be inaugurated in the first week of January, in time for the Orthodox Christmas. “We have many events at the zoo for Christmas,” said Tbilisi Zoo public relations and media manager Mzia Sharasidze. “The opening of this special park will have a wonderful Christmas theme which the children will definitely enjoy.” “Over the years, we have worked very hard to develop relations between the Philippines and Georgia. This park symbolizes the strong ties of friendship that bind our two countries. BICT, and its parent ICTSI, are world-class companies. Filipinos love Georgians! This is a special gift to Georgia from the Philippines,” said Consul Cunanan. For their parts, Consul General Chichinadze and Director Gurielidze expressed their support for

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ed to arrive in Georgia in time for the friendship park’s inauguration. ABOUT THE CONSUL (A.H.) Thelmo Cunanan Jr. has been Honorary Consul of Georgia in the Philippines since early 2011. He is a businessman, sportsman, television host, writer, amateur aviator, and philanthropist. He laid the groundwork for socio¬cultural and economic relations between the two countries by founding the Philippines–Georgia Business and Friendship Association, Inc. in 2003 and was the first Filipino citizen to formally engage the Georgian government. Consul Cunanan has worked tirelessly to promote Georgia–Philippines relations and regularly gives radio and television interviews about the subject. He has written numerous articles about Georgia and is often invited by colleges, universities, and organizations all over the Philippines to talk about the country’s culture and heritage


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COMPANY NEWS

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DAR BUILDING TOOK COMMITMENT TO INVEST $15 MILLION IN BATUMI

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ccoridng to Ministry of Economy and Finance of Adjara, the company acquired land plot at 563 000 USD on the area of Hero Alloy in Batumi and took commitment to develop multi-functional tourism infrastructure. However, 80-room hotel, residential apartments and underground parking should be placed in the building. The investor is obligatory to finish construction of multi-functional building and launch the hotel in 60-month term. Fast foods and entertainment centers, including “Karaoke” will be placed in the multi-functional

building. According to the auction terms, investors should carry out investment of 15 million USD for implementation of the project. To remind, Hero Alloy is divided into 14 investment land plots. Multi-story building should be built at this area and the building will include hotels, apartments, restaurants, entrainment and recreational facilities. It should be noted, that other land plots were brought at the auction, but they did not sell. LLC DAR Building is a company registered in February, 2013 and Revaz Darchidze, citizen of Georgia is the director and 100%-shareholder of the company as well.

GEORGIAN WINEMAKERS WAITING FOR ENACTMENT OF GEORGIACHINA FREE TRADE AGREEMENT

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eorgian wine companies engaged in export of their products to China are waiting for entering into force the Free Trade Agreement between the two countries. As reported by Nutsa Abramishvili, CEO at “Shuhman Wines”, active negotiations on this issue are already underway. According to her, the Chinese market has great prospects for Georgia. “Now China is the number one priority for our company, and we welcome the opportunity to sign an agreement on free trade. The Chinese market is large and solvent. In recent years, the Chinese began to actively drink wine and Georgian products are very interesting, competitive, and slightly exotic for them, “- she says. In her words, a label and design is of great importance for the Chinese consumers. “For example, if the Europeans prefer a more low-key and modest design, the Chinese, considering their own culture, look at it quite differently. Their tastes differ with respect to the actual wine. They mostly prefer table grapes, semi-sweet, dry and blended wines, which they really like. Based on the cultural characteristics of the Chinese people, they do not like white wine, respectively, red wine is a priority in the Chinese market ,”- Nutsa Abramishvili notes.

However, in the words of the head of “Telavi Wine Cellar” Zurab Ramazashvili, high customs duties are not a serious obstacle for exporters - in his opinion, if the wine is good and in demand, it always can be exported and sold. “There are countries that have certain privileges for export to China, respectively, they find themselves in an advantageous position, and their products are cheaper than ours. Of course, if the import duty is lifted, it will be good for the Georgian producers. China for us is an absolute priority because of the fast-growing economy and the purchasing power of the population. The average standard of living in China is quite high, which gives them the opportunity to spend more, including on the Georgian wine. We need to correctly present our wine in the Chinese market to increas interest, “- the businessman says. He explains that mainly red wine is sold in the Chinese market. Zurab Chkheidze, Director of “Kakhetian Traditional Winemaking” also speaks about the attractiveness of the Chinese market. “We always try to work actively in the Asian markets. We have a marked increase in exports to China - exports to China grew by 35-40% over the past period in 2015 as compared to the same period in 2014,”- he adds.

“METRO ATLAS GEORGIA” WILL INVEST IN NEW BOULEVARD

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s per the agreement, the investor will ensure the construction of a hotel housing a minimum of 200 and an apartment housing a minimum of 250. According to the project, a casino, conference rooms, and a spa center will be set up on the territory. A minimum of 500 people will be given

jobs once the investment is complete. The company will spend 1 million USD to rehabilitate the water channel near the investment territory. Carrying out the project will begin this year. As per the agreement, Ltd “Metro Atlas Georgia” will have 5 years to complete the construction, although according to the company’s statement the project will be done by 2017.

“MARGEBELI TSKALI “ PLANS TO EXPAND EXPORT TO CHINA

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argebeli Tskali” (Healthy Water) is working on expanding exports to the Chinese market. According to a representative of the company, the company’s products are exported to China for several months and represents an interesting direction for the company. Levan Chikovani says that China is a big country and it will take time to

develop exports to it. Simultaneously the company is working on the Arab markets. In Chikovani’s words, dynamic sales are being observed in the Arab markets and they hope to succeed. “Margebeli Tskali” produces mineral water Nabeghlavi and spring water Bakhmaro. At this stage, the company exports its products to 28 countries worldwide.

HENKEL’S ENTRY INTO GEORGIA NOT DECIDED YET

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erman concern “Henkel” is working on the development project in Georgia. “Commersant” was told by “Henkel” representative in Russia, Belarus and Kazakhstan that the issue of the plant construction in Georgia is not resolved, but the company is working on the business development in the Central Asia and Caucasus region and the project deals with setting up a local venture.

In early year it was reported that “Henkel” first enterprise in the Caucasus was planned to be built in the Gardabani municipality. EUR 6 million was going to be invested in the adhesive building materials plant. “Henkel” has a 135 -year history and industrial groups are engaged in business activities in 70 countries. Apart from the adhesive materials, it produces detergents, cleaning products, cosmetics and personal care products.

“MERCURE” HOTEL TO OPEN IN TBILISI IN MID-JUNE

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AIR ASTANA LAUNCHES NEW SERVICES FROM ASTANA TO GEORGIA

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ir Astana, the award winning Kazakh flag carrier, is launching new services from Astana Tbilisi,Georgia today. The new service from Astana to Tbilisi is operated by Embraer E190 (9 Business class/88 Economy class seating configuration) twice a week and is additional to the current five times a week service from Almaty to Tbilisi now offering a daily product between Kazakhstan and Georgia. More than 120,000 passengers have travelled on Air Astana flights to Tbilisi since

services commenced in 2011. “The new services from Astana to Seoul and Tbilisi mark another significant step in building the network of international flights from Kazakhstan’s capital, which fully meets the “Nurly Jol” policy proposed by Nursultan Nazarbayev, President of the Republic of Kazakhstan” said Peter Foster, President of Air Astana. “I’m confident that the new services will be prove to be popular with business/financial executives and tourists.” Air Astana commenced regular flight operations on 15 May 2002 and currently operates a network of 64 routes between 39 international and domestic destinations. Air Astana operates a fleet of 30 Boeing 767-300ER, Boeing 757-200, Airbus A320 family aircraft and Embraer E-190. Air Astana became the first carrier from Russia, the Commonwealth of Independent States (CIS) and Eastern Europe to be awarded the prestigious 4-Star rating by Skytrax in its World Airline Awards 2012 and was named The Best Airline in Central Asia and India.

ccor Group” will open its “Mercure” hotel in Tbilisi in mid-June. “Commersant” was told by the hotel representative that the hotel would be opened in test mode on 1 June, while its grand opening ceremony will be held on June 16 or 17. Construction of a four-star hotel is carried out by “Macro Construction” company. The hotel will have 108 rooms of five different categories. The company doesn’t specify what will be the cost of a room, however, notes that it will be designed for the medium and high income visitors. The hotel will also have a fitness room and sauna.

“Mercure” is “Accor Group’s” hotel, the world’s leading hotel operator and market leader in Europe, that is present in 92 countries with more than 3 700 hotels and 480 000 rooms. “Accor” provides an extensive offer including complementary brands—from luxury to economy—that are recognized and appreciated around the world for their service quality: Sofitel, Pullman, MGallery, Novotel, Suite Novotel, Mercure, ibis, ibis Styles, ibis budget, hotelF1 as well as Thalassa sea & spa. “Mercure” is a 3 and 4-star hotel chain intended for business trips and rest. 750 hotels around the world are operating under its brand name.

MAHAN AIR AND ATA AIRLINES TO FLY FROM TBILISI TO TEHRAN

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wo Iranian airlines - Mahan Air and ATA Airlines - will perform TbilisiTehran flight. According to the head of the Civil Aviation Agency of Georgia Guram Jalagonia, tentatively flights will be operated from June, after the parties sign a relevant Memorandum. According to him, the frequency of flights and other technical issues are not specified yet, but an agreement on the main issues has been reached. “If nothing hinders, the first flight will be performed in June. Perhaps there will be disagreements on some technical issues, but principle

agreement has been reached, “- Guram Jalagonia notes. Flights between Tehran and Tbilisi have been stopped for several months. Until October 2014 flights in this direction were carried out by Flyvist, however, due to the introduction of a visa regime with Iran, passenger traffic decreased so that the flights were stopped. Georgia’s visa policy was declared one of the reasons why Mahan Air refused from entering the Georgian market. Apparently, the decision to resume flights was taken after the government of Georgia eased visa regulation for Iran.


CURRENCY

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FX UPDATE: NFP IS DEAD AHEAD BUT IS THE EURO SQUEEZE DONE?

JOHN J HARDY Head of FX Strategy / Saxo Bank Denmark

• Any relief in European bonds will allow EUR to consolidate • Although uncertainty surrounds whether the turmoil is over • USD resilient ahead of employment report

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mean interaction with the 1.1500 area and even the 200-day moving average up above 1.1750, though these levels look like quite a stretch at this point in time and the risk points more toward a sudden collapse back into the low range if USD strong and bad nerves in Europe calm.

EURUSD EURUSD has been more about the squeeze on short euro positions this week rather than any notable weakness in the USD and today sees potential significant volatility for both currencies. Technically, the pair needs to plunge all the way back through the 1.1065/1.1000 area to signal that this entire squeeze episode is over and we can get back to discussing parity. Meanwhile, further bond market turmoil in Europe in the near term and/or a particularly ugly US employment report today (not expected) could

THE G-10 RUNDOWN USD: waiting US data as indicated above – generally looking resilient and waiting to add EURUSD to the bullish USD story if the euro squeeze shows further signs of fading on bond market volatility easing. EUR: All about positioning and whether we are getting to the other side of the bond market turmoil – suspect we are nearer the end than the beginning of that phenomenon in the big picture. JPY: trading on a very weak footing since the big break in USDJPY above 122.00. Any extrastrength data from the US today (or severe disappointments) should be felt strongly here. GBP: Trading passively in the background and will likely trade like a low beta US dollar against the euro, if the euro squeeze is fading and the US employment report comes in strong today (i.e., GBP up versus EUR, but down vs. USD) CHF: Still reactive to Greek news but also the general squeeze in euro and suspect in the longer run that the upside in EURCHF remains the side of least resistance (with or without the euro bond market turmoil) once we get to the other side of a deal for Greece. AUD: Horrible trade report pressuring AUD a bit, and interesting to see today whether a strong US employment report can force a full rejection of the recent RBA-inspired rally and put the focus back on the lows for the cycle and beyond. CAD: weak oil prices pressuring CAD and we have the double whammy of the US and Canadian jobs reports today. Continue to focus on a test of the cycle highs above 1.2800 and an eventual test of the huge 1.3000 area. NZD: Interesting that fresh highs in AUDNZD didn’t hold – watching whether the coming days confirm that development as we face a bout of range trading for that pair. In NZDUSD, the focus is on maintaining the validity of the recent break below the 0.7200/0.7175 zone. SEK: EURSEK easing back lower in sympathy with the euro consolidation. We haven’t had sustained direction here since March. NOK: Little relief in EURNOK despite the euro easing back elsewhere, as the focus is on the oil price sell-off. A couple of interesting data points up today and the Norges Bank regional network report (somewhat akin to Fed beige book), which could shift the market’s expectations for Norges Bank (high risk of this eventually ahead of/at Norges Bank June 19 meeting) and maintaining a bias for a weak NOK. (EURNOK to test 9.00?).

n June 4 we saw a further aggravated sell-off in European bonds, but at least a temporary bottom was found right near the 1.00% yield level in German bunds before a rally set in that took yields back below the previous day’s close, allowing EURUSD to finally find a ceiling and ease back lower after rallying above 1.1350 at one point yesterday. Further signs of relief and stability in European bond markets will likely allow the euro consolidation to continue. The uncertainty is whether the turmoil is over or whether it extends for a while. Meanwhile, Greece exercised its option to delay today’s payment to the IMF after the latter extended the option to roll together its payments due this month to the end of the month and the latest noises from the creditors’ side point to little or no progress on the negotiations. The USD, meanwhile, is relatively resilient in the background, outside of the spike in EURUSD as we look toward today’s important employment report as the next key “incoming data” input. The Fed’s Tarullo was out fretting the quality of the US recovery and whether there was something worse afoot in the weak Q1 numbers than the factors attributed to causing the slump (weather, port strike and seasonality). We are leaning for an inline change in nonfarm payrolls print (the usual approx. 220,000 is expected) though I suspect the risk is for an upside surprise, which could generate significant further upside for the USD, especially in EURUSD if European bond markets are calming, but certainly elsewhere in other USD pairs. And remember to keep one eye on the trend in US earnings growth, which is at least half of the story from here on the timing and steepness of Fed rate hikes to come (market is extremely complacent here…) . A +300,000 print and average hourly earnings above 2.3% (2.2% is expected and 2.3% is the highest print since 2009, so 2.4% or higher would look very significant) might blow the doors off this market, though anything above 250,000 on payrolls with positive revisions and earnings growth at 2.3% with a better-than-expected month-on-month number (0.2% expected) would look very USD supportive.

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CRUCIAL EVENTS ON CARDS TO CONTINUE FUELING FOREX MARKET VOLATILITY

ast week, nine month high capital goods orders and improved housing market details, coupled with better than forecast consumer confidence, helped securing the US Dollar upward trajectory against negative reading of Q1 2015 US GDP. The US Dollar Index (I.USDX) closed five-day trading with consecutive second weekly gains while the Euro region currency remained under pressure as Greece again failed to agree with its international creditors during selfimposed deadline talks. Moreover, the JPY registered heavy losses as weaker inflation and spending numbers, in addition to strong expectations of near-term rate hike by the Fed, continued suppressing the Japanese currency while the GBP was also weaker against majority of its counterparts as second estimate of Q1 2015 GDP plunged to the lowest since May 2013 by matching initial forecast of 0.3% growth. During the first full week of June, many important details/events are to become catalyst to foresee nearterm Forex moves. Amongst them, US labor market details and the series of UK PMIs, coupled with monetary policy meetings by the ECB, BoE and the RBA, are likely to generate headlines while Flash reading of EU CPI and Australian GDP are some other details that could continue making forex players busy during the week. Ever since the Core CPI, coupled with Fed Chair’s hawkish tone, fueled expectations that the Fed continues to be strong contestant for an interest rate hike this year, USD traders printed buying positions in favor of the greenback. Moreover, last week’s better than forecast capital goods orders and housing market numbers, in addition to improved consumer confidence, helped them ignore the negative GDP reading and support the US Dollar Index to print another weekly gain. This week, being the first of the month, has many important events scheduled that could help determine near-term USD moves. However, labor market details, up for Friday release, are ahead of all these numbers in weighing chances of near-term Fed rate hike. In its recent release, the NFP came back to +200K number, the 223K, while the Unemployment Rate printed a fresh seven year low with 5.4% mark, supporting fair chances of an interest rate hike in 2015. Market players do expect the NFP to print 226K while the unemployment rate is expected to remain at 5.4%. Anything above +200K NFP print and a below 5.6% unemployment rate is favorable for the USD; however, a slight miss to the forecast could pull-back some of the recent greenback gains. ADP Non-Farm Employment Change, scheduled for Wednesday release, becomes an indicator to foresee Friday’s NFP number. Should the actual reading meets its three month high, 200K, forecast, against the 169K prior, it is likely to pave the way for stronger USD. Factory Orders, to be published on Tuesday, is another important reading to determine USD strength. The orders are likely to print 0.0%, reversing its prior two months’ gains, to again join the six monthly decline series and an actual reading matching the consensus could drag down the greenback gains. Other than these headline numbers, Monday’s ISM Manufacturing PMI, Wednesday’s monthly Trade Balance and Thursday’s weekly reading of Jobless Claims are some of the additional readings that could help analyze the USD moves. While ISM Manufacturing and Trade Balance bear expectations of favorable prints, to 51.9 and -44.2B against 51.5 and -51.4B respectively, the Jobless Claims could decline to 277K against it 282K prior. Being the minor readings amongst the army of crucial US releases this week, only drastic changes in actual numbers could affect the USD trading. With June hike almost off the table, market players are likely to determine the chances for September as a trigger for Fed’s interest rate hike and should the labor market numbers meet their favorable forecasts, the Federal Reserve would have lesser obstacles to meet the market expectations, supporting considerable USD up-move. However, weaker than forecast

reading by the NFP, printing a 220K below number and/or higher unemployment rate, may force the policy makers to think before introducing first interest rate hike since 2006, forcing the US Dollar to liquidate its recent gains. Even if this week’s monetary policy meeting by the ECB, scheduled for Wednesday, is likely to become a non-event, press conference by the ECB President, Mario Draghi, following the rate announcement, becomes important to see how big the recent QE could be. Some of the policy makers have already said that the pace of QE will be high in near future and the ECB President has always praised the effectiveness of these measures. Should Mr. Draghi discusses recent economic weakness and need to magnify the QE effort, Euro could witness considerable downside while optimistic tone of the central banker, as always, may help Euro to minimize some of the recent losses. Flash version of CPI, scheduled for Tuesday release, is likely to print six month high, to 0.1% against 0.0%, while the Core version also bears optimistic forecast to print 0.7%, five month high, against 0.6% prior. Given the inflation reading meets consensus, it could become strong positive for the Euro while a negative reading may force the region currency to extend its decline. In addition to US NFP and EU CPI, monetary policy meetings by the Reserve Bank of Australia, Bank of England, quarterly release of Australian GDP and the Construction and Services PMIs from UK, are some of the important events to help foresee near-term Forex market moves. Even if the RBA cut its benchmark interest rate for the second time in 2015 during April meeting, leaving more room for no change in current monetary policy meeting on Tuesday, the Governor, Glenn Stevens, left the doors open for another interest rate cut, if situation demands. Recent readings from Australia have been weaker while Chinese Manufacturing PMIs have starting gaining a bit, as could be witnessed from Monday’s prints. Hence, unclear Australian economics could restrict the central bank from altering on-going monetary policy, supporting a bit of AUD strength; however, a bearish tone of the rate statement could provide additional drag to the AUD. Moreover, the quarterly reading of Australian GDP, scheduled for Wednesday, becomes another important event to help forecast nearterm AUD moves. The number is expected to print 0.6% against 0.5% reading for Q4 2014 and an actual figure meeting the consensus could reverse some of the recent AUD losses. Other than these numbers, monthly details of Australian Retail Sales and Trade Balance, scheduled for Thursday release, are additional details to better foresee AUD moves. The Retail Sales is expected to maintain the same growth rate of 0.3% while the Trade deficit is likely to widen to the -2.11B against previous reading of -1.32B. Being the export oriented economy higher deficit is likely to draw more of AUD downside. Although, monetary policy meeting by the Bank of England, scheduled for Thursday, expected to become a non-event, Construction PMI on Tuesday and the Services PMI on Wednesday, are likely to help foresee near-term GBP moves. After Monday, lesser than expected Manufacturing PMI, the Services PMI, core to the UK GDP, is likely to lag behind its previous 59.5 by printing 59.2 number, signaling more of GBP decline. However, the Construction PMI is expected to surpass 54.2 previous reading by marking 55.1 print and could become a support to restrict the GBP decline. Other than the mentioned headline details, Canadian Ivey PMI, scheduled for Thursday, and the monthly details of Canadian labor market numbers, scheduled for Friday, are some other data points to fuel forex market moves. Considering recent weakness in Canadian economics, a plunge into the Ivey PMI number, coupled with another negative figure of Employment Change, beating the forecast of 10.2K against -19.7K prior, and the higher unemployment rate, against no change consensus to 6.8%, could provide considerable weakness to the Loonie, as it is nicknamed.

Admiralmarkets.ge/analytics/ facebook.com/adimralmarketsgeorgia/


RESEARCH

June 8, 2015 #102

DIET AND TBILISI CITIZENS

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ttractive physical appearance and diet become especially prevalent as summer and beach season approaches. Consequently, ACT was interested, how concerned residents of Tbilisi are with extra weight and which methods do they use to get rid of it. As the research results show, 7 out of 10 capital citizens have never tried to diet; naturally, the majority among those, who do diet, are women. Please tell me, have you tried dieting in the last three years?

NEIGHBORHOOD

Azerbaijan’s price for hosting first European Games

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fter the European Games in Baku, people across the world will know that Azerbaijan is in Europe.” For Sports Minister Azad Rahimov, the motivation was clear for Azerbaijan’s multi-billion dollar effort to host the first European Games, an official Olympic franchise. Azerbaijan’s government wants to put the country on the map. With 6,000 European athletes competing in 20 sports at newly-built venues in the capital Baku, the official cost of the game stands at $1.2bn (£700m).

Turkey election: What’s the economic context

P The majority (65%) of those, who have tried to diet, did it to change their weight; however, there are also many individuals (48%), who have tried to limit their food ration due to health issues. Why did you diet?

Every second resident of Tbilisi (52%), who has tried to diet at least once, ration their food themselves, while 39% refer to the specialist and 19% select the diet programs undertaken by their peers and friends. ACT was also interested, whether dieting individuals have tried different pills. As it turns out, the weight loss pills are not so popular (only 6% of those who have dieted, have given pills a try); moreover, individuals that taken them state that weight loss pills have not helped them lose weight. The survey was conducted on 405 adult residents of Tbilisi, in April, 2015. The statistical error of the data does not exceed 4.9%.

TSIPRAS CALLS ON GREECE CREDITORS TO WITHDRAW ‘UNREALISTIC’ PLAN

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rime Minister Alexis Tsipras called on Greece’s international creditors to withdraw their “unrealistic” plan to provide the nation more money, remaining defiant in an address to parliament. “The proposals from the creditors are clearly unrealistic,” Tsipras told lawmakers in Athens late Friday. “The Greek government cannot consent to unreasonable proposals that call for devastating measures for pensioners and Greek families. I want to believe that it was a bad negotiating trick and will be withdrawn.” Tsipras spoke after telling German Chancellor Angela Merkel and French President Francois Hollande during a call Thursday that a list of

proposals needed to unlock bailout funds hammered out earlier this week by creditors can’t be the basis for a deal. German and French officials declined to comment on the contents of the talk. Greece also notified the International Monetary Fund on Thursday that a 300 million-euro ($337 million) payment due Friday would be deferred and bundled with three more payments at the end of June. The move was a 180-degree turn by the government and caught many by surprise. While bundling the transfers is permitted under IMF rules, the deviation from standard practice adds to signs that Greece may be readying for a potential breakdown of talks after a four-month-long impasse.

olitically, Turkey has been dominated by the Justice and Development Party of the President, Recep Tayyip Erdogan, for more than a decade. The party, often known by its Turkish language acronym, the AKP, is likely to put in a strong performance again this time, but it faces significant challenges to its dominance. Since the party came to power, following an election in late 2002, the economy has expanded by 68%, equivalent to an average annual growth rate of 4.5%, despite two bad years (2008-09) at the height of the global financial crisis. That’s well short of China’s growth performance, but as Turkey is a more advanced emerging economy you wouldn’t expect it to grow as fast. Perhaps a more appropriate comparison would be that Turkey’s growth was stronger than South Africa or Brazil managed in the same period. It’s about the same as Chile, often seen as something of a poster child for managing an emerging economy. It’s worth recalling the circumstances in which the AKP came to power. It was in the aftermath of Turkey’s own financial crisis, which led to an IMF bailout.

IMF Forecasts zero Growth in Armenia Economy

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he International Monetary Fund has slightly improved its outlook for the Armenian economy but still thinks that it will not grow this year, the IMF’s resident representative in Yerevan, Teresa Daban Sanchez, said on Tuesday. In the most recent World Economic Outlook published in April, the IMF forecast that Armenia’s Gross Domestic Product will likely shrink by 1 percent in 2015 due to knock-on effects of a recession in Russia. According to Daban Sanchez, the fund now expects zero growth in the country. She argued that oilprices stabilized in February, somewhat shoring up the Russian ruble. This should reflect positively on the Armenian economy, she said. “We have moved from the minus one [growth] to the zero,” the IMF official said. She went on caution, though, that even this economic outlook is fraught with “huge uncertainty.”

Russia isolation deepens, shuns German olive branch

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ussia’s relations with it global counterparts have sunk to new lows as Moscow appears to have refused an olive branch from one of its biggest trading partners, Germany. On Thursday, Germany’s Foreign Minister Frank-Walter Steinmeier said that the Group of Seven leading industrialized nations should allow Russia back into the group in the longer term. “I believe that we cannot have an interest in keeping the G-7 format a G-7 format in the long term,” Steinmeier told journalists Thursday after he had met with his Ukrainian counterpart ahead of a G-7 summit on Sunday and Monday, according to Reuters. The G-7—which is made up of Britain, Canada, France, Germany, Italy, Japan and the United States—allowed Russia into the powerful group in 1998 to form the G-8, only to suspend it following the annexation of Crimea and conflict in Ukraine last year.

WORLD NEWS

OPEC leaves output unchanged - Saudi Arabian oil minister

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he Organization of Petroleum Exporting Countries (OPEC) has decided to keep its oil production quotas at 30 million barrels per day, Saudi Oil Minister Ali bin Ibrahim AlNaimi told reporters in Vienna on Friday. The cartel has scheduled its next meeting for December 4, Al-Naimi said. The cartel said in its report that the global economic recovery has stabilized, with GDP growth projected at 3.3 percent in 2015 and 3.5 percent in 2016. The sharp drop in oil prices at the end of 2014, caused by oversupply and speculation, has now stopped, with prices rising slightly in recent months.

In ‘year of Apple Pay’, many top retailers remain skeptical

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n a January earnings call with investors, Apple Inc (AAPL.O) Chief Executive Tim Cook made a confident prediction: “2015 will be the year of Apple Pay,” he said. Since then, the company has aggressively courted retailers - and claimed significant success. “We’ve spoken to all of the top 100 merchants in the U.S., and about half will accept Apple Pay this year, with many more the following year,” a company spokesperson recently told Reuters. But interviews with analysts, merchants and others suggest that Apple’s forecast may be too optimistic and that many retailers remain skeptical about the payment system. The service is one of Apple’s biggest bets, a chance to tie customers more tightly to its phones and its new smart watch, as well as to take a tiny bite from every retail transactio

World Economy To Gain By Over $900B From Better Protection Of Oceans: WWF

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rotecting the planet’s oceans is not only an environmental imperative but also a sound business decision as it could add $900 billion to the global economy in a few decades, according to a study by the World Wildlife Fund (WWF). Creating marine protected areas (MPAs) will yield a three-fold return for every dollar invested in the exercise, the study suggests. The WWF-commissioned study, produced by researchers at Amsterdam’s VU University and published Wednesday, found that increased protection of critical marine habitats could generate net benefits worth between $490 billion and $920 billion in the next 35 years. The efforts could also help create between 150,000 and 180,000 jobs worldwide by 2050, the study said. “A healthy ocean safeguards our coasts, stores carbon, creates employment and feeds families,” Marco Lambertini, director general of WWF International, said in a statement. “Marine protected areas can have the double impact of contributing to a healthy ocean and creating important economic opportunities.”

HSBC to pay $43 mn in probe over Swiss subsidiary’s tax evasion

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SBC said it will pay 40 million Swiss francs ($43 million) in compensation to Geneva authorities to avoid charges of money laundering for its Swiss subsidiary. The fine is the biggest ever in Geneva’s history. “The investigation found that neither the bank nor its employees are suspected of any current criminal offences,” HSBC said in a statement on Thursday, according to the Guardian. The bank added that the probe was closed. The Genevan authorities said the payment, which is being described as “compensation” rather than a fine, was in line with the profits obtained by HSBC from processing illicit funds.


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PUBLICITY

caucasian business week

June 8, 2015 #102


June 8, 2015 #102

Embassy United States of America Embassy 11 Balanchivadze St., Dighomi Dstr., Tbilisi Tel: 27-70-00, 53-23-34 E-mail: tbilisivisa@state.gov; askconsultbilisi@state.gov United Kingdom of Great Britain and Northern Ireland Embassy 51 Krtsanisi Str., Tbilisi, Tel: 227-47-47 E-mail: british.embassy.tbilisi@fco.gov.uk Republic of France Embassy 49, Krtsanisi Str. Tbilisi, Tel: 272 14 90 E-mail: ambafrance@access.sanet.ge Web-site: www.ambafrance-ge.org Federal Republic of Germany Embassy 20 Telavi St. Tbilisi Tel: 44 73 00, Fax: 44 73 64 Italian RepublicEmbassy 3a Chitadze St, Tbilisi, Tel: 299-64-18, 292-14-62, 292-18-54 E-mail: embassy.tbilisi@esteri.it Republic of Estonia Embassy 4 Likhauri St., Tbilisi, Tel: 236-51-40 E-mail: tbilisisaatkond@mfa.ee Republic of Lithuania Embassy 25 Tengiz Abuladze St, Tbilisi Tel: 291-29-33 E-mail: amb.ge@urm.lt Republic of Latvia Embassy 16 Akhmeta Str., Avlabari, 0144 Tbilisi. E-mail: embassy.georgia@mfa.gov.lv Greece Republic Embassy 37. Tabidze St. Tbilisi Tel: 91 49 70, 91 49 71, 91 49 72 Czech RepublicEmbassy 37 Chavchavadze St. Tbilisi ;Tel: 291-67-40/41/42 E-mail: czechembassy@gol.ge Web-sait: www.mzv.cz Japan Embassy 7 Krtsanisi St. Tbilisi Tel: +995 32 2 75 21 11, Fax: +995 32 2 75 21 20 Kingdom of Sweden Embassy 15 Kipshidze St. Tbilisi Tel: +995 32 2 55 03 20 , Fax: +995 32 2 22 48 90 Kingdom of the Netherlands Embassy 20 Telavi St. Tbilisi Tel: 27 62 00, Fax: 27 62 32 People’s Republic of China Embassy 52 Barnov St. Tbilisi Tel: 225-22-86, 225-21-75, 225-26-70 E-mail: zhangling@access.sanet.ge Republic of Bulgaria Embassy 15 Gorgasali Exit, 0105 Tbilisi, Georgia Tel: +995 32 291 01 94; +995 32 291 01 95 Fax: +99 532 291 02 70 Republic of Hungary Embassy 83 Lvovi Street, Tbilisi Tel: 39 90 08; E-mail: hunembtbs@gmail.com State of Israel Embassy 61 Agmashenebeli Ave. Tbilisi Tel: 95 17 09, 94 27 05 Embassy of Swiss Confederation’s Russian Federation Interests Section Embassy 51 Chavchavadze Av., Tbilisi Tel: 291-26-45, 291-24-06, 225-28-03 E-mail: RussianEmbassy@Caucasus.net Ukraine Embassy 75, Oniashvili St., Tbilisi Tel: 231-11-61, 231-12-02, 231-14-54 E-mail: ukraina_pu@wanex.net; emb_ge@mfa.gov.ua Consular Agency: 71, Melikishvili St., Batumi Tel: (8-88-222) 3-16-00/ 3-14-78 Republic of Turkey Embassy 35 Chavchavadze Av., Tbilisi Tel: 225-20-72/73/74/76 E-mail: turkemb.tbilisi@mfa.gov.tr Address: 8, M. Abashidze str. Batumi, Georgia; tel: (8-88-222) 7 47 90 Republic of Azerbaijan Embassy Kipshidze II-bl . N1., Tbilisi Tel: 225-26-39, 225-35-26/27/28 E-mail: tbilisi@mission.mfa.gov.az Address: Dumbadze str. 14, Batumi Tel: 222-7-67-00 Fax: 222-7-34-43 Republic of Armenia Embassy 4 Tetelashvili St. Tbilisi Tel: 95-94-43, 95-17-23, 95-44-08 E-mail: armemb@caucasus.net Web: www.armenianembassy.ge Consulate General, Batumi Address: Batumi, Gogebashvili str. 32, Apt. 16 Kingdom of Spain Embassy Rustaveli Ave. 24, I floor, Tbilisi Tel: 230-54-64 E-mail: emb.tiflis@maec.es Romania Embassy

TBILISI GUIDE

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7 Kushitashvili St., Tbilisi Tel: 38-53-10; 25-00-98/97 E-mail: ambasada@caucasus.net Republic of Poland Embassy 19 Brothers Zubalashvili St., Tbilisi Tel: 292-03-98 Email:tbilisi.amb.sekretariat@msz.gov.pl Web-site: www.tbilisi.polemb.net Republic of Iraq Embassy Kobuleti str. 16, Tbilisi Tel: 291 35 96; 229 07 93 E-mail: iraqiageoemb@yahoo.com Federative Republic of Brazil Embassy Chanturia street 6/2, Tbilisi Tel.: +995-32-293-2419 Fax.: +995-32-293-2416 Islamic Republic of Iran Embassy 80, I.Chavchavadze St. Tbilisi, Tel: 291-36-56, 291-36-58, 291-36-59, 291-36-60; Fax: 291-36-28 E-mail: iranemb@geo.net.ge United Nations Office Address: 9 Eristavi St. Tbilisi Tel: 225-11-26/28, 225-11-29/31 Fax: 225-02-71/72 E-mail: registry.geo@undp.org Web-site: www.undp.org International Monetary Fund Office Address : 4 Freedom Sq., GMT Plaza, Tbilisi Tel: 292-04-32/33/34 E-mail: kdanelia@imf.org Web-site: www.imf.ge Asian Development Bank Georgian Resident Mission Address: 1, G. Tabidze Street

Freedom Square 0114 Tbilisi, Georgia Tel: +995 32 225 06 19 E-mail: adbgrm@adb.org; Web-site: www.adb.org World Bank Office Address : 5a Chavchavadze Av., lane-I, Tbilisi, Georgia ; Tel: 291-30-96, 291-26-89/59 Web-site: www.worldbank.org.ge Regional Office of European Bank for Reconstruction and Development Address: 6 Marjanishvili St. Tbilisi Tel: 244 74 00, 292 05 13, 292 05 14 Web-site: www.ebrd.com Representation of the Council of Europe in Georgia Address : 26 Br. Kakabadze, Tbilisi Tel: 995 32 291 38 70/71/72/73 Fax: 995 32 291 38 74 Web-site: www.coe.ge Embassy of the Slovak Republic Address: Chancery: 85 Irakli Abashidze St. Tbilisi, 0162 Georgia Consular Office: 38 Nino Chkheidze St. Tbilisi, 0102 Georgia Phone: 2 222 4437, 2 296 1913 e-mail: emb.tbilisi@mzv.sk

Hotels in Georgia TBILISI MARRIOTT Tbilisi , 13 Rustaveli Ave. Tel: 77 92 00, www.marriott.com COURTYARD MARRIOTT Tbilisi , 4 Freedom Sq. Tel: 77 91 00 www.marriott.com RADISSON BLU HOTEL, TBILISI Rose Revolution Square 1 0108, Tbilisi Tel: +995 32 402200 radissonblu.com/hotel-tbilisi RADISSON BLU HOTEL, BATUMI Ninoshvili Str. 1, 6000 Bat’umi, Georgia Tel: 8 422255555 http://radissonblu.com/hotel-batumi SHERATON METECHI PALACE Tbilisi , 20 Telavi St. Tel: 77 20 20, www.starwoodhotels.com SHERATON BATUMI 28 Rustaveli Street • Batumi Tel: (995)(422) 229000 www.sheratonbatumi.com HOLIDAY INN TBILISI Business hotel Addr: 1, 26 May Square Tel: +995 32 230 00 99 E-mail: info@hi-tbilisi.com Website: http://www.hi-tbilisi.com BETSY’S HOTEL With Marvellous Tbilisi Views Addr: 32/34 Makashvili St. Tbilisi Tel: +995 32 293 14 04; +995 32 292 39 96 Fax: +995 32 99 93 11 E-mail: info@betsyshotel.com Website: http://www.betsyshotel.com

Restaurants CORNER HOUSE Tbilisi, I. Chavchavadze ave. 10, Tel: 0322 47 00 49; Email: contact@cornerhouse.ge RESTAURANT BARAKONI Restaurant with healthy food. Georgian-European Cuisine Agmashenebeli Alley 13th Phone: 555 77 33 77 www.barakoni.com CHARDIN 12 Tbilisi , 12 Chardin St. , Tel: 92 32 38 CAFE 78 Best of the East and the West Lado Asatiani 33, SOLOLAKI 032 2305785; 574736290 BREAD HOUSE Tbilisi , 7 Gorgasali St. , Tel: 30 30 30 BUFETTI - ITALIAN RESTAURANT Tbilisi , 31 I. Abashidze St. , Tel: 22 49 61 DZVELI SAKHLI Tbilisi , 3 Right embankment , Tel: 92 34 97, 36 53 65, Fax: 98 27 81 IN THE SHADOW OF METEKHI Tbilisi , 29a Tsamebuli Ave. , Tel: 77 93 83, Fax: 77 93 83 SAKURA - JAPANESE RESTAURANT Tbilisi , 29 I. Abashidze St. , Tel: 29 31 08, Fax: 29 31 08 SIANGAN - CHINESE RESTAURANT Tbilisi , 41 Peking St , Tel: 37 96 88 VERA STEAK HOUSE Tbilisi , 37a Kostava St , Tel: 98 37 67 BELLE DE JOUR 29 I. Abashidze str, Tbilisi; Tel: (+995 32) 230 30 30 VONG 31 I. Abashidze str, Tbilisi Tel: (+995 32) 230 30 30 BRASSERIE L’EXPRESS 14 Chardin str, Tbilisi Tel: (+995 32) 230 30 30 TWO SIDE PARTY CLUB 7 Bambis Rigi, Tbilisi Tel: (+995 32) 230 30 30

Cinemas AKHMETELI Tbilisi. “Akhmeteli” Subway Station Tel: 58 66 69 AMIRANI Tbilisi. 36 Kostava St. Tel: 99 99 55, RUSTAVELI Tbilisi. 5 Rustaveli Ave. Tel: 92 03 57, 92 02 85, SAKARTVELO Tbilisi. 2/9 Guramishvili Ave. Tel: 8 322308080,

SH. RUSTAVELI STATE THEATRE Tbilisi. 17 Rustaveli Ave. Tel: 93 65 83, Fax: 99 63 73 TBILISI STATE MARIONETTE THEATRE Tbilisi. 26 Shavteli St. Tel: 98 65 89, Fax: 98 65 89 Z. PALIASHVILI TBILISI STATE THEATRE OF OPERA AND BALLET Tbilisi. 25 Rustaveli Ave. Tel: 98 32 49, Fax: 98 32 50

Galleries ART GALLERY LINE Tbilisi. 44 Leselidze St. BAIA GALLERY Tbilisi. 10 Chardin St. Tel: 75 45 10 GALLERY Tbilisi. 12 Erekle II St. Tel: 93 12 89

Real Estate International Real Estate Company (IREC) Tbilisi. 9 P. Aslanidi St. Tel: +995 32 238 058 Mob: 599 95 76 71 Email: Info@irec.ge www.irec.ge

GSS Car rental offers a convenient service for those who are interested in renting car in Georgia. Rental fleet mainly consist of Japanese made SUV’s, the company has various models of cars including sedans and minivans which are in good technical condition. Contact information: Email: info@gsservices.ge. Address: Shalva Dadiani 10

Akhvledianis Khevi N13, Tbilisi, GE. +995322958377; +995599265432

Theatres A. GRIBOEDOV RUSSIAN STATE DRAMA THEATRE Tbilisi. 2 Rustaveli Ave. Tel: 93 58 11, Fax: 93 31 15 INDEPENDENT THEATRE Tbilisi. 2 Rustaveli Ave. Tel: 98 58 21, Fax: 93 31 15 K. MARJANISHVILI STATE ACADEMIC THEATRE Tbilisi. 8 Marjanishvili St. Tel: 95 35 82, Fax: 95 40 01 M. TUMANISHVILI CINEMA ACTORS THEATRE Tbilisi. 164 Agmashenebeli Ave. Tel: 35 31 52, 34 28 99, Fax: 35 01 94 METEKHI – THEATRE OF GEORGIAN NATIONAL BALLET Tbilisi. 69 Balanchivadze St. Tel: (99) 20 22 10 MUSIC AND DRAMATIC STATE THEATRE Tbilisi. 182 Agmashenebeli Ave. Tel: 34 80 90, Fax: 34 80 90 NABADI - GEORGIAN FOLKLORE THEATRE Tbilisi. 19 Rustaveli Ave. Tel: 98 99 91 S. AKHMETELI STATE DRAMATIC THEATRE Tbilisi. 8 I. Vekua St. Tel: 62 59 73

THE BEST GEORGIAN HONEY OF CHESTNUTS,ACACIA AND LIME FLOWERS FROM THE VERY HART OF ADJARA MATCHAKHELA GORGE IN THE NETWORK OF GOODWILL, NIKORA AND SMART


PUBLICITY

16

caucasian business week

Two luxurious residences for 464 apartments with amazing sea view. Shopping Center, Conference Hall, Cinema, Bowling Center, Trade and Dining areas are integrated within the project. Hotels and Residences have absolute infrastructure that integrates panoramic restaurants on the roof and inside the hotel, Casino, SPA, swimming pool, terraces, laundry, shopping mall, dining areas, Gym, cinema, bowling center, a la Carte Restaurants, playground for children, outdoor swimming pool, private beach with gold sand yacht club. The construction of the complex will be finished in 19 April, 2017 in compliance with all the European standards. 10% Adv Payment 36 MONTH INTERNAL CREDIT 25% Adv Payment 60 MONTH INTERNAL CREDIT

STARTING PRICE IS FROM 1425 $ Address: Mtsvane Street N1, Batumi Tel: +995 577 14 17 14 info@metrocity.ge www.facebook.com/MetroCity.GE

www.metrocity.ge

June 8, 2015 #102