Caucasus Business Week #108

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BUSINESS WEEK WWW.CBW.GE caucasus business week Partner News Agency

July 20, 2015 #108

July 20, 2015, Issue 108






ferry service operating between Georgia and Bulgaria is increasing its trip frequency to bolster vehicle and cargo turnover and bilateral tourism between the two countries. Pg. 5

THE 13





eorgia’s Agriculture Ministry is stepping up its promotion of the country’s wine and winemaking culture in China; with the unveiling of a promotional centre and winemaking house during an official visit of the Agriculture Ministry to China. Pg. 6





Georgian HPP has slashed its energy emissions and is now “well-positioned” to generate additional financial revenues and bolster the economy, says a top European investment bank. By reducing its energy emissions, the state-owned operator of Enguri HPP Engurhesi Ltd was able to conclude the first sale of carbon credits Pg. 9



he head of the Competition Agency George Barabadze said. We are talking about Wissol (a fine in the amount of GEL 10 426 393), LUKOIL ( GEL 4 740 260), SOCAR (GEL 14 381 385), Rompetrol (GEL 10 885 806) and Gulf (GEL 11 267 384) and three economic agents which have close relations with the abovementioned companies. Pg. 11



rime Minister of Georgia Irakli Garibashvili instructs Finance Minister Nodar Khaduri to postpone compulsory labeling of non- alcoholic beverages. “Manufacturers of alcoholic beverages have asked the Prime Minister of Georgia Irakli Garibashvili to defer the mandatory labeling of the products. Ministry of Finance prepared a draft, according to which the labeling of carbonated, mineral and fresh drinks becomes mandatory from September 1. Pg. 2

Pg. 4

Azim Sadikov: Floating Exchange Rate Policy Will Protect Georgian Economy Pg. 8


lobal Alliance will assist Georgia in implementing the primary healthcare system reforms, Jean-Elie Malkin, a president for the International Consulting Group of Global Alliance, told the international conference that was held at the national medical-training center of the Georgian Ministry of Labor, Health and Social Protection. Pg. 10

Irakli lekvinadze: We are Working on the Vere Gorge Highway Restoration

Pg. 5

The Way Communications Regulator Lobbies Internet Providers


he Banks&Finances constantly highlights the internet market realities. Absolute arbitrariness in the market has inspired multiple public outrages. The founder of the social network page of “the Lower Internet Prices and Higher Internet Speed” has responded to one of our articles. Today the internet market operates

in bipolar conditions, in practice, he said. Silknet and Caucasus Online companies carry out arbitrary policy. The worst thing is the competition agency prefers to keep silent and turn a blind eye. And the Georgian National Communications Commission (GNCC) seems to be lobbying the providers. Concerning the issue our incognito respondent has recalled one case. Pg. 5

Central Bank’s Policy Further Devalues the National Currency


ast week, the Georgian lari gained some of its value against the major currencies, continued its fluctuations due to the National Bank’s actions, as some experts believe. “The weakening of the lari is a “continuation of sabotage. Kadagidze’s actions led to the lari’s de-


Mikheil Chelidze: Lack of Knowledge is the Main Problem of the Georgian Business

Pg. 8

preciation again,”- Mikheil Dundua, 2030 organization member, an economist, says commenting on the recent fall of the lari exchange rate. “On July 14, the NBG President increased commercial banks lending by GEL 75 million and a loan volume amounted to 855 million that resulted in the exchange rate further falling . Pg. 5

Batumi Hosts Ajara Business Week’s Presentation

n official presentation of the Ajara Business Week (ABW), a new English-language business-economic weekly, was held at Hilton Hotel in Batumi, the Autonomous Republic of Ajara. The event was attended by representatives of the local business sector

Vano Mtvralashvili: Iran Deal Will Significantly Boost Iranian Investments in Georgia Pg. 8

and the local government, interested audience and the media sector. The presentation was led by GEPRA consulting company’s senior partner Kakha Maghradze. He widely overviewed the reasons and goals for issuing an English-language newspaper with a focus on Ajara-based Pg. 3 business entities.



Adjaristsqali Georgia CEO: A company is a success, when it demonstrates a responsibility for the country and the society, in which it does business RONNY SOLBERG

Pg. 7




July 20, 2015 #108

caucasus business week



he Parliament of Georgia is today discussing amendments to the state budget for 2015, introduced by the country’s Finance Ministry in response to a downgraded economic growth forecast. Members of Parliament (MPs) gathered today in Kutaisi for an extraordinary meeting to discuss the state budget amendments. Georgia’s economy growth forecast has been downgraded from five to two percent however Deputy Finance Minister Giorgi Kakauridze said economy growth might reach three percent.



eorgia is exporting fewer products and importing more from abroad, says the country’s National Statistics Office, Geostat. The volume of Georgia’s exports is on a slight downward trend while imports are on the rise, according to latest information by the country’s National Statistics Office, Geostat. This week Geostat published dataabout external trade of Georgia for 2014 and compared it with earlier data; in the past five years Georgia’s export volumes has increased until now, while imports has steadily risen since 2010.



ne month after hundreds of people lost their homes in the deadly Tbilisi flood, victims are beginning to receive compensation for their loss. After the severe flood hit Tbilisi, 400 people from 80 families were deemed to be victims of the flood and many of these were forced to leave their homes. The Georgian Government stated the process had now begun to compensate these victims of the natural disaster.



eorgia’s Prime Minister has offered a message of hope to the prisoners inside Rustavi #16 penitentiary facility as he officially opened the refurbished prison. PM visited the prison and said: “I wish you to return to your families soon and never come back and we will make sure that you serve you sentence with dignity”.



espite the ongoing financial crisis in Greece the country is still among the top donor countries in terms of volume of money transfers to Georgia, lagging only behind Russia. Last month $13.8 million USD was transferred from Greece to Georgia, announced National Bank of Georgia (NBG), taking up 13.7 percent of all money transfers. This was less than was transferred in May when Georgia received $15.3 million.



eorgia is developing an electronic signature system that will allow clients of the country’s three large banks to sign their important documents from a signature pad, saving the time and money to print and sign official papers. The e-signature idea was initiated by the National Bank of Georgia (NBG) last year. ProCredit Bank, the first bank to join the initiative, got involved in the early stages and has significantly contributed to its development. As of today, all ProCredit Bank branches offer e-signature service to its customers.



bilisi is calling on the global community to “properly respond” to Russia’s “illegal actions” of creeping occupation at the Administrative Boundary Line (ABL) between breakaway Tskhinvali region (South Ossetia) and the rest of Georgia. Last week Russia’s occupational forces illegally placed so-called border signs near Georgia’s central highway in several villages in Gori municipality in central Georgia. This action, referred to as Russia’s creeping occupation, saw about two more kilometres of Georgian soil in the heart of the country now become occupied by Russia.

Russia had already occupied about 20 percent of Georgian territory. Georgia’s Foreign Ministry urged the international community to make a “relevant evaluation of the actions that are aimed against peace and security”, which “violate fundamental principles of the international law.” In a special statement the Ministry said it would use all international levers to ensure Russia’s provocative actions are met with a relevant response. Meanwhile the Georgian Prime Minister’s special representative for relations with Russia, Zurab Abashidze, travelled to the Gori district and met with local residents who were effected by Russia’s “border marking” activities.

Abashidze said the situation was “very critical” and he would raise this issue at his next meeting with Russia’s Deputy Foreign Minister Grigory Karasin in Prague on July 15. The so-called Abashidze-Karasin talks are the only format of direct Georgian-Russian dialogue since the two countries cut off diplomatic ties after the 2008 August war. The first Abashidze-Karasin meeting took place in 2012 in Geneva. The talks are limited in scope to economic and other practical issues but today Abashidze said the ABL issue was “so acute” it could not be avoided at the upcoming meeting.



rime Minister of Georgia Irakli Garibashvili instructs Finance Minister Nodar Khaduri to postpone compulsory labeling of non- alcoholic beverages. “Manufacturers of alcoholic beverages have asked the Prime Minister of Georgia Irakli Garibashvili to defer the mandatory labeling of the products. Ministry of Finance prepared a draft, according to which the labeling of carbonated, mineral and fresh drinks becomes mandatory from September 1.Companies asked to postpone that date in view of the summer season and the complexities associated with the deployment of the necessary marking equipment. The Prime Minister takes into account the request of manufacturers of soft drinks and instructs the Minister of Finance to postpone the mandatory labeling till 1 November 2015 “, - a statement released by the press service of the government of Georgia reads. Not: The authorities wanted the mandatory labeling the business has been struggling with for almost 5 years to come into effect in the coming months. As they say, at this stage all expenses will be covered by the Revenue Department. The government does not specify whether the business will have to pay all the costs in the near future, while the businessmen do not doubt that the events will develop under this scenario. Finance Minister Nodar Khaduri gives the example of the neighboring Armenia as the argument, where water, Coca Cola and other soft drinks are labeled.

As for the financing of the project, the Minister notes that the funds at this point will be paid by the Revenue Department and not from the budget. We wrote earlier that the original version that envisaged the imposition of all expenditures for marking system on business would lead to a rise in price of the products, reduced competitiveness of the Georgian products, suspension of investments and business environment deterioration. However, allocation of funds from the state budget to cover the costs for the introduction of the electronic marking system may also cause severe problems. In a time when the country is trying to minimize the administrative and other costs, to pay millions for service that doesn’t maintain any criticism in costs efficiency and optimal financial estimates is tantamount to the embezzlement of state funds. At the same time, budget funds outflow abroad will reflect badly on the country’s economic situation and will further undermine the stability of the lari exchange rate which without any additional factors reacts very sensitive to such processes. Recall that in order to establish highly secured track and trace system, GRS has announced a competition on “Integrated System of Movement and Registration of Products” on 10th November, 2011. Seven bids were submitted from the companies; the requirements of GRS were met by “SICPA Security Solutions SA”. The agreement was concluded between Georgia Revenue Service and “SICPA Security Solutions SA”.

The main purpose of Georgia Revenue Service was to establish electronic system as it allows controlling accuracy of the payment process; in addition, consumers are protected from using counterfeit goods. The system offered by Swiss company allows marking the production by means of unique secured code which could be applied on excise stamps or directly on the production. The movement of the production through manufacturing line is controlled by the devices produced by the company; these devices provide identification and marking of production; quality control of applied stamps and activation of unique secured code through database. The information collects and transfers via special device, automatically. It could be mentioned, that during the quality control process of applied stamps, in case of detecting defected stamp, product is pushed out from manufacturing line; this leads to significant simplification of calculating process of manufacturing defects, ensuring continuous production process. The previous government sais that that implementing new marking system would give a possibility to apply paper-based label and on-product marking on excise and non-excise products; to establish Data Management System (DMS), to receive information about marking local or imported products in real time; to control/monitoring circulation of goods on consumer market and calculation/reduction of manufacturing defects in local enterprises.



ferry service operating between Georgia and Bulgaria is increasing its trip frequency to bolster vehicle and cargo turnover and bilateral tourism between the two countries. The ferry currently travels across the Black Sea between Georgia’s port cities Poti and Batumi with Bulgaria’s second largest city Burgas. Today Georgia’s Prime Minister Irakli Garibashvili met with representatives from Bulgaria’s


The Editorial Board Follows Press Freedom Principles Publisher: LLC Caucasian Business Week - CBW Address: Aleksidze Street 12 Director: Levan Beglarishvili Mobile phone: +995 591 013936 WWW.CBW.GE Email:

bank holding BACB to discuss future cooperation between Georgia and Bulgaria, including tourism development. During the negotiations the parties agreed that Georgian transport and logistics carriers will be allowed to use BACB’s large logistic centres that are located in the Balkans. As well as PM Garibashvili, Georgia’s Economy Minister and Vice PM Giorgi Kvirikashvili, also attended the meeting.

Afterwards he said: “The [bank] holding also includes a tourism company that owns several resorts in Bulgaria. We discussed future plans regarding establishing a partnership between our and Bulgarian mountain resorts.” “The partnership should be about selling joint packages. I hope all what was planned will be fulfilled in the nearest future,” said Kvirikashvili. The sides also discussed the possibilities of launching direct air flights between the two countries.

The weekly is distributed to top companies, banks, embassies, state sector, Tbilisi and Batumi hotels, Tbilisi, Batumi and Kutaisi Airports, as well as in the town of Marneuli. The newspaper will also penetrate Azerbaijan in the near future

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


July 20, 2015 #108

PRESENTATION caucasus business week



n official presentation of the Ajara Business Week (ABW), a new English-language business-economic weekly, was held at Hilton Hotel in Batumi, the Autonomous Republic of Ajara. The event was attended by representatives of the local business sector and the local government, interested audience and the media sector. The presentation was led by GEPRA consulting company’s senior partner KAKHA MAGHRADZE. He widely overviewed the reasons and goals for issuing an English-language newspaper with a focus on Ajara-based business entities: “Ajara is a very active region in terms of economic development – there is a quite high pace of economic activity in the region compared to the remaining country. Moreover, Ajara’s peculiarity consists in various foreign investors operating in the Region. Therefore, we have decided to issue an English-language newspaper. The edition is mainly oriented on decision-makers in the business sector and various organizations around the business sector. The edition is also designed for top officials, managers of the small and medium business sectors and the civil sector employees interested in the region’s business and economic activities”. The ABW’s concept, goals and objectives were also overviewed by ABW editor-in-chief ZURAB KUKULADZE. “With multiyear experience in the business media, our team fully realizes the business potential the Autonomous Republic of Ajara holds in the current situation. This team will act as a certain mediator between the Authorities, the business sector and the society in terms of unbiased and qualified coverage. We believe our undertaking will increase the attractiveness of the Region’s business environment. We will provide qualified analysis on Ajara’s business potential to the interested audience. The newspaper will actively cover achievements, challenges and potential of the local business. We plan to tightly cooperate with local and central governments to deliver valuable information on governmental initiatives and reforms to the interested audience and provide additional opportunity to local major and smaller businesses and investors to better realize and perceive the region’s huge potential. In one word, our team will have friendly relations with the Region’s business sector and lobby the local initiatives and highlight the Region’s opportunities. I hope the local business and the society will accept our friendship and fruitfully cooperate with our team”, Kukuladze noted. The ABW editor LEVAN BEGLARISHVILI has introduced the editorial board’s plans regarding organizational management, frequency of issuance and distribution aspects. “I would like to welcome the presented society and congratulate you on the newspaper issuance that, first of all, will promote the local business. The newspaper will be issued in a weekly format without seasonal breaks. The edition will cover Ajara’s business and governmental initiatives throughout the year. The newspaper will be delivered free of charge to representatives of the Ajara government, business, media and civil society sectors. Ordinary citizens will be able to receive the newspaper at local hotels, restaurants, cafes and other public places. The newspaper will be

also delivered to the local airport and air passengers. ABW is also distributed to Tbilisi and other cities of Georgia. Moreover, the ABW will share its news and articles to the very popular foreign media platforms. As a result, international attractiveness of the Ajara Region will further increase”. The local government officials have also delivered speech at the presentation. They expressed gratitude to the ABW editorial board for this beneficial undertaking and showed willingness to cooperate with our newspaper. Batumi Mayor GIORGI ERMAKOV pointed he was pleased to welcome any similar media edition with a focus on the region’s processes, especially, on the Batumi developments and events, that will deliver information on the region’s and Batumi’s events and process to its audience, foreign media partners and potential investors. “I imply the investments the Ajara government has been making in the Region. I also mean the business environment that enables perspective foreign investors to receive required information. I also mean summertime culture events in Batumi. Besides information delivery to the interested audience, this is also a very good opportunity to valuably advertize the region and the city. Batumi City Hall is also ready to tightly cooperate with the edition and provide all due information in continuous regime on the Batumi City Hall activities and performance, about the municipal innovations. All these efforts will contribute to improving the economic situation and developing the tourism sector in Ajara and the whole country”, Giorgi Ermakov said. AVTANDIL BERIDZE, the Ajara Supreme Council Chairman: The Ajara residents appreciate you have issued this newspaper. In the name of the Ajara Supreme Council we pledge to ensure overall and efficient cooperation with this edition. I imply that our government has prioritized the agriculture sector. This field is a priority direction in the Ajara Region. There is an advertisement of the Produce in Georgia state program on the 6th page. And we know this program makes focus on the agriculture sector and this is of vital importance, as the agriculture sector is interrelated with the tourism sector. All tourists need food products. Therefore, it is important that food products be produced in Georgia. We will cooperate with the newspaper in this direction. Moreover, the Ajara Supreme Council has set up a special commission for financial and economic issues. This commission works very successfully and discusses bills, amendments to the legislation and we welcome the newspaper will highlight all amendments and changes and this information will be very interesting to the business sector and foreign investors”. Ajara Economy Minister GIORGI BALADZE: I welcome you have issued this newspaper. This is a good opportunity for investors to receive information in the international language and they will not need any more to apply to various local governmental offices to have real and valuable information. This is a definitely step forward for our region, where foreign investors have been actively operating. I am sure our government and the newspaper will tightly cooperate to valuably cover the region’s economic developments and the determined directions. I would like to wish a success and all the best to the ABW editorial board”.





caucasus business week


n 2016, the tomatoes grown in greenhouses of the company “Stimor” will be exported to Europe. A representative of the Israeli company Avrum Gagulashvili says that a corresponding agreement with European partners has already been signed and “Stimor” is currently working on obtaining international certificates required for exporting products to the EU. It is expected that certification will be completed in 2016.

The June 13 natural disaster in the Vere Gorge has sacrificed 20 individuals. Three citizens are still missing. The flood has inflicted losses and damages to about 160 families. Part of the houses will be rehabilitated, while 10 families remain still unsheltered. A month has already passed since the natural disaster. This is a very short period to provide valuable assistance to the natural disaster victims, alleviate their pain for died relatives and family members. At the same time, this is a sufficient period that the society has received answers to some questions. The IPress news agency publishes a short report of the government, business sector, politicians and the society about what has been done for the natural disaster victims, for preventing new available natural disasters and for rehabilitating the damaged zones. We offer you an interview with Deputy Tbilisi Mayor Irakli Lekvinadze:



on-governmental organization “Mercy Corps” and its partner organization in the framework of the program of “Development of Farmer Cooperatives in the Rural Municipalities” come up with a new initiative which foresees support of business development of agri cooperatives. The program is funded by the European Union, specifically by the European Neighborhood Program for Agriculture and Rural Development (ENPARD).



ompany “Figaro” opened plastic and concrete tile plant in Khobi. The project is implemented within the program frame “Produce in Georgia” and its construction cost amounts to 2 million GEL. The Premier took part in the opening of the new enterprise.



ulgarian holding BACB plans to get active on Georgian market. The Premier met representatives of the company on Friday. Current and future projects have been discussed at the meeting. “Frequency of ferry service is increased between the ports of Georgia and Bulgaria, big Bulgarian holding BACB will make additional investment, - Prime Minister Irakli Garibashvili has declared after the meeting.

July 20, 2015 #108


e evacuated the population from Svanidze Street and accommodated them next day of the natural disaster. About 160 families were accommodated to various hotels and apartments. For this period we have provided food products, essentials, medications and medical assistance to these families. As to the destroyed infrastructure, we have provided immediate reaction to the natural disaster problems. We immediately started cleaning works and in several days we completed these works in the natural disaster zone. As a result, we launched infrastructure rehabilitation works. At this stage, part of the infrastructure has been already rehabilitated. Only the new highway remains unrepaired and the restoration works will start in the near future. We have also launched strengthening works of the houses in the risk zone. Tbilisi City Hall has also established regulations

for providing accommodations, heating systems and essentials to the victim families. This process implies unbiased and transparent distribution of the sums mobilized for the natural disaster victims assistance. A month has passed and we can declare we have been providing active works to ensure the unsheltered families with respective accommodations and to rehabilitate their houses. We have already completed the cleaning works and rehabilitated a part of the infrastructure. As to large-scale projects, namely, the restoration of the highway and the Vere Gorge, we have been working in intense regime in this direction. We will start the highway restoration works in the near future, while a group of professionals will work on the Vere Gorge future arrangement issues. The Gorge requires hydro-engineering constructions, more protector constructions, and alarming systems. A recreation zone may be also arranged in this zone in the future. Moreover, the natural disaster has annihilated a part of the Tbilisi ZOO and we plan to relocate this asset to the Tbilisi Sea territory. Regretfully, the outcomes are grave. The natural disaster has sacrificed 20 individuals and 3 persons are missing. We have provided maximal support to the victim families. Tbilisi City Hall has covered all burial expenditures of the sacrifices. Each victim family has received 10 000 GEL compensations. The unsheltered families will receive 8-10.5 thousand GEL packages due to the number of family members, so as they purchase essentials and keep certain money resources.

- When will be the temporary overpass restored? - Certain period should be passed to choose the most appropriate solution and name the best project and proposal. At this stage, we can only tell you the highway will definitely open. The due works will start in the near future and we suppose to unveil the rehabilitated highway till October, maybe, earlier. This is not a simple process, because we should carry out strengthening works and hydro-engineering works….The process, though, will not be protracted. - Have you received any recommendations from the commission that is exploring the natural disaster inspiring reasons? Is there a threat of flooding the houses again in the future? -The Environment Protection Ministry has examined a part of the Vere Gorge, namely, the Akhaldaba-Tskneti section. The exploration works have outlined risk zones and a certain part of land masses that may cause landslips, but in only small scales. We will make focus on houses within the risk zones. The population keeps communication with the municipal board and, naturally, they are informed about this. In case of hazard, they will be evacuated from the risk zone. As to the remaining part, research-exploration works are being carried out there. - Do the natural disaster victim families remain in hotels? - The natural disaster has inflicted damage and losses to 160 families with 700 individuals. A major part of them has been already accommodated to private apartments from hotels. Only a small part of them still remains at hotels.



ational joint-stock company Naftogaz of Ukraine and U.S. Frontera Resources Corporation have signed a Memorandum of Understanding during the Ukrainian-U.S. Business Forum held in Washington on July 13, the press service of the holding has reported.

ISET: ECONOMIC GROWTH ABOVE 2% IS NOT REALISTIC An interview with Senior Researcher at the research center ISET Maya Grigolia



ilano Investments is not among the shareholders of the company after on July 13. Italian company held 60% of “Goodwill” up to now. To note, Gogi Shevardnadze has returned 60%-share of supermarket chain “Goodwill” and his share increased up to 90%, while 10% is still owned by George Makhatadze.



ine company “Armazi” started wine sales on the local market as well. The company offers 6 naming wines to the local consumers, which price segment totals to 15-20 GEL – 2 types of white and 4 types of red. Wine sales have started in June with local wine shops.



ELASI declares, that damage cases of JSC TELASI’s cables by other organizations get more frequent through the recent period, which causes hamper of electricity supply to the population. According to electricity supply company, 23 damage cases of TELASI’s cables have been fixed from July 1 to July 8 and as a result, over 26 318 subscribers have been left without electricity. Such irresponsible acts damages not merely “TELASI” but also creates discomfort to the Tbilisi population, the company declares.

- In 2015, the Georgian government planned 5% growth of the economy, but now it is obvious that it will not exceed 2%. How realistic is this figure and is it low or high taking into account the situation in the region? - The Russian-Ukrainian conflict has a significant negative impact on the situation in the region. Economic growth in Russia, Ukraine, Armenia, Belarus and Moldova in the current year is projected to be negative. These countries are in recession. In addition, drop in international energy prices has an additional negative impact on petroleum exporting countries. For example, the forecast for economic growth in Azerbaijan is 0, 6% (in 2014 - 2, 8%). Georgia has an open economy, which is highly dependent on imports and foreign investment, respectively, it is very sensitive to external risks. We cannot influence the situation in the region,

respectively, we import all the risks that exist in the trading partners. In this situation, a 2% growth is not such a low rate. If there are no additional geopolitical risks, it is quite realistic. - In the current situation, whether a growth above 2% is realistic? Can the current government work effectively? What should the government have done and what it has failed to do? - External instability was reflected in the national currency and in November 2014 our economy has entered a zone of turbulence. Accordingly, it would be unrealistic to expect growth of more than 2%. The situation in the region does not give us grounds for reassurance, and the government should work as efficiently as possible to solve domestic issues, those that can be solved. Internal factors include the creation of maximum favorable conditions for business. consultation with the entrepreneurial class in making economic laws is also crucial. For example, the recommendation of the EU should be taken consistently and in a reasonable time, not for one month. The main function of the state is to develop reasonable rules of the game and create an environment for the legal, social, economic and political development. - There is an opinion that the budget of Georgia took on too many social obligations that led to the lack of the funds to support the business. What can you say about the country’s budget, if it is properly planned? - Of course, the heavy social background interferes with economic development and therefore

a priority of social issues in Georgia is justified. But spending still should be more targeted, and the funds should be allocated more efficiently. Social spending should increasingly be focused on those sectors of the population that are in need the most. This will free up the budget funds that can be spent on infrastructure projects and the strengthening of state institutions. - In general, what prevents Georgia to attract investments? - Only stable political and economic environment can attract investors. A country in transition is inconceivable without reforms, but they must be carried out consistently and deliberately, particularly if they relate to the introduction of new regulations for business. A quick, unexpected, and often directed against the business economic decisions create a sense of uncertainty among investors. - What should the government do to promote economic growth? - The simplest answer to this question lies in the fact that the country should accumulate physical capital, encourage investment, increase human capital. A reform of the education system is definitely needed, as well as the introduction of new technologies, adapting the experience of developed countries, which again is connected with education. For all this, it is necessary to create strong state institutions and implement reasonable rules of the game. Providing property rights, education and health reforms , the fight against corruption and crime. It should be understood that all this will not give quick results, as this is a long process.

July 20, 2015 #108



The State Budget Mobilizes over 25 million GEL


he June 13 natural disaster in the Vere Gorge has sacrificed 20 individuals. Three citizens are still missing. The flood has inflicted losses and damages to about 160 families. Part of the houses will be rehabilitated, while 10 families remain still unsheltered. A month has already passed since the natural disaster. This is a very short period to provide valuable assistance to the natural disaster victims, alleviate their pain for died relatives and family members. At the same time, this is a sufficient period that the society has received answers to some questions. The IPress news agency publishes a short report of the government, business sector, politicians and the society about what has been done for the natural disaster victims, for preventing new available natural disasters and for rehabilitating the damaged zones. According to the Finance Ministry decision, special GEL and USD accounts have opened at the state treasury to assist the natural disaster victims and finance the natural disaster liquidation works. A separate account has opened at the state treasury for making money transfers to the Tbilisi municipal budget. At this stage, the account for the natural disaster results liquidation and victims assistance has mobilized 24 611 618 GEL, 882 710 USD and 71 927 EUR, including contributions from the private sector and physical bodies made up 10 457 959 GEL, 882 710 USD and 71 937 EUR. THE BUSINESS SECTOR’S CONTRIBUTION The business sector has mobilized about 10 million GEL for the natural disaster results liquidation works. Over 100 companies have transferred about 10 million GEL to the special account for the June 13 victims assistance and the capital city rehabilitation. The companies have also supplied various products, including drinking water, medications and construction materials. INTERNATIONAL MEDIA ON TBILISI FLOOD International media agencies have widely covered the June 13 natural disaster outcomes. The world’s distinguished editions and online news agencies such as BBC, Telegraph, Reuters and other ones have thoroughly covered the Tbilisi tragedy. On July 8 the Guardian published a vast and summarizing article about the June 13 natural disaster in Tbilisi.

The article’s author Andrew North writes foreign news agencies were mainly making accent on the escaped Zoo animals, while Andrew himself expresses admiration with the hospitality Georgian citizens have showed despite the tragedy days. “But on one of several visits to families hit by the disaster, I was treated instead to typical Georgian hospitality. “I’m so sorry I can’t invite you inside for tea,” apologised Ilia Mosikashvili, pointing towards her house, half of which now hangs over a precipitous drop after the ground beneath was washed away”, Andrew North writes. In his article Andrew also overviews the developments, but he does not confine with only negative events and finishes his article with positive and encouraging mood. ‘Back at the zoo, Sharashidze puffs nervously on a cigarette. “There used to be only two smokers here,” she says. “Now almost all of us are.” But they have had some good news since the disaster. A rare Caucasian red deer, which the zoo is helping to protect as part of a WWF-backed conservation project, has just given birth to a young female calf. Gurielidze has named her “Pyrra”’, after one of only two survivors of the giant flood in Greek mythology ordered by the god Zeus”, Andrew has finished his articles in this positive way. THE BANK SECTOR’S CONTRIBUTION Commercial banks have also allocated money resources for liquidation of the natural disaster outcomes. Cartu Bank has made a major contribution and mobilized 2.5 million GEL. VTB Bank dona-

tions marked 1% of the 2014 profits and constituted 207 575 GEL. Liberty Bank transferred 100 000 GEL for the liquidation works. TBC Bank’s contribution made up 50 000 GEL. Bank of Georgia assistance made up 100 000 GEL. Progress Bank mobilized 50 000 GEL. Bank Republic transferred 30 000 GEL and PASHA Bank mobilized 10 000 GEL. Moreover, TBC Bank has taken a decision on pardoning loans to the natural disaster victim physical bodies. This signifies the June 13 victims, who are registered in the Tbilisi City Hall official lists, will not have to pay off TBC Bank loans. INSURANCE SECTOR’S CONTRIBUTION The natural disaster has damaged hundreds of vehicles, private property and refueling stations. For the month the insurance companies have fully described the losses, while a part of them has remunerated the losses to clients by 100%. Aldagi insurance company losses marked 1.5 million GEL. The company’s losses from auto insurance made up 0.5 million GEL, while the remaining losses came from the real estate. GPI company losses made up 700 000 GEL. The company has remunerated 65% of the losses. The ratio of auto insurance losses made up 70%, the remaining losses came from the real estate of legal and physical bodies. GPI Holding company has insured distribution vehicles of Vake Meat Products Plant. The company losses will be remunerated by 100% and it will receive 210 000 GEL compensation.

Communications Commission Sets Wholesale Internet Prices without Auditing 50% of Expenditures



CENTRAL BANK’S POLICY FURTHER DEVALUES THE NATIONAL CURRENCY National Bank’s actions will speed up reforms in this sector


he Banks&Finances constantly highlights the internet market realities. Absolute arbitrariness in the market has inspired multiple public outrages. The founder of the social network page of “the Lower Internet Prices and Higher Internet Speed” has responded to one of our articles. Today the internet market operates in bipolar conditions, in practice, he said. Silknet and Caucasus Online companies carry out arbitrary policy. The worst thing is the competition agency prefers to keep silent and turn a blind eye. And the Georgian National Communications


caucasus business week

Commission (GNCC) seems to be lobbying the providers. Concerning the issue our incognito respondent has recalled one case. As reported, in January 2015 GNCC set a top margin tariff for wholesale prices to Caucasus Online and Silknet - 32 GEL per megabyte. The companies were also obliged to ensure full information transparency, to prevent discrimination, regulate tariffs r (top margin tariff of 32 GEL per megabyte) and make separate accountancy for expenditures and revenues. After the top margin tariff introduction, some experts started asserting the 32 GEL price for a megabyte could not bring real results and lower the service tariffs. These considerations have justified. The top margin has brought no real results. On the contrary, the companies have further increased the service prices. Besides this case, the founder of the Page of “the Lower Internet Prices and Higher Speed” recalls another important detail: I have personally attended these meetings and I asked whether the presented expenditures had been fully audited. A GNCC representative answered he was not sure the expenditures had been fully audited. Moreover, the regulatory commission assured only about 50% of the expenditures had been audited and consequently, the decision was taken according to the partially-audited indi-

cators. GNCC head Vakhtang Abashidze said he was not sure the expenditures really constituted 32 GEL, more or less. Nevertheless, the top margin tariff was determined by 32 GEL anyway, the incognito respondent noted. Audio files of this meeting exist, but GNCC does not publish them, he added. Moreover, the founder of the Page of the Lower Prices and Higher Internet Speer makes focus on the decisions that provesthe regulator lobbies the internet providers, in practice. The prices are growing without substantiation and in this situation the regulator’s refusal to explore the retail market is a very disputable and suspicious decision, he said. “The full transparency policy is ignored in Georgia and the regulator manifestly follows this arbitrary course. I would say even the regulator does not want to fully regulate the sector and to put an end to the issue of tariffs. Monopolists do not want that the retail market be explored and a full transparency policy be carried out either. If the regulator does not revise the current policy to establish full transparency on the market and protect the consumer interests, the common interests of the monopolists and the regulator will be clearly outlined. This signifies unprotected subscribers and full arbitrariness on the market”, the founder of the social network page noted.


ast week, the Georgian lari gained some of its value against the major currencies, continued its fluctuations due to the National Bank’s actions, as some experts

believe. “The weakening of the lari is a “continuation of sabotage. Kadagidze’s actions led to the lari’s depreciation again,”- Mikheil Dundua, 2030 organization member, an economist, says commenting on the recent fall of the lari exchange rate. “On July 14, the NBG President increased commercial banks lending by GEL 75 million and a loan volume amounted to 855 million that resulted in the exchange rate further falling . On July 15, the central bank increased a volume of the so-called overnight loans by

265 million. The loan totaled GEL 1,120 billion and hit a historical maximum. As a result, the lari fell to 2.27. This is an obvious continuation of the policies aimed at the deliberate devaluation of the lari , “- Dundua says noting that the lari devaluation has nothing to do with natural processes and is intended to create a stir and panic as the lari’s further fall will raise indignation among the population. According to the expert, it serves a specific purpose. So those who will buy dollars will lose because the current rate of the national currency is a result of the central bank’s deliberate policy and the lari will strengthens positions in the near future again. Dundua brings the data for the period from July 1, 2013 to July 15, when the National Bank’s debt to commercial banks reached GEL 630 million, in 2014 this figure amounted to 70 million, the current figure covering the period from July 1 to July 15 increased from 635 million to 740 million. “These data show that we are dealing with a radically different picture. If before the National Bank focused on contraction of the money supply to stabilize the lari , from January 2015 we clearly see the opposite, which, of course, led to excessive money mass that has a very negative impact on the lari, “- Dundua explains. He stresses that this is a temporary process and in a few days the Georgian lari will stabilize again. In his words, the National Bank’s structural reforms are important to stabilize the situation, it is also necessary to increase the level of confidence and reveal whether the National Bank exerts pressure on the commercial banks, etc. “When the banking supervisory functions will be separated from the National Bank, the central bank will be deprived of an important lever, namely , to consciously and deliberately instigate the devaluation, which will ultimately have a positive impact on everything,” – he points out.



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oreign trade turnover of Georgia is declined by 13% as of 6 months’ data. According to “Sakstat”, Foreign trade turnover of Georgia has made up 4,761 billion USD. At that, 1,082 million USD has accounted for export, which is less by 24% comparing to the index of the same period. However, import volume



eorgia’s Agriculture Ministry is stepping up its promotion of the country’s wine and winemaking culture in China; with the unveiling of a promotional centre and winemaking house during an official visit of the Agriculture Ministry to China. The opening event for the centre, located in capital Beijing’s Nutrition and Alcohol Research Institute, was led by Minister Otar Danelia and included a presentation and tasting of Georgian products. The event was attended by China’s deputy agriculture minister, wine importers and industry representatives. Danelia said the centre aimed to promote Georgian culture and winemaking and contribute Georgia’s efforts to export its products to “strategic” markets. The centre will be led by vice president of the Institute, with a special coordinator contributing from Georgia. In a separate ceremony in China’s Zhagang province, Minister Danelia opened a Georgian wine house where 30 varieties of dry, semi-dry and semi-sweet wines will be represented. According to Ministry data, wine made up 93 percent of the country’s agricultural export, with around one million litres of wine exported to China “over the recent years”. Danelia emphasized it was very important for Georgia to deepen trade-economic relations with China. “Georgian wine is distinguished by its uniqueness. Georgia produces 18 wines of local origin and one geographically indicated product – Chacha. We can offer a wide variety of white, red and rosé wines. We are glad to see demand of Georgian wine is increasing in China,” Danelia said.

Meanwhile a Chinese businessman recently opened a Georgian wine house in China. The man, who was not named, stressed the uniqueness of Georgian wine and its “distinguished taste” encouraged him to open a Georgian wine house. He believed Georgian wine had “huge potential” to establish itself in the Chinese market. The entrepreneur intended to open the same type of Georgian wine houses and a Georgian wine museum in other cities of China. Georgia will export 100,000 bottled of wine in the first stage of the partnership. Meanwhile, in August about 20 Chinese businessmen will visit Georgia to arrange meetings with representatives of Georgian wine companies. In recent times Georgia has worked hard to diversify its wine import markets, and this was evident in the Agency’s latest data. Export of Georgian wine had increased to “strategically important markets” like China, Eastern European countries and Canada, said Georgia’s National Wine Agency. Canada recorded the largest percentage increase (250 percent) in terms of volume of Georgian wine imported in the first part of this year. From January to April 2015, China also experienced an 87 percent increase in its import of Georgian wine, claimed the Agency. In recent times Georgia has made an effort to penetrate the Asian wine market, and results were now becoming evident, said the Agency. This could further be backed up as exports of Georgian wine increased by 9 percent to Japan so far this year. In total, from January to April, Georgia exported 7,978,749 bottles of wine (0.75 litre), valued at $23 million USD to 26 countries across the world.



ince 2010 Georgia’s Ministry of Agriculture and the International Fund for Agriculture Development (IFAD) have been carrying out the Agriculture Support Project (ASP). The project’s goals are to end infrastructural problems and support farmers’ economic growth. An important part of the project is the rehabilitation of irrigation systems and dealing with issues regarding irrigation water in various regions across Georgia. This will greatly contribute in developing local agriculture. In order to improve the information given to farmers regarding the carried-out rehabilitation activities, as well as defining certain benefits, various Georgian regions saw workshops being held with local farmers. The workshops were led by Irma Inashvili, an expert from the Georgian University, who noted while talking with CBW that due to Georgia’s natural climate conditions, programmed harvest cannot be yielded without proper ameliorating procedures (irrigation and drying), once again emphasizing the importance of their proper upkeep. “Traditionally, surface-level self-streaming irrigation is most widespread in Georgia and requires certain care, since irrigation erosion may develop in the soil and lots of water can be lost due to filtration and vaporization, but Georgian farmers still prefer it due to cheapness. As for modern approaches, irrigation sprinklers are quite economic in terms of water usage, along with a cheaper and efficient alternative which is drip

irrigation, which is mainly used in hot and dry climates. While meeting with the farmers we try to convince them of modern systems’ efficiency and advice on which specific approach to use on certain territories,” noted Irma Inashvili. According to her, from 1990 to 2011 the development of agricultural amelioration was practically halted and existing irrigation and drainage systems went out of order. “Due to the structural and organizational activities, as well as ongoing rehabilitation and technical exploitation programs, by 2013 it was possible to irrigate up to 56 thousand hectares of land in the amelioration sector, and 88-90 thousand in 2014, which is over thrice as much as the irrigated area index from 2012.” – noted Irma Inashvili. The International Fund for Agriculture Development (IFAD) is one of the most generous donors in the agriculture sector. It has been financing various projects in Georgia since 1998. Areas of activities are the Inner Kartli, Mtskheta-Mtianeti, and Samtskhe-Javakheti municipalities, where 6 irrigation systems were rehabilitated.

is dropped to 3,680 billion USD, while the figure is declined by 9% year-over-year. The negative trade balance has amounted to 2,598 billion USD in January-June, 2015 and 55% of foreign trade turnover. Therefore, the detailed indexes of Georgia’s foreign trade turnover will be reported by July 21 of this year.



he negative balance declined by 123 million USD in June comparing to May and the figure made up 402 million USD. The negative trade balance reduction is basically conditioned by import decline in June. Import from foreign countries has totaled to 600 million USD, which is less by 120 million comparing to May. However, June of this year is behind by $98 million to the data of June, 2014. As for the export made form Georgia to abroad,

export volume has been grown by 3 million through the last month and the figure has achieved 198 million, while decline of 19% has been fixed year-over-year. To note, export volume has been 244 million USD in June, 2014. It should be noted, that export share is on the maximum of the year in June. However, 6 months’ export of 2015 is declined by 24% comparing to the previous first half of the year, import – by 9% and trade turnover – by 13%.



ccording to Public Registry, 49 138 transactions have been fixed on the real estate market in June, which exceeds by 7,3% comparing to the same month of the previous year. However, transaction number has been grown by 17,4% through the last month. To note, the volume of primary transactions is increased by 27,7% comparing to May, while the secondary – by 15%. Monthly index of registry transactions (Decem-

ber, 2010 = 100) has been fixed on 1.168-level by June, which exceeds the same index of the previous year (1.089). As for the annual index, primary (15.8%), as well as secondary transactions (5.3%) of the real estate are increased comparing to the same month of the previous year. In addition, 79.6% of registration transactions carried out in June has accounted for secondary, while 20.4% - primary registration transactions (respectively, June, 2014 – 81.1% and 18.9%).



inimum living wage, counted according to the minimum food basket, is changed insignificantly by 50 tetri through the last month, while the figure is increased by 11,7 GEL year-over-year, “Skastat” reports. Minimum living wage of an average family totals to 270,8 GEL in June.

The minimum living wage of 1-member family amounts to 143 GEL, 2-member – 228,8 GEL, 3-member – 257,4 GEL. However, 4-member family needs 286 GEL for a living, while 6-member and more – 380,4 GEL. To remind, more than 136 thousand families need subsistence allowance in Georgia, they receive the monthly aids from the state.



ccording to “Sakstat”, Producer Price Index is increased by 1,3%, while annual growth pace – 10,2% in June comparing to May, which is on the maximum of 30 months. In addition, the index is grown by 82,2% comparing to the average of 2015. As of “Sakstat”, price growth of 1,9% on the processing industry had a basic impact on the formation of the index through the last month, which has reflected by 1,53 percentage point to the total index of the percentage index change. Namely, prices are grown on chemical industry (14,1%), metallurgical industry and fabricated metal prod-

ucts (3.4% 0). As for the index formation in 12-month period, price change on the processing industry and electricity, air and water production and distribution had a basic impact. Costs are grown by 12,9% in the processing industry. Price increase has been fixed on the food staff in the mentioned period (including beverages) and tobacco production (17,3%), chemical production (18,2%) and metallurgical industry and fabricated metal products (7,1%). It should be noted, that prices were reduced in energy, air and water production/distribution sector by 2,8%.



eorgian potato export to foreign markets decreased by 74% last year. According to Sakstat data, 2 500 tons of potatoes with a total value of $ 0.894 million were exported in 2014, in 2013, 9 980 tons worth $ 3,454 million. In 2012, Georgia exported a total value of $ 96 800 in potatoes.

Georgian potato is mainly exported to Azerbaijan ( 58% of all exports). Among exporting countries are also Kazakhstan, Armenia, Belarus, Russia. It should be noted that last year Georgia imported 30 478 tons of potatoes worth $ 7.032, 10 165 tons worth 1 866 million in 2013. Armenia, Ukraine and the Netherlands are among the major importers.

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caucasus business week


ADJARISTSQALI GEORGIA CEO: A COMPANY IS A SUCCESS, WHEN IT DEMONSTRATES A RESPONSIBILITY FOR THE COUNTRY AND THE SOCIETY, IN WHICH IT DOES BUSINESS Adjaristsqali Georgia LLC has a new CEO Ronny Solberg. Mr. Solberg has got multiyear work experience on top managerial positions in many countries. Ronny Solberg has contributed to the successful implementation of several multimillion projects. - Mr. Solberg, how useful is the implementation of hydro power projects for the Georgian economy development? - Georgia has substantial hydroenergy resources and a development of these resources is very important for the country’s economy. The energy from hydropower stations is one of the cheapest and most environmentally friendly sources of energy. The enhancement of this sector, reduction of energy imports in the Georgian energy system and increase of energy exports are extremely important in order to gain energy independence for the country. Georgia has great hydropower energy capabilities from 300 of its 26 000 rivers, however, only 18% of these resources have been developed. It is also necessary that hydropower projects are carried out in compliance with all standards, mitigating the impact on the environment. This can be done with constant monitoring and control. - What is the benefit the Ajara Region and the whole country will receive after the Shuakhevi HPP project implementation? - Shuakhevi HPP is not just a 187 MW hydro power plant. It means much more for Ajara and Georgia as a whole. Investments of 400 000 000 USD Adjaristsqali Georgia will make signifies: a development of the hydropower sector, creation of new job places, money inflows to the state budget in terms of taxes, an increase of qualified staff in the Georgian labor market, the development of the Ajara region, contribution to the independence of the Georgian energy system and

implementation of social projects which are designed to assist in the long-term development of the Ajara highlands. - How many workers has the Shuakhevi HPP employed from the villages around the construction area? - As of today, over 650 citizens of Georgia are employed in the Shuakhevi HPP project. It should be noted that 90% of the hired labor force is from the local municipality. The hired people are not working only on the construction, a part of them are involved in social projects funded by our company. For example, I would like to mention the rehabilitation of drinking water supply initiated by our company in Makhalakidzeebi village, the Shuakhevi municipality or the rehabilitation project of the public school in Vashlovani village, the Khulo municipality. Both of these projects are currently being implemented right now with a direct participation of local workers. Our company is trying to ensure that Shuakhevi HPP have a positive impact on the standard of living of the local population. - Your company is implementing social projects in the Ajara region. What projects are we talking about and are they are oriented on a long-term development of the region? - Our priority is to support the long-term development of Ajara. In this regard, our company is distinguished by high social responsibility that we have in relation to the communities where we work. Our projects cover various areas such as education and awareness-raising, community

empowerment programs, local infrastructure development, etc. For example, this year we funded BA tuition fees for 8 students, who are studying at higher educational institutions. In summer we are starting a students’ internship program, which aims to support Georgia in preparation of qualified personnel in engineering. Also we have started community empowerment program, which provides grants and support for family business. We have a great list of projects that we are implementing together with local municipalities. It is important for us that our projects are primarily tailored to the interests and needs of local communities. In order to be a successful project, it is a prerequisite that the project have been planned jointly with involvement of local communities and municipalities. All social projects that are implemented by Adjaristsqali Georgia are focused on long-term goals. We will do our best that our planned projects bring sensible results in the region’s development process. - Our society, business sector and the Authorities frequently appraise Adjaristsqali Georgia as a company of high social responsibility. What role should be given to the business sector in the social development process? - I am proud that our company is one of the most socially responsible companies in the Georgian market. It has implemented all the social projects in this region and it is serving for the better future of Georgia. I have a family, children, and what can we do the most valuable for them? I think certainly

we should guarantee high-quality education for them. Our company’s priority is focused exactly on the implementation of social projects oriented on education. I believe a company is a success, when demonstrates its responsibility for the country and the society, in which it does business, when it tries to help to the social development, analyzes public needs. - In addition to the above-mentioned, what kind of benefits can the construction of Shuakhevi HPP hbring to our country? - One of the largest and most important things that Georgia will acquire with this project is qualified, skilled, talented people, who in the future will have their say in the development of the country. With this experienceand ac-

cumulated knowledge they will successfully carry out important projects for both state and private sector. On the other hand, as it is known to the public, before the beginning of this project there were a number of trainings conducted for local residents who had different kinds of work in the construction process. They learn and develop their skills with the professionals, and when this project will be completed, it will not be difficult for experienced and qualified personnel to find jobs. They will be always in demand in the Georgian labor market. - Finally, what do you think about Georgia, what is your attitude towards this country? - My first emotion, when I came to Georgia for the first time, was its amazing nature is very similar to the nature of my country, Norway. I have tasted Georgian food and I like it enormously; I have managed to visit Svaneti – it is very beautiful and impressive region of Georgia, what I have seen so far has exceeded my expectations. I like the villages of Ajara highlands. Each of them has an amazing view, a lot of greenery around, and the most important is that the most kind, warm and very open-hearted people live there. Adjaristsqali Georgia is a Georgian company, which is doing very important work for this country. This is a strong team, I would say it is more like a family, who works hard for the success of the project. On the one hand, a success of the project means construction of the Shuakhevi HPP and, on the other hand, improvement of living standards of the people, who live in the areas of construction. When these two important goals will be reached, only then we can consider the project as successful.




“Floating Exchange Rate Policy Will Protect Georgian Economy”

AZIM SADIKOV IMF Resident Representative in Georgia eorgian economy should adjust to new external shocks, which will be sustained for along-term period and floating exchange rate policy of GEL is the sole correct policy


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in this environment, Azim Sadikov, IMF Resident Representative in Georgia has stated in an interview with Maestro TV’s Business Contact. Azim Sadikov believes that National Bank of Georgia’s policy not to be engaged in the formation of the rate with currency interventions has been the sole correct policy. Otherwise, import will be grown, while export – decreases. “No one can be blamed for the GEL devaluation in Georgia. The Lari has been basically devaluated towards USD and it has been caused by the external factors – USD has strengthened towards many currencies of the world. External shocks from Russia and Ukraine had made a severe blow on the region. However, problems have been created in Azerbaijan and Kazakhstan due to the depreciation of oil. Keeping the floating exchange rate has been the sole correct policy in this critical environment. This step will enable the Georgian economy to overcome the external shocks,” - Azim Sadikov said.

“Iran Deal Will Significantly Boost Iranian Investments in Georgia”

VANO MTVRALASHVILI Vice-President of the Georgian-Iranian Chamber of Commerce deal on the lifting of sanctions against Iran is a historic event, which serves to strengthen peace in the world. When it comes to its impact on the world economy, the first thing to take into account is that Iran is one of the largest oil producers, and its return as an active exporter can have a big impact on the world energy market. Today, Iran has accumulated a stock of about 50 million tons of oil, which is contained in storage, in the case of the lifting of sanctions will be delivered to the world market. In addition, the country has large reserves of gas, which is very important


for global energy security. Iran may be an alternative to Russia in the international oil and gas market,” Vano Mtvralashvili stated. “As for Georgia, we are just waiting for a positive outcome. Georgia and Iran have a very close economic relationship, despite the lack of land border between us. Iran is interested in transportation of energy resources to Europe via Georgia by using the Georgian seaports. The construction of pipelines is also possible - these are promising and quite realistic projects. There is a global interest in Iran and Georgia has to use it. In addition, there are expectations in terms of investment inflow, which are impossible due to the ban on banking transactions for Iranian companies. Restrictions are also imposed on investments by large companies linked to the Iranian government but will be cancelled after lifting of the sanctions. However, a visa regime imposed by the Georgian side on Iran still remains a problem resulted in a sharp reduction in the number of visitors from Iran. After the introduction of visa regulation, trade turnover between the countries fell to $ 120-130 mln. Iran is the main supplier of bitumen to Georgia, which is actively used in road works. Iranian businessmen are very interested in energy, tourism, construction of hotels, and construction in general, imports of building materials, processing industry, etc. At this stage, we are not talking about big business, but after the lifting of sanctions we could expect its activism.

“Lack of Knowledge is the Main Problem of the Georgian Business”

MIKHEIL CHELIDZE mall and Medium-sized Enterprises Association President ack of Knowledge is the Main Problem of the Georgian Business. Last year the program to promote micro and small-sized enterprises was launched in Georgia. The budget of the program implemented by the Entrepreneurship Development Agency (EDA) is GEL 20 million. Nearly 4 000 people are to due to receive financing within the framework of the program. If you ask entrepreneurs, everyone will point out taxes and access to finance as the most major prob-


lem for small and medium-sized businesses. This is clearly wrong. Taxes are paid in every country and obtaining finances is difficult in every country. I personally believe that a much more major problem lies in the apparent lack of knowledge displayed by the Georgian business. We are talking about simple things, like tax code and financing - not macroeconomics. A major plus of the state program is that the beneficiary receives a grant and not a loan. There is a high probability that the business will not succeed and in this case, the entrepreneur will not have a debt, which is very important. This way an entrepreneur will be able to try out his or her business for the second time. In terms of tax legislation, Georgia doesn’t face any major problems. Platform for the small business is quite good; it almost does not require an accountant. When you pay 5% of revenue, it is very easy to calculate. With regard to the availability of finance – the risks are very large, and banks are very good example of this. The provision for a loan is very high - it is almost 2-3 times higher than the loan amount. This is a big problem for startups, since due to such conditions, they have to work a long time to cover the loan and not on profit. And it is clear, as the banks are commercial organization, not charitable funds. However, if someone really wants to do business today, then such an opportunity always exists.

GDP and money transfers from foreign countries

In recent years, Georgia has observed a significant increase of GDP. In 2013 the growth rate of GDP stood at 3.3% and reached USD 16.14 billion. In 2013 money transfers from foreign countries grew by 11% and amounted to USD 1.48 billion. In the first half of 2014 the growth rate stood at 2% compared with the same figure of 2013. The biggest proportion of money transfers is held by Russia, with 50%, after which comes Greece – 14% and Italy with 8%.

Positive trend in mortgage lending

During 2010 – 2011, the growth rate of mortgage lending amounted 39% and the volume of issued loans reached USD 314 million. In 2012 a 34% decrease was observed in comparison with the previous year. In 2013, due to the marketing campaigns of commercial banks and reduced interest rates the volume amounted USD 416 million. In 2014 growth rate of issued mortgages amounted 30% comparing with the same figure in 2013, and reached USD 541 million.

High tenure structure and average household size

Home ownership in Georgia currently stands at 93%. Compared with other European countries it stands second only to Romania, with 96%. This is an indication that the rental market development is very low. Although it can not be discounted that some of the population has not officially registered lease agreements. In Tbilisi the proportion of home ownership is 86%. Average household size in Georgia is still very high and has been around 3.6 for the last few years. In the EU, the average household size is around 2.4. The longterm forecast is that this figure will decrease as economic prosperity improves.

Tbilisi and Batumi are the main flows of new supply

Residential real estate development in Georgia is dominated by Tbilisi and Batumi. In the rest of country the future pipeline is very poor and current stock is mainly represented by Soviet Union period buildings. Ongoing and pipeline residential project in Tbilisi amounts almost 2.9 million sqm under construction. During next two years supply will rise by 16,000 dwelling units and amount 360,000 dwelling units. In the last two years, strong demand has resulted in stalled projects being resumed. There are 112 residential real estate projects under construction in Batumi, which amounts 1.2 million square metres construction area and around 12,000 dwelling units. Suspended construction activity in Batumi stands at a significantly lower level than in Tbilisi.

Growing demand in Tbilisi

Registered purchase transactions are following a positive trend in Tbilisi. The average growth rate of selling transactions during last three years was 8% in Tbilisi. The volume of registered transactions in 2013 amounted USD 829 million. In 2014 transaction volume increased by 6% in Tbilisi (USD 882 million).

Selling price indices are increasing slightly

The average residential real estate selling price in Tbilisi grew from USD 826 per sqm in Q1 2012 to USD 830 per sqm in Q4 2014. Batumi has seen 6% price increase during last three years from USD 646 per sqm in Q1 2012 to USD 686 per sqm in Q4 2014. The average selling price in Mtskheta is more volatile. Despite that by the end of 2014 the average price has increased by 49% comparing with Q1 2011, equaling to USD 418. Comparing to the same figure of Q3 2014 the average selling price increased by 14%. Rustavi observed the 64% increase of average selling price during 2011- 2014. By the end of 2014 the mentioned index amounted to USD 386 per sqm.

July 20, 2015 #108

BANKING NEWS caucasus business week




apitalization problems might be created to the banks on the background of uncertainties, caused by separation of banking Supervisory”, - Azim Sadikov, IMF Resident Representative in Georgia regards. Azim Sadikov has considered bill on Separation of Banking Supervisory from National Bank of Georgia with the program “Business Contact” at TV-company “Maestro”. Sadikov still recommends Georgian government to leave Banking Supervisory under the control of NBG, but hereby notes, that “model selection is a sovereign decision of the country”. Sadikov explains, that capitalization problems might be created to the bank, despite the fact their total indexes are rather high today. “Quality of banks’ credit portfolio might be worsened because GEL has devaluated by 30% towards USD through the recent year, whereas 60-65% of credits are issued in USD. Despite the fact, that banks’ capitalization is rather high, some of the banks might need additional capital. Several investors might delay to make investments in the bank on the background of uncertainties caused by separation of Banking Supervisory from NBG and it will get harder attraction of capital for the banks”, - Sadikov explains and notes, that if it becomes so, banks will be obliged to restrict crediting of economy in order to strengthen bank’s balance sheet data, which will have an impact on economic growth prospect of 2016. Representative of IMF says, that draft version of the bill includes serious problems, but the government works to refine it. In Addition, he notes, that IMF has submitted several concrete recom-

mendations to Georgian government. “Our recommendation is that the initiated amendments must be in line of Basel Core Principles, which means that Banking Supervisory should be independent, there should be transparent managing structure, some issues related to accountability should be definite and independent budget should exist. We have represented many concrete recommendation in this direction”, - Sadikov says. He explains, that the most important is not to worsen quality of Supervisory. Supervisory must be still strong and independent from political impact”. “We are not sure, that this initiative will improve Banking Supervisory, but finally everything will be dependent on the type of the adopted code. There are tow issues, there is a risk, that the Agency will not be wholly independent and the management will not meet to the international standards. Correct legislation is extremely important in order to protect independence of the Supervisory. I mean good management and accountability. Merely strong legislation can minimize these risks. The second risk is related to the transition period, after the Parliament will adopt the code, there should be a period, when NBG should deliver the duties to the new independent agency and not to worsen banking supervisory”, - Azim Sadikov declares. Azim Sadikov has noted, that it is not first case when international organizations have appealed to the government with a joint similar letter, but he did not specified the submitting period and the issue. Sadikov excludes IMF to leave Georgia. According to him, the Fund cooperated with Georgia in harder conditions and always is ready to assist Georgian people.



ASHA 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 mediumsized enterprises. PASHA Bank has been operating in Georgia for over two years already and it was named the Fastest Growing Corporate Bank in Georgia 2015 by Global Banking and Finance Review Awards. Since its inception in 2011, the Global Banking and Finance Review Awards reflect the innovation, achievement, strategy, progressive and

inspirational changes taking place within the Global Financial community. The awards were created to recognize companies of all sizes which are prominent in particular areas of expertise and excellence within the financial world. The Awards have evolved and grown to include those in Banking, Foreign Exchange, Insurance, Pension Funds, Compliance & Advisory, Corporate Governance, Brokerage & Exchanges, Project Finance, Binary Options, Investment Management, Technology, Asset & Wealth Management, Exchange Traded Funds, Real Estate, Corporate Social Responsibility and other areas.



ASHA Bank co-funded yet again another educational project this summer: foundation Bright Georgia organized a special Summer Camp for university applicants from socially vulnerable group in Kobuleti. The Summer Camp hosted 30 participants who were selected from different parts of Georgia. The application and selection process was conducted by foundation Bright Georgia. The applicants took part in a twoweek preparatory intensive course for university entrance exams. Two-hour preparatory seminars were provided daily for Georgian and English language exams as well as tests for analytical skills. Mock tests were held for the applicants in order to prepare them for national exams. The Summer Camp also hosted special guests who shared their success stories with the appli-

cants, telling about the importance of hard work and education for achieving life goals. Tatia Sharangia, Dato Turashvili, Kakhaber Tsiskaridze, Giorgi Chaushba and Nikolay Deriugin gladly visited the Summer Camp and spent their time with the participants. “Corporate Social Responsibility is very important to PASHA Bank. We have implemented several CSR activities during previous years and we are intending to continue doing so. We believe that such educational projects are extremely useful for the youth and their future. We hope that the knowledge that the applicants received at the Summer Camp will help them pass their exams with the desired results so that they continue their studies at different universities. We wish them success,” commented the CEO of PASHA Bank, Mr. Shahin Mammadov.



Georgian Hydro Power Plant (HPP) has slashed its energy emissions and is now “well-positioned” to generate additional financial revenues and bolster the economy, says a top European investment bank. By reducing its energy emissions, the stateowned operator of Enguri Hydro Power Plant (HPP) Engurhesi Ltd was able to conclude the first sale of carbon credits, putting the company in a favourable state to generate additional financial revenues from the sale of its emission reductions going forward, said the European Bank for Reconstruction and Development (EBRD), who supported the deal through its Carbon Project and Asset Development Facility (CPADF). The deal comes after years of investment, which led to the project’s registration under the Kyoto Protocol’s Clean Development Mechanism

(CDM) towards the end of 2012. EBRD provided technical assistance to help Engurhesi Ltd decide on a sales strategy as well as verification of emission reductions realised between January 2013 and August 2014. As a result, over 400,000 carbon credits were subsequently issued and sold by Engurhesi to Norwegian energy company Statkraft. The EBRD financed the rehabilitation of Enguri HPP, which now produces over 40 per cent of the electricity consumed in Georgia. As a result of the refurbishment, the overall output from Enguri HPP has increased by 10-15 percent, leading to significant emission reductions. Today the EBRD said part of the emission reductions also compensated for the environmental impacts of the Bank’s 2015 Annual Meeting and Business Forum in Tbilisi, which was recently certified as a carbon neutral event.



iberty Bank CEO, George Arveladze and UnionPay International President, Shi WenChao announced the ongoing project about issuance of UnionPay International QuickPass contactless cards in Georgia at a joint press conference held at Liberty Tower. After implementing the project, Liberty Bank will become the first bank in the region to offer UPI QuickPass contactless cards. With enhanced contactless payment function customers will be able to pay at merchant locations simply by tapping cards on POS terminals – completing payments in a few seconds. Customers will be able to use new QuickPass cards at shops, restaurants, pharmacies, gas stations and other merchant locations as well as for ecommerce purchases. Liberty Bank is one of the financial institutions in Georgia offering full-fledged acquiring and issuing services of UnionPay International cards. Since August 2014, Liberty Bank has issued over 197,000 Classic and over 58,000 Diamond UPI cards. Liberty Bank has successfully finished the Chip Migration Project enabling acceptance of UnionPay Chip Cards in all its ATM and POS network. In addition, when paying with UnionPay International cards, Liberty Bank cardholders earn points at Liberty Club. Customers can redeem accumulated points for cash, top up mo-

bile airtime or pay for utility bills. In addition, all cardholders enjoy up to 50% discounts available at partner locations. Customers also benefit from special offers and discounts globally, designed for UPI cardholders. “I am glad to launch UnionPay International QuickPass cards in Georgia - creating more convenience for the customers. Liberty Bank is the largest of the financial institutions in Georgia partnering with UnionPay International for issuing and acquiring services and we are looking forward to creating new products and solutions such as Issuance of UnionPay QuickPass cards and E-Commerce projects which will enhance customer experience” – announced George Arveladze, Chief Executive Officer of JSC Liberty Bank at a joint press conference with UnionPay International. “UnionPay International is expanding its footprint worldwide. I am glad we have a strong partner in Georgia offering full-fledged issuing and acquiring services of UnionPay International. Up to date over 250,000 of Liberty Bank customers are using UPI cards in Georgia and abroad and we are looking forward to having this number grow. I am glad to announce launching of contactless QuickPass cards in Georgia” – said Shi WenChao, president of UnionPay International.



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July 20, 2015 #108



lobal Alliance will assist Georgia in implementing the primary healthcare system reforms, JeanElie Malkin, a president for the International Consulting Group of Global Alliance, told the international conference that was held at the national medical-training center of the Georgian Ministry of Labor, Health and Social Protection. The conference was called as Primary Healthcare: Future Perspectives in Georgia. The conference was organized by Global Alliance. The organization experts professor Peter Makara and doctor Andrei Mechineanu introduced researches on the topic: 1) Cornerstone of Healthcare Services Supply Systems and 2) Primary Healthcare in Georgia: Renovation and Reinvestments. The presentations referred to the recent initiative of Georgian Health Minister David Sergeenko on primary health system reformation. The primary healthcare system reformation will make serious positive influence on the public

health, Georgian Health Minister David Sergeenko noted at the conference. “For many years our health system have erroneously made accents on the technologies that needed refined hospital treatment, high-technology operations and developing unprecedented technologies. This is very important for the health system, but this is only a particle of the pyramid. Primary healthcare system was less supported previously. This sector includes three main functions: prevention of diseases, early diagnosis of disease and its efficient management, providing the population with medical education. These three main functions of the primary health system were pushed to the backstage previously. Our main goal is to restore the ground on which the normal health system is based”, Sergeenko said. “The Georgian Heath Ministry has shifted accents onto the primary health system as a cornerstone of the health system. With an active involvement of professional doctors and nurses and with a support of Global Alliance, the country is starting a new process to outline the primary healthcare

system importance. More resources, higher skills and higher quality are required to improve the system for public welfare. This is our goal. This signifies citizens will visit the primary health system and they will have less need to visit the secondary and third chains of the health system. Consequently, early diagnosis ensures higher chances for healing and health recovery will proceed with higher quality. Hence, the quality of the primary health system

will be one of the sensible results of this system. The Health Ministry assures the population that the primary health system is a cornerstone of the whole system and one of the important fields”, Jean-Elie Malkin said. Discussions were also held around the presentations with the participation of representatives of the Health Ministry, donor organizations, Georgian medical community and Tbilisi and regional chains of the primary health system.



ew demands on primary health care emerge due to aging, depopulation and need of prevention and long-term care of non-communicable diseases (NCDs). Because of underinvestment in primary care in the previous decades, the current supply of primary care needs significant strengthening of network, infrastructure, human resources, financing and setting the right incentives to produce quality services and universal coverage with primary care,” reads Georgia’s Ministry of Health’s and the international consulting group Global Alliance’s shared event’s statement. The event titled “Primary Health Care: The Way Forward in Georgia” was held in the Ministry of Labour Health and Social Affairs of Georgia on July 16. The event’s main focus was dedicated to creating a platform where domestic and international experts can share their ideas on planning the new Primary Healthcare network and system in Georgia. The Ministry of Health and Global Alliance recognize the Primary Healhcare as the pillar of a new healthcare system that is due to be

established in Georgia. International experts Jean-Elie Malkin from Global Alliance and Prof. Peter Makara from Semmelweiss University Budapest shared with the local media their main points on developing a successful Primary Healthcare in Georgia. Both underlined the importance of recognizing Primary Healthcare as the priority for the country. “Since the Independence Day of Georgia Primary Healthcare has been stressed as the main priority by the government, however this just remained true in rhetoric and nothing substantial has been done in this regard up until this point,” Hungarian Prof. Makara specializing in Public Health Policy told the Georgian media. Jean-Elie Malkin, the president of the consulting group Global Alliance, who is actively working with the Minister of Health David Sergeenko in the Hepatitis C elimination program in his turn told the media that Georgia needs to create its own Primary Healthcare model that will be accommodated to the country’s healthcare specificities. Mr Malkin stressed that many countries may have similar programs, but Georgia needs to focus on creating a unique model that will

be successful for the country. Jean-Elie Malkin: “Let me, first of all, congratulate the Ministry of Health of Georgia for taking the issue of Primary Healthcare as a priority for the country. It’s very important; it’s a real framework for the process of improving the healthcare system of Georgia. We as Global Alliance are delighted to participate in this process. So, there is already an established Primary Healthcare system in Georgia, but we can always improve the system. We can always improve it by giving more tools, skills, finance and I will say – which is very important – recognition to the doctors who are in charge. By this I want to point out not only the doctors but also the med-sisters who work for Primary Healthcare.” I think the fundamental change will come when the overall health system will improve with Primary Healthcare as one of the cornerstones of this process of improvement. The population will see that now they will get more quality of care in Primary Healthcare and it will be easier to go to Primary Healthcare instead of bypassing this system by going to the secondary level hospitals.



he primary health care (PHC) is the founding pillar of a new health care system in Georgia. It desserves a top priority focus in policy planning and in medical practice. A comprehensive PHC system prevalent in the EU, comprising a wide range of health education, promotion, prevention, curative and rehabilitative, and terminal activities. Comprehensive PHC is not just for richer EU member states, it is also affordable and deliverable in countries, like

Georgia at least in longer term perspective. Given the right incentives, in the Georgian health system, there is a real opportunity to expand provision of medical services in a primary care setting, which is a prerequisite of an improved health system and a better health of the citizens.. The remaining gaps in access to high quality primary care in Georgia are in part a reflection of the fact that monetary support for primary care has been lagging behind rhetoric. The situation in wich primary care has been constrained by a lack of resources has, however, aggravated the lack of trust that Georgian citizen are willing to bestow on it, particularly when hospitals, secondary and tertiary care facilities are in better physical condition, better equipped and better staffed. The rural population suffers disproportionately from this situation and physicians, feldshers and nurses often act as de facto generalist staff, even when they are not fully trained to do so. Primary care facilities in Georgia are not yet in a position to take on the bulk of health services, as would be necessary for the full implementation of the family medicine model. There are a number of steps that would need to be taken to achieve this goal. In addition to the appropriate allocation of financing for human resources and equipment, as well as investments in the training of staff , these will include revised payment allocation mechanisms, improved quality of care through the development and implementation of clinical practice guidelines and the enforcement of quality assurance mechanisms , more clearly delineated levels of care, and im-

proved gatekeeping and referral mechanisms. Policy-makers need to be made aware of the concept of primary care and what it has to offer. This will require investment for advocacy and marketing activities to communicate the benefits of primary care to health professionals, policymakers and the public. The role of primary care should not be defined in isolation but in relation to the constituents of the health system. Primary and secondary care, generalist and specialist, all have important roles in the development of new Georgian health system. There are varied definitions and options of the scope and role of general practice, primary health care and specialists in Georgia. For instance, theoretically a primary care team can vary from a community nurse, a feldsher or rural general practitioner to a multidisciplinary team of up to 30, comprising specialist nurses, managers, support staff, family medicine and other primary care specialists(like in the most developed EU countries). The developmental process has to build on existing structures, private ownership and more then one organisational form can coexist paralelly The rural medical point as organisational framework can tackle the diversity of existing activities and offer different level and scale of services depending on the size and quality of human and infrastructural resources, on the basis of a well estabsished quality control and development system. In a longer future a gradually developing GP system, the new role of the general practitioner, better equiped and better remunerated on perfor-

mance basis may give an indication of the breadth of the primary care services provided, and the degree of uniformity in the services. Organizational structures in Georgia are changing, giving potentially way to integrated institutions comprising primary and secondary care. In Georgian health system, services traditionally provided by hospital and secondary care specialists could now be increasingly the responsibility of the primary care team. A new approach is necessary: one in which primary care is seen in a positive light, with a proven contribution to health gain beyond control or cost-containment functions. The approach should be based on a comprehensive and integrated model developed in the frame of the new health policy in Georgia. The new approach should combine principle of equity, new universalism with affordability, economic realism with the objective of providing coverage for all and not coverage for everything. The renewed PHC will provide integrated primary health care to patients in a single point; will to a greater degree focus on diagnostic and treatment of chronic diseases and conditions; will provide accessible, appropriate and affordable health care to their patients; advice to increase the interest of the population for their own health and prevention, including through promoting a healthy life style, which could help improve diagnostic and treatment of chronic diseases. PHC will use effective and efficient information technologies; and should provide a good working environment to attract and encourage a high quality labour.

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ccording to Tourism and Resort Department of Adjara, regional tourism statistics is based on the objects’ data registered in Adjara. “Despite the unstable social and political situation in the targeted countries, June’s data is not merely sustained but moreover

is slightly increased (0,44%)”, - the Department declares. To remind, 496 758 international visitors have visited Georgia in June, 2015, which exceeds by 9,3% comparing to the same period of the previous year. Annual growth of tourist number has made up 3,4% in the same period.



anager of the enterprise has discussed investment plans with Vice Premier George Kvirikashvili on Monday, who was visiting Ksani on Monday. Minister of Economy has introduced to the producing process. “The plant employees 370 persons. The company

implemented additional investment of 21 million USD in the previous year and increased production. The products is not merely produced for local market, but the most demanding markets of foreign countries. Today we have discussed the tools, which might support this production in terms of additional job creation. We also maximally assist the company at the exporting market to avoid any hamper”, - George Kvirikashvili declares. According to the managers of JSC “Mina”, investment of over 60 million USD has been made in the plant through 1998-2014, at that 21 million USD is invested in 2014, which enabled the company to double production capacity. Now the plant can produce different types of glasses with a capacity of 60 thousand. The plant is equipped with the newest technology and devices. Over 25% of produced products is sold on Azerbaijan, Turkey and Italy markets.



ccording to the 2013-2015 collective agreement and additional agreements with the Georgian Railway’s trade unions, a special commission has been set up for settlement of labor disputes. The commission is

staffed by representatives of the Georgian Railway Trade Union and the Georgian Railway Workers’ New Trade Union. The commission operates due to the duration of collective agreements. The commission’s decisions will make clearer the labor disputes settlement process.



he head of the Competition Agency has officially confirmed the information exclusively obtained by “Commersant” two days ago - sanctions will be imposed on five largest oil companies for violation of competition law. The head of the Competition Agency George Barabadze said at the briefing a few minutes ago. We are talking about Wissol (a fine in the amount of GEL 10 426 393), LUKOIL ( GEL 4 740 260), SOCAR (GEL 14 381 385), Rompetrol (GEL 10 885 806) and Gulf (GEL 11 267 384) and three economic agents which have close relations with

the abovementioned companies. A total volume of the fine reaches GEL 55 million. According to him, the conclusion is voluminous and includes 1 100 pages based on 50 volumes of materials. Barabadze notes that the Agency was given a 10-month deadline to complete the survey, but it was finished in 8 months ahead of schedule. Based on the results, the Agency came to the conclusion that in the years 2008-2014 the companies have violated the principles of competition on the market, imposed artificial barriers and bargain prices.



ube Tower” hotel will be built in Batumi with Azerbaijani investment. According to Mikheil Dzodzuashvili, Director of “Adog Georgia” company engaged in the hotel construction, works will start in about ten days. A few days ago “Adog Georgia” signed a contract with the construction company “ANAGI”. Dzodzuashvili says that at least $ 40 million will be invested in the project that is scheduled to be



e are honored to have won the UNDP Gender Equality Award 2015, for Gender Balance at the Executive Level. We are pleased that our policy of equal opportunity for men and women in the workplace was acknowledged and positively appraised by an organization of such high standing. Over the years, we have stood by our belief that women and men should be equally involved in decision-making processes. Indeed, in the pursuit of development, this devotion to gender equality is the only way to progress in today’s business environment. For decades now, the world’s leading innovative companies have been following this approach. Their development and success is a clear argument for gender equality. Samsung, IBM, Unilever, KPMG and Ernst & Young are among the leading examples in this regard. The world has never seen so many women in

paid employment than it does today, and women everywhere are occupying top level management positions. However, there is still an imbalance to be addressed. We believe that tomorrow will be even more diverse and we’ll have even more successful women. Olia Watt, Executive Director at PMCG explains: “While some companies find formal targets more appropriate to use, we as well as many other successful companies prefer not to create formal frameworks. We are oriented on discovering talented professionals and encourage and support their further development. For us, our team is the most valuable asset. That is why we try to create a comfortable environment, oriented toward progress where everyone has an equal opportunity to develop. For example, we realize that mothers need a more flexible working schedule; we fully compensate them for maternity leave; we have corporate insurance packages that also includes family members”.

completed in 2017. “Cube Tower” will be a 30-storey hotel consisting of 180 rooms with a terrace pool arranged in one of the cubes. ‘’Adog Georgia” was founded in Batumi in 2011, its head office is located in Baku. Dzodzuashvili confirms that in 2011 the company has purchased the area of 1 621 square meters for 1 GEL. According to the undertaken commitment, the investor should build a 22 - storey hotel complex.



cDonald’s” starts selling a royal Bavarian beer “Kaltenberg”. According to Temur Chkonia, “McDonald’s Georgia” founder, a limited amount of beer will be sold in the restaurant. He says the sale and consumption of alcoholic beverage will correspond to “McDonald’s” standards and the sale of beer to minors will be regulated. Beer is sold in “McDonald’s” restaurants in many countries - some “McDonald’s” restaurants in France even offer one glass of wine. In Georgia beer will be sold in a bottle “drive”, and inside the restaurant – in plastic glasses. We’ll try to introduce a culture of beer drinking “, - says Chkonia. In his words, Georgia will be the fourth country in the world, among other European countries, where locally produced beer will be sold. Royal Bavarian beer “Kaltenberg” will go on sale in all “McDonald’s” restaurants in the coming days. By the end of the year 5 million liters of royal Bavarian beer are expected to be sold in Georgia, the agreement also foresees export of tens

of millions liters of the royal Bavarian beer made in Georgia to Armenia and Azerbaijan. The beer is produced on the Georgian-German investments, and is the property of the Bavarian royal family. “Around 3.200 million euro was spent on the creation of the new enterprise. The brand owner, Prince Leopold Heinrich of Bavaria arrived in Georgia on May 23 to review the situation on the ground. The new beer is of a very high quality. We have already purchased new bottles, labels, and new technologies “- Chkonia told “Commersant”. “The Prince’s family have brewed quality beer since 1260. Its quality is controlled personally by the Prince and his family. It is their beer, and unlike our competitors, its quality will be very high, “- notes the businessman. Royal Bavarian beer is brewed only in a few countries, according to the standards specified in the Bavarian Purity Law adopted in the 16th century. The Bavarian Purity Law is the oldest food law whereby Duke Wilhelm IV of Bavaria passed a law which stipulated that only barley, hops, water and yeast may be used to brew beer.



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July 20, 2015 #108


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July 20, 2015 #108



caucasus business week

BUSINESS SECTOR - I QUARTER, 2015 Economic Outlook and Indicators


President of Azerbaijan Demands Removal of Barriers for Business


zerbaijani President Ilham Aliyev spoke in defense of Azerbaijani businessmen during his speech at a meeting of the Cabinet of Ministers dedicated to the socio-economic development in the first half of 2015 and the upcoming challenges. In his speech, the Head of State particularly emphasized that the only duty of the business to the state is to timely pay taxes in full – more business owes nothing to anybody. The President also noted that if desired businessmen are free to implement social projects that are sure to be welcomed. However, as Aliev said, it is not an obligation. According to him, the culture of social responsibility in the country is just being formed. Ilham Aliyev stressed that the attempts of some government agencies to impose informal taxes on business, and attempts of the so-called “protection racket” are unacceptable. The head of state said that such attempts, unfortunately, take place both from some representatives of the tax authorities and the local authorities and law enforcement agencies. President Ilham Aliyev called such behavior the betrayal of the country and urged businessmen to actively inform him of all such violations through letters, e-mails and so on. President of Azerbaijan gave a clear order to stop obstructing businessmen and stressed that amid falling oil prices, business can and should become a major driving force of economic development.

Russia plans fuel shipments to Syria from Crimea


ussia plans to supply Syria with 200,000 tonnes of liquefied petroleum gas (LPG) per year via the Crimean port of Kerch, two trading sources told Reuters. The plans are a further sign of cooperation between the two countries despite hopes in the West that Russia might stop shielding President Bashar al-Assad from pressure to step aside. Moscow had been shipping significantly lower volumes of LPG to Syria via Kerch before Russia annexed the Crimea peninsula from Ukraine in March 2014. The United States and the European Union, which say the seizure of Crimea violates international law, have imposed sanctions on individuals and business in Crimea, which include restrictions on use of the Kerch port. Russia is a staunch ally of Syria and an exporter of arms to Damascus. President Vladimir Putin reaffirmed support for Assad last month, saying Moscow opposed any use of external force to try to end four-and-a-half years of conflict. “There are talks about LPG to first be shipped to Kerch and then to Syria, about 200,000 tonnes per year,” one trader said.

Turkish company to provide TANAP with gas turbines


urkish GE Petrol&Gaz company will provide TANAP with gas turbines, Anadolu agency reported. A corresponding agreement has been signed between the sides, however, its cost is not disclosed, according to the agency. The groundbreaking ceremony of TANAP was held in Turkey’s Kars province with participation of Azerbaijani, Turkish and Georgian presidents March 17. TANAP project envisages transportation of gas of Azerbaijan’s Shah Deniz field from the GeorgianTurkish border to the western borders of Turkey. TANAP’s initial capacity is expected to reach 16 billion cubic meters of gas per year. Around six billion cubic meters of this gas will be delivered to Turkey and the rest of the volume to Europe. Following the completion of a legal implementation procedure, TANAP’s shareholders list will be as follows: SOCAR – 58 percent, Botas – 30 percent and BP – 12 percent.


Obama, Putin congratulate each other for Iran deal


ussian President Vladimir Putin and U.S. President Barack Obama spoke on Wednesday July 15, congratulating each other on reaching a nuclear agreement with Iran. The Kremlin issued a statement following a telephone conversation between Putin and Obama, a call the White House also confirmed. “Both sides stressed that the comprehensive agreement on the Iranian nuclear program meets the interests of the entire international community, helping strengthen the nuclear nonproliferation regime and decreasing tensions in the Middle East. In this respect, the presidents emphasized the role of Russian-U.S. dialogue in ensuring security and stability in the world,” according to the statement. Putin and Obama “expressed a mutual intention to continue joint work in the interest of sustainable implementation of the Vienna agreements, as well as certain other current international matters, including countering international terrorism,” according to the Kremlin statement. The two leaders also “congratulated one another on a special date in Russian-American relations: the 40th anniversary since the Soyuz-Apollo orbital flight.”

North Korea To Hold Local Elections In July, First Under Kim Jong Un


orth Korea announced in June that it plans to hold local elections in July, the first time since leader Kim Jong Un came to power in 2011. The elections will be held for deputy positions at provincial, city and county assembly levels, state-owned Korean Central News Agency, cited by Yonhap, reported. The North’s local elections are held every four years, with the number of seats being determined by each district’s population. North Korea’s legislature, while nominally democratically elected, has long been criticized for its electoral process, where people eligible to vote for their district’s deputy are represented by only one candidate, who is nominated by the ruling party. The Democratic Front for the Reunification of the Fatherland coalition, which selects the candidate, is headed by the Workers’ Party of Korea. The results of the elections are also believed to be a rubber-stamp for the Kim dynasty’s regime. When the country held its first parliamentary elections under Kim’s leadership last March, official voting figures showed a voter turnout of nearly 100 percent. North Korean defectors claim that the vote acts as an informal census, with local neighborhood committees being formed to monitor the voter turnout. Abstaining from the vote or failing to appear can reportedly be considered treason. Kim, who was still the heir to the nation during its last local elections, ran in the 2014 parliamentary elections representing the dynasty’s home district, Mount Paektu, the Korean Peninsula’s highest peak.

Google’s quarterly revenue and profits rise


oogle’s profits rose 17% to $3.93bn in the three months to June from the quarter last year, boosted by an 11% rise in revenues to $17.7bn. The search giant’s all-important advertising revenue was also up 11%, to $16bn. In a statement Google’s finance chief Ruth Porat highlighted ad growth on mobile and YouTube. Google’s shares jumped 7.5% in after-market trading as traders welcomed the better-than-expected results. The share price had already risen 3.5% during normal trading hours. Advertisers pay Google only if a user clicks on one of their ads. “Cost per click”, or the average price of online ads, fell in the quarter, but was more than offset by the increase in ad volumes. Google’s ad revenue has been under pressure as consumers access its services on mobile devices such as smartphones and tablets, whose advertising rates tend to be lower.



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July 20, 2015 #108

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Embassy United States of America Embassy 11 Balanchivadze St., Dighomi Dstr., Tbilisi Tel: 27-70-00, 53-23-34 E-mail:; United Kingdom of Great Britain and Northern Ireland Embassy 51 Krtsanisi Str., Tbilisi, Tel: 227-47-47 E-mail: Republic of France Embassy 49, Krtsanisi Str. Tbilisi, Tel: 272 14 90 E-mail: Web-site: 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: Republic of Estonia Embassy 4 Likhauri St., Tbilisi, Tel: 236-51-40 E-mail: Republic of Lithuania Embassy 25 Tengiz Abuladze St, Tbilisi Tel: 291-29-33 E-mail: Republic of Latvia Embassy 16 Akhmeta Str., Avlabari, 0144 Tbilisi. E-mail: 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: Web-sait: 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: 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: 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: Ukraine Embassy 75, Oniashvili St., Tbilisi Tel: 231-11-61, 231-12-02, 231-14-54 E-mail:; 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: 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: 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: Web: 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: Romania Embassy



caucasus business week

7 Kushitashvili St., Tbilisi Tel: 38-53-10; 25-00-98/97 E-mail: Republic of Poland Embassy 19 Brothers Zubalashvili St., Tbilisi Tel: 292-03-98 Web-site: Republic of Iraq Embassy Kobuleti str. 16, Tbilisi Tel: 291 35 96; 229 07 93 E-mail: 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: United Nations Office Address: 9 Eristavi St. Tbilisi Tel: 225-11-26/28, 225-11-29/31 Fax: 225-02-71/72 E-mail: Web-site: International Monetary Fund Office Address : 4 Freedom Sq., GMT Plaza, Tbilisi Tel: 292-04-32/33/34 E-mail: Web-site: Asian Development Bank Georgian Resident Mission Address: 1, G. Tabidze Street

Freedom Square 0114 Tbilisi, Georgia Tel: +995 32 225 06 19 E-mail:; Web-site: World Bank Office Address : 5a Chavchavadze Av., lane-I, Tbilisi, Georgia ; Tel: 291-30-96, 291-26-89/59 Web-site: 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: 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: 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:

Hotels in Georgia TBILISI MARRIOTT Tbilisi , 13 Rustaveli Ave. Tel: 77 92 00, COURTYARD MARRIOTT Tbilisi , 4 Freedom Sq. Tel: 77 91 00 RADISSON BLU HOTEL, TBILISI Rose Revolution Square 1 0108, Tbilisi Tel: +995 32 402200 RADISSON BLU HOTEL, BATUMI Ninoshvili Str. 1, 6000 Bat’umi, Georgia Tel: 8 422255555 SHERATON METECHI PALACE Tbilisi , 20 Telavi St. Tel: 77 20 20, SHERATON BATUMI 28 Rustaveli Street • Batumi Tel: (995)(422) 229000 HOLIDAY INN TBILISI Business hotel Addr: 1, 26 May Square Tel: +995 32 230 00 99 E-mail: Website: 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: Website:

Restaurants CORNER HOUSE Tbilisi, I. Chavchavadze ave. 10, Tel: 0322 47 00 49; Email: RESTAURANT BARAKONI Restaurant with healthy food. Georgian-European Cuisine Agmashenebeli Alley 13th Phone: 555 77 33 77 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:

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: 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




caucasus business week

Two residential complexes include 464 apartments with parking, green area, outdoor swimming pool and playground for children. ”Metrocity” is unique with its special maintenance services. “Metrocity” integrates two five star hotels, private school and residences with private swimming pool, panoramic terrace restaurants, casinos, Spa, shopping center including 100 brand stores, sport club, cinema, bowling center, playground for children, gold sand beach and the biggest conference hall in Transcaucasia for 1500 guests.”MetroCity” can be found just 2 km from Batumi International Airport and 500m from the city center. The complex with its location is harmoniously mixed with mountains and sea views. The project implementation has begun in February 2015 and will be successfully completed in April 2017. Residences from 38 m2 to 300 m2 are available.


STARTING PRICE IS FROM 1425 $ Address: Leh and Maria Kachinsky Str.1, Batumi Tel: +995 577 14 17 14

July 20, 2015 #108

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