Caucasus Business Week #128

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BUSINESS WEEK December 28, 2015 #128

December 28, 2015, Issue 128

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HAPPY NEW YEAR - 2016

Review 2015


2 MAIN EVENTS

Association Agreement Has Been Finally Ratified by all EU Countries The association agreement between Georgia and the European Union was finally ratified by all EU countries, according to chairman of Georgian parliament David Usupashvili. Belgium ratified the Association Agreement between Georgia and the European Union, which was prerequisite to finalize the deal, Davit Usupashvili said. The European Union and Tbilisi signed the EUGeorgia Association Agreement on June 27, 2014. To come into effect this agreement should be signed by all 28 EU states. “Good news came from Brussels. Belgium, which was the last, the 28th country of the European Union member states to ratify the Association Agreement, has completed this process,” Usupashvili told reporters. According to the lawmaker, the association agreement was finally ratified by all EU countries. However, the Georgian Foreign Ministry said that the association process has not yet been completed. Georgia has been in talks with the European Union over the association deal since 2010. The agreement was ratified by Georgian parliament on July 18, 2014. The European Parliament ratified the agreement on December 18, 2014, leaving the document to be ratified by all the 28 EU member states. The European Union is also due to introduce a visa-free regime with Georgia in 2016, according to EU officials. The country meets EU criteria for cancelling visa travel, with the European Commission set to propose necessary legislation to the European Council.

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December 28, 2015 #128

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GEORGIAN PRIME MINISTER IRAKLI GARIBASHVILI RESIGNS

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eorgian Prime Minister Irakly Garibashvili resigned on Wednesday after two years in office in a surprise move less than a year before a parliamentary election. In a televised address to the nation, Garibashvili gave no specific reason for his decision which he said took immediate effect, but opposition politicians linked it to a decline in the popularity of the ruling Georgia Dream coalition which faces an election in October next year. “I’ve made a decision today to resign from the post of prime minister ... I’m leaving this position today, but will remain a loyal soldier of my motherland,” Garibashvili said. Garibashvili became the prime minister, the

country’s most powerful position, in November 2013, when Bidzina Ivanishvili resigned and named his close ally as successor. He served as an interior minister after Ivanishvili’s Georgian Dream coalition defeated former President Mikheil Saakashvili’s party in an election in October 2012 and took control both of the government and legislature. “The interior minister’s position or prime minister’s post was never an end in itself for me. It was always an opportunity to serve my country and our people,” Garibashvili said. But both observers and the opposition linked it to a sharp fall in support for Georgian Dream coalition down to 18 percent, according to a recent opinion poll.

“This reshuffle is linked to the upcoming parliamentary election. Members of the Georgian Dream coalition have seen a decline in their popularity rating and it would be difficult to start a pre-election marathon with the same premier,” an opposition politician Mamuka Katsitadze said. The opposition blames Garibashvili’s government for mounting economic woes in the former Soviet republic of 3.7 million, which is the subject of geopolitical rivalry between Russia and the West. It was not immediately clear who would replace Garibashvili, who will remain as an acting prime minister before a successor and a new cabinet is approved by parliament.

Russia is Facilitating Visa Regime with Georgia Nine years after mass deportation of Georgian citizens, Russia will introduce a simplified entry visa regime for Georgian citizens starting December 23, the Russian Foreign Ministry said Tuesday. Russia has completely reversed its tough stance on Georgian tourists by introducing simplified visa-procedures. Today Russia’s Ministry of Foreign Affairs released a statement that said from tomorrow, December 23, all Georgian citizens can enjoy simplified visa procedures with Russia. The Russian side stressed the country had taken this step because it “strived for positive relations with Georgia”. “In the context of the continuing normalization of Russia-Georgia relations and in the interest of stimulating the positive trends between our countries, starting December 23, 2015, Georgian citizens will be able to receive working, study and humanitarian single- and multiple entry visas, as well as private visas…issued by Russian immigration authorities in line with standard regulations,” the ministry said in a statement. This does not exclude future visa-free travel between Georgia and Russia achieved through mutual cooperation,” the Russian body added. The ministry added that a visa-free regime with Georgia may be introduced “on a reciprocal basis” sometime in the future. At present, the Russians can travel to Georgia without visas, but the Georgians must receive visas to enter the Russian Federation. According to members of the ruling team, introduction of visa-liberalization regime for Georgians is targeted to warming of relations between Georgian and Russian citizens.

GIORGI KVIRIKASHVILI AS GEORGIA’S NEXT PM

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eorgia’s president on Friday nominated vice prime minister Giorgi Kvirikashvili as the new head of government after the surprise resignation of Irakli Garibashvili. President Giorgi Margvelashvili said he had submitted Kvirikashvili’s candidacy to parliament for approval after the country’s ruling coalition threw its support behind the 48-year-old economist as it struggles to boost popularity ahead of key parliamentary polls next year. In brief comments to reporters, Kvirikashvili, who until now also served as foreign minister, said he was planning “some change -- not a dramatic one” to the cabinet. The 33-year-old Garibashvili suddenly resigned on Wednesday after just two years on the job without explaining his decision. He became Europe’s youngest head of government when he was appointed at age 31 in November 2013.

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He welcomed Kvirikashvili’s nomination, praising it as a “very good choice” He was involved in politics in the late 1990s then again three years ago when he revealed himself as member of the Georgian Dream coalition (GD), established by former Prime Minister Bidzina Ivanishvili. The GD coalition defeated United National Movement (UNM) in the Parliamentary Elections in October 2012. Before entering politics and shortly before the 2012 elections Kvirikashvili was general director of the Tbilisi-based Cartu Bank, established by Ivanishvili. He held this position from 2006 to 2011. Since 2012 until September this year Kvirikashvili served as the Minister of Economy of Georgia. On September 1, 2015 he was appointed as the Minister of Foreign Affairs. Kvirikashvili gained his education in the United States and has more than 12 years’ experience in the financial sector. This includes com-

mercial bank leadership where he was CEO of one of Georgia’s top five group member banks. He is also an experienced economic policy adviser. During his career Kvirikashvili was involved in the United States Agency of International Development (USAID) pension reform in Armenia and in the World Bank Project - Secured Corporate Obligations Market. During the government of Eduard Shevardnadze and the beginning of Saakashvili’s regime, from 1999 to 2004, Kvirikashvili was a Member of the Parliament of Georgia and Deputy Chairman of the Economic Policy Committee. In 1999 he was deputy head of the Fiscal, Monetary-Credit and Foreign Economic Service at the State Chancellery and head of a joint program between the Georgian government and USAID regarding development of small and medium-sized businesses.

Editor: Nino Gojiashvili. Mobile phone: 595 050404 Reporters: Nutsa Galumashvili; Lazare Gvimradze; Shiva Parizad. Designer illustrator: Giorgi Magradze. Technical Assistant: Giorgi Kheladze

Source: www.commersant.ge, www.bpi.ge, www.gbc.ge, www.agenda.ge, www.civil.ge


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GEL 2015

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December 28, 2015 #128

DEVALUATED ECONOMY Heavy Consequences of Lari Depreciation MERAB JANIASHVILI Economic Analyst

The GEL exchange rate depreciation is considered a main economic event in 2015. Until October 2015, the national currency was volatile and vulnerable to devaluation in relation to both EUR and USD. The GEL devaluation process broke out in autumn 2014. In the end, the national currency volatility period ended in September 2015 and since then the currency maintains stable exchange rate. At the initial stage of the GEL depreciation, the Government was urging the National Bank of Georgia (NBG) to apply the monetary leverages and intervene in the currency market. The NBG, though, was referring to the decreased foreign currency inflows and it was shifting the responsibility onto the Authorities. Naturally, it is upon the Government to draw investments, grow exports and ensure foreign currency inflows, but the NBG is an only state body that keeps leverages for making direct influence on the currency exchange rate. Only the central bank owns leverages for making interventions in the currency markets to ensure the exchange rate stability, but the NBG refused to apply them and referred to expected squander of the currency reserves and negative aspects of the tightened monetary policy. As a result, throughout the year, amid reciprocal accusations, the GEL exchange rate continued falling, and none of these state segments has changed the policy. Following the disputes for several months, the NBG and the Government came to a single position and named external factors behind the national currency devaluation. As a result, both structures have escaped the responsibility.

GEL Rate Dynamics through 2015 The GEL depreciation started in November 2014 and the process continued in 2015. In November 2014, the GEL exchange rate against USD stood at 1.75 point, while the GEL exchange rate against EUR was 2.18. The GEL rate in relation to USD fell to 1.88 point as of January 1, 2015 and the national currency rate against EUR constituted 2.18. The GEL devaluation peak came on the end of September, when the GEL exchange rate against USD fell to 2.44 point, according to the NBG official statistics, and one EUR was sold at 2.80 GEL. In October, the GEL rate started rising and for the last months the rate is around 2.40. Thus, the GEL exchange rate against USD has fallen to 2.39 from 1.75 since November 2014, while the GEL rate against EUR has declined to 2.60 point from 2.18. (Chart #1)

of USD in the currency market, these countries had to devaluate the national currencies anyway. It is nonsense to spend currency reserves amid the fundamental misbalance. We could not let this happen and we have not done this”, the NBG President Giorgi Kadagidze noted in his interview with the Vlasti Russian-language edition.

The National Bank Policy Through the year the National Bank of Georgia (NBG) has taken no efficient step for stabilizing the GEL exchange rate. The NBG was rejecting the idea of tightening the monetary policy rate or/and applying the currency reserves. “The most popular and the most incorrect method are to demand that the central bank intervene and spend its reserves. This is an inefficient approach in the light of multiyear history of the world economy and the samples of our neighboring countries, including the countries that are much richer than Georgia thanks to energycarriers exports. Having injected several billions

“Consecutive” Giorgi Kadagidze The NBG used to resort to reciprocal criticism against the opponents. The NBG President was criticizing economic experts for creating negative expectations or accusing mystical “fundamental” problems of the GEL exchange rate devaluation. However, the audience will conclude whether the NBG President was competent and consecutive in relation to the national currency. Here we Chart #1

submit several statements that the NBG President made for the last year. December 5, 2014 (1USD = 1.89 GEL): “Both internal and external factors have driven the national currency devaluation. For the last 7 years, besides the strengthened USD rate, we witness a decline in main sources of currency inflows. At the same time, according to our estimations, this misbalance has been eradicated and this positive tendency has been already reflected on the GEL exchange rate. As to the developments of the last days, they are basically driven by panic conduct of the market players that is characteristic to the financial markets in similar situations”. February 7, 2015 ( 1USD=2.25 GEL): “I reaffirm that fundamental economic factors have driven the GEL depreciation. The GEL exchange rate has declined by 30% and the 30% contraction has later also affected the imports. We expect that the imports slowdown will decrease the demand for the foreign currency and the negative effect on the national currency will be alleviated and the GEL will show stabilization and strengthening tendencies”. May 14, 2015 (1USD=2.36 GEL): “The factors that were affecting the GEL exchange rate are almost disappeared and in the midterm period we do not expect the rate to depreciate in other equal conditions. As to shortterm fluctuations and the existing devaluations, these processes are driven by many factors, particularly by expectations, that today are excessively negative and this factor nourishes devaluation tendencies. August 12, 2015 (1USD =2.30 GEL): “Based on the collected information, we can say the existing shocks have been already reflected into the exchange rate depreciation. To put simply, the 1 billion USD losses in currency inflows have been already reflected in the reduced consumption and consequently, the in the imports declination. The imports decreased in July by about 21 % and this signifies, in all other equal conditions, we do not expect serious fluctuation of the exchange rate. However, negative expectations make the worst affect on the exchange rate. The GEL exchange range plunge saw its bottom on September 22, 2015 when one USD was sold at 2.4499.

Heavy Consequences The NBG has not done even a hand’s turn for the GEL exchange rate stabilization, despite expected many negative outcomes. The NBG is accountable for the inflation regulation, not for the GEL stability, the NBG was trying to escape the responsibility in this argument. The 40% plunge of the GEL exchange rate throughout the year was reflected into the whole economy. First, the situation worsened for the citizens who receive wages in GEL, but has taken loans in USD. The GEL exchange rate devaluation has increased the imports in value and prices on major part of products surged. It was easy foreseeable extreme devaluation of the national currency would hike prices on almost all products, while Georgian economy depends on the imports. The NBG assertions that it had no direct responsibility for the GEL exchange rate stability lost the importance, because the currency volatility resulted in inflation processes in the economy. And fixing the inflation to the target indicator is an only obligation of the NBG money-currency policy, but the central bank failed to cope with the task. Thus, amid the increased inflation expectations, the NBG extremely tightened the monetary policy throughout 2015, while the inflation indicator was growing the whole year and for the last 5 months of the year the inflation level exceeded the NBG-determined target indicator (5%). The annual inflation rate in November marked 6.3%, while the refinancing loan’s interest rate rose to 8% from 4.5% in 2015. The tightened monetary policy will rise loans in value and badly affect the state economy. Thus, in 2014 the declined foreign currency inflows led the country to the national currency depreciation, while the NBG’s incorrect policy and unused monetary leverages for the GEL exchange rate stability led the country to various economic problems. Namely, the inflation rate increased, the monetary policy was tightened, currency reserves were spent and the national currency depreciated by 40%. Thus, Georgia is meeting the 2016 New Year with worsened macroeconomic parameters and the new president of the NBG will have to overcome all these challenges.


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WINE 2015 caucasus business week

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GEORGIA’S WINEMAKING BUSINESS SUFFERS A BLOW IN 2015

Interview with Giorgi Samanishvili, the head of the National Wine Agency of Georgia - How would you appraise the current year performance in the winemaking sector? What volume of wine products has Georgia exported in 2015? What is the current situation in the exports? - The year of 2015 is not over yet, but the year may be appraised as successful, in general. The current year was positive, despite exports slowdownm, compared to 2014.

The year of 2015 has recorded a sharp downturn in our wine exports because of current economic processes in the Russian Federation and the hostilities in Ukraine. Anyway, we have increased our exports to other markets. Despite certain problems, our exports to Kazakhstan grow stage by stage. Our exports grow to China, Poland and the Baltic countries. We have also penetrated new markets, Canada, Japan and the USA. - Has these three countries balanced our exports contraction in the Russian and Ukrainian markets? - Russia and Ukraine were main markets. Therefore, the 2015 exports indicators have slipped in terms of quantity. This year we have diversified exports markets. We export Georgian wines to 50 countries, but the field has already determined its strategic exports markets such as China, Poland, Great Britain and the USA. We will continue active efforts in these markets in 2016 too. - Which markets will you make accent on and what volume of wines does the country plan to export to foreign markets in 2016? - We will make focus on 4 markets in 2016, as determined by the marketing strategy. Moreover, we will also attend all influential exhibitions in 2016. The national wine agency will assist the winemaking companies to take part in the exhibitions.

What is the opinion of Georgian winemakers on the 2015 results? The year was quite problematic, they said. Besides Russian and Ukrainian markets, problems arose in Belarus and Kazakhstan too. The ongoing political and economic developments in these countries have already made negative effect on exports of Georgian products and revenues of winemaking companies. We plan to maintain our sales volume in certain markets, for example, in Ukraine. We plan to take certain steps in this direction. The exports volume depends on the situation in the exports markets. It is difficult to make forecasts in advance. - How much have the 2016 marketing costs increased compared to 2015? - The budget will be the same in GEL as in 2015. - How would you assess the 2015 vintage? Was it successful or not and what kind of complications have arisen in the vintage period? - The process is improved and refined year by year. Despite the reported tensions in the Kakheti Region, this year vintage may be evaluated as the most successful one. The government has not interfered in the pricing process, for the first time. This is very important to let prices reflect the product quality. It is also significant this year the low-quality grapes were not supported. - Do you think the government should subsidize the vintage in the future? The government plans to stop the sector subsidization and is the sector able to exist without subsidization?

Our objective is to free the sector from the subsidization component, because this instrument only weakens the field. It is upon the government to decide whether to subsidize the sector in 2016 or not. The issue will be resolved based on the market realities, i.e. the volume of harvest and the market demand. After calculation of the averaged market price, the government will take a due decision. The government wants to remove subsidization component, but the government may resort to certain interventions, if necessary.

GIORGI MARGVELASHVILI The Tbilvino founder The year of 2015 was unfavorable for our company in terms of export sales. Namely, the sales dropped about 20%. Major slowdown was recorded in Ukraine, Russia and Belarus, as well as in Kazakhstan. The previous year was very good, when our sales in Russia extremely surged. Therefore, we should not refer to those indicators. Our company will intensify efforts in the Baltic countries, Poland and the USA to remunerate losses in Russian, Ukrainian, Belarus and Kazakh markets. We have found new partners in Germany and Australia. This year our domestic sales rose by 15%. We expect the year of 2016 to bring better results. The wineries cannot fully use the harvest that is reaped in Georgia. In 2016, wineries will still have wine reserves and therefore, the field is expected to face problems again”, Margvelashvili noted. GIA GAMTKITSULASHVILI The founder of Twins Wine House “Our company has been operating in the Georgian wine market for 15 years. We were the first who moved pitcher wine to bottles in 2005 and we prepared 5000 bottles of Kakhetian wine from the Napareuli micro zone grapes. Since then our company has expanded the business. The current year was especially important for our company, because we penetrated new wine markets, namely, China and the USA. Moreover, the company exports wines to seven countries such as Japan, China, Russia, Germany, Great Britain, the USA and Lithuania. This year we have processed such grape varieties as Qisi, Khikhvi, Cabernet, Kakhetian Green. In 2016 we will introduce these wines to the Georgian market. We will also export our wines to Latvia, Estonia, Ukraine and Poland in 2016. We will also introduce new wines with new labels such as Qisi, Khikhvi, Kakhetian Green, Cabernet, Alazani Valley White, Alazani Valley Red”, Gamtkitsulashvili said. NUTSA ABRAMISHVILI The founder of Schuchmann Wines Georgia

“The year of 2015 was less profitable compared to our expectations because of currency volatility in our partner countries. At the beginning of 2015 we determined a clear strategy to actively diversity our markets. We have fulfilled this plan and our sales slowdown has marked only 15%, while the exports contraction in the whole country is about 60%. This year we have diversified our markets. Initially we wanted to reduce our ratio in Russia. We have reached this goal and we are meeting the New Year very content. In whole, our company has exported 1.100 million bottles throughout 2015. This year the Russian market was problematic.

Moreover in 2015 the company started use of oil of grapes stone. In 2016 we will introduce the first product. This will be the first gastronomic line in the Georgia market, but this products will be also used for medical treatment. IN 2016 the company will build Schuchmann Wine SPA on the territory of Schuchmann Wines Georgia. ZURA RAMAZASHVILI One of the founders of Telavi Wine Cellar “The year of 2015 was satisfactory for our company if we take into account the regional developments. Russian and Ukrainian realities have sharply shrunk our exports indicators. Anyway, we have shifted these ratios to other markets. In 2015 the company entered new exports markets too, namely, South Korea, Uzbekistan and Kyrgyzstan. In 2016 the company will actively strengthen in the new markets, but the indicators depend on the political and economic situation in the neighboring countries. Moreover, in 2016 the company plans to arrange drip irrigation system by investing 1 million USD to make our grapes higherquality products”. GIGI ARONISHIDZE The marketing director for Dugladze Wine Company “The year of 2015 was very interesting and full of innovations. Our brand appeared in the Georgian market in 2015. The company management decided to carry out the rebranding to penetrate new markets and new consumption niches. Consequently, we have made many important changes: we have developed the company brand code and on its ground we have carried out all other works. We have settled the brand’s architecture, the brand’s communication platform and so on. Besides strategic works, we have also determined the company visual identity: new logotype and brand style, packing of full assortment of products and so on. In 2015 we have introduced two varieties of the sparkling wine of Samepo (Royal) – semisweet and semidry rose. Moreover, Dugladze Wines and Spirit also offer new products. Everybody remembers distinguished marks of Tbilisi, Eniseli, Very Old, Gremi and Vartsikhe. Our company holds reserves of these valuable drinks. We have decided not to lose this competitive advantage, but to promote it and offer new products under these appellations. We also offer wine brands of 3-5 year age. We will introduce Dugladze Wines and Spirit products to both domestic and exports markets in 2016. Our assortments are divided in four groups: top quality wine of indications of specific growth origin, regional wines, table wine Ranina and special wines. The quality and packing of our products have deserved much approval from our partners. They have already made early orders. We plan to implement many other interesting projects in 2016 through communication of both new and old products.


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BUSINESS 2015

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PRIVATE SECTOR ASSESSES ANNUAL PERFORMANCE What has the year of 2015 brought and what the year of 2016 will bring? Amid the current social and economic tendencies in Georgia, a part of the major business sector representatives negatively evaluate the year of 2015, while another part shows content with the current year’s performance. market. At the same time, the GEL depreciation performed serious role and brought painful results to all companies. The GEL devaluation limited the solvency of our population. Nevertheless, the currency volatility has not brought catastrophic results to our company.

Our objective is to boost our output in two-digit figure and to penetrate new markets in 2016.

TEMUR CHKONIA The Coca-Cola Bottlers Georgia founder We have commenced many important projects in 2015, including a construction of bakery on the Castel brewery territory in Lilo, Tbilisi. The plant will be put into exploitation in 2016. I will supply the bakery products to the network of fast food restaurants. The bakery will issue several varieties of pastry and the products will not be sold in only McDonald’s. We have invited an advisor from Israel to take consultations on assortments and other additional details. We will invest at least 2.5 million EUR investments on the bakery construction.

Moreover, this year we launched tea cold production, opened a new restaurant of McDonald’s in front of the US Embassy and this was a successful decision. We have also laid a foundation of new restaurants in Gldani and Rustavi that will open in 2016. Besides the McDonald’s network expansion, a central storehouse of McDonald’s will be constructed in Lilo that will be put into exploitation in about 4-5 months. The Kobuleti hotel will be also expanded. We have already carried out certain measures in this direction. Namely, with the support of the Ajara Government we have bought additional side for the hotel expansion. Moreover, we will make focus on cold tea exports to Turkey in 2016, because I am sure this step will bring important success. It should be also noted our budget transfers from all our own companies will total 60 million GEL. I am proud the companies founded by me pay so much money to the state budget”.

a negative period for the business. We hope the next year will bring better innovations. I admit the capital flow is free in the country, the tax pressure absents and our country provides all efforts to reach considerable economic growth that will be immediately reflected on our company.

Absence of veterinary services is our major problem and we have invited foreign specialists and taken serious costs. This year the company has invested total of 4 million USD in the production. In 2016 the national currency exchange rate will determine many tendencies. We plan to increase the farm output, but everything depends on economic realities. We want to double the neat cattle quantity to 900 ones this year. In 2016 the company will invest 10 million USD”.

ANZOR KOKOLADZE The founder of Techno Boom home appliances company “The Russia-Ukraine crisis and a plunge in oil prices have badly affected the Georgian economy in 2015. As a result, the GEL exchange rate depreciated, the imports shrank, including the home appliances market also narrowed. Therefore, our objective in 2015 was to improve the efficiency, not growth and we have used the current year for optimizing business processes.

The 2015 realities have thwarted plans for drawing additional investments. Economic situation considerably worsened in our trade partner countries. Their potential declined because of regional risks and they show more caution to new projects. In 2016 we will start constructing the Region’s biggest hypermarket for home appliances. We will also develop internal installment payment project, sign additional dealer agreements with famous brands and hold marketing campaigns. Negotiations are underway with investors.

GIORGI MSHVILDADZE The Tegeta Motors director general Tegeta Motors is a holding that offers a full package of automobile products and automobile repair services to both corporate and individual sectors. The current year was very important for our team as we have implemented a weighty project as part of the cooperation memorandum with State Technical University and arranged Tegeta Motors Study for students of the transport and car-building faculty, as well as for lectures, practical and qualification improvement courses to upgrade the students professional skills and promote the sector development. We have also signed a mutual understanding memorandum with the Entrepreneurship Development Agency, under which Tegeta Motors will provide free technical and consulting assistance to micro and small enterprisers whose business plans will be connected to our company business direction.

We have unveiled a new showroom in our branch at the Kakheti highway, Tbilisi, for auto service machineries, instruments and electric equipments. The showroom assembles products of such famous brands as Bosch, Toptul, Hitachi, Matrix, Telwin, Rema TipTop and so on.

MIKHEIL CHKUASELI The GeoPlant director general “The year was successful because we opened a new plant in Ozurgeti and increased out potential as part of the Produce in Georgia program. As a result, we have increased output and sales. The program has doubled our production. This year we have penetrated the Ukrainian

LASHA PAPASHVILI The founder of Kvarlis Baga company “Our company is one of the best enterprises in the Region, but the current year has brought undesirable financial indicators after the GEL devaluation. The company is ending the year with losses. The solvency of our population has shrunk and that’s why the company bears losses. The current year has shocked both ordinary citizens and the major business. This year was

We have established an entirely new innovation – Online Reservation that enables the consumers to book visits at Tegeta Motors to receive desirable services from homes. The Georgian business industry has been growing for the past years. The Georgian market is diverse and we have many competitors in each direction. Despite sharp competitive environment, Tegeta Motors remains a leader in the automobile service field. The company puts important investments in research and development projects every year and all these efforts are

reflected in the financial indicators. Namely, this year a 5% growth was recorded in the company compared to 2014. In 2016 we will further improve and develop the existing projects, because we show much responsibility to our business and always care for satisfaction of our customers. That’s why in January 2016 we will unveile a new branch of Tegeta Motors in Zugdidi, the Samegrelo Region to offer international standard services and products. We will also open a regional storehouse in western Georgia to deliver products to clients in the shortest period and to supply our products to the branches as soon as possible. Based on the research report, we will expand the motorcars service in Kutaisi. In 2016 Tegeta Motors will introduce the www.mycarhistory.ge website for corporate clients so as they control their vehicles in online regime, explore wastes and receive various analytical reports. A new online platform will be introduced for our dealers so as they purchase Tegeta Motors products in online regime. The holding has directed its 20-year experience and the future-oriented technologies to the future development to offer a wider range of innovations to the customers.

TSEZAR CHOCHELI The founder of Zedazeni company “The current year was very important for our company, because the court remove arrest from all our companies. This fact is of crucial importance for us. At the same time, the year was difficult in terms of economic indicators amid the currency volatility. We have not taken intense steps this year, because the arrested assets were thwarting our operation. The GEL depreciation has further worsen our condition. We had to serve foreign currency denominated loans, while our revenues were denominated in GEL and the fact gas inflicted much loss to our company.

We will inaugurate the projects that could not be commenced because of property seizure. Namely, this year we will launch a juice production project. We have already ordered the production line machineries. This project will mainly compete with importer companies, but we also plan to intensify efforts in the export markets too. Today, imported juice products control 80%85% of the market and we aim to replace the imports by our domestically manufactured products. We have ambitious plans for 2016 to implement all previously determined projects such as coffee production and the direction of construction materials. The next year we will make a quite big investment, but I cannot specify the investment amount at this stage.


POWER SYSTEM 2015

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ENERGY SECTOR ACHIEVEMENTS AND CHALLENGES OF 2015

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he year of 2015 was very important and full of challenges for the Georgian power system. Many interesting projects were carried out in both generation and infrastructure parts. Georgia gives priority to hydropower system development. Large-scale projects should be implemented to this end. Real perspectives were outlined for many projects. Currently, the country is implementing 104 projects at various stages. Total installed generation of all 104 projects exceeds 3 000 megawatts. The expected generation totals 12 billion kw/h and total investment value of these projects make up 4.1 billion USD. In august 2015, the Nenskra HPP construction agreement was signed. The installed generation of Nenskra HPP makes up 280 megawatts. The annual generation will make up 1.2 billion kw/h and the project’s investment value is 1 billion USD. Nen-

skra HPP is considered a cornerstone for the energy security and energy independence of the Georgian power system. This year the partnership fund and the Georgian Oil and Gas Corporation (GOGC) jointly implemented a 230 megawatt steam power plant project in the Gardabani District, the Kvemo Kartli Region. The plant’s annual generation will be 1.6 billion kwt/h. The operational efficiency of this plant twice surpasses other Georgia-based steam power plans. If the power system of Georgia faces certain problems, the Gardabani steam power plant will ensure continuous electricity supply to the system in the shortest period and this plant will be the most stable reserves in the Georgian power system. As to construction of hydro generation facilities, the Shuakhevi HPP construction is of crucial importance in the Ajara Region. In 2015, the construction works reached a turning point. Shuakhevi

HPP will be an important facility in the Georgian power system. After the Shuakhevi Cascade starts operation, the Georgia’s domestic generation will be replenished by additional 187-megawatt installed generation and the Georgian power system will receive about 450 million kw/h electricity every year. As a result, Georgia’s power system steadiness will considerably increase amid the growing demand for electricity in the country. It should be also noted Adjaristsqali Georgia Ltd, which is an investor company in the Shuakhevi HPP project implementation, makes special contribution to the Ajara Region development. The Georgian government also prioritizes the universal gasification project. The current year was special in this direction. The government allocated 20 million GEL for arranging natural gas supply networks in 76 villages of 14 municipalities allover Georgia. The Government has also approved the

“We Respond to Current Global Challenges by Constructing New and Entirely Updated System”

“Our Objective is to Provide High-Quality Services and to Make the Commission’s Performance more Efficient”

SULKHAN ZUMBURIDZE The chairman of the board of directors of the Georgian State Electrosystem (GSE), overviews the 2015 important aspects. “Our company launched a very important and large project for the Georgian power system several years ago. The project calls for reconstructing and rehabilitating all main substations of GSE. As to the current year, we have successfully installed new technologies that will serve the GSE and the Georgian power system for 15-20 years without problems. In 2014, we installed modern technologies at five substations, while the remaining five substations were reequipped in 2015. Primary equipment were entirely replaced. The substations were renewed by contemporary management and security systems. We have replaced all systems of 6-500 kw/h. As to the Ksani substation, the reconstruction works will be finished in the second quarter of 2016. This substation is the last one that will thoroughly complete our rehabilitation project. Besides primary and second-level equipment, we have also carried out supply transformers rehabilitation projects. Two mobile repair groups have stage by stage rehabilitated all main supply transformers. We have installed the voltage regulation under loading (RPN) systems manufactured by the newest technologies at all power transformers to improve the electricity quality. We have installed 13 units of RPN and this is a huge investment for our country. Currently, all substations provide stable and high-quality electricity supply to the consumer.

IRINA MILORAVA The GNERC head The field regulatory mechanisms are considered one of the main directions in the power system. The year of 2015 was very important in this direction. The Georgian National Energy and Water Supply Regulatory Commission (GNERC) has set new consumer tariffs in 2015. The GNERC head Irina Milorava noted the changes were taken because of the national currency volatility. “The GNERC has taken active steps in 2015. The commission has developed many regulatory acts for developing the energy and water supply sectors. We have corrected tariffs and continued consumer rights protection. We keep close communication with our society and this is one of the main priorities in the GNERC performance. Steam power plants and electricity distribution companies applied to GNERC for correcting the tariff after their expenditures increased following an extreme change in the Georgian national currency exchange rate against USD. Based on the best practices and international standards of tariff methodology, the commission satisfied the mentioned application and set just tariffs. The commission aims to make its performance transparent and to provide the society with comprehensive information in all issues. At the same time, the current year has recorded a growing number of applications regarding aged tax arrears and ungrounded charges. According to the report as of December 8, 2015, GNERC has written offer more than 2 million GEL from the consumers, based on the decision that the commission has taken on the appeals and disputes that were submitted at public sessions by the Energy Ombudsman and GNERC commission for citizens appeals. We have also developed and approved the Network Regulations for the electricity sector. According to the new regulations for calculating electricity normative losses, which is based on the best international practice, we have calculated normative losses of JSC TELASI and they were reduced to 5.34% from 12.4%.

Our top-priority objective is to rehabilitate substations and transmission lines and to construct a new, modern infrastructure. We respond to the challenges of the contemporary world and construct a new and entirely updated system. We have clearly determined our development plan for the 10year perspectives. We have developed and approved, based on the government resolution, a long-term development strategy, where the infrastructure development and future projects are determined due to the coming year. This is a very significant factor to connect new power facilities to the network. We aim to boost the power balance of Georgia and increase domestic generation sources and reduce our dependence on imports”, GSE head Sulkhan Zumburidze noted.

The 400-GEL package for switching new subscribers to the natural gas supply network is continued successfully. This year 58 new villages were connected to the natural gas supply network and currently 627 settlements enjoy 400-GEL package preferences. As to the 2016 plans, the commission will perform huge job in the next year too. The main accent will be made on strict monitoring on service quality standards. Our objective is to provide high-quality services to the consumers and to make the commission performance more efficient”.

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2015 plan for gasification works. As a result, SOCAR Georgia Gas, by the consent of the Georgian Energy Ministry, will arrange natural gas supply networks in 71 villages. It should be also noted an alternative energy employment project was also inaugurated in 2015. This year the European Bank for Reconstruction and Development (EBRD) signed a 25 million USD allocation project for constructing the Kartli wind-driven electricity plant. Total investment value of the project is 35 million USD and its installed generation constitutes 20 megawatts. The plant will annually generate 87 million kw/h. The year of 2015 was very interesting period and a turning point for improving the power system and energy infrastructure of Georgia. Energy infrastructure is one of the most important chains in total power system in terms of construction of transmission lines and substations.

“Inauguration of the Khudoni HPP construction works is one of the major challenges before the Authorities in 2016” ANDRIA GVIDIANI An expert for the Association of Young Financiers and Businessmen (AYFB) The energy projects and the power system, in general, is being developed dynamically, but the delay in inaugurating the Khudoni HPP construction works, to his words, is one of the main failures of the current Authorities. “The year of 2015 has brought very worthy results for the Georgian power system as the country provides tireless efforts for the hydropower potential employment.

The level of energy security and the power system development, in general, depends on hydropower potential employment. Fortunately, Georgia owns huge hydro resources and their rational employment will enable us to ensure Georgia’s electricity independence. Georgia’s hydropower potential constitutes 80 billion kw/h, of which 40 billion kw/h resources are thoroughly profitable and economically justified. The potential installed generation of the Georgian hydropower resources is 15.500 megawatts, of which we employ only about 3000 megawatts, regretfully. Therefore, it is important that, despite negative attitudes, we intensify the construction of major HPPs and employment of hydropower potential, in general. The degree of Georgia’s energy security and energy independence cannot be increased without construction of major regulatory facilities. Important changes were made to the Khudoni HPP memorandum in 2015. Namely, the investor is obliged to leave 1.5 billion kw/h electricity, the full generation, in Georgia. This factor will fully reduce our energy dependence on neighboring countries. I think the inauguration of Khudoni HPP construction works will be the biggest challenge before the Authorities in 2016. As to the electricity tariff revision, I believe this was an inevitable decision, because the national currency devaluation increased generation expenditures to steam power plants. All these factors have directly affected the consumer tariffs. I believe the tariff should fully reflect the sector’s expenditures. The power system is not a field that would resolve the social problems”, Andria Gvidiani said.


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BANKING SECTOR 2015 caucasus business week

December 28, 2015 #128

GEORGIA’S BANKING SECTOR LOOKS TO 2016 WITH OPTIMISM

T

he Fitch rating for the Georgian bank sector is “Stable”. This signifies considerable reserves of commercial banks will compensate the quality of assets affected by the GEL depreciation. The 36% devaluation was the main

GIORGI KADAGIDZE The NBG President „The solution consists in strong institutions, where officials full of responsibility take decisions to the benefit of the country and citizens. I am proud a team of professionals works at the NBG that, under the constitutional obligations, ensures financial and macroeconomic stability. And the NBG successfully fulfills these obligations. We have maintained the mandatory level of currency reserves. The NBG is to maintain the adequate international currency reserve to guarantee the stability of our country”. In 2015 the NBG introduced new banknotes of GEL, for the first time since 1995. The new banknotes will appear in the turnover stage by stage starting 2016. The year of 2015 was important as the Georgian national currency celebrated its 20th anniversary. In this period the GEL has withstood many challenges, deserved confidence. The Georgian national currency will be withdrawn, when Georgia will refuse to carry out its own currency policy, the day Georgia will join the EuroZone. This is a final stage in the Euro Integration process that was approved by the will of our population.

challenge in 2015. The bank sector has showed steadiness amid the GEL depreciation, GDP growth slowdown and a demand contraction in exports markets. The Georgian bank sector has maintained positive indicators. Capital - 4.2 Billion; CAR - 17.3%; NPL -

MURTAZ KIKORIA The Bank of Georgia director general “The year of 2015 was difficult. The business environment was also suitable. The bank’s financial indicators are stable. The bank grows. Bank of Georgia has successfully positioned at the London Stock Exchange (LSE). The IPO of GHG shares is a very important fact and a certain demonstration that investors trust Georgia. In the LSE premium listing the shares of Georgian Healthcare Group (GHG) are traded beside shares of the world’s famous brand such as NMC Health, Al Noor Hospitals, Spire Healthcare. Investors put money in Georgia, first, because the country has painlessly overcome the devaluation crisis. This year brought many achievements that inspire us for future expansion and growth.

VAKHTANG BUTSKHRIKIDZE The TBC Bank director general “We confirm our plans to take one important step for development. TBC Bank built strong and stable business 20 years ago and this is a logic continuation of our evolution towards a public company. In this respect the year of 2015 was fruitful. The bank follows the determined course. We should emphasize our involvement in the energy sector, Georgia’s one of the strategic directions. The power sector has huge development potential and we will actively cooperate in this direction with other companies. At the same time, the bank has been actively positioning in the market and ranks first in terms of individual deposits. TBC Bank has intensified activities in the social responsibility projects. The current year was completed with the New Year of New Mziuri campaign, when our bank marked its 23rd anniversary. This campaign is the part of our campaign for support of the June 13 natural disaster victims. This year TBC Bank hosted an annual meeting of EBRD and large-scale business forum. Besides international awards, TBC Bank ranks first in media sector inquiry in terms of public confidence and realibility”.

ARCHIL MESTVIRISHVILI The vice president of the NBG “The increased monetary policy efficiency has stimulated a contraction in loan interest rates, as well as macroeconomic stability, sharpened competition on the market. As a result, we have a well-capitalized sector with high liquidity and low ratio of bad loans”. Bad Loans - 490 million Total Loans - 15.8 billion Deposits - 14.2 billion Assets - 24.8 billion The Georgian bank sector registers 19 commercial banks, of which 18 ones ended the period in profits of more than 0.5 billion GEL. Despite the bank sector has maintained a high level of profitability, bankers make focus on the current year’s external shocks that provoked serious challenges in the whole region, including in Georgia.

RAMAZ KUKULADZE The Bank Republic director general “Despite many problems, our bank continues growing. We have increased the market ratio. The volume of bad loans has considerably decreased thanks to appropriate management of risks. It should be noted the growth is recorded in both directions, corporate and retail segments. The year of 205 was very important in terms of inauguration of new projects. We have introduced more flexible services, including digital signature. This is a new stage of civilization in out world. It is important in terms of social responsibility too, because our clients will care for environment jointly with Bank Republic. Introduction of technological innovations is our priority in 2016.

2.9%; ROE - 16.4%; ROA - 2.6% According to the International Monetary Fund (IMF), the conservative approaches in the supervision part has maintained the positive indicators. According to the Financial Sector Assessment Program (FSAP), the Georgian practice is

recognized as the most advanced one. The risk-oriented supervision frameworks enabled to identify risks in the early phase (all potential bank risks are assessed). Loan interest rates have considerably decreased. They have halved for the last 5 years.

The year of 2015 was complicated, but the bank maintained a high level of profitability thanks to valuable management of sales and risks”.

Georgia received an international credit rating from Fitch as BB-, outlook stable; is going to reach more than 55% growth of loan portfolio and almost to double the net profit. At the same time, the bank follows conservative approach in credit activities, which in turn realized in the one of the best quality portfolios in the market. This year bank opened another branch in Tbilisi reaching total number of branches to 6, had significant progress in cards business, ecommerce, became a principle member of VISA and associated member of MasterCard; Halyk Bank Georgia was the first and still is the only one who offers SME and corporate businesses mobile POS terminals enabling them a more attractive way of accepting payments. As a result the Bank managed to improve overall service portfolio. Halyk Bank Georgia continues to emphasize on increasing the quality of services provided and in 2016 plans to propose to customers new and interesting products

ALEX MATUA The Procredit Bank director “We have partly fulfilled our plans in 2015, excluding the parts that was affected by the current economic realities. This factor has slightly changed our plans and affected our revenues. Two main factors have influenced our business activity: the GEL devaluation and the slowdown in sales. We had not frustration in terms of activities, products and services. The bank widely introduced the 24/7 service. In August we introduced money lodgment service. We have continued active crediting of the small business and we have serious growth in the sector in this direction. The bank has ambitious plans in 2016 too, especially for our target groups - small and medium business sectors. We plan to offer convenient and comfortable services adapted to their interests. There are all preconditions that business companies expand their activities. ProCredit Bank has introduced a new model of management – flat management, after the bank’s director general Asmus Rotne left the company in December. He plans to stay in the Georgian business sector. The year of 2015 was special in terms of several changes in the management chains. Lado Gurgenidze, the executive director of the Liberty Bank supervisory board, resigned ahead of schedule, but later decided to remain in the team that units 16 leading managers since 2009. “In 2015 the bank continued dynamic growth. The profitability and capital adequacy coefficient have recorded historical indicators.

LADO GURGENIDZE The executive director of the Liberty Bank supervisory board: “In 2015 the bank continued dynamic growth and maintained a high level of profitability. The capital adequacy coefficient (CAR) reached historical maximum - 20.13%. The bank also possesses excessive supervisory capital to maintain the growth in 2016. Amid the current macroeconomic situation in Georgia, we expect the 2016 growth will be low, at the same time, we are able to support the bank’s average growth at the expense of additional capital generated within the bank”.

SHOTA CHKOIDZE The Deputy CEO of Halyk Bank Georgia Halyk Bank Georgia, a member of Halyk Group Kazakhstan, operates in Georgia since 2008. We run an universal banking business targeting corporate, SME and retail sectors. Although 2015 can be characterized as the one of many challenges for the Bank, especially currency devaluation and related debt service deterioration, as well as increased competition, still the Bank forecasts achievement of all strategic goals by the end of the year. Namely, Halyk Bank

DAVID TSAAVA The Basisbank director general “The year of 2015 was special because of its difficulties and success. The bank has maintained high paces of growth, including in the crediting part. The crediting portfolio has increased by more than 60%. Amid the GEL devaluation the Bank has managed to balance the increased risks to borrowers and offered adapted terms, maximally alleviated the GEL depreciation burden. The Bank has managed this through additional reserves and reasonable management of risks. At the same time, we have maintained paces for developing new products. The bank continues the network expansion too. We have also achieved an important agreement with partners and ensured the bank’s successful positioning. The year was also important in terms of social responsibility. The bank has broadened education programs and enabled more young persons to continue their studies and receive Basisbank scholarships”.

ARCHIL KONTSELIDZE The VTB Bank Georgia director general “VTB Bank Georgia is finishing the outgoing year in a success. Despite the economic complications, the bank has finished the year in profits. We have introduced new products, unveiled new service centers in Tbilisi and regions. Our assets rose by over 20% and the capital grew by 35%. The bank has carried out important corporate social responsibility projects throughout the year and our total contribution marked 3 million GEL. The money was spent on promotion of Georgian sports, culture and on conducting charity projects. The 30% devaluation of the national currency was the main challenge in 2015, but these problems arose in the whole region and the same scenario was developed in neighboring countries too. Nevertheless, the Georgian economy maintained steadiness compared to the neighboring countries and the 2016 forecast will exceed 2%. These processes have naturally affected the Georgian bank sector too. In 2016, we plan to maintain the growth paces, open new branches, introduce new products and expand our services.


December 28, 2015 #128

PUBLICITY caucasus business week

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ECONOMY caucasus business week

December 28, 2015 #128

ECONOMY OF GEORGIA IN 2015

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DP rose by 2.8% (averaged indicator for January to October period in 2015) after 4.5% upturn in 2014. Foreign direct investments declined by 17% to 1.019 billion USD (the January to September indicators), foreign trade plunged by 14%, while international tourism turnover rose by about 7% - these indicators reflect the outgoing economic year’s main parameters. The Autonomous Republic of Ajara ranks second in terms of attracted investments, after Tbilisi, according to the January to September report. Namely, the region has drawn more than 74 million USD investments in the January to September period. Moreover, the FDI amount increased to 795 million USD in the same period. In terms of new investments, the current year saw an inauguration of special project in the Ajara Region. Namely, a 12- storied hotel complex of Metro City is being constructed in Batumi. The construction works will end in 2017. The projects investment value constitutes 90 million USD. The project is of crucial importance for the region development and improving the investments environment in the whole country, because this project represents a certain recommendation to other investors for making new major investments in the Ajara Region and the whole country. The investments and economic growth indicators are lower compared to the figures of the same period of 2014 and the national currency depreciation has mainly caused this slowdown. The investment inflows in the January to September 2014 surpass the indicators of the same period of 2014 by 17%, while the 2014 economic growth marked 4.6%. As to foreign trade, in January to October period (the freshest report by the time of

writing this article) this segments declined by 14% compared to the same period of 2014. Today, the foreign trade turnover makes up 8.121 billion USD, including the exports account for 1.832 billion USD (down 24%) and the imports marked 6.289 billion USD (down 10%). The exports of wines, Georgia’s one of the strategic items, has halved, in practice. For example, the country exported 59 million bottles in 2014, while the January to October exports in 2015 marked only 23 million bottles. As to the international tourism sector, the January to October period recorded 5 431 723 visitors, up 6.9% year on year. The quantity of tourism visits made up 2 123 514, up 1.9% year on year. The official report on unemployment level in Georgia has not been published yet, but, according to early estimations, the unemployment index has reduced to 12.4% from 14.6% year on year. The country has created 90 000 new job places since 2014, the ex Prime Minister noted in October 2015. As to prices, according to GeoStat, the national statistics service of Georgia, prices increased by 11.5% in the health sector compared to 2014. Besides the healthcare sector, prices have surged on food products and soft drinks (+5.2%), housekeeping (+12%), water, electricity, natural gas and other kinds of heating (+9.2%). Common inflation rate for all sectors constitutes 6.3%. The figure exceeds the NBGdetermined target inflation rate by 1.3%. Despite the deterioration of the abovementioned macroeconomic parameters, amid the GEL depreciation and the currency crisis in the region, a part of the economic team of the Georgian government appraises these indicators as an important achievement.

“Out Top Priority is to Create New Job Places. We will Adhere to this Priority in 2016” We have created 126 enterprises and this quantity will further increase. Investments of 350 million GEL were made in these enterprises and 7 000 new job places were created.

KETI BOCHORISHVILI, the Deputy Minister of Economy and Sustainable Development of Georgia, overviews the mechanisms the government has applied against the GEL depreciation: Our top priority is to create new job places and we will remain devoted to this priority direction in 2016 too. The Produce in Georgia is to achieve these objectives. Under this program,

The number of persons, who were indirectly employed as part of this program, is twice higher. All these efforts foster the diversification of our products and this is our main objective. It is also important that two new components were embodied in the Produce in Georgia project: hotel and movie industry directions. This is a good platform to attract international moviemaking companies to Georgia and create new job places. As to the hotel component, the government will subsidize the fee for franchise of international brand hotels (royalty fee) for the next two years. The micro business project is also worth noting. The first stage of the project implementation will be finished soon. Three thousand enterprisers will be trained as part of the project and 1500 ones will be promoted by a financial component. The project is to encourage micro enterprises in regions. Our objective is to open as many job places in region as possible. Our main challenge is to defeat the unemployment in regions.

“Georgian Economy has Successfully Withstood Challenges and Maintained Positive Growth Dynamics” NATIA TURNAVA The Partnership Fund deputy director “The outgoing year was very problematic, but successful simultaneously, because we have faced serious challenges and we have overcome them with dignity and honor and I believe this is a success. The economic crisis from currency shocks and sudden frictions in the currency markets generated major problems and complications in the Region, including in Georgia, the country tightly integrated in this region. All these developments would have definitely affected Georgia. Negative results were reflected in deteriorated trade balance, reduced sales in exporter companies. In general, various business sectors have faced serious problems and many questions and the feeling of instability started dominating in the country. Finally, our economy has withstood this test. We have settled the situation in a short period, compared to other countries in the neighborhood. We maintained a positive dynamics of economic growth, while there are many examples in the Region, when the countries lost positive dynamics of growth and fell to the zero point, at best, or sank under the minus indicators. Thus, we have managed to stabilize the economy in 2015 and this factor makes us hopeful for 2016 too.

As to the Partnership Fund, it is one of the major economic agents and instruments that carires out the state economic policy. Therefore, we provide adequate reaction and response to all challenges that arise every year. Our objective was to work more flexibly with our potential partners, add more attractiveness to investment projects. We have demonstrated more flexibility, more liberalism and adequacy amid the new risks and shocks in the Region. Therefore, the year of 2015 has brought real results. Namely, the Partnership Fund has launched about 10 new projects of various scales and put them into exploitation. I would like to stress the new projects in the power sector. Two major projects were implemented with our active involvement: 1) Gardabani steam power plant was put into exploitation in 2015 and currently the power facility successfully supplies electricity to the Georgian power system. The energy security is of vital importance, especially amid various challenges. 2) Nenskra HPP project is another major project. The HPP construction works started in 2015 and we have achieved agreement with the investor. The process of making investments is underway and the project implementation paces are geared up. Moreover, other smaller but very important projects were inaugurated that reflect the diversification of the fund’s portfolio. For example, the tourism and hotel sector has acquired a new 5-star Rixos hotel in Likani. The complex opened at the beginning of 2015. In Kutaisi we started constructing a small, but very interesting hotel– Best Western. This is the first branded hotel in Kutaisi. The construction works are being carried out at high paces and the complex will be unveiled in 2017. The Fund has also taken active steps in the industry and building materials sectors and promoted the inauguration of an enterprise that man-

ufactures building sandwich panels. The company has already introduced first product in the retail sales network and plans to launch exports to foreign markets. When talking about the general economic context, the imports replacement is of crucial importance and this project aims to replace the imports by domestic products. The Partnership Fund has also promoted creating an airplane spares enterprise and we are implementing the project jointly with Israeli company Elbit Systems. At the end of 2015, Georgia has intensified efforts to the eastern direction. Namely, we have launched implementing joint projects with China. At this stage, we have already signed several memorandums with the Chinese party, including in the textile and Chinese pottery production fields. These directions will be further promoted in 2016. The main thing is that in 2015 we laid foundation of these perspective projects. The Fund also plans to strengthen the agribusiness sector. We have already launched two projects, namely, the bog whortleberry production in the Ozurgeti district. We have already started financing the project and the first exports sales have been already carried out. Another important agribusiness project was recently inaugurated in Samtredia. The project calls for expansion of the existing greenhouse. In the future, the Partnership Fund will intensify efforts for the agribusiness sector development. As to new hazards and challenges that may arise in the economy, the main objective of our fund, as well as the Authorities, in general, is to transform potential hazards into revenue sources and turn all challenges into profitable deals. This objective is always achievable through adequate tactics. Currently, we are working on the model that will enable the Partnership Fund to provide adequate reaction and response to the future requirements and challenges. One thing is evident: The existence and role of the Partnership Fund in the Georgian economy is very significant. The Fund will intensify efforts to attract more investments to the Georgian economy. The Partnership Fund’s legal status is a joint stock company and it is an efficient instrument for carrying out important economic and investment policy. Therefore, our performance fully corresponds to the policy of the economic team of the Authorities. Anyway, we adhere to our mandate that is more flexible and efficient compared to all other state structures, because the Partnership Fund is a private entity in terms of a legal status, but the body belongs to the state sector. The effect of this synergy, first, will be directed to attracting new investments, as this direction was a main challenge in 2015 and will remain a main challenge in 2016 too.


December 28, 2015 #128

ECONOMY

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caucasus business week

ECONOMY OF GEORGIA IN 2015

“Today, the Authorities Take Pride in the Achievements that Take Origin from Our Government Contrary to the state officials and representatives of the state sector offices, opposition forces negatively appraise the 2015 macroeconomic indicators. MP Mikheil Machavariani from the opposition United National Movement (UNM) assures the ruling Authorities have no success in any direction. In his interview with the Caucasus Business Week (CBW), MP MIKHEIL MACHAVARIANI said: I cannot understand how the Government may be content with the 2015 indicators: 6.3% inflation, the GEL collapse to 2.4 from 1.8, slowdown in exports and imports. The current economic growth paces of 2.8% may fully destroy the state economy in longterm perspective. Investment inflows have declined in the power sector, the agribusiness sector. Georgia has become unattractive country for putting money in it. Today the Authorities take pride in the achievements that take origins from our government, for example, construction of motorways and the Olympic village infrastructure. Today, the Authorities are boasting of these projects, but our government has taken decisions and concluded agreements with international organizations. The current government had to only carry out the construction works and they have done this.

Would you name any sector, where new job places were created? Maybe, there were temporary job places, for example, as part of the youth Olympic festival project that Mikheil Saakashvili and Gigi Ugulava gained for Georgia. Where are 125 enterprises the Authorities are screaming about? Maybe, the noise of these 125 enterprises is overwhelmed in the murmur of one million trees planted. As to the agitated success in the agribusiness sector, the state, i.e. we, ordinary citizens, pay 41 million GEL in subsidizing a part of the credits, as part of the preferential agro credit program. And what do we receive in exchange? In 2014, the agriculture sector’s ratio in GDP accounted for 1.6% and the figure has increased to only 2.5% in 2015! Thus, we pay 41 million GEL for this tiny growth! The fact is the tourism sector development paces have declined, because nothing new is created in the country. No new airport was constructed after our government, no new flights were appointed to the Kutaisi Airport… I would like to also mention another agitated direction – the healthcare sector. Even the International Monetary Fund (IMF) gives recommendations for efficiently increasing financial injections into the universal healthcare program. The fact is that this program has 100 million GEL deficiency and this shortage represents a system defect of this program. Pensions will grow to 180 GEL, but their purchasing value has decline and consequently, the progress in this direction is imaginary. As to the infrastructure, the budget allocations in this sector declined to 850 million GEL, while only 600 million GEL has been employed as of December 1, 2015. Hence, I cannot understand the ground of proud and boasting statements made by state officials. They do not recognize the problems and they try to appropriate our undertakings. Naturally, we also liked boasting, but these Authorities have prevailed.

“The NBG Failed to Fulfill Constitutional Obligations and This Factor Negatively Affects Economic Growth Indicators” MIKHEIL DUNDUA An economic expert for the 20/30 civil organization The 2015 economic indicators should be considered a real success and maximum available achievement amid the current economic realities in the region, Mikheil Dundua, an economic expert for the 20/30 civil organization, told the CBW. The outgoing year brought many problems in the region. Economic developments seriously worsened in all our trade partner countries. Strengthened US Dollar seriously affected our relations with our trade partners. Amid these economic challenges, the achieved economic growth indicator should be appraised as a success, compared to reports from our neighboring countries. As to investment inflows, it is important that this year has recorded one of the good indicators and the country received more than one billion USD investments in the January to September period. FDI of 489 million USD received in 3Q15 is one of the record indicators since 2007. The GEL depreciation was the most negative factor in 2015.

The GEL devaluation has frustrated the internal investment-making processes. The companies that have taken USD denominated loans took considerable expenditures to serve the bank loans. Consequently, their profits declined and internal investmentmaking process was decelerated. At the same time, the National Bank of Georgia (NBG) failed to fulfill its constitutional obligations and we faced the inflation hike because of increased operating expenditures. The annual target inflation rate inclined by 25% (from 5% to 6.3%), while the NBG keeps exclusive leverages for regulating these processes. The NBG has not fulfilled the constitutional obligations and this fact negatively affects the economic growth indicators. As to the tourism sector, the international tourism revenues have increased, despite the crisis in the region and the national currency volatility. There were fears that the revenues from the international tourism would decline, but we have received opposite results. The sector has brought higher revenues. For the last 2.5 years, the international tourism business has brought more net profits compared to the 2003-2012 period. As to the agriculture sector, the report published by the International Fund for Agriculture Development (IFAD) that covers 99 countries promulgates that Georgia ranks third in terms of government efficiency, distribution of financial resources and management. The report also stresses the investment climate was improved in the country and the country is listed in the top three countries in this respect. Government projects such as Cheap Agro Credit, Produce in Georgia foster creating new job places in regions, efficient distribution of GDP and developing real entrepreneurial fields that should be a fundament for economic growth.

“Business Sector Expects Government to Abolish Profits Tax in 2016” BESO NAMCHAVADZE Economic expert “Georgia’s economic growth in 2015 may be fixed at 2.7%2.8% level. The initial forecast stood at 5% and the government was not revising the forecast until springtime. Nevertheless, the Authorities lowered the forecast to 2%. I suppose the government could have more achievements, because our neighboring countries Armenia, Azerbaijan and Turkey are finishing the reporting period with high economic growth indicators, based on the January to September period reports. Even more so, Azerbaijan had serious losses following contraction in global oil prices. As to Armenia, the country is more dependent on the Russian Federation economy. What could Georgia do and what has not the country done for better economic growth indicators? In practice, the government did not have counter-crisis plan. First statements on similar plan were made in late February 2015, when the GEL exchange rate slipped under 2.30 point. The government has fulfilled some entries from this plan, but failed to fulfill another part. For example, the Authorities have not cut the budget expenditures, namely, administrative expenditures. Moreover, the government has reduced infrastructural costs that, on the contrary, are to boost the economic growth.

The privatization process was intensified and the state budget has already collected more than 200 million GEL, but the forecast was fixed at 300 million USD, that is, more than 700 million GEL. This signifies this plan has not fulfilled even by half. The government has not abolished the profits tax either. The working process on the issue is protracted. Anyway, today the business sector expects the Government to abolish the profits tax in 2016. I think the Authorities were to reduce taxes as part of the counter-crisis program, not only the promised profits tax, but also revenue tax, even more so the revenues plan has been fulfilled amid the intensified inflation processes. As to the government programs such as Produce in Georgia, Cheap Agro Credits and so on, these programs are far useful from the economic point of view, compared to all other expenditures, including in the social sector. Investment inflows should be appraised as normal. Despite 33% year on year slowdown, we should remember that the record inflows were registered in 2014 and the 2015 downturn is compared to the 2014 reports. The 2015 FDI inflows are expected to reach 1.5 billon USD and I think this is a normal figure. However, the Georgian economy has showed that one billion USD investments do not suffice for high-rate economic growth dynamics. Catastrophic contraction in FDI inflows was reported in the power sector, as the government expected 600 million USD, but the January to September inflows marked only 50 million USD. As to the government’s positive decisions, I would name the fact the taking of internal debts was reduced by about 200 million GEL at the end of 2015. I also positively appraise a reduction of revenues tax from the real estate transactions. The housing sector has been recording two-digit growth in the last years thanks to growing volume of investment inflows. The National Bank of Georgia (NBG) has also performed good job, because the GEL depreciation has been prevented through slight interventions. At the same time, we have maintained a considerable volume of foreign currency reserves.


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TOURISM 2015 caucasus business week

December 28, 2015 #128

TOURISM SECTOR GREETS 2016 WITH A POSITIVE OUTLOOK “Currency Depreciation Badly Affects Domestic Travelers, Stimulates International Tourists” The National Tourism Administration positively appraises the 2015 tourism season. The administration head Giorgi Chogovadze assures the 2015 report will register record figures. The administration will continue campaigns for attracting foreign tourists in 2016. The next year Georgia will host the first international wine conference that is organized bye the world tourism organization. The event is expected to draw a new wave of international tourists to Georgia.

GIORGI CHOGOVADZE The national tourism administration head “I positively appraise the national tourism administration’s performance in 2015, based on official statistics and reports. Everybody remembers at the beginning of 2015 the country recorded a slowdown in inflow of foreign tourists, because of certain reasons, including the Russia-Ukraine conflict, as well as the national currency devaluation in the target tourism countries, from where a major part of international visitors arrive in Georgia. Our objective was to improve these indicators. Having found the first negative signals in the statistics, we analyzed the slowdown reasons and outlined the problem solution measures. Shortly, we organized a crisis management board and determined the necessity of diversifying the market amid the existing realities. Finally, we developed an action plan.

Under the plan, we made focus on the international activities that would grow an inflow of foreign tourists from new markets and improve the situation in the old markets. Throughout the year, we have carried out many operations for attracting foreign tourists to Georgia. For example, as part of the summer season campaign, we carried out active campaigns in nine target markets. Georgia’s image-maker commercials were also broadcast by the CNN and EuroNews channels. Moreover, throughout the year we have hold many meetings with invited reporters from various countries. We have invited about 400 media reporters, who have prepared TV spots, programs, documentaries, articles and blogs on Georgia. All these efforts have naturally upgraded Georgia’s tourism potential abroad. We have conducted intense marketing campaigns for autumn and winter seasons. As part of this campaign, we have spent about 11 million GEL on creating internet, television, radio, print advertising products for the target markets, as well as on broadcasting winter image-maker commercials in the cuts of the CNN and EuroNews channels. We have participated in 26 interna-

tional tourism exhibitions. Thanks to these efforts, in the January to November period Georgia attracted as many tourists as throughout the 2014 year. Therefore, we are sure the December report will grow the 2015 total performance to record figures. Besides marketing campaigns, I would like to overview other important projects and events that the national tourism administration has conducted. Namely, in 2015, with the World Bank (WB) support, the national tourism administration developed a strategy. In 2015 we implemented small infrastructural projects, namely, we have installed tourism outlet signs in 14 settlements and cities, bilateral lighting systems in 17 cities and settlements. We have also introduced innovations for extreme tourism followers: bicycle tracks were arranged in Gudauri and Bakuriani and this decision has made these ski resorts more attractive for even summer period. We have conducted trainings in eight regions for improving the service quality. As a result, we have trained 1100 employees in the following directions: service skills, service +, operation of agro tourism facilities, Alpine guide’s training courses, base English courses, hotel business and service skills, urgent medical assistance, guide’s skills, taxation and financial accountancy, disabled service skills, operation of food outlets. In 2015, we launched a large-scale campaign for the internal tourism stimulation– Know Georgia. We have prepared video commercials, organized seven press tours in various regions. Media reports have prepared TV spots and articles on Georgia’s tourism potential. We believe all these endeavors have inspired many citizens in Georgia to travel across the homeland. - Do you find the current indicators satisfactory in terms of tourist inflows? Do you think the quantity of visitors is adequate to your efforts? - In the January to November period, the inflow of foreign tourists rose by 7% and this is a quite good indicator. This growth fully fits our target indicator that calls for increasing the annual inflows of foreign tourists to 11 million persons by 2025. The national tourism administration permanently works on penetrating new target markets. As a result, we have considerably increased the inflow of foreign tourists year on year. - What specific measures will you carry out in 2016 to improve the service quality at tourism facilities and attract new tourists? - A special management operates at the na-

tional tourism administration that makes focus on this direction. This department organizes various trainings throughout the year. We invite qualified trainers from abroad. In general, competition seriously promotes improving the quality. We try to draw the interest of investors and to further develop this direction. - How the strengthened US Dollar has influenced the domestic tourism and foreign visitors inflows?

The currency depreciation badly affects domestic tourists, while stimulates or makes no effect for foreign tourists. - Do you have early report on the tourism sector’s revenues in 2015? Are the sector’s revenues growing or declining? -The tourism sector’s total revenues in January to June period exceeded 766 million USD, up 3% compared to the same period of 2014. The January to October period has recorded a 25% upturn in transactions made by foreign payment cards. Similar payments made up 1.2 billion GEL (+243 million GEL). - Was the internal tourism development program successful? What results has this program brought and will the tourism administration continue and expand this program? - To stimulate the internal tourism, we have inaugurated a new campaign called as Know Georgia. The project acquired large scales and deserved positive evaluations. Many media reporters are participating in the project implementation and they have prepared many TV spots and newspaper articles about the tourism potential in various regions. As part of this press tours, we have visited Samegrelo, Imereti, Ajara, Racha, Khevsureti, Samtskhe-Javakheti, Kakheti.

All of us seems to be aware of the rich tourism potential of our country, but for some

reasons we cannot travel across our homeland. These TV sports are additional efforts to stimulate and inspire our citizens to trip to various regions of Georgia together with our families. The strengthened US Dollar exchange rate has brought negative results to the domestic tourism. Nevertheless, I believe the Know Georgia is a successful project, because after these TV spots the travel companies planned specific tours in various directions and the general interest increased. We will definitely continue the project in 2016, because there are still many things to be seen. - What are your plans in 2016 and what main challenges do you expect in 2016? - In 2016, we will continue our main projects, active marketing campaigns, developing small infrastructural projects. We plan to construct new information centers. It is also important that in September 2016 Georgia will host the first international wine conference.

The World Tourism Organization (UNWTO) organizes the event. It should be noted similar event will be held for the first time and it will be held in Georgia. The conference will be held in Kakheti on September 7-9. I and the UNWTO head Taleb Rifai divulged the decision at a joint news conference in London as part of the international exhibition. More than 250 foreign guests and ministers from 20 countries will attend the conference. We do our best to ensure Georgia’s world recognition as a winemaking homeland. Moreover, in 2016 Georgia will host the 5th meeting of the UNWTO Technical Advisory Board and the 16th meeting of Committee on Statistics and Tourism Satellite Account. In January, we will also open a convention bureau. Thus, the coming year is expected to be very busy and active. We plan to implement many projects and events for developing internal and international tourism sectors.


December 28, 2015 #128

TOURISM 2015 caucasus business week

“The year of 2015 was much more fruitful for the tourism sector compared to 2014” SHALVA ALAVERDASHVILI The founder of the federation of hotels and restaurants The year of 2015 was much more fruitful for the tourism sector compared to 2014. The sector’s sales have grown in 2015. The year of 2014 was comparatively worse because of restricted visa regime. The regime was alleviated in 2015 and the tourism sector received real benefits. All these factors have largely stimulated eastern countries to enter Georgia. Tbilisi was full of foreign tourists in August 2015, while in 2014 the capital city lacked for visitors and tourists were mainly heading to resorts. And this year both resorts and Tbilisi were full of tourists and the ratio of visitors from Arab countries is decisive in this indicator. Despite this category of tourists belong to the medium segment, they spend more money compared to the visitors from Poland, for example. The current year was satisfactory for the private sector, despite they had higher expectations from the Tbilisi Youth Olympic Festival. These expectations have not justified in this respect. In other cases the results were satisfactory, including the UEFA football match in Tbilisi was a fantastic event. I think in 2015 Tbilisi has performed very well.

Timely marketing campaigns are of vital importance to increase the tourist inflows. The time and period is of crucial importance in this business, despite the fact marketing campaigns are conducted in ordinary regime. For example, the Olympic Games advertising campaign started on July 25, when the Games were scheduled for July 26. The campaign lasted up to August 20 in the EuroNews channel.

Several millions of USD has been spent on popularizing and advertising Georgian ski resorts in foreign markets, while the public awareness remains at low level in Georgia. In practice, I have not seen ski resort advertising commercials in Georgia. We should also make a use of everything by providing timely reaction. For example, RIXOS

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“Today Information Campaigns Circulate around Georgia and Nobody Cares Developing Products” Vakhtang Asatashvili The founder of Gudauri Heli-Ski

commercials are permanently circulated on Russian channels. At this stage, the Turkish Rixos has been blocked for Russian tourists in practice. Therefore, we have a good opportunity to redirect Russian tourists from Turkish Rixos to Georgian Rixos. We must use this chance and attract as many Russian tourists to Georgia as possible. The government should achieve this objective jointly with the private sector.

Advertising campaigns are very good, but timely advertising is of vital importance. Several days ago, Goderdzi ski resort opened in Ajara, but I am interested whether our citizens had full information on the inauguration of this new ski resort. Only reporters and a small group of Georgian citizens were aware of this event. New resorts should be unveiled by huge PR campaigns, advertising campaigns.

Specific affairs are made, but we lack for timely and intense PR campaigns. All affairs must be supported by adequate PR campaigns. Previously, affairs could be less, but PR campaigns were more intense. Today the real affairs are done, but there is a deficiency of efficient PR campaigns. And this is a negative factor. Ski resorts should be not be advertized on the eve of inauguration, because this is a delayed PR campaign, because foreign and domestic vacationers have already planned their tours. The same problem exists in relation to the Tetnuldi resort. When the resort inauguration time will come, a group of persons will arrive there, unveil the complex and the ceremony will be over. In practice, tourists cannot receive information and cannot get there, because they have already chosen other destinations.

The statistics shows the 2015 results were unsatisfactory. In the January to November period, 2 % upturn was registered in the tourism sector and the inflows of visitors have increased by 7%, while in 2014, an 8% growth was registered in the tourism sector and the inflow of tourists increased by 2%. In 2014, the tourism administration spent 12 million GEL, while this year initially 18 million GEL was allocated and later the amount increased by 7 million GEL to 25 million GEL. Let’s see the statistics. I will not mentione the fact the tourism sector’s ratio is unimportant and even the existing indicators are the merit of transit, especially amid the 2014 negative reports. A lot of trailer drivers are included in the tourism statistics, because they have to wait for 24 hours before they leave the territory of Georgia through the Larsi Checkpoint. I can only say that we had 39% upturn in tourist inflows. The growth marked 57% in 2012, 22% in 2013 and 2% in 2014. Today the business sector will tell you that the tourism sector is declining. What is the reason? The Government refers to regional problems, but if we knew about expected regional problems, why has not the tourism administration taken preventive steps? The Russian economic crisis was foreseeable, plus there is the Russia-Ukraine tension and the tourism administration refers to these factors to substantiate the current slowdown in the tourism sector. But we knew about the war. They could take adequate steps timely. The tourism administration had serious budget, 25 million GEL, in whole. It turns out our spending is growing year by year without results. At the same time, I cannot say these funds are spent in vain. I would say these funds are spent inefficiently. The country spent 12 million GEL in 2014 and received better results, while we spent 25 million GEL in 2015 and received the worse results.

A target campaign matters when you arrive in the target market, unveil a promo office and besides advertising campaign, you offer tourism products sales services simultaneously. This is a direct marketing. But today only advertisements are circulated that seem to be useless.

Certain reforms should be definitely carried out in the tourism sector. The current policy is based on the 2005 reforms, when the perception of Georgia was mainly determined by participation in various international exhibitions. Since then, everything follows the drift. We have been doing the same and there is nothing new in our efforts. Today we carry out information campaigns about Georgia and nobody cares for developing the products in itself. The last period Georgia’s partner countries spread information through their embassies that the travel to Georgia is not safe. Similar precedents were recorded in other countries too, but they were carrying out coordinated job. In this case, the major responsibility is laid on the Interior Ministry and the Foreign Ministry. Instead of spreading correct and reliable information for 24 hours to partner organizations about valuable safety conditions in Georgia, the Georgian government seems to be indifferent. As a result, the country has received many negative reports. At this stage, it is ruled out that the ongoing geopolitical developments reap any positive for the Georgian tourism sector. The current situation may bring worse results.

Many persons expect the Russia-Turkey confrontation will direct tourists to Georgia. This is incorrect position. Georgia cannot provide such tourism services as Turkey does. Turkey provides high-quality services at low prices, while there are no appropriate hotels in Georgia. Only Black Sea regions may be offered to foreign tourists as a counterweight. But hotel service tariffs are triple higher compared to Turkey. Georgia cannot compete with Turkey in reality. Naturally, a tiny growth will be recorded, no fundamental changes are not expected. We should not Cause Incorrect and Ungrounded Expectations.


INSURANCE 2015 16 EMBRACING EUROPEAN STANDARDS: STATE-FREE INSURANCE IN GEORGIA caucasus business week

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he year of 2015 brought many risks to the Georgian insurance industry. The Tbilisi natural disaster reminded the insurance companies, the Authorities and ordinary citizens that the insurance culture in the country is undeveloped and this direction should be somehow stimulated, even at the legislative level. In 2016, the companies have to withstand new challenges. The sector has been operating

without state medical insurance programs for a year. Therefore, the Georgian insurance industry has to meet the European standards and certain criteria. After Georgia signed the EU association agreement, the country should implement certain instructions, including, in the insurance market. Currently, fifteen licensed insurance companies operate in Georgia. The sharp market competition enables citizens to choose various insurance products and services.

The 2015 final financial indicators are not famous yet. However, the January to September report shows that the insurance market has increased by 29.4% year on year (up 66.4 million GEL) and the companies have generated insurance premium of over 292 million GEL, while 126 claims were paid. GPI Holding occupies leading positions in the sector with 57.14 million GEL. Aldagi ranks second with 55.67 million GEL. Imedi L is third

December 28, 2015 #128

with 54.16 million GEL. Unison has advanced to the fourth position with 27.59 million GEL and Irao is fifth with 23.93 million GEL insurance premium. As to the insurance products, health insurance segment ranks first. The Georgian insurance market is regulated by the insurance state supervision service. The body is to carry out the state policy, ensure market stability, ensure solvency, and foster financial stability and adjust the sector to the EU standards.

INSURANCE COMPANIES IN SERVICE OF CITIZENS IOSEB GOGOLASHVILI The head of the insurance state supervision service of Georgia

“The Tbilisi natural disaster brought new challenges in the country in 2015. The insurance companies estimated losses in the shortest period. It would be impossible to remunerate similar losses so quickly. The damaged and annihilated automobiles were compensated without franchise. Private business spaces that were damaged by the natural disaster were also remunerated timely. The sector has showed a high level of readiness for providing timely reaction and assisting people in emergency situations. The insurance companies have demonstrated unprecedented solidarity and professionalism. The agro insurance pilot program was also of crucial importance. The program is to insure various risks in the agribusiness sector. The project has remunerated many small and major losses. In 2016, the sector will introduce the automobile owner’s civil responsibility insurance prod-

uct that is one of the leading mandatory insurance packages in the world. At the initial stage, “the bill on Insurance of Civil Responsibility of Owners of Automobiles Registered in Other Countries” is being developed. Under the bill, the insurance package will be mandatory for owners of the automobiles that are registered in other countries, but drive in Georgia and participate in the road traffic in Georgia. As a result, the losses inflicted by this category of automobiles to the health, life or property will be remunerated under the law-determined requirements. To ensure the financial stability of insurance companies, the solvency margin will be introduced and the supervisory capital will be determined that will be supported by both bylaws and legislative acts. This is the worldwide-recognized standard and we must establish it in Georgia. In the future, the minimum capital of the companies will increase stage by stage, due to the class and form of insurance. The first stage was fulfilled. We also plan to introduce internal audit standards in the companies to tighten and strengthen internal control systems and to make the process more transparent and refined. Starting 2016 insurance mediators (brokers) will be controlled by a joint regulatory system. They will be obliged to submit periodical performance reports to their offices. The requirements for registration of insurance brokers will be also expanded.

INSURANCE SECTOR ON WAY TO RECOVERY GIORGI GIGOLASHVILI The Georgian Insurance Institute president Georgia has knocked on the EU door and the EU has opened the door, but warned us to clean boots at the entry and sent us the EU instructions. These EU instructions are that have accelerated the following processes in 2015: we have launched developing the solvency margin. These requirements to the capital and structure of insurance companies will further upgrade the financial stability of financial companies and the insurance market, as practiced in the EU. According to the schedule, these instructions must be fulfilled until 2018. Namely, the capital of insurance companies must increase stage by stage. This is important to prevent any problems before beneficiaries and the insurance sector. At the same time, the mandatory third-party liability insurance will be also introduced. Initially, this norm will concern the automobiles that are registered abroad. Moreover, the insurance companies will move to the so-called corporate management platform. Today an insurance company may be a joint stock company (JSC) or a limited liability company (LLC). If the company satisfies the license conditions, it may have a one founder, who will execute the commissions of a decisionmaker director. He/she may take erroneous decisions and damage the interests of many persons. To maximally minimize similar human errors, a legal organization form will be introduced for insurance companies and this form will be a joint stock company (JSC). The body will embrace stakeholders and a general meeting of stakeholders will manage the company, that will also have

a supervisory board, a directorate. This system minimizes the availability of making erroneous decisions. This decision will improve the company management aspects and recover the insurance sector. The system of insurance brokers will be also changed. Previously, this direction was not regulated, but now this segment will be controlled.

It is important that for the first time since 2007, Georgia is not implementing the state medical insurance programs, starting 2015. We stopped this program in September 2014 and now the insurance is made up of not budget allocations, but commercial earnings. I believe, thanks to this decision, the insurance sector is on the way to recovery. As to the market realities, there is sharp competition, the quantitative indicator has increased by 10-15 thousand units in the automobile segment. The growth is reported in the real estate segment too. The market is protected from shocks, no company is expected to go bankrupt and no one thinks to set up company without bearing due responsibility. New standards in the market may generate certain changes and some companies may merge or major companies may absorb small companies, while the introduction of the automobile segment may also outline certain foreign or domestic groups to the market.


December 28, 2015 #128

INSURANCE 2015

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caucasus business week

EMBRACING EUROPEAN STANDARDS: STATE-FREE INSURANCE IN GEORGIA

Nikoloz Gamkrelidze The director of the Georgia Healthcare Group “The year of 2015 may be appraised at one of the important periods for the Georgian Healthcare Group, because we have carried out the IPO and the company is now represented at the London Stock Exchange (LSE). This is Georgia’s first nonbank organization that is represented at the LSE. We have mobilized 100 million USD additional capital for our group development and this fact is of crucial importance for the company and the sector and the Georgian economy. This is a foreign direct investment that will be spent in Georgia and new job places will be created. This move was the most remarkable fact for our company in 2015. Nevertheless, there were serious challenges in the insurance sector in 2015, because the industry has moved to an independent regime of operation. The so-called social insurance was suspended at the end of 2014, when the state sector used to finance the target social groups. Because of the previous system, the insurance companies lost considerable revenues and the sector had to overcome the problem. It was questionable whether the insurance industry would manage to compensate the losses. The sector has coped with this challenge; but was it a success? The future will show this. The field continues growing despite low paces and this is very important. I believe the development pace will be geared up. As to the merge of Imedi L and Aldagi, Aldagi purchased Imedi L in 2012 and we united this company into Aldagi. Because of plans for entering the LSE, we have decided to divide these companies into health and nonhealth insurance directions. We have integrated the health insurance direction into the Georgian Healthcare Group, where it is more synergic with out healthcare business. At the same time, Aldagi was positioned under the brand of Imedi L, while Aldagi remained under the umbrella of Bank of Georgia, because it is more synergic with the bank business.

Vladimer Bezhashvili The PSP Insurance director general “There is sharp competition in the insurance market. The Georgian insurance market is a complicated and peculiar segment. Nowhere in the world health insurance portfolio is a leader direction, while in Georgia this segments ranks first in total insurance portfolio with 65-70% ratio. As to our company, we have fulfilled all our plans. We are represented in the corporate health insurance segment and occupy one of the leading positions in the market. The company has introduced a new system for quality monitoring. As a result, we provide one of the best services in Georgia and this is proved by various researches. As to 2016, we have signed several major contracts at the end of 2015 and these projects will enable us to at least double our potential in 2016. This is serious challenge for our company and we will go ahead of such major insurance companies that have been long operating in the market, while our company launched operation in 2010. The year of 2016 will be interesting and difficult because the exchange rate misbalance and the global economic developments will affect our company too. Therefore, we expect complications. At the same time, we are ready to withstand all problems. We plan to introduce property insurance products in the second half of 2016, but we will not carry out aggressive policy in this direction. We will maintain our niche in the market and remain in this segment. In 2017, we will start active campaign in other directions too. It is important that the generated insurance premium increased in 2015, despite the fact the insurance policy sales had not increased.

Paata Lomidze The GPI Holding director general “In 2015 no fundamental changes were recorded to either positive or negative direction in the insurance market. The January to September period recorded a small growth following currency exchange volatility. It should be also noted the market development paces are unsatisfactory. Naturally, everything depends on economic activity and investments, but certain changes may be carried out at the legislative level too. Several important projects are underway with the state sector participation, For example, the agro insurance pilot project. This is important for all farmers, who have access to agro insurance. In January to September 2015, we remunerated more than 7 million GEL to about 2000 farmers. The year of 2015 was special in terms of the insurance sector efforts for remunerating the June 13 natural disaster losses. The world practice shows that the insurance industry compensates about 50% of the losses after similar major natural disasters. This signifies the state sector is prevented to bear all the burden of compensations, as a major part of the population is involved in the insurance system. As to Georgia, the domestic insurance industry has compensated only 2% of total losses, because the ratio of insured individuals and business companies is very small. Everybody who had insured the property received compensations in the shortest period. Insurance companies paid about 4.3 million GEL claims in a very short period. In August 2015, we introduced our social project for free insurance of automobiles from natural disaster. We have introduced innovations for improving the quality of our services. Namely, a software for automobile insurance that enables all beneficiaries to receive claims in online regime. Our priority is to simplify and improve service procedures. We will continue active work in this direction to make insurance produce simpler, more accessible and comfortable.

Tengiz Mezurnishvili The IC Group director general „The company sales declined in 2015 because of the economic developments. In general, IC Group and the insurance sector will end the year in little profit. The market faced many difficulties; including the GEL volatility considerably affected the sector. IC Group has introduced several new products in the market, including individual health insurance package. Previously, the company used to offer only corporate insurance package. We have developed four various products and the tariff starts from 15 GEL. We have also introduced a product for insurance of cellular phones from loss, hacking and other risks. The product covers cases in foreign counties too. The current year was special, because we presented hybrid automobiles insurance package at unprecedented low tariff. The number of hybrid automobiles in Georgia is very small and this segment starts development. The insurance of cardholders from illegal use of bank cards was also an interesting product, as well as the insurance of leaser’s property, hotel insurance that is relevant in case of brand hotels. Now small hotels are also interested in our services. Consequently, we try to adapt our products to the interest of our clients and to offer diverse products. The year of 2016 will be very important, because the obligatory insurance for automobile owners will be introduced for transit automobiles. Georgia is an only country, where the obligatory insurance does not operate. For many years, this issue was tabooed. This product will stimulate the industry development. All citizens will be insured and all claims will be compensated.


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COMPANY caucasus business week

December 28, 2015 #128

DUGLADZE WINES & SPIRITS - DIVERSITY OF GEORGIAN CHARACTER! Givi Aronishidze, the marketing manager at Dugladze Wine Company The history of Dugladze Wine Company is related to the name of Dimitri Dugladze, who has made much contribution to the development of Georgian alcoholic beverages. Today, his sons, Dugladze Brothers, continue his undertakings. The company manufactures a full assortment of grapes alcoholic beverages. The company has been long represented on the Georgian market by Royal sparkling wine. In export markets the company has introduced wines and wine brands. Dugladze Wines & Spirits is an integrated enterprise with a full production cycle that produces wines, brand spirits, wine brands and sparkling wines. The winery is fully modernized and equipped with technologies of the world’s recognized companies such as Setic, Della Toffola, Krones, Cavagninno & Gatti, Seitz Enzinger Noll. The company actively participates in various international exhibitions, contests and business forums. Dugladze Wine Company exports products to Russia, Ukraine, Kazakhstan, the USA, China, Estonia, Latvia and Poland. - Was the year of 2015 successful for the company? Are the sales indicators satisfactory? - The year of 2015 was full of innovations for the company. We have introduced two new varieties of sparkling wines and returned the old wine brands to the Georgian customer. I mean Vartsikhe, Gremi, Very Old, Eniseli and Tbilisi. We introduced these products in October 2015, outlined due plans and we are content with their fulfillment. Naturally, the next year will be more ambitious and full of big plans. - What is the domestic market’s ratio in your sales? Is this ratio growing? In general, what sort of wines do Georgian consumers prefer amid the current social and economic situation? - Before 2015, our company used to make focus on exports. In the second half of 2015, we introduced three varieties of Royal sparkling wine and seven varieties of wine brands with 3, 5, 7, 9, 12, 14 and 17 aging. At the beginning of 2016, we will introduce our distinguished exports wines to

the Georgian market too. - Which markets has Dugladze Wines & Spirits penetrated and which products are the most in-demand and sellable on exports markets? - We export our products to many countries in the world and they are appreciated everywhere. Wines are the most in-demand and sellable products. Russia is a major exports market for our products. For the last three years, since the Russian Federation removed embargo on Georgian wines, our company is a major exporter on the Russian market among Georgian winemaking companies. This achievement stresses we produce high-quality products. Anyway, we have performed much job jointly with the national wine agency and other Georgian companies to make Georgian wines in-demand products in the Chinese market. We attend exhibitions, meet Chinese distributors and set up business contacts with many Chinese distribution companies. All these efforts have reaped real yields and we have

already sent first consignments to China. We have big plans on the Chinese market to boost our sales as much as possible. Besides the mentioned countries, we export our products to Slovenia, Estonia, Ukraine, Kazakhstan and Japan. Naturally, we will not stop on the achieved results and we will intensity efforts to increase the sales volume in these countries, as well as to penetrate new export markets. - You have introduced your products in a new packing this year. What factors have you led to the re-branding process and how much money have you spent on the re-branding process? - Besides money resources, this sort of rebranding project has taken huge and zealous job of the company and the company personnel. Having explored the consumer behavior and demand, we realized we had to make changes in terms of company re-branding and packing the products. We have carried out the re-branding project that called for improving both the visual and qualita-

tive aspects. Our company obtained ISO 22 000 certificate and strengthened the products quality aspects. Moreover, we continue the process of refining and improving all this process. - What are your plans for increasing the sales? Do you plan to increase the assortment? - We have ambitious plans. Our objective is to become the market leading company in a short period. To this end, we have introduced seven varieties of wine brands and three varieties of sparkling wines. Naturally, we will continue our efforts for expansion. Our company will introduce our exports products to the domestic market. Specially for the Georgian market, we have developed table wine brand of Ranina. Its slogan is – Georgian Temper Poured into Song. The brand has already deserved much appreciation. In this short period, we have already received early orders. Thus, we are saying goodbye to the 2015 old year and meeting the 2016 New Year with these ambitious plans.


December 28, 2015 #128

POWER SYSTEM 2015 caucasus business week

GEORGIAN OIL MARKET TENDENCIES OF 2015 AT A GLANCE

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Specially for the CBW, several oil products importer companies have prepared analysis on the 2015 achievements.

SOCAR PETROLEUM GEORGIA

55 million GEL Fine by the competition agency, GEL devaluation and global tariffs volatility – these main factors have determined the Georgian oil products market tendencies in 2015. In his interview with the Caucasus Business Week (CBW), Vano Mtvralashvili, the head of the Union of Oil Products Importers, overviews the 2015 market tendencies in Georgia.

W

e positively appraise the 2015 performance. The current year has brought many positive and favorable results. Namely, the investment inflows were maintained and the infrastructure was renovated. The process of constructing new filling stations with modern infrastructure is being continued and the new stations meet the European standards. Moreover, a number of companies keep constructing and developing gas filling stations (SOCAR, Wissol, Gulf) This year the companies have developed various services, including, all companies have introduced various discount campaigns for their own loyal clients. This segment of clients occupy considerable ratio in sales indicators.

The current year has registered a record volume of imports and consumption of oil products compared to the previous years. Despite an essential plunge in global oil prices that cuts state budget payments in the VAT part, the budget payments were maintained at high indicators thanks to a record volume of imports and higher revenues from excise taxes. Moreover, the non-branded sector has also started development. Namely, today the number of branded filling stations is about 560 ones, while the number of non-branded filling stations is 460. The comparison shows the quantity of nonbranded filling stations has nearly equaled to the quantity of branded filling stations.

The plunge in global oil prices are of crucial importance, as the retail prices have declined in the domestic market. As to negative tendencies, Vano Mtvralashvili has outlined two aspects: 1. the GEL ex-

change rate deprecation in relation to USD that has negatively affected the financial indicators of the companies; the fuel prices have not declined in the proportion that is adequate to the global tendencies; 2. The fine imposed by the competition agency was disapproved by our companies and the decision was appealed to the court. This factor has partly influenced the investment environment. As to the failed projects, Vano Mtvralashvili named the Poti oil refinery construction project. Regretfully, the investors has not been selected yet, Vano Mtvralashvili said. - What should we expect in the next year and what challenges may arise before the Georgian oil products market in 2016?

The GEL exchange rate against USD is a main factor. We hope the GEL rate will strengthen and become stable. We also hope the court will satisfy the appeal of our companies, because we are sure these companies have committed noting illegal. The competitive capacity on the oil products market has increased and the companies have to be more self-concentrated, to develop infrastructure and to expand the geographic range. The oil products imports will be still high, while fuel prices will remain low amid a plunge in global oil prices. The low fuel prices are expected to make direct influence on the consumption growth. The fuel qualitative indicators and the control on it will be also improved in 2016. Namely, the country will move to the Euro5 standards. As to diesel fuel, its qualitative characteristics will reach highest indicators. This factor will foster environment protection and establishing competitive environment in the market”, Vano Mtvralashvili said.

The company has built and put into exploitation eight filling stations, including two filling stations (Aghmashenebeli and Zugdidi) and six filling stations (CNG): Gori, Khashuri, Ianeti, Sanapiro, Kairogas and Astragas. The filling stations have employed 50 persons. The company has won the tender for constructing a multifunctional complex at the crossroad of Terjola with the East-West highway. The company has also unveiled a new service center in Tbilisi. Total investments, from own sources and bank credits, made up 5 165 531 GEL throughout 2015. The company has paid 109 240 678 million GEL to the state budget. Sponsorship funds (the Georgian Football Federation and so on) marked 118 051.92 GEL. Charity spending constituted 2 432.80 GEL. For successful performance, the company has obtained the following awards: The Title of the Sector’s Leader and a Medal from the Union of National Business Ratings of Georgia. An honorable diploma from GeoStat, the national statistics service of Georgia. The first place among Georgia’s 50 top bitumen importers.

GULF The year of 2015 was very successful for the company in terms of fuel sales. Gulf unveiled a new filling station at the Gori-Tbilisi highway and opened 7 new stores in the Gulf Store network. In 2015, Gulf implemented many projects in terms of CSR, including, in the June 13 natural disaster period, when Gulf company immediately allocated funds for assistance of the natural disaster victims. Moreover, this year the company helped about 100 socially vulnerable families. Gulf was one of the first companies that signed a cooperation memorandum with the Solidarity Foundation.

LUKOIL In his interview with the CBW, Shavleg Mishveladze, the deputy director general of Lukoil, noted the main achievement of the company is that it imports top-quality European fuel to Georgia. „The fuel quality issue is more and more accentuated in Georgia. Therefore, our major achievement is that our network trades in top-quality European fuel, the quality that dominates in the leading European countries. This fact makes us proud. We do not offer various low-cost products at the expense of fuel quality deterioration”, Mishveladze said. In 2015, the company maintained its niche, expanded the network and unveiled two new stations in Samtskhe-Javakheti. As to the sales, the company has maintained the existing sales indicators and this is a success amid the GEL exchange rate devaluation, Mishveladze noted.


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REAL ESTATE 2015 caucasus business week

December 28, 2015 #128

DEVELOPMENT SECTOR FACED SERIOUS CHALLENGES IN 2015 Irakli Rostomashvili, the head of the Georgian Association of Developers.

- How would you appraise the year of 2015 for the development sector? - The national currency volatility has badly affected the sector in terms of sales. We had serious slowdowns, upturns, though,

Finally, the currency devaluation has negatively influenced the field. The development of our sector immediately depends on the state economy realities. The social and economic conditions of our population are also directly reflected on the field. - Has these negative tendencies narrowed investment inflows? - The investor is a body that puts money to later get it back. Naturally, investors see there are financial problems in the country and they abstain to take bold steps. People with 3000 GEL monthly salaries used to pay 600 USD installments a month (1000 GEL) for new apartments, but the currency volatility made our the clients pay 300 GEL higher installments and this problem deteriorate the solvency of our population. - Would you recall any specific events, including at the legislative level, which has either promoted or frustrated the sector development? The issue was of construction amnesty. - There is nothing important to recall.

TORNIKE JANASHVILI The head of investment projects of Block Georgia investment-development company “I would say the year of 2015 was fruitful. Currently our company is implementing three projects. This year we wanted to launch two hotel construction projects, but the licensing issue was delayed. We will definitely inaugurate these two projects in 2016. We also plan to start a joint project with Orbi development company. The project is valued at 150million USD”.

MALKHAZ KUNELAURI The Redco development company manager “Naturally, the sector faces difficulties because of certain economic problems in the country. Therefore, it would be incorrect to assert the business is unproblematic. Indeed, there were serious challenges in 2015, but we have overcome them. This year we were implementing projects amid difficulties, but the result matter anyway. The year of 2015 was important as we launched large projects such as the new building construction beside Batumi Tower, were a LeMeridien five-star hotel will be erected; the construction of a new residential building at the Vake-Saburtalo new highway; New Gudauri, a hotel-style residential complex in Gudauri; a hotel-style residential complex in Bakuriani. In 2016 Redco company will try to expand its business and unveil new hotels in Gudauri by investing total of 15 million USD. The project also calls for constructing a new residential complex. At the end of 2016, the international hotel brand of Radisson will also appear in Gudauri. I believe this ski resort has the potential to get into the list of the world’s leading ski resorts.

We plan to inaugurate other projects too in 2016. At this stage, we are conducting negotiations around these projects and I will not divulge other details. We want to further enhance our business in 2016 and to invest more money in Georgia. We want the investment environment to be more stable so as more projects be implemented in Georgia.

TORNIKE ABULADZE The head of Arci development company “The year of 2015 has brought positive results to our company, because this year our company managed to start active fulfillment of the liabilities assumed 7 years ago. For many years these projects were suspended. This factor is of crucial importance for us. Currently, we are implementing all projects. Some of them will be finished in 2-3 months. Arci development company will complete all projects in the first half of 2016. The year of 2015 was also important because Arci company has chaired the association of developers. As part of the association, this year we have managed to fulfill liabilities before the state in terms of the projects that were launched in 2008. We have paid VAT and K2 liabilities. We will pay the remaining portion of liabilities in 2016 and launch new projects. We have gained much experience from the past years.

BESO TKHELIDZE The founder of Atori development company ”This year was successful, but, the development sector, in general, has to overcome many challenges. Despite complications, we have fulfilled all plans and completed four multistoried

buildings on Saburtalo, launched construction of three new buildings. In several days we will start construction of new residential building in Vake. The GEL depreciation brought serious problems to all business sectors. This factor has also affected the investors’ decisions and moods. For example, several investors were ready to take part in several projects, but the economic difficulties and the currency volatility made them change plans. Commercial banks also tightened crediting policy. In practice, we have implemented our projects without external assistance. In 2016 we plan to implement 6 projects and build residential buildings. We plan to invest 1520 million USD investments in the next 2 years.

GIORGI ZAKAIDZE The head of Tiflis Business Group The current year was very important for our company, as on December 27 we will launch construction of hotel Budapest that was suspended about a one year ago. The hotel construction works near the Vake Square was halted because of confrontation between Tbilisi City Hall and the company. After this break, on December 25 the foreign investors of the company will arrive in Tbilisi jointly with defense lawyers, all equipment and machines will be mobilized and the hotel construction works will start. We own a construction license and this license was never annulled. This is simple. Our company has already spent about 4 million USD on the hotel Budapest project implementation, including 3 million USD was paid for the site, while 1 million USD has financed the office expenditures. We will invest 22 million USD in the project implementation. Moreover, we started and finished the construction of a business center on Belinski Street in Tbilisi. The company has invested 5 million USD in the project implementation. This is an ultramodern center with electronic systems. We have already rented 50% of the spaces. As to the year of 2016, our company is permanently oriented on development and implementing new projects.

As to the construction amnesty, these norms were not enforced in reality. I do not know the reasons. The Revenue Service is discussing the issue and no important decision has been taken in this respect yet. And this unclearness is bad. The process is protracted very long. The building code was also being developed, but the document has not come into force yet. - What should we expect in 2016? - I personally expect something will change positively in this country, namely, the justice will reign. I have much expectation.

IRAKLI BURDILADZE CEO at JSC m2 Real Estate The current year was full of important events. We finished a new energy efficient residential complex M2 on Nutsubidze, ahead of schedule, and handed over finished apartments to the customers. Moreover, in October 2015, we started constructing our largest project M2 at the hippodrome. The project calls for constructing 819apartment energy efficient complex with modern technologies, safety systems, comfort and recreation and children zones. A two-floor nursery school will be arranged in this complex. It should be noted the early sales started in summer and has finished successfully. We have also attracted a new large investment. The International Finance Corporation (IFC), a member of the World Bank (WB) group, and Green for Growth foundation has allocated 23 million USD loan to m2 Residential ltd, a subsidiary of JSC m2 Real Estate, to develop and expand the energy-efficient (the so-called Green) construction complexes and make them attainable to average-income population. Moreover, IFC will also allocate additional 7 million USD credit resource to our subsidiary for constructing three-star hotel Ramada Encore in Tbilisi. Through this project, we will start improving hotel infrastructure in Georgia to meet the tourism sector’s growing needs in Georgia. In 2016 we will finish three new residential complexes: m2 on Kazbegi, m2 on Tamarashvili and Optima in Isani. Revival of our projects and the accommodation process is very important and pleasant moment for us. Thus, in 2016 about 800 families will move to new apartments to live in comfortable environment. Moreover, naturally, we have expansion plans and will launch new projects. We are developing several new projects and introduce them to our society in 2016.


December 28, 2015 #128

AVIATION 2015 caucasus business week

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GURAM JALAGHONIA: THE YEAR OF 2015 BROUGHT STABILITY TO AVIATION SECTOR The Georgian Civil Aviation Agency (GCAA) has finished the process of improving shortcomings detected after the 2013 ICAO audit. Currently, Georgia and its aviation segment has twice better indicators compared to the 2007 audit, the agency head Guram Jalaghonia noted and positively appraised the 2015 performance. He outlined several reforms, particularly, Georgia’s undertaking for regulating drones. The year of 2015, as well as several past years, was stable for the aviation sector of Georgia with positive dynamics of turnover and safety guarantees, he added.

- What reforms were carried out and what innovations were introduced into the Georgian aviation sector through 2015? - The agency has zealously worked throughout the year and this factor is the most important for the country and the agency in itself, I think. We have already finished improving all shortcomings that were exposed under the 2013 audit. As reported, the 2013 audit outlined our growth in terms of aviation supervision issues, in almost all directions for fulfillment of the ICAO requirements. Today Georgia and its aviation management have twice better indicators compared to the 2007 audit report. Nevertheless, in the 2013 audit ICAO exposed errors in the process of certifying airplane exploiters. To remove these gaps, the agency has carried out all necessary measures: we have added changes to the corresponding normative acts, announced 6-month moratorium on registering new airlines, carried out new certification of exploiters of the existing airplanes. The process was carried out jointly with European inspectors, namely AustroControl and the Agency inspectors for flight safety. The due information was uploaded into the ICAO database. Under the ICAO regulations, at this stage, the uploaded information is being explored by ICAO. We show maximum readiness to receive ICAO validation audit so as Georgia’s achievements be reflected into the ICAO indicators and all existing shortcomings be removed. As to innovations, we have adopted many important normative acts in 2015 for upgrading flight security standards and fulfilling international liabilities. The agency has approved the general regulations for safety management and determined requirements to our aviation companies in terms of developing safety policy and goals, ensuring aviation safety and risks management. The agency has approved Guideline for Runway Security Group that calls for organizing local groups of airports of all participant parties with the aim to improve the runway safety level (airdrome exploiters, airlines, aviation service enterprises, civil aviation agency if necessary, and other aviation enterprises and experts). These groups will develop runways security plans and programs, work on determining and preventing risks. The process of establishing these groups is underway and we have good expectations in this respect. By the initiative of the civil aviation agency, in January 2015 aviation search-rescue reaction plan was enacted to alleviate the outcomes of emergency situation after aviation accidents in Georgia, as well as to minimize casualties, introduce a joint system of search and rescue and coordinate the performance of all chains of

the system. The operation is underway in this direction too. An interdepartmental commission has been set up, several meetings were held , sectoral audits were underway to determine technical and human resources and how international liabilities are fulfilled in this direction. The agency has also launched one undertaking that is an innovation in Georgia and the world aviation sector.

We follow the process jointly with international organizations and other aviation authorities in parallel regime – this is the regulation of drones. In this direction, this year the agency has set up a workgroup that will elaborate drones certification and exploitation regulations. The agency has joined the Joint Authorities for Rulemaking on Unmanned Systems (JARUS). This step will establish European regulations and the best practice of exploitation of drones in Georgia. We have issued recommendations regarding safe exploitation of drones that will guide operators of drones (before the regulatory norms are enacted) where to operate, what restrictions run and how to protect flight safety norms. - Does the agency think the year of 2015 was successful for the aviation sector?

The current year, as well as the past several years, was stable for the aviation sector. It brought positive dynamics and safety.

No aviation accident was registered in the agency. In January to November 2015, Georgian airports served 2 120 720 passengers by regular and irregular flights, up 13% compared to the same period of 2014. The passenger turnover considerably increased after restoration of regular flights between Georgia and Russia, as a result of technical consultations and negotiations between aviation authorities of Georgia and Russia. In January to November 2015, the passenger turnover between Georgian and Russian destinations increased by 68% (up 128 794 passengers) compared to the same period of 2014. The restoration of regular flights has positively affected the number of passengers transported by the national airline that has transported 29 000 more passengers compared to the previous year. - What are negative and positive factors that influenced Georgia’s air market in 2015? - In general, we provide valuable prevention of negative factors in the civil aviation field. Naturally, the benchmark is the security of flights and passengers. To reduce and prevent negative factors, we apply the following leverages: technical and legal regulations, permanent supervision, security system management, notification of aviation events and so on.

As to commercial aspects, the unleashed hostilities, new conflict zones and intensified acts of terrorism generated temporary frustration in terms of flights worldwide. In our case, the use of Georgian air ways was reduced. Moreover, flights were reduced to the direction of Ukrainian towns because of the hostilities there, but we think similar difficulties are of temporary character and the aviation sector immediately reacts for overcoming negative factors. - Did new players appear in the Georgian air market in 2015? What projects are being carried out to make the Georgian air market more attractive and boost competition by introducing new players? - In 2015 the following foreign airlines started

regular flights from Georgian airports: Ellin air, Fly Baghdad (Regular), Enter Air, “Bek Air” (Charter). The civil aviation agency will continue the liberal course in 2016 too. Under the joint airspace agreement signed by Georgia, EU and its member countries (CAA-A), we will introduce several European regulations. Having fulfilled the liabilities under this agreement, the country will become a part of the joint airspace of Europe and this signifies both sides will open the air market. Introduction of European standards will make the Georgian air market more attractive for the new players in terms of flights security, its supervision, protection of passenger rights, access to the air market, qualification of aviation specialists, arranging air traffic, security and other main directions. It should be also noted, under the legal authorities and competences, the agency remains open for acting organizations and seeker organizations in the aviation industry. Permanent consultations are provided on such issues as a commencement of operation in Georgia, implementing aviation activities, receiving any services from the agency, at all stages and formats. - What are the agency plans and priorities in 2016? - The agency gives priority to improving the flights security level, supervision quality, timely and consecutive fulfillment of international obligations, including under the CAA-A agreement.

To reach the determined goals, we plan to deepen our cooperation with the International Civil Aviation Organization (ICAO), with leading European aviation organizations and the aviation authorities. Our objective is also to efficiently employ the project that was inaugurated at the agency by the EU financial support – Improvement of Structure and Potential of the Georgian Civil Aviation Agency for Efficient Establishment of the EU aviation legislation in Georgia, under the joint airspace agreement”, that will foster institutional and structural enhancement of our agency and this factor will assist us in attaining all the abovementioned objectives.


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December 28, 2015 #128

Merry Christmas And Happy New Year!

www.marjanishvili.com


HEALTHCARE

23 HUMANITY-GEORGIA A NEW PHARMACEUTICAL COMPANY ENTERS GEORGIAN MARKET December 28, 2015 #128

caucasus business week

“This is a very important event, because market competition will increase and the sharper competition will regulate prices. AS to the quality of the generics imported by this company, the tightening of quality control on medications will regulate this issue. In general, there is nothing bad in imports and use of generics. On the contrary, the healthcare expenses will be reduced.

Medications will become more accessible for ordinary citizens.

ANDREY KUZMA - Director of Humanity-Georgia Quality of the company-manufactured medications is approved by the manufacturer’s EU GMP Certificate. Humanity Georgia company has entered the Georgian pharmaceutical market. According to the business registry, the company was registered in May 2015. Humanity Georgia will introduce a wide option of medications to the pharmaceutical market in the near future. The first set of drugs will be represented by frequently-used drugs at the end of December 2015. ANDREY KUZMA Director of a company notes that, the quality of their drugs is approved by producer’s EU GMP certificate and also by the WHO laboratory which has carried out series of control.

Our company is a young, but we have advantage of having world’s best experts in our management, who have very good experience. The most of our employees have worked for such brands as SANOFI, PFIZER and etc. Humanity Georgia is dynamically developed company, with ambitious plans. We aim to establish our name as the affordable, safe and high quality supplier company of drugs. Specialists, doctors and even politicians positively appraise that a new company will operate on the Georgian pharmaceutical market. The fact will boost competition on the domestic market and medications will become more affordable, the noted. Medical adviser TINA TURDZILADZE overviews the importance and performance of the new pharmaceutical company: “Humanity Georgia was registered as a joint stock company in Georgia in April 2015. The company is owned by a sole stakeholder. The

company’s commodity portfolio consists of generic copies of Indian and Chinese origins, including peculiar (against chronic diseases) and widely-applied drugs. It is necessary that a pharmaceutical company possess the manufacturer’s EU GMP certificate and a world health organization (WHO) certificate as a proof of medications quality. Moreover, the legislation obliges a pharmaceutical company to have obtained either of them, while this pharmaceutical company possesses both certificates. We welcome the new player has entered the market.

MARINA SHIKHASHVILI, the director at the Tbilisi Family Medicine Training Center, talks about the necessity of use of generics and entrance of a new pharmaceutical company: “High-quality generics are widely used in the world. Naturally, we also apply branded medications and generics, but the Georgian pharmaceutical market should be regulated, because in most cases generics are more expensive compared to branded medications. Generics are appointed for cost-efficient treatments, as a usual, but today in Georgia generics are more expensive than branded drugs. This direction should be regulated. Therefore, it is difficult to say that generics should be appointed for cost-efficient treatment. At the same time, a doctor must be sure that applicable medications are high-quality products. I cannot say something specific about Humanity Georgia. I have no information and due competence, but I would mark one thing – there are European enterprises in India that meet European standards. The quality of medications of Humanity Georgia is approved by the manufacturer’s EU GMP certificate. Consequently, if the drug is manufactured in India, this fact does not signify the drug is a low-quality product and it does not satisfy the European standards. In general, substantiated arguments should be submitted when casting doubt on efficiency of this or that medication. Therefore, the government should tighten the quality control on medications.

As to the entrance of the new pharmaceutical company, I believe this is a timely and necessary event that will regulate the market prices thanks to healthy competition”. “I have no valuable information on Humanity Georgia. Anyway, the company is not the first one that will import Indian generics to Georgia. India-manufactured drugs are successfully sold in the pharmacy networks. Drugs may be imported from India, Indonesia, but if it sold in the EU countries too, they are accompanied by due quality certificates and licenses. Therefore, I cannot make their quality questionable. I welcome that the new pharmaceutical company has entered the Georgian pharmaceutical market”, Georgian MP Malkhaz Tsereteli noted and emphasized several positive factors of use of Indian generics: “Announcement of generics as low-quality drugs comes from unawareness. IN reality, generics represent the so-called mother drugs. Generics are experienced and approbated drugs worldwide. The World Heath Organization has confirmed their quality and efficiency. I personally avoid the medications that may appear in the market from unclear origins as they may not satisfy the standards.

Generics will be beneficial for our population”. Humanity Georgia represents Humanity Holding GmbH Consortium group of companies founded by strategic partners with the purpose of business opportunities development at the pharmaceutical market of Georgia. The consortium incorporates certified EU – PIC/S GMP pharmaceutical manufacturers which have an ambitious potential in development of pharmaceutical products and product portfolio potential, Project Company, as well as project management and Logistics Company which jointly possess unprecedented combination of international special knowledge and skills at the pharmaceutical market.

This fact will boost competition on the market and make medications more accessible”. MP GIGA BUKIA, a member of the parliament’s health committee, appraises the appearance of a new pharmaceutical company in the Georgian market: “This is a very important event, because market competition will increase and the sharper competition will regulate prices. As to the quality of the generics imported by this company, the tightening of quality control on medications will regulate this issue. In general, there is nothing bad in imports and use of generics. On the contrary, the healthcare expenses will be reduced. Medications will become more affordable for ordinary citizens.

The pharmaceutical market should follow healthy competition principles. Consequently, the market must be free. Moreover, interested companies should have wider option to enter the market. This is a very important issue for our country. Humanity Georgia is a famous company that possesses quality certificates and medications imported by this company must not be questionable”. MP GIORGI GOZALISHVILI, a member of the parliament’s health committee, comments on entrance of Humanity Georgia in the Georgian market:

EU GMP STANDARD PHARMACEUTICAL FACTORY TO BE OPENED IN GEORGIA

H

igh Technology equipment and international standard pharmaceutical factory will open in Georgia soon, Humanity-Georgia together with Partnership Fund are implementing the project. Total investment of this agreement exceeds $130 mln, which is signed between Georgia’s state-owned shareholding company, the Partnership Fund(PF) and an Austrian company Humanity Holding. According to Andrey Kuzma, this fact is important due to couple of facts: “Pharmaceutical factory will be the best in Transcaucasia’s region. At least 600 different drugs will me manufactured in the factory which will supply local population and also export to other countries. The most important thing that the factory includes is creation of WHO certified laboratory,

which has carried out series of control, this will result in producing high quality and safe products. Our company is a young, but we have advantage of having world’s best experts in our management, who have very good experience. The most of our employees have worked for such brands as SANOFI, PFIZER and etc. Humanity Georgia is dynamically developed company, with ambitious plans. We aim to establish our name as the affordable, safe and high quality supplier company of drugs. In total 440 people will be employed at the factory, including Georgian and foreign professionals after the commission. Humanity-Georgia’s current product portfolio lists more than 700 discrete medications covering a range of dosages and delivery system which is approved by producer’s EU GMP certificate. The company’s medications will be offered to people at reasonable prices.


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December 28, 2015 #128

BUSINESS caucasus business week

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EFSE AND MFO CREDO JOIN FORCES TO FOSTER ECONOMIC DEVELOPMENT IN RURAL REGIONS OF GEORGIA

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SD 10 million loan will finance more than 16,000 loans to micro entrepreneurs and low-income households Luxembourg and Tbilisi, 22 December 2015 - The European Fund for Southeast Europe (EFSE) and MFO Credo have teamed up to provide micro entrepreneurs and lowincome households in the rural areas of Georgia with access to credit. The USD 10 million senior loan, which the Fund is providing to Credo for this purpose, will finance more than 16,000 micro loans. MFO Credo is the leading microfinance organization in Georgia with a market share of 50% by number of clients. With the majority of its branches located outside Tbilisi, it has a strong focus on agricultural lending and deep outreach to the underserved rural communities. “With its clear focus towards the EFSE’s target group of micro entrepreneurs and lowincome households, MFO Credo is a natural choice for strengthening our network of partner lending institutions,” says Monika Beck, Chairperson of the Board of EFSE. “We are pleased to start our cooperation with the European Fund for Southeast Europe. The facility will be used to finance micro and small entrepreneurs consequently, further contributing to income growth and enhancing employment opportunities in rural Georgia,” states Credo’s Chief Executive Officer Zaza Pirtskhelava. ABOUT THE EUROPEAN FUND FOR SOUTHEAST EUROPE The European Fund for Southeast Europe

(EFSE) was initiated by KfW Development Bank (KfW) with the financial support of the German Federal Ministry for Economic Cooperation and Development (BMZ) and the European Commission. It aims to foster economic development and prosperity in Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, former Yugoslav Republic of Macedonia, Kosovo, Georgia, Moldova, Montenegro, Romania, Serbia, Ukraine and Turkey. As access to finance is a key success factor in developing the micro, small and medium enterprise segments, the EFSE focuses on assisting local financial sectors in strengthening their ability to ensure adequate and sustainable financing. The funding the EFSE provides as long-term finance primarily for micro and small enterprises (MSEs) – but also for private households in the form of home improvement loans – is channeled to these loan customers through local partner lending institutions. Supporting the EFSE’s investment activities is the EFSE Development Facility, which provides partner lending institutions with technical assistance, consulting and training services to build operational capacities and professional management. Initiated by KfW Development Bank (KfW) on 15 December 2005 from four multi-donor programs under its management, the EFSE is the first public-private partnership of its kind and the first privately managed fund in development finance to leverage private funding for MSE finance in the target region. Capital is provided by donor agencies, international financial institutions and private institutional investors, including the German Federal Ministry for

Economic Cooperation and Development (BMZ), the European Commission (EC), the Government of Albania, Small and Medium Business Credit Support CJSC (SMBCS), a subsidiary of the Central Bank of Armenia, the Development Bank of Austria (Oesterreichische Entwicklungsbank - OeEB), the Swiss Agency for Development and Cooperation (SDC), the Danish International Development Agency (Danida), KfW as Lead Investor, the International Finance Corporation (IFC), the Netherlands Finance Company (FMO), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), Sal. Oppenheim and Deutsche Bank. Oppenheim Asset Management Services S.à r.l., Luxembourg, and Finance in Motion GmbH, Germany, are, respectively, the EFSE’s

Fund Manager and Fund Advisor. For more information about the European Fund for Southeast Europe, please visit: www. efse.lu ABOUT MFO CREDO Credo is the leading micro finance organization in Georgia in terms of number of clients with countrywide presence. It operates 59 branches and serves more than 190 thousand customers across the country. It offers innovative products, quality services and expertise in agriculture financing. Credo is owned by international shareholders, the social impact investors - Access Microfinance Holding AG (Germany), and funds managed by ResponsAbility Investment Management AG (Switzerland) and Triodos Investment Management BV (Netherlands).


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PUBLICITY caucasus business week

December 28, 2015 #128


December 28, 2015 #128

Embassy United States of America Embassy 11 Balanchivadze St., Dighomi Dstr., Tbilisi Tel: 27-70-00, 53-23-34 E-mail: tbilisivisa@state.gov; askconsultbilisi@state.gov United Kingdom of Great Britain and Northern Ireland Embassy 51 Krtsanisi Str., Tbilisi, Tel: 227-47-47 E-mail: british.embassy.tbilisi@fco.gov.uk Republic of France Embassy 49, Krtsanisi Str. Tbilisi, Tel: 272 14 90 E-mail: ambafrance@access.sanet.ge Web-site: www.ambafrance-ge.org Federal Republic of Germany Embassy 20 Telavi St. Tbilisi Tel: 44 73 00, Fax: 44 73 64 Italian RepublicEmbassy 3a Chitadze St, Tbilisi, Tel: 299-64-18, 292-14-62, 292-18-54 E-mail: embassy.tbilisi@esteri.it Republic of Estonia Embassy 4 Likhauri St., Tbilisi, Tel: 236-51-40 E-mail: tbilisisaatkond@mfa.ee Republic of Lithuania Embassy 25 Tengiz Abuladze St, Tbilisi Tel: 291-29-33 E-mail: amb.ge@urm.lt Republic of Latvia Embassy 16 Akhmeta Str., Avlabari, 0144 Tbilisi. E-mail: embassy.georgia@mfa.gov.lv Greece Republic Embassy 37. Tabidze St. Tbilisi Tel: 91 49 70, 91 49 71, 91 49 72 Czech RepublicEmbassy 37 Chavchavadze St. Tbilisi ;Tel: 291-67-40/41/42 E-mail: czechembassy@gol.ge Web-sait: www.mzv.cz Japan Embassy 7 Krtsanisi St. Tbilisi Tel: +995 32 2 75 21 11, Fax: +995 32 2 75 21 20 Kingdom of Sweden Embassy 15 Kipshidze St. Tbilisi Tel: +995 32 2 55 03 20 , Fax: +995 32 2 22 48 90 Kingdom of the Netherlands Embassy 20 Telavi St. Tbilisi Tel: 27 62 00, Fax: 27 62 32 People’s Republic of China Embassy 52 Barnov St. Tbilisi Tel: 225-22-86, 225-21-75, 225-26-70 E-mail: zhangling@access.sanet.ge Republic of Bulgaria Embassy 15 Gorgasali Exit, 0105 Tbilisi, Georgia Tel: +995 32 291 01 94; +995 32 291 01 95 Fax: +99 532 291 02 70 Republic of Hungary Embassy 83 Lvovi Street, Tbilisi Tel: 39 90 08; E-mail: hunembtbs@gmail.com State of Israel Embassy 61 Agmashenebeli Ave. Tbilisi Tel: 95 17 09, 94 27 05 Embassy of Swiss Confederation’s Russian Federation Interests Section Embassy 51 Chavchavadze Av., Tbilisi Tel: 291-26-45, 291-24-06, 225-28-03 E-mail: RussianEmbassy@Caucasus.net Ukraine Embassy 75, Oniashvili St., Tbilisi Tel: 231-11-61, 231-12-02, 231-14-54 E-mail: ukraina_pu@wanex.net; emb_ge@mfa.gov.ua Consular Agency: 71, Melikishvili St., Batumi Tel: (8-88-222) 3-16-00/ 3-14-78 Republic of Turkey Embassy 35 Chavchavadze Ave., Tbilisi Tel: 225-20-72/73/74/76 embassy.tbilisi@mfa.gov.tr Consulate General in Batumi 9 Ninoshvili Street, Batumi Tel: 422 25 58 00 consulate.batumi@mfa.gov.tr Republic of Azerbaijan Embassy Kipshidze II-bl . N1., Tbilisi Tel: 225-26-39, 225-35-26/27/28 E-mail: tbilisi@mission.mfa.gov.az Address: Dumbadze str. 14, Batumi Tel: 222-7-67-00; Fax: 222-7-34-43 Republic of Armenia Embassy 4 Tetelashvili St. Tbilisi Tel: 95-94-43, 95-17-23, 95-44-08 E-mail: armemb@caucasus.net Web: www.armenianembassy.ge Consulate General, Batumi Address: Batumi, Gogebashvili str. 32, Apt. 16 Kingdom of Spain Embassy Rustaveli Ave. 24, I floor, Tbilisi Tel: 230-54-64 E-mail: emb.tiflis@maec.esRomania Embassy

TBILISI GUIDE

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caucasus business week

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

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

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

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

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

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

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

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

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

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

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

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


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PUBLICITY caucasus business week

December 28, 2015 #128