Caucasus Business Week #205

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August 14, 2017 #205

August 14, 2017, Issue 205 -

Law Only Four Judges Discuss Business Disputes at Civil Court

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Vazil Hudák: “It’s interesting for us to use smart city as an import of innovations and develop solutions”

Tatiana Gvenetadze: PR in Georgia Can be Seen as at the Stage of Development Today

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Regions should Vitalize Economic Potential

Record Figures in Tourism Sector

Competitive and knowledgebased economy in regions can ensure stable economic growth, create more job places and attain high social-economic welfare. Over the past decade, social and economic condition of regions has improved. The Authorities have shaped economic models for social equality. As a result, social inequality has shrunk; stimulation of innovations and market platforms revived region’s environment and intensified region’s economic activity (however, influence of the mentioned factors is assessed as unsatisfactory). The existing facts prove that economic sector in regions are not flexible, incomes of employees in regions are low, economic potential in regions are not employed, while government’s interventions and initiatives are inefficient. It should be noted that because of political environment, economic problems of regions of Georgia are diverse: Highly qualified persons in regions stay unemployed or work in other fields of specialization or migrate to other countries.

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Turkmen origin crude oil discharged in Iran bypassing American sanctions

Photo/ Georgia - The Wonderland

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On August 3rd vessel VF Tanker20 under the Russian flag arrived to the Iranian Caspian port of Neka and discharged about 6’000 tonnes of Turkmen origin crude oil produced by the company “Dragon Oil”. The discharge of that cargo took place on 3-4 of August into the terminal, which is owned and and operated by NIOC (National Iranian Oil Company). This is the first time in a long time that “Dragon Oil”, 100% owned by the “Emirate National Oil Company (ENOC)”- decided to deliver crude oil cargo to Iran independently, via its trading sister company “ENOC Singapore”. Till today, Dragon Oil sold all its crude oil export volumes on tenders on FOB Aladja, Turkmenistan basis. Pg. 13


2 Government

Major infrastructural development ahead for Georgia in 2018

Georgia continues to follow its ambitious infrastructural development plan and the country’s Prime Minister promises larger scale infrastructural projects to be implemented in 2018.

Budget Organizations Spend 34.6mln GEL on Official Business Trips in 1H17

Budget organizations spent 34.6mln GEL on official business trips, including the Parliament spent 1.2mln GEL, the President’s administration – 401 636 GEL, Government’s office – 1.4mln GEL.


Galt & Taggart announces Georgia’s Economic Growth by 4.6%

Georgia’s economy expanded 4.6% y/y in June 2017, after growing 5.3% y/y in previous month. Overall, in 1H17 GDP growth was 4.5% y/y. Monthly rapid estimates are based on VAT turnover, fiscal and monetary statistics.

State Electrosystem Revenues Rose by 15% in 2016

Revenues of Georgian State Electrosystem and its subsidiaries rose by 15% in 2016, from 104.3 million GEL to 120.2 million GEL as a result of growth in revenues from transmission.


Commercial Banks Raise 38mln GEL Fines in 1H17

Commercial banks have mobilized 37 982 147 GEL fines from overdue loans in the first quarter of 2017. in this component Liberty Bank is leader with 13 063 588 GEL, TBC Bank ranks second with 10 120 167 GEL, Bank of Georgia is third with 6 357 465 FEL.

Bank of Georgia is Leader in Crediting Development Sector

Development sector crediting portfolio has increased up to 837mln GEL in Georgian banking sector (1.819bln GEL in 1Q17). As of July 1, 2017, the sector’s ratio in corporate loans portfolio (8.4bln GEL) accounts for 10%


More than Half Million Tourists Visited Batumi in Six Month

According to the Government of Ajara, 20-22 flights are done at Batumi International Airport per day and more than half million tourists have visited the region in just six month on the year.

2Q17 Revenues from Tourism Sector Marked 657.6mln USD

Tourism sector’s revenues in the first half of 2017 made up 1.09bln USD, including revenues in the second quarter totaled 657.6mln USD, up 28% as compared to the same period of 2016.


August 14, 2017 #205

SSM Textile Plans to Open Factory in Georgia

The owner of “SMM Textile” was interested in Investment circumstances and legal issues concerning with investment in Georgia. The textile factory will be existed in Georgia in the nearest future.

BDO Solutions accomplished SAP Business One implementation project in Anaklia Development Consortium


DO Solutions has successfully completed the major SAP Business One implementation project for Anaklia Development Consortium (ADC). BDO and ADC teams have been working on the project intending to provide robust technological platform to manage construction and development of the port and related operations. Specific modules therefore introduced in ADC’s system are Assets & Inventory, Procurement, Financial Accounting & Reporting, Settlements and Payroll. “We knew what we wanted when we opted for SAP Business One here at Anaklia”, says Zurab Pichkhaia, CFO, “Complete operational visibility and control, integration with common systems and laws and potential for strong analytics on SAP HANA platform along

with BDO Solutions’ experience in the field, were the drivers in our decision to work with them on this project. Dedicated BDO team turned out to be very helpful and comfortable to work with. We have yet to uncover more benefits of SAP as we go, which I have seen this whole period, are integrally available in the software once you identify the need to use them”. Designed to meet the tailored needs of growing businesses such as Anaklia Development Consortium SAP Business One quickly after adoption demonstrates the measurable benefits of using an integrated ERP application including: - Targeted business growth through streamlined operations - Operational efficiency achieved by eliminating redundant and manual data entry

errors with integrated core functionality - Closer relationships with key stakeholders including vendors and employees through better supply chain management - Lower technology costs and speed time to value For businesses in construction and real estate sector, SAP Business One is an intelligent solution for proper integration of key business areas from financials and accounting to inventory and procurement, to provide clear visibility into entire business. By capturing data into a single centralized location, the business can access critical real-time information to make fast, informed decisions. BDO Solutions provides ongoing support to Anaklia Development Consortium for smooth deployment of all SAP B1 modules integrated so far.

Establishing EU Instructions – Georgian Railway Sharing French Experience


eorgian Railway is getting to know experience of National Railway Company of France (SNCF). A group of experts of the railway company of France is consulting Georgian colleagues in establishing European instructions and carrying out structural reforms. Frederic Parde, director of international projects of SNCF, noted that the world goes global and all companies should be adapted to new reality. “There are excellent opportunities to introduce the company onto international level, however, this is not easy affair. Time is required. France passed this stage in 20 years. We explained to Georgian


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partners that it is difficult, but interesting process to penetrate international markets. Akaki Saghirashvili, head of corporate management department of Georgian Railway noted that the meeting of Georgian and French railway experts proceeds in bilateral discussions. Georgian and French railway specialists make accents on EU instruction N34 for structural reformation of railway. Georgian Railway experts are being consulted by experts of Europe’s one of the successful models – national railway company of France (SNCF). “As part of EU TAIEX program, we are hosting French specialists and French railway experts share experience in establish-

ing EU instructions”. Saghirashvili told BPI that as part of EU association agreement, Georgia has assumed responsibility for establishing instructions and regulations in transportation field. These obligations include 3 regulations and 5 instructions. In whole, 8 normative acts should be established in railway sector. Georgian railway should establish these instructions by 2021 and the company is carrying out corresponding measures, including the company has already prepared a package of legislative amendments. EU regulations mainly refer to passenger rights, while instructions cover safety, licensing, market opening and competition issues.

Editor: Nutsa Galumashvili. Mobile phone: 595 380382 Reporters: Nina Gomarteli; Mariam Kopaliani; Merab Janiashvili Technical Assistant: Giorgi Kheladze;


August 14, 2017 #205





August 14, 2017 #205

Record Figures in Tourism Sector

Merab Janiashvili Economic Analyst

It should be noted that in JanuaryJuly 2017 the number of tourists with international classification (visitors who have stayed for more than 24 hours in the country) made up 1 829 331 persons, that is 46% of all visitors. As to July 2017, total of 519 349 (52.8%) persons turned out tourists out of 982 487 visitors.


n July Georgia hosted about 1mln foreign visitors, National Tourism Administration of Georgia reports. In whole, the country has hosted about 4mln tourists as of August 1, 2017. According to January-August indicators, the country received 3 978 657 international visitors, up 16.8% year on year. Number of tourists, who have stayed in the country for more than 24 hours made up 1 829 331 persons, up 30.2%. A major part of visitors arrived from Azerbaijan (+8.7%), Armenia (+18.3%), Russia (35.9%), Turkey (-12.9%) and Iran (+169.5%). Positive tendency is maintained from EU countries, including Austria recorded 52% upturn in the reporting period, the Netherlands +39%, Germany +32%, United Kingdom +29% and France +26%. Special growth was recorded from the following countries: Jordan +398%, Lebanon +318%, Saudi Arabia +218%, Kuwait +185%, Iran+170% and Uzbekistan+138%. In the reporting period, an inflow of international visitors increased from 149 countries and total number recorded 674 753 tourists. Inflow rose by more than 6000 persons from 11 countries and total number of visitors constituted 590 862 persons (total growth marked 88%). As to July 2017, Georgia hosted 982 487 international visitors, up 28.5% year on year, including 519 349 international visitors stayed in the country for more than 24 hours (growth constituted 32.9%). In July 2017 a major number of visits was recorded from Russia (+60.4%), Armenia (+25.4%), Azerbaijan (+13.8%), Turkey (+0.6%) and Iran (+85.8%). Positive tendencies are maintained from EU countries, including tourist inflows from Netherlands grew by 43%, the United Kingdom +34%, Germany +33% and France +33%. Special growth was recorded from the following countries: Lebanon +579%, Jordan +373%, Saudi Arabia +254%, Kuwait +207%, Iran +86% and the USA +65%. According to July 2017 indicators, inflow of international visitors rose from 134 countries and totaled 219 628 persons. Tourist inflows rose by more than 2000 persons from 11 countrires and total growth constituted 198 874 persons (total growth marked 91%). It should be noted that in January-July 2017 the number of tourists with international classifica-



ithin the framework of Community Investment Program, established on the initiative of Nenskra HPP Project, JSC Nenskra Hydro have donates to Mestia municipality the 16-seater minibus Hyundai H-350 Bus, which would satisfy special needs of population from Nenskra and Nakra valleys (children’s sightseeing tours, etc.). Several weeks ago, also within the framework of the same program, schools of Nenskra and Nakra valleys received sports equipment and computers, and kindergartens – kitchen equipment and toys. Community Investment Program was developed by the Nenskra Hydropower Plant Project based on needs assessment of Nenskra and Nakra valleys’ population. This program, which will be actively implemented from September onwards, stipulates an improvement of infrastructure, facilitation of development of agriculture and tourism, development and improvement of skills of local youths. “Community Investment Program is an integral part of Nenskra HPP Project. We pay much attention to the sustainable development of that region, in which the project is implemented. Maximal employment of local workforce is envisaged, as during the construction phase, as well as in the operational phase of HPP. Community Investment Program is mainly focused on the development of agriculture and tourism in Nenskra and Nakra valleys, but we will not limit ourselves with this and our goal is to improve living conditions of population in these two valleys. Donating a minibus is an example of this policy”, – JSC Nenskra Hydro Chief Executive Officer. Mr. Byoung Seub Choi has noted. JSC Nenskra Hydro is a project company that was established as a result of cooperation between Korea Water Resources Corporation K-Water and JSC Partnership Fund in 2015. The purpose of the company is the construction of Nenskra Hydropower Plant in Nenskra and Nakra rivers’ valleys in Mestia Municipality of Svaneti region. Nenskra HPP, installed capacity of which is 280 MW, will generate 1’200.00 GWh of electricity annually, which will be fully consumed by the local market.

Georgia Hosted about 1mln Visitors in July


Nenskra Hydropower Plant Project donates HYUNDAI H-350 Bus to Mestia municipality

tion (visitors who have stayed for more than 24 hours in the country) made up 1 829 331 persons, that is 46% of all visitors. As to July 2017, total of 519 349 (52.8%) persons turned out tourists out of 982 487 visitors. It is worth noting that in July 89% of visitors came from Europe, including 75% of tourists entered the country by land and only 22.5% used air transport. These indicators reaffirm that a major number of visitors and tourists arrive from the neighboring countries. As to revenues from the tourism sector in the first quarter of 2017, Georgia received 435mln USD revenues from the sector. In the reporting period the sector’s ratio in GDP constituted 6.8%. (Table #1) It should be noted that tourism is one of the leading sectors of Georgian economy and it continues growing on annual basis. At the same time, the sector attracts foreign currency and promotes a development of domestic production. It is frequently said that tourism sector should not be a key segment of the state economy, because it is a service field, not production field. Moreover, tourism is very vulnerable to crisis periods. The countries, where tourism sector occupies a significant place in state economy, mostly suffered during the 2008-2009 crisis. However, analysis shows that tourism sector occupies only a small part in state economy of Georgia and assessments in terms of profits and risks are exaggerated. Today, tourism sector’s ratio in GDP is under 10%, while in the countries, which mostly suffered in the 2008-2009 global crisis, tourism sector occupied 20-25% in state economy. Therefore, this sector needs considerable development and growth in Georgia to make it a leading segment in state economy. Table #1

“There are a lot of projects that will be launched in 2018 and they are being designed today. In the second quarter of 2018 we will reach the scales that Georgia has never seen before. This is not a political statement. This is a reality that we plan to implement. I believe, thanks to these works, infrastructure of our country will fundamentally change and all structures of the government meet these challenges. The whole team must ensure coordinated working process and I believe Our team is absolutely ready for this”.

Giorgi Kvirikashvili Prime Minister

August 14, 2017 #205





August 14, 2017 #205

Only 4 Judges Discuss Business Disputes at Civil Court

Part of Lawyers and Businessmen Show Skepticism towards Reforms On August 1 a special direction was established at the Board of Civil Affairs of Tbilisi City Court for discussing commercial disputes. The board will probe into investment and commercial disputes of more than 500 000 GEL. According to the Tbilisi City Court chairman, four magistrates will discuss disputes in this category: Tamar Burjanadze, Levan Mikaberidze, Lasha Kochiashvili and Soso Ghurtskaia. Giorgi Mikautadze, secretary of the High Council of Justice, noted that the special direction for discussing commercial disputes will foster an improvement of business environment, investment inflows and economic situation in the country.

A part of lawyers and businessmen show skepticism towards this special direction for discussing commercial disputes at Civil Board of Tbilisi City Court. Lawyer Imeda Dvalidze says that this decision is useless if one magistrate has to discuss thousands of cases and it takes 2 years to appoint a trial. Over the past years, the civil court used to apply both formal and informal practices for distributing dispute cases to this or that magistrate. As a result, this practice has neither reduced the number of cases nor accelerated the discussion process. Sometimes even the substantiation quality is unsatisfactory, he pointed out. «If the board gets free of other cases,

makes focus on these specific cases and if the burden of cases shrinks, we welcome this process, but, in general, I am very pessimistic towards these processes in the court and I do not hope any cardinal changes may take place in the court system», Imeda Dvalidze said. The judiciary system lacks for a due quantity of professionals and one magistrate has to supervise thousands of cases, he said: «It is inadmissible that a magistrate discuss family disputes and commercial disputes simultaneously. It would be better that one category of affairs be discussed by one magistrate. What is the objective of innovations if one magistrate has to discuss thousands of cases and if we have to wait two years for appointing a trial? Or why do the


ccording to information of High Council of Justice, the Council has taken into account the discontent expressed by businessmen about shortcomings related to similar disputes. Magistrates with specific specialization in commercial disputes will will accelerate and improve quality of proceedings on investment and commercial disputes and this will foster an improvement of investment climate in Georgia, enlarge an inflow of foreign investments and accelerate economic growth pace. The Caucasus Business Week (CBW) has inquired how efficiently the mentioned directions in Civil Board will function and whether this board is able to resolve multiyear trials, especially those named by business circles.

name and surname of magistrates matter? The country lacks for a due number of magistrates. Over the past years, the Authorities cannot select magistrates. There were a plenty of vacancies in the court system and how this moment can be improved? We cannot wait for future lawyers when they will finish schools». As to the fact that four magistrates have been selected for discussing the mentioned disputes, Imeda Dvalidze noted that it is difficult to say in advance whether four magistrates can cope with the accumulated quantity of cases. «It would be wonderful if these magistrates had certain practices in the field of specific disputes, had assistants. Moreover, schedules are of crucial importance for similar disputes. I do not

know whether four magistrates is an optimal number, but I welcome this first effort anyway. However, it is difficult to say whether four magistrates will cope with such a number of cases», Dvalidze said. Lawyer Koba Bochorishvili says that narrower specialization cannot reduce the number of disputes. «I share the position that the specific specialization will alleviate proceedings, but we have a different situation. If we examine information on website of High council of Justice, you will face an unusual situation. First of all, there is no research conclusion why this type of a board became necessary, while there are a number of other categories, where cases are retarded. This factor poses a

major part of our society in unequal condition. The statement only shows tendency that the mentioned narrow specialization has been arranged by request of business sector. Creating this board has proved that we have huge problems in the judiciary system. We do not trust magistrates. There are a lot of dispute cases and magistrates cannot discuss all of them. Therefore, we should think of alternative mechanisms and fundamental reforms rather than taking this type of decisions. We should consider this issue from the standpoint of system changes and we should not try to resolve the problem in 5 minutes. We should not expect that the number of disputes will decline by creating the mentioned narrow specialization, however, we should expect general results anyway», Bochorishvili said. As to magistrates, it is unclear for Bochorishvili why the selected magistrates need trainings. «If we have to train these magistrates, then why High Council of Justice says that these magistrates will discuss cases faster and in more qualified way. Why do they need trainings? Let’s choose qualified magistrates directly. I have no objection against these specific four magistrates. I just cannot take this statement. If the existing staff needs trainings, then we should not talk about reforms. The problems may be resolved only by qualified staff. There should be alternative ways of resolution of disputes», Bochorishvili said. The special civil board should not discuss disputes only above 500 000 GEL: «Why only Tbilisi and not other cities? I think this is the most unequal moment. Why should not this service be available for Kutaisi, Batumi, Poti? Moreover, other disputes should be also discussed in the same process», Bochorishvili said. Fady Asly, head of the Georgian national committee of International Chamber of Commerce, shows also pessimistic attitude towards creating the special direction for discussing commercial disputes at the Civil Court. The system will remain non-transparent again, the businessman said. “As a result of creating a special direction for commercial disputes at Civil Court, discussion of commercial disputes will be accelerated, but transparency will not increase, corruption will be maintained in the court system, because government officials or nongovernmental bodies will still make calls to magistrates and use personal contacts for disputes resolution. They will not invite magistrates from Switzerland and the same magistrates will discuss cases. Thus, a special direction will be organized for commercial disputes at the court, but the problem will not be resolved. I have very pessimistic expectations”, Fady Asly said. At the same time, Fady Asly warns Georgian Authorities again: “If the Government does not take steps for improving the situation and promoting business sector activities, we will notify all international investors to abstain from making investments in Georgia”, Fady Asly said. As to 4 magistrates, Giorgi Mikautadze, secretary of High Council of Justice explains that if the number of cases grows, the Tbilisi City Court chairman is authorized to assign 5-6 magistrates to the direction of commercial disputes. After Civil Court, it is not ruled out to create similar special direction at the Court of Appeals, he said. «If the number of cases grows, Tbilisi city court chairman is authorized to attach 5-6 magistrates to this board. In general, four magistrates are sufficient, because today we have about 220 commercial disputes left. Each magistrate will have to probe into 55 cases, while today each one has to discuss 300-400 cases. Therefore, it is easier to manage 55 cases», Mikautadze said. The process of assigning cases to magistrates has started and they will be trained in the future, he said.

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7 “We are overall committed to support Georgia, especially for the production of clean energy. Georgia is one of the main leaders producing hydropower and we will continue supporting in this part”

“It’s important to cooperate directly with private sector, in order to avoid a negative impact on public debt and deficit. I see a potential with Partnership Fund”

ninna gomarteli

Vazil Hudák Vice-President of European Investment Bank - Tell us about the purpose of your visit? - I actually had two reasonsbusiness and family. The bank of the European Union is not only active within the EU but also outside its borders, especially, the countries of the Eastern neighborhood where Georgia belongs. Georgia is a very active partner of European Investment Bank. We’ve already allocated about 1.5 billion Euro since 2007. One of the aim was to hold discussion with Georgian Government about what’s their strategy, things we have done and plans for the future. Another part is family; I’ve been to Georgia 5 times, which has been a typical business trip- from airport to hotel, hotel to meeting and back to airport. I knew that Georgia is a beautiful, hospitable country and I wanted to experience it with my family- with my wife and 12 year-old son. Thanks to very nice Georgian friends, we experienced wine tourism in Kakheti, wine growing region. Sighnaghi reminded me of Tuscany, Italy. It was our first time to see how wine is produced in Qvevri, which has a history of thousand years. We even baked Georgian bread, prepared Georgian snickersChurchkhela, and had wonderful dinner at Lopota Lake. We also traveled to Borjomi, Romanov Castle, Akhaltsikhenicely renovated castle, Vardzia, Svaneti. - As you visited so many

“It’s interesting for us to use smart city as an import of innovations and develop solutions” places, how do you see the perspective of tourism in Georgia? - I think, Georgia has a great perspective in different types of tourism-first of all, wine, as you have very unique over 500 sorts of wine; mountain, ski, ecotourism. Summer resorts, by the seashore are developing too. Potential is huge, although infrastructure needs to be developed in terms of transportation system, facilities at accommodations, hotels to become more global. You need to bring more people from abroad who will get familiar with traditions,

culture and nature. - You have signed financial agreement on Hydro Power Plant rehabilitation; do you think this field requires a quick action in Georgia? - EIB mostly used to support governmental, large infrastructure projects. The conference about Georgia-European days was held 3 weeks ago, in Batumi. 250 million EUR were allocated for the construction of highway with Minister of Infrastructure. I signed 22 million EUR investment for Georgian Water and Power to manage water cleaning. We were asked to increase our

support for the project itself, we are overall committed to support Georgia, especially for the production of clean energy. Georgia is one of the main leaders producing hydropower. There is a lot of potential; Georgia can even become an exporter, for example to Iran. We will continue supporting in this part. - Why is Gino Green City project attractive to you, what are your expectations? - Apart from the mentioned fields, we started to search for private sector projects where we can support directly. As

a bank, smart city concept is what we are actively looking for. The city is growing; there is more need of modern facilities, especially for young families who expect modern types of services. It’s interesting for us to use the city as an import of innovations and develop solutions by using solar energy, wind power; use transport like self-driving cars and maybe try startup technologies inside the city. So that, it will be a very interesting concept which could develop a modern project not only for Georgia, but for the region as well. It can present how city can be modern, friendly environment for inhabitants and create innovations using local talent. - What are the set tasks with partnership fund for long-term cooperation? - Partnership Fund is a very interesting institution as it combines state assets; they can be a partner in various projects. I was visiting places supported by them and it was obvious they have a great experience in Georgia. People would recognize Chairman-David Saganelidze and it was clear, they work closely with locals, it’s not just an institution, which doesn’t communicate. We agreed that we would arrange meeting between European Investment Bank and Partnership Fund to brainstorm about priorities of the fund, develop a strategy for cooperation and discuss about the plans. It’s important to co-operate directly with private sector, in order to avoid a negative impact on public debt and deficit. I see a potential with Partnership Fund.


PR Person

August 14, 2017 #205

PR in Georgia Can be Seen as at the Stage of Development Today

Interview with Tatiana Gvenetadze, Head of Public Relations Department of Medical Company-Vivo Medical Group.

- What is your profession? I’m a doctor, I graduated medical faculty of Tbilisi State Medical Institute. – What was your first job place? My first job started in the NGO sector; I was a student of the last course when I joined NGO. The Union of Young People’s Association was the unification of progressively thoughtful young doctors who had very interesting and important social projects. – What is your current job and position? My position is Public Relations at Vivo Medical Group, group of leading clinics in the market.The Vivo Medical Group currently unites six clinics: Innova, Innova Invitro, Tbilis Central Hospital, Bokhua Cardiovascular Clinic, Zhordania Clinic, Lisi Clinic. – What was your first success? I would say, winning grant contest while working at NGO was my first success. – Is it possible today, in Georgia, to study PR valuably? Or is international knowledge and experience required anyway? PR has a brief history in Georgia as a profession. PR in Georgia can be described as at the stage of development today, that requires support. As for learning, of course international experience is an ad-

“ PR has a brief

history in Georgia as a profession. PR in Georgia can be described as at the stage of development today, that requires support. As for learning, of course international experience is an additional advantage.

ditional advantage. – Is PR management perceived and understood in Georgia in its classical form? We can say that there is a small specificity, contacts and authority is the most important part. - What’s the difference between PR and advertising? - PR requires more planning and strategy than advertising. The main task of PR is to cause an interest. As, there are too much advertisements, customers get bored and pay less attention. - Which media outlets do you follow daily? There are several foreign ones like The Guardian, Businessinsider. Mostly I follow Georgian media outlets. - Name the best project or period of yours that makes you proud. Vivo Medical Group prepares an entirely unprecedented social project which analogy is not in the field of health care and medicine nowadays. At this point, I will refrain from naming the details. – Where would you work if not in the PR management field? I would work as an event manager in some international company or cultural journalist. – Where do you see yourself after 20-30 years? I hope, I will be leading a small

consulting company in medicine and health care field. - Name the field where you would never work. -It’s boring for me to have a routine job where there is no creativity and mobility for me, I would never work in a bank as well. - What benefits do you receive from the company where you work? What makes your company interesting? First of all, it’s a really big experience and a job that I love. I work with all of the Vivo Medic Group Group’s leading specialists in various fields of medicine, to enable our patients to get the correct and comprehensive information about the services implemented in a way they understand. I also had the goal to unite two of my favorite fields-medicine and public relations. all my goals in the Vivo Medicare group have been realized and now I have a very interesting job. - What are your strong and weak sides, as a businesswoman? - I will be banal to say that it’s difficult to talk about myself in positive terms, but I can say that, ambition and self-confidence are the strongest side of mine. As for my weak side, it is sensitivity that can cause biased opinion.


August 14, 2017 #205

Discovering Unseen Friendly Free Walking Tours Around The City Tbilisi Free Walking Tours was founded three years ago, offering travelers opportunity to experience Tbilisi in a different way no matter the budget, team, consisting of local experts and Tbilisi-lovers, are passionate about their city and its history and love sharing their favorite spots in Tbilisi. Caucasus Business Week talked with Levan Giorgadze, 29, founder of the FWT. - When did you start free walking tours? What motivated you to do it? - When I travel in cities I always take free walking tours, because this is the best option to explore the city! Once, when I was back in Tbilisi from my travel, I tried to find same type of tour in my city, but nothing appeared like that. Then I decided to make “Tbilisi Free Walking Tours”. Our mission is to offer every visitor the opportunity to experience Tbilisi in a different way, no matter the budget. Our motivation is our city! We want to show travelers our charming city in details and from different point of view, tell them the highlights from our history and give important information about culture, food, wine and more. Here they can find new friends and continue travel around Georgia with them. It is not as

same style of tours which they can find in Travel agencies - What obstacles and challenges did you have at the beginning? - Three years ago, when I started these tours, I asked a friend of mine to help me, she liked my idea and we started to make some steps. At that time I took my own money and printed some flyers, then I handed to people on streets, also I asked some hostels to put some of my flyers at their front desks. For the first time it helped me and I got new tourists on my tours. Then we put our tours on TripAdvisor and we created an official website which helped more people to find us. Step by step we gained more and more tourists but, as you know, for now in Georgia tourist season is still in the summer when many visitors come in the country, this affects also our tours.


Tbilisi - How many people are in the team and what is a normal work day for you? - In the team for now there are 4 guides, including me, but we are always open for new energetic, friendly, communicative and fun people. We have weekly schedules where we can manage our daily shifts. Some of us have another part time job and some still studies, so we need to know our schedule of tours. - What makes your company different or special? - We have three different free tours: “Tbilisi Free Walking Tour”, “Backstreets of Tbilisi” and “Tbilisi Free Photo Tour”. As the Free Walking Tour we are based exclusively on tips, our expert local guides are always motivated and determined to please our customers’ expectations, ensuring a consistent high quality experience during their time in Tbilisi. Each of the guides have an unique approach to the audience which is clearly shown in reviews that we get on TripAdvisor. I guess this is one of the big reasons why we are different and special. - What is your brand value? - Our value is our approach, we keep things informal. At least we try that. We are not some officials who get a salary for promoting the country but we choose to

be “distant friends” who would, on the one hand, tell the history of the city and, on the other hand, help to catch a taxi with the minimum price. - What type of experiences do you offer to your customers? - Our experience comes from our daily lives. We study daily and we discover with our guests. There always are the things in the city which we do not pay attention to because we live here and we are used to it but the guests are not. So, observing them, their questions, things they look at, the details which they take pictures of gives us many possibilities to find the answers and make our tour reach. For instance, many tourists would like to know why do we have both rightwheel and left-wheel cars. It’s so easy for us to answer but they don’t get it unless you explain. - You have excellent TripAdvisor reviews... what does it mean for you and your team? - Reviews for us are more important than anything else! For us it’s important every single opinion. By the reviews people choose you and your tours over others’. On the tours with the people from the different countries and different personalities it’s always difficult to find a golden

middle to meet everyone’s needs. We always try to do our best for them and to do it in a remembering way. This is one of the best ways for good reviews and one good review is an opportunity for more people to the next tour. - What are the challenges for city tours in general in Tbilisi? - Main challenges for city tours always meet the main challenges of citizens. We are deeply concerned when we are faced with too many garbage in the streets or beggars or even some unfinished projects in the middle of old town. These things sometimes are really embarrassing as they give a clear message to the guests about our style of living and the level of development. So, they start asking questions about the government and civil society where we try our best to explain the situation. - Who is your target market and how do you reach them? - Our target group is everyone how wants to visit Tbilisi, no matter budget, we will offer our free walking tours. The main requirement is to walk with us. We use different sources to reach our potential customers, like social media, Tripadvisor, Google, Hostels, Hotels and even cafes and Restaurants.



Tbilisi Gardens Website to Become Site of the Day on

Georgian Footwear Brand Exports Products to 16 Countries under Made in Georgia Name

Everyday selects a website that stands out with its unique design, innovative ideas and technological performance. Tbilisi Gardens website created by Leavingstone became the site of the day on August 4th. Marketer had an interview with Leavingstone creative team and Tbilisi Gardens Marketing director, Teiko Lominadze. Nikoloz Kumbari-Art Director, Leavingstone We set the goal to represent skyscraper perfectly. In order to be distinguished from other real estate websites, we highlighted the characteristic building itself. We made a simple interaction with skyscraper curve contours to give comprehensive information on flats. All building follows a scroll along the moving of elevator. Many talented people’s work turned the idea into the website. Thanks to Mamuka Okriashvili and Saba Kavtaradze for rendering a building, which is a very important component of the site and it’t identical to Gardens real structure.

Crosty company started production of male and female footwear since November 2016. Georgian footwear may be bought from any part of the world in online format. At the same time, Georgian brand products are sold at one of the prestigious stores of New-York – Wold Badger. In autumn, the company products will appear in Tokyo and Stockholm brand stores. The company founders aim to sell their products at all Metropolitan cities of the world. Giorgi Mikaia launched business jointly with his brother 2 years ago – they import raw materials from Italy, while production plant is located in Kutaisi. “Our product is not of lower quality compared to other footwear brands. We import raw materials from the same plant, which serve the world’s leading brands.

European Business Association to Create Matchmaking Lobby for Business to Business David Lee, Chief Executive Officer of European Association held a meeting with startup companies at Business Incubator. He discussed conditions of membership, concepts of association and their role. Besides, attendees were asked to form an opinion, list issues and review what they expect from EBA. European Business Association was launched on July 25th, 2017. EBA is a nonprofit, membership-based organization, registered under the laws of Georgia to advocate European business in the country and facilitate trade between Europe and Georgia. It will be primarily online and working language will be English. David Lee noted that they want to cover all Georgia and make regions involved. ‘’We know exactly where we want to go- to the West, in EU. I think, it’s quite realistic to consider that it can happen in 5-10 years. Although, we are not interested in politics, we want to grow businesses, but avoid EU investing a loan in it,”-says David Lee.

TeraBank Renovates Melikishvili Branch Under the concept of Finance House, TeraBank has renovated one more branch. The bank’s commercial director and the branch’s manager cut red ribbon at Melikishvili Avenue N8/2. Starting today you are able to visit the renovated branch on Melikishvili Avenue and receive entirely different banking services. Cozy environment, warm colors in interior and warm attitude from the bank’s personnel are main characteristics of the Finance House on Melikishvili Avenue. The branch will serve citizens in standard working house, from Monday to Friday, 10:00-18:00, and on Saturday from 10:00 to 14:00.

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Campaign to Restore Borjomi Forest Prolongs On August 8, at 20:00, a summary of Aghadgine (restore) campaign was held in the yard of the Georgian National Museum. The attendees were introduced a report of the work and planted trees within project. Representatives of the companies who contributed to the restoration of the burning forest of Borjomi attended the event. Participant companies have been awarded with a certificate of appreciation for their contribution. About 150 companies and over 5,000 individuals participated in the campaign. At this stage, 45,263 trees were planted within project. Aghadgine is organized by BIA and is implemented with the technological provision of the Startup treepex. According to statement, campaign Aghadgine will

last until 15 September. “The main goal has been achieved, we showed many companies and people the ecological problems in the forest of Borjomi and that we have social and civic responsibility. It turned out that a large part of Georgian companies are taking care of nature and ecology. In addition, the campaign has a very good response from the public. This is why we have decided to prolong the campaign for a month, to get even more trees planted,”said Salome Kukava, deputy director of the company BIA . Campaign took a start on April 25. Autumn plants will resume in the Borjomi forest area in September. Aghadgine aims to restore 250 hectares of forest cover destroyed in 2008 by a fire. Anyone can plant a tree on following website- Aghadgine

Zaza Pachulia to Support Promotion of Business Initiatives with TBC Bank Zaza Pachulia will support promotion of business initiatives with TBC Bank. Basketball player talked about this on 9 August at Impact Hub meeting, where he met TBC Bank’s project startuper and business awards nominees ”Startup of the year” participants. ”We have a lot in common, me as a sportsman and you as a businessman. There are people in Georgia who have a great potential, but they need a push and helping hand, that’s what TBC does and I came here to share my experience. I’m on your side,”-said Zaza Pachulia. According to Nikoloz Kurdiani, deputy general director of TBC Bank: ”It’s very important that we gathered initiative people who create new business, introduce new ideas and turn them into reality. They support economy development in Georgia this way, create working spaces

and improve social life. Befriending Zaza Pachulia with Startuper is important, as he achieved his goal stepby-step, after working hard, which is very familiar with startup field.” Famous basketball player also discussed about an importance of making mistakes, courage, having strong team and self-confidence. ”It’s not a shame to ask a question or make a mistake, on the contrary, be courageous, you will learn a lot from the experience.” Zaza Pachulia has been participating in TBC Bank projects. For instance, his startup ”Snap” was nominated in business awards, last year. This time, he will be a representative of ”Startup of the year”. Pachulia answered a question at the end of the event: ”You must think of development all the time, support one another. Your success is a success of the state.”


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Regions should Vitalize Economic Potential

Rati Abuladze Professor, Doctor of Economics


ompetitive and knowledge-based economy in regions can ensure stable economic growth, create more job places and attain high social-economic welfare. Over the past decade, social and economic condition of regions has improved. The Authorities have shaped economic models for social equality. As a result, social inequality has shrunk; stimulation of innovations and market platforms revived region’s environment and intensified region’s economic activity (however, influence of the mentioned factors is assessed as unsatisfactory). The existing facts prove that economic sector in regions are not flexible, incomes of employees in regions are low, economic potential in regions are not employed, while government’s interventions and initiatives are inefficient. It should be noted that because of political environment, economic problems of regions of Georgia are diverse:

• Highly qualified persons in regions stay unemployed or work in other fields of specialization or migrate to other countries. As a result, resources are not used and spent rationally; • political circles do not change discussions and approaches around economic policy; governance is not efficient and reformatory; Consequently, it is impossible to create flexible and new economy. • Despite global and local economic challenges, academic character and strategic skills of administrative resources are not perceived as a key strategy for economic competitiveness and growth in a region; • Strategy and approaches of regions cannot make essential influence: on improving living conditions in regions, growth in revenues and welfare; improving productivity and eradicating inequality; maximum use of current or mobilized resources (financial, academic) and reception of profits; competitive capacity of separate regions and growth in ratio of economy. Research works prove that development of regions depends on economic thought, approaches of interventionism, various political perspectives and GDP growth volumes. It should be stressed that aspiration of regions should be based on: new political and governance force, academic and active resources, new leaders and intellectuals. Research works prove that central and local governance environment of Georgia requires fundamental

transformation in line with modern economic requirements, where regional policy will be focused on: • Efficiency of governance environment, quality of governance and flexibility; implementation of progressive policy; • Improving economic activity in regions; economic policy, economic growth, creating job places; • shaping of business community and national middle class; • growth in institutional potentials on regional level; • mobilizing dispersed economic and social welfare resources; • narrowing social and economic inequality between cities and villages and growth in welfare; • Employment of academic resources; • employment of academic resources; • necessity of Economic Policy Deviation, based on challenges of local governance. Based on the issue summary, it should be noted that: • More and more people suffer from economic deprivation amid low economic indicators, weak economic activity, small social assistance, unemployment, subsidization policy, problems with governance and economic policy efficiency in regions; • Despite GDP growth in the country, if priorities and directions are not determined in right way, the regions will not be developed at high paces. These directions are as follows: development of education and science and upgrading their

It should be stressed that the country should become economic development hub, which will enable to shape all sorts of hubs (transport, logistics, finance, educational, digital and other fields) in the region (South Caucasus Region).

role; investing in education and science is one of the efficient methods for economic growth of regions and equal distribution of welfare. Therefore, central and local governments should realize the value of making investments in education and science and management of academic resources; • The role of strong human resource is a driver of economic progress in the region. Therefore, it is necessary to transform governance environment and upgrade management efficiency; • regional development should be seen from the position of all social systems; • The Authorities should ensure economic potential of a region, resolve infrastructural needs, carry out digital policy, upgrade economic ratio through regional potential; be first to show the sample of assuming responsibility for problems and fulfilling plans; Regions should perform a leading role in activation of young intellectuals, professionals, attracting academic resources and governance space. It should be stressed that the country should become economic development hub, which will enable to shape all sorts of hubs (transport, logistics, finance, educational, digital and other fields) in the region (South Caucasus Region). Finally, it should be noted that results of invasion of successful economic policy of one region is reflected on activation of other regions too.


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Brand History TechnoBoom company was founded on March 3, 2010. The company makes a key accent on wholesale and retail sales of household appliances, computer equipment and cell phones, TV sets, audio and video systems. On May 20, 2010 the company opened two stores – in Tbilisi and Batumi. On July 12, 2010 the Boom’s wholesale center opened at the 13th kilometer of Aghmashenebeli Alley and, for the first time in Georgia, our citizens got access to a wide range of products to buy desirable equipment under the lowest price guarantee. In 2011 three other stores opened in the fol-

lowing regions: Gori, Zestaponi and Kutaisi. Today, TechnoBoom company owns 15 stores all over Georgia. TechnoBoom company has a special history of foundation. According to the company management, Saakashvili’s Authorities illegally expropriated ElitElectronics, the leading company on the equipment market, from the company founder Anzor Kokoladze. The company management did not endure this illegal action and about 200 persons left the company. The idea of a new company foundation arose in this way and TechnoBoom was created on this enthusiastic wave.

Name and Logo of the company were dictated by the same factor. The new company was to bring boom and noise on the market. Therefore, we have taken the name and logo as a symbol of explosion and huge novelty – a wide choice of global brands and the lowest prices – key strategy of the company. The brand succeeded thanks to the experienced team, which carried out valuable and correct management, as well as thanks to devotion and support by entrepreneurs and consumers. The company has faced many difficulties during its history. The company representa-

tives noted that the success of TechnoBoom irritated Saakashvili’s Authorities, because TechnoBoom became a major competitor for illegally expropriated ElitElectronics. Therefore, the Finance Police continued obstructive activities against TechnoBoom, however, after the power change the company got rid of state pressure and renewed development. TechnoBoom company offers a wide choice of products and the world’s famous brands, renewable assortment – with one-month guarantee of the lowest price. TechnoBoom is famous for special campaigns, amazing prices and gifts.

August 14, 2017 #205



urkey Defiant as German Relations Slump to a Postwar Low

Turkmen origin crude oil discharged in Iran bypassing American sanctions On August 3rd vessel VF Tanker-20 under the Russian flag arrived to the Iranian Caspian port of Neka and discharged about 6’000 tonnes of Turkmen origin crude oil produced by the company “Dragon Oil”. The discharge of that cargo took place on 3-4 of August into the terminal, which is owned and and operated by NIOC (National Iranian Oil Company). This is the first time in a long time that “Dragon Oil”, 100% owned by the “Emirate National Oil Company (ENOC)”decided to deliver crude oil cargo to Iran independently, via its trading sister company “ENOC Singapore”. Till today, Dragon Oil sold all its crude oil export volumes on tenders on FOB Aladja, Turkmenistan basis. Due to the sanctions against Iran, export volumes were transported since 2011 solely towards Europe through territories of Azerbaijan (either via pipeline Baku-Tbilisi-Ceyhan or via railways Baku-Batumi) and Russia (via pipeline MakhachkalaNovorossiysk). The decision of Dragon Oil and ENOC to resume oil supplies to Iran caused surprise among market participants. Despite the fact, that some of the sanctions against Iran were lifted in 2016 after “Iranian Nuclear Deal” in November 2015, many restrictions are still in place to date. Most of the companies prefer to wait for detailed recommendations from the Office of Foreign Assets Control of the US Treasury (OFAC) before starting any business related to Iran. In this particular case, the decision of Dragon Oil to start deliveries of crude oil to Iran looks both hasty and risky: this oil producer performs all financial transactions in US dollars, works on a long-term basis with US contractors (for instance: the largest American oilfield service company “Schlumberger”) and has US citizens occupying top-management positions. It also looks surprising, that ENOC, the National oil company of the United Arab Emirates, is actively developing new business with Iran, bypassing US sanctions, despite the fact, that the UAE is the USA’s main ally in the region. It is not excluded that this delivery to Iran was not initially planned. Indeed, the vessel VF Tanker-20 arrived first in port of Baku, Azerbaijan and queued on roads from July 25th to August 1st. However, the vessel was rejected for discharge due to the not documented (possibly smuggled) cargo aboard the ship being found. Thereafter, ENOC redirected the tanker to the Iranian port of Neka, where it is possible to discharge cargo without actual presentation of documents for the goods. By now, the market participants are waiting for further developments of the situation: was this oil shipment a random cargo discharged in Neka because of documents issues, or is it a start of a planned program for the supply of Turkmen crude oil to Iran? Several signs speak in favour of the second scenario: ENOC is currently very active on the freight market and several ships belong to the Russian shipping company “VF Tanker” were redirected to the Caspian Sea towards the port of Aladja.

Turkey’s Foreign Minister Mevlut Cavusoglu said his country wouldn’t give in to threats, as relations with its NATO ally Germany slumped to their lowest since World War II. Cavusoglu was responding to an announcement by German Foreign Minister Sigmar Gabriel earlier Thursday of a “re-orientation” of German policy toward Turkey, in which he warned companies against doing business in the country and issued revised guidelines for travelers. “Germany knows very well that the Turkish people have never bent in the face of any threats or blackmail,” Cavusoglu said. “We will evaluate these threats made to us with the same state seriousness and we will of course respond.” The tit-for-tat escalation underscores what Turkey called a “serious crisis of confidence” with Germany that threatens to harm trading ties worth more than $36 billion last year. After months of discord over NATO troop visits, imprisoned journalists and Turkish

barbs peppered with Nazi references, tensions came to a head this week over the detention of a German human-rights activist. “This is the worst crisis between Turkey and Germany since World War II, when Turkey and Germany took their places on the opposite camps even though Turkey did not enter the war,” Huseyin Pazarci, a professor of international relations who lectures at Near East University in northern Cyprus, said by phone from Ankara. “Political and trade relations with Germany have been steadily improving since it began receiving Turkish workers in 1960s.” The rapidly escalating situation affects two NATO allies that are mutually dependent. Germany is Turkey’s largest trading partner, while ethnic Turks make up Germany’s largest minority. More than 6,800 German firms are currently operating in Turkey, according to the German-Turkish chamber of commerce.

ADB doubles loan amount for NorthSouth project

ENOC continues to supply crude oil to Iran despite sanctions Despite the sanctions, the companies Dragon Oil and ENOC shipped the next crude oil cargo to Iran. At the end of July, the same vessel VF Tanker-20, carried crude oil produced by Dragon Oil, arrived on roads of Baku port, Azerbaijan. However, after one week delay, caused by detection of some undeclared cargo on board, suddenly rushed to Iranian port of Neka and discharged crude oil to the terminal, operated by the National Iranian Oil Company (NIOC). On August 7th, VF Tanker-20 loaded a new cargo of crude oil in Aladja port, Turkmenistan, and moved towards direction of Baku, Azerbaijan. However, soon after exiting the territorial waters of Turkmenistan, the ship turned to the south and later arrived to Neka port in Iran. It would appear, that this maneuver is linked to the fact, that Dragon Oil and ENOC, most likely, didn’t obtain necessary permissions from Turkmenistan Government authorities (State Customs Services and others), allowing Turkmen crude oil supply to Iran, and, therefore, issued cargo and custom documents, showing port of discharge Baku, Azerbaijan for

further transit delivery to Europe. It is not excluded, that Dragon Oil will not be able to obtain such permission at all, due to the serious worsening of relations between Turkmenistan and Iran after a dispute over payment for Turkmen natural gas delivered to Iran and intention of Iranian side to sue Turkmenistan in international arbitration courts. Moreover, such movements of the ship may be explained, as the attempts of Dragon Oil and ENOC to hide the true destination of crude oil delivery – Iran, and, therefore, to avoid being included into the list of companies, violating US sanctions against Iran. We recall, that NIOC (National Iranian Oil Company), NICO (trading structure of NIOC) and their related entities in various countries are included in the US sanctions list. At the moment, Dragon Oil and ENOC are loading the third crude oil cargo aboard vessel VF Tanker-13 (belong to the same shipping company VF Tanker from Russia). Whether this vessel will go to Iran again, bypassing US sanctions and customs regulation of Turkmenistan, remains under question.

The Asian Development Bank (ADB) increased the loan amount [from $200 million to $400 million] for the International North-South Transportation Corridor (INSTC), as well as for the development of the railway sector of Azerbaijan. The Bank reported that in this regard, ADB has postponed the terms of consideration of the credit allocation. The bank planned to review the project on August 25, 2017, but now the date was postponed to September 22, 2017. Besides, the project fact gathering mission has been postponed from 1-11 August for 28 August-8 September 2017. The loan will be directed mainly to develop the Baku-Yalama railway line (the border with Russia) within the framework of the INSTC and support the expansion of the autonomy of the management of the Azerbaijan Railways CJSC, effective financial restructuring of the company’s obligations, expansion of financial and managerial control, efficiency and accountability in Azerbaijan Railways, as well as business development and corporate restructuring of the department. The North-South infrastructure reconstruction project involves rehabilitation of the 441-kilometer Baku-Yalama [double-track] section, development of a computerized cargo management system and provision of consulting services for the project. The International North–South Transport Corridor is a 7,200-km-long multi-mode network of ship, rail, and roadroute for moving freight between India, Russia, Iran, Europe and Central Asia.



August 14, 2017 #205

August 14, 2017 #205


INDEPENDENT AUDITOR’S REPORT To the Shareholders of JSC International Bank of Azerbaijan – Georgia: Opinion We have audited the financial statements of JSC International Bank of Azerbaijan – Georgia (the “Bank”), which comprise the statement of financial position as at December 31, 2016, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2016, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRSs”). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (the “IESBA Code”) together with the ethical requirements that are relevant to our audit of the financial statements in [CIS Country], and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern In 2016, the Bank recognized a loss after tax amounting to GEL 1,499 thousand. After the transfer of the 2nd tranche of problematic assets from the Bank to OJSC “International bank of Azerbaijan” (“the Parent”) in March 2017, loans to customers decreased by 54% to GEL 36,237 thousand. In addition, on May 11, 2017 the Parent defaulted on its obligations included in the initial restructuring plan and announced further restructuring of its liabilities. On July 12, 2017 the creditors voted in favor of the proposed restructuring plan. These events and conditions, along with other matters as set forth in Note 2, indicate that a material uncertainty exists that may cast significant doubt on the Bank’s ability to continue as going concern. Management’s plans concerning these matters are also discussed in Note 2 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified in respect of this matter. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. - Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. - Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. - Evaluate the overall presentation, structure and content of the financial statements, including the disclosures and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. August 03, 2017 Tbilisi, Georgia




August 14, 2017 #205

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