Caucasus Business Week #208

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September 18, 2017 #208

September 18, 2017, Issue 208 - www.cbw.ge

Opinion Role of Young Generation in Overcoming Modern Challenges Pg. 4

Wine GWS brings the Feast of Bacchus back to Georgia (where it belongs) Pg. 13

Tata Khvedeliani: You should be ready for any challenge when you work in PR department Georgia is Already in the Future

Last month, Georgia’s capital Tbilisi hosted two significant events: VISA Risk Executive Council and the Security Summit. Both events discussed key focus in risk management , current worldwide trends and fraud prediction technics , and showcased VISA’s most advanced technologies and innovative practices to make payments even more secure.. VISA sees Georgia as a pioneer country that has launched and acquired modern technologies and has made huge steps towards transactional and e-commerce innovation.

Pg. 6

Negative Trade Balance Improved In January-August 2017 Georgia’s external turnover constituted 6 618.2mln USD (excluding undeclared trade), up 12.2% as compared to the same period of 2016. Exports made up 1682.8mln USD, up 28.5% year on year, while imports totaled 4935.5mln USD, up 7.5%. In the reporting period, negative trade balance constituted 3252.7mln USD, 49.1% in foreign trade turnover. It should be noted that, over the past 5 years, better indicators of negative trade balance, as compared to the 2017 January-July period, was registered in 2013 in terms of amount, while in terms of percent better indicators were recorded in 2013-2014 years.

Pg. 4

Government Admits Exceptions into Land Law Parliament of Georgia has discussed a bill of amendments to the law on Ownership of Agriculture Lands by a first hearing. In the transient period, the current moratorium about suspension of acquisition of ownership rights on agriculture land plots will not be applicable to commercial banks and microfinance organizations. The bill also grants discretional rights to Government of Georgia to pass corresponding decisions regarding exceptional cases. Pg. 11


Newsroom

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Kumsishvili Met Representatives of Large British Investment Fund

As foreign visitors said, international business circle’s interest is increasing towards Georgia, which is due to the country’s correct economic policies and ongoing successful reforms.

National Tourism Administration to Develop Marketing Strategy for Imereti and Kakheti

The marketing campaign will be held in the target countries in order to popularize the tourism potential of the regions according to the project.

economy

Georgia’s Exports Rose by 23% in August

According to preliminary information of National Statistics Service of Georgia, in August 2017, as compared to August 2016, Georgia’s exports rose by 23% (+43.9mln USD), while imports declined by 6% (-45mln USD).

Georgia’s Foreign Direct Investment falls 5.5 pct in H1

Foreign direct investment (FDI) into Georgia fell 5.5 percent year on year in the first half of 2017, with Azerbaijan the biggest investor and the transport and communications sectors dominating.

banking

TBC Bank’s Market Capitalization Declines

In the reporting period trading sessions closed at 16.2 GBP (+0.12 week on week; -0.61% month on month). Deals were made on 131 000 shares. Over the past 4 weeks deals were made on 22 000 shares a day on average.

London Stock Exchange Makes Deals on 456 000 BGEO Shares

Price of Bank of Georgia shares (BGEO LN) at London Stock Exchange (LSE) made up 32.9234.83 GBP (L/m – GBP34.25 – 35.90). The price declined by 4.3% week on week, by 7.84% month on month.

business

Kakhetian Farmers Receive 18mln GEL Incomes from Sales of Grapes

The 2017 vintage has moved to an active phase. As of 13 o’clock of September 11, farmers have sold 18.7 thousand tons of grapes and received about 18mln GEL incomes.

Tourists Spent 1.86 billion USD in Georgia

According to the report published by the National Bank, tourists spent $ 391 million in August, which is 31% more than the same period of previous year. In January and August, the expense of foreign tourists amounts $ 1.86 billion.

company

Company Anagi to Build New Terminal at Kutaisi Airport

The new Terminal will allow Kutaisi Airport to operate 6 flights simultaneously. Construction should be completed within 140 days after the contract is concluded.

September 18, 2017 #208

McCain Institute co-hosts high-level international conference in Tbilisi

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he Georgian capital of Tbilisi is hosting a two-day international conference organised by the McCain Institute for International Leadership at Arizona State University and the Economic Policy Research Center (EPRC). The annual conference - A World in Flux: The Future of Democracy, Transatlantic Relations, Europe and the Middle East” – was opened yesterday with the participation of Prime Minister Giorgi Kvirikashvili. Kvirikashvili talked about the ongoing processes in the country and the priorities the government has defined and is trying to achieve. “I think that we have achieved significant progress. Thanks to the achievements during the past seven years, I think that we have the most impor-

tant advancement in terms of human rights protection”, Kvirikashvili said, adding that the judiciary has also improved compared to what it was like five years ago. Kvirikashvili stressed that the good pace of European and Euro-Atlantic integration remains the top priority of the government. “To ensure this, we need to implement a range of reforms, including political and constitutional ones. We need to adopt a more democratic election code, and follow the agenda of our four-point reform plan”, he said. The annual Tbilisi International Conference provides a unique platform and brings together experienced political and security leaders from the United States, Western Europe, Georgia and the wider EuroAtlantic community to discuss

the vision of a Europe whole, free and at peace; the challenges facing Europe’s eastern nations; and strategies to move forward. This year’s conference is built on the previous year’s discussion on NATO and Black Sea regional security, while taking a more in-depth look at Georgia’s geopolitical compass: in addition to traditional areas of the scope to the West and North, particular attention is devoted towards its South and East direction. With high-level speakers from the United States, Europe and regional countries, the conference addresses US foreign policy under President Donald Trump and its implication on political processes in Europe and its neighborhood and the Middle East. Particular emphasis is given to security and NATO’s role.

Govt Mulls Exemptions for Finance Sector before Constitutional Ban on Land Sales to Foreigners

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he ruling Georgian Dream - Democratic Georgia party, which intends to impose a constitutional ban on agricultural land sales to foreigners as part of the ongoing constitutional reform process, is planning to introduce certain exemptions for foreign-owned banks and microfinance organizations. The GDDG-proposed amendments to the Law on Agricultural Land Ownership come less than three months after the ruling party introduced a temporary blanket restriction on land ownership by foreigners to the same law, which, as a consequence, also applied to Georgian citizens, who are no longer able to use land as an asset in securing their loans from foreign-owned banks and microfinance organizations based in Georgia. According to the amendments initiated by the ruling party on August 31, foreign-owned banks and microfinance organizations will be exempt from land ownership restriction if their right to ownership was acquired through “banking/

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microfinance activity,” meaning the land that they have obtained as a result of borrower defaults. The microfinance organizations and banks will, however, have to sell the acquired property in a year or two years’ time, respectively. At the same time, in “special circumstances,” the Government of Georgia may grant its consent to foreigners or foreign companies wishing to own agricultural land in Georgia. The decision drew criticism from opposition politicians, who have denounced the restriction previously as well, citing its negative economic effects. “We have warned them that this law was unconstitutional, absolutely imprudent, and the first difficulties have emerged with respect to the banks; lands used as loan securities have become practically unusable,” stated MP Roman Gotsiridze of the United National Movement. “We told them two months ago as well, that such a rigid ban on agricultural land sales would create problems in the agricultural sector. Today, those who

created the very problem are trying to address the issue and present it as a step forward,” said MP Irakli Abesadze of the European Georgia. Georgian Young Lawyers Association criticized the changes as well, saying that the government is considering the amendments “in an accelerated way,” and that granting additional powers to the government in deciding the “special circumstances” would increase “the risk of sham deals.” Prime Minister Giorgi Kvirikashvili issued a statement on the matter on September 12, stressing that the restriction remains in force, and that it applies “only to the financial sector and for a limited period of time.” The legislature is to discuss the ruling party-proposed amendments at its upcoming plenary session. Under the new constitution, which will be put to final vote in late September, exceptions related to land purchases will be regulated by organic law. Before then, restrictions contained in the Law on Agricultural Land Ownership will apply.

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

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


September 18, 2017 #208

publicity

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econo-mix

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Negative Trade Balance Improved

Rati Abuladze Doctor of Economy

Role of Young Generation in Overcoming Modern Challenges

January-August Marked 28% Upturn in Exports

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Merab Janiashvili Economic Analyst

It should be noted that, as compared to the past 2 years, in January-August 2017 Georgian economy has demonstrated gradual recovery signs. In the reporting period, the ratio of hired citizens in total employment has increased, while the ratio of selfemployed gradually declined and the latter tendency is a proof of growth in output.

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n January-August 2017 Georgia’s external turnover constituted 6 618.2mln USD (excluding undeclared trade), up 12.2% as compared to the same period of 2016. Exports made up 1682.8mln USD, up 28.5% year on year, while imports totaled 4935.5mln USD, up 7.5%. In the reporting period, negative trade balance constituted 3252.7mln USD, 49.1% in foreign trade turnover. It should be noted that, over the past 5 years, better indicators of negative trade balance, as compared to the 2017 January-July period, was registered in 2013 in terms of amount, while in terms of percent better indicators were recorded in 2013-2014 years. For example, in the same period of 2016 negative trade balance was 55.5%, in 2015 – 52.8%, in 2012-14 – 54.1%, 47.7% and 48.3% respectively. (table #1) «Exports of ferroalloys, fertilizers, mineral waters, wines, medications have increased. Conseqeuntly, Georgia’s external trade demonstrates positive tendencies since September 2016. Exports growth month to month and foreign trade make positive affect on Georgia’s economic growth», Nino Javakhadze said. In January-August 2017, the trade balance was improved by 28.1mln USD. In August 2017, exports of ferroalloys rose by 134%, nitric fertilizers (+84%), medications (+79%), wines of natural grapes (+64%) and mineral and spring waters (+23%). As to imports, oil and oil products imports rose by 32%, telephone devices (+27%), medications (+17%). «External trade indicators are of crucial importance, because they make direct influence on economic growth and exports», Nino Javakhadze said. In July 2017, economic upturn constituted 3.8%, while in January-July preliminary indicators, averaged economic growth marked 4.4%. According to the statement by Nino Javakhadze, Deputy Minister of Economic Development, in July 2017 a considerable upturn in GDP was registered in the following fields: Development sector – 11.7% upturn; Hotels and restaurants – 16.4% growth; Trading – 4.8% growth; The Deputy Minister noted that the private sector plays a key role in Georgia’s economic advancement and in creating new job places. Consequently, economic indicators in the private sector are of crucial importance. Namely, according to the recent indicators, in January-June 2017 the business sector turnover

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Social and economic changes in a country largely depends on scales of political and governance activities of young people. Demographic factors, restrictions for continuous development, low salaries, unemployment, problems with professional and career growth, inefficient economic policy grow inequality between generations. Today, Government has been trying to stimulate business activities among young citizens, improve their social environment through various programs. Special accent is made on upgrading an educational level of students, improving practical skills through various programs. The Government also cares for socially vulnerable families, provides promotion programs to beginner entrepreneurs. However, intentions and ambitions are wider compared to real approaches and implemented projects. It is important to say that the country needs the dynamic resources for country development and these resources are accumulated in young generation. Georgian economy and better future of the country depends on young generation, who is capable of shaping strong policy, establishing unbiased approaches and standards in the country to ensure a reformation of state policy on global and regional levels. Global research projects prove that today young people earn less compared to the previous period (in many countries revenues have shrunk by 20%). Revenues of young families in 7 major economies of Europe, the USA and Great Britain have considerably plunged. Influence made by Georgia’s economic policy on social environment demonstrates the following tendency: over the past period (2015-2016), the number of weddings and expected longevity have significantly shrunk, number of divorced couples has increased, social inequality scales grow. The country has an army of social allowance beneficiaries. Politics has not made essential influence on poverty. Subsidies for village residents have been suspended or reduced (vintage, land cultivation and so on). We should analyze a wide range of factors that the young generation encounters, including: employment, attainability to financial resources, perspectives for career growth, continuous development conditions. Research works prove that a growth in number of young scientist-researchers has a direct relation with economic development, enhancement of political involvement, innovations and reforms, radical and revolutionary changes. It is recognized that the ideology of politics cannot subdue young social resource and cannot make influence on its activity. Consequently, ratio of young people in governance segment and politics is unimportant. It should be noted that outcomes of problem resolution efforts depend on the way of employment of public resources. Young resources that create reputation and public values follows rather democratic, professional, moral and ethic principles. However, the attitudes towards young people determines barriers in career and self-establishment approaches. Consequently, social-economic and political steadiness of the country also complies with the mentioned approaches. Stimulation of young people in political space is of crucial importance for governance balance and it determines governance results. Consolidated power of youth resource has potential to appraise pros and cons of the past and change Georgia’s social-economic and political environment through innovative and dynamic ideas. It should be noted that the Government rather talks than acts. Outcomes and effects of programs are insignificant compared to the quantity of state offices involved in reformation process. It should be also stressed that young personnel has higher sense of responsibility for shaping the future and implementing reforms, compared to the old political environment. Therefore, amid global changes and challenges, for the purpose of enhancing the competitive capacity of the country, it is of vital importance to carry out fundamental reforms oriented on young generation. It should be stressed that today the country has the generation and its potential and authority, strategic thought and potential, scientific activity and willingness nourish our belief in creating strong future. Therefore, it should be noted that Georgian state and economy needs the following components to attain success: • Resource of young intellectuals and academic resources and their participation in state building process; • Governance of reformative and academic thought, which is magnificently accumulated in youth; • Introduction of standards and criteria, which should be created by state system policy and programs; • Leading role of science, education and digital technologies, as a basis for development of the country. If the political and governance chain realizes the advantage of the mentioned fields in Georgia, both the economy and system will make advancements; • Evaluation of outcomes of political and governance chains. In Georgia, over the past 4 years economic growth pace was ranging from 2.7% to 4.6%. Consequently, outcomes of governance solutions could not be reflected on revenues and averaged Georgian family. The country needs governance standards and, naturally, they should be based on evaluation and analysis of operation of governing chains. • State arrangement principle, when young generation is better than previous one. In the state, where a way is opened to new generation, to ensure a state development and increase economy and living conditions; • Social-economic and political problems may be resolved thanks to young intellectuals and academic resources, because in today’s digital epoch, the mentioned resource plays a decisive role; And finally, the attitude towards young generation determines a development of social-economic, technological, political and business environment. P.S. the article stresses advantage of resource of young generation and this does not imply a restriction of any generation in the country.

September 18, 2017 #208

rose by 16.9% year on year, the sector’s output increased by 18.9%. «Upturn was registered in private sector in terms of employment. In the second quarter of 2017 the averaged number of employed rose by 5%, while the number of hired persons rose by 6%. Growing tendency is maintained in the business sector in terms of averaged salary. The mentioned indicator has risen by 13.2% as compared to the second quarter of 2016 and totaled 1 106.9 GEL», Nino Javakhadze said. Almost all sectors have recorded an upturn in turnover. The highest ratio in business sector turnover is recorded in trading (+14%); art, entertainment, recreation (+39%), processing industry (+19%), development sector (+21%) and power sector (+21%). Besides exports growth, tourism sector and revenues from it have also increased considerably. «Only in a month, more than 1 million international visitors arrived in Georgia, up 27.4% year on year, including more than 573 000 were tourists, who have stayed in the country for more than 24 hours. In general, unprecedented growth was recorded in not only August, but also summer season», Nino Javakhadze said. Namely, according to June-August indicators, more than 2.7mln international visitors arrived in Georgia (+28%), of which more than 1.4mln tourists stayed in the country for more than 24 hours (+32.7%)», Nino Javakhadze said. In January-August, more than 5mln international visitors arrived in Georgia (+18.9%), including 2.4mln tourists (+29.4%). The leading countries are the same: Azerbaijan, Russia, Armenia and EU countries. At the same time, unprecedented upturn was registered from Iran (+141.9%), Saudi Arabia (+196.4%) and India (+98.9%). It should be noted that, as compared to the past 2 years, in January-August 2017 Georgian economy has demonstrated gradual recovery signs. In the reporting period, the ratio of hired citizens in total employment has increased, while the ratio of self-employed gradually declined and the latter tendency is a proof of growth in output. However, current exports potential does not enable to attain serious results, because agriculture products and semi-finished goods constitute a key component of our exports. It is necessary to ensure strong domestic production to boost exports, reduce negative trade balance and increase foreign direct investments in the country.

“We have many potential investors, including companies with 400bln capital and more. They can make investments in Georgian companies by making a phone call and we need liquidity in this case – if they put money in Georgian companies, they should be also able to withdraw. This is impossible without developing a stock exchange. Today Georgia looks like an infarcted person, whose hear beats, but this does not suffice. Thanks to stock exchange thousands of companies will be able to draw resources without commercial banks and this is the best way to draw foreign investments”.

Aiet Kukava

Director of Alliance Group Holding


September 18, 2017 #208

publicity

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interview

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September 18, 2017 #208

nutsa galumashvili

Last month, Georgia’s capital Tbilisi hosted two significant events: VISA Risk Executive Council and the Security Summit. Both events discussed key focus in risk management , current worldwide trends and fraud prediction technics , and showcased VISA’s most advanced technologies and innovative practices to make payments even more secure.. VISA sees Georgia as a pioneer country that has launched and acquired modern technologies and has made huge steps towards transactional and e-commerce innovation. We had the opportunity to talk with Larisa Makarova, VISA’s Head of Risk in CIS&South East Europe countries.

Georgia is Already in the Future

A conversation with Larisa Makarova, VISA’s Risk Services Director (CIS & SEE)

- Cybercrime is fast becoming one of the greatest challenges in the marketplace. How is VISA ensuring that consumer data is protected and that the company remains ahead of the curve? - VISA has been doing well throughout the sixty years of its history. Nowadays cybercrime and new technological threats are growing very fast. We have four key strategic pillars, which we have already tested and have been working on for a couple of years. 1. Protect Data: VISA has initiated standards for data protection now called Payment Card Industry Data Security Standards (PCI DSS), which were mandated in the payment industry worldwide. In simple words PCI DSS ensures that transaction data is secured, when stored, processed and encrypted when transmitted from one point to another. 2. Devalue Data: Data should be ‘devalued’ while in transit, and here we can talk about EMV chip, Verified by VISA and the recent innovative practice developed by Visa which is ‘tokenization’. VISA’s Token Service, a new security technology, replaces sensitive account information such as the 16-digit account number with a unique digital identifier called a token. The token allows payments to be processed without exposing actual account details that could potentially be compromised.

As consumers increasingly shop with connected devices, the need for a seamless and secure digital payment experience becomes crucial. Without exposing the consumer’s account to fraud, tokenization enables frictionless, card-free payments in digital commerce environments. 3. Harness Data: What we mean here is stop fraud before it occurs. Recent technological innovations have given rise to artificial intelligence, which is playing an increasingly important role in today’s world, but also making the job of fraudsters easier. Nowadays, cyber-attacks can be more successful as malware’s ability to mimic human behavior has increased, making it more difficult to identify whether one is facing a phishing attack or a real email. Malware is helping criminals to commit crime, but the good news is that the same technology and the same artificial intelligence is helping us to identify potential attacks and stop them before they occur. One of our techniques is called VISA Advance Authorization, which enables us to identify real cardholder behavior based on neuron networks techniques. At VISA Net we score every transaction, whether it is considered risky or not, and if we see evidence of a high degree of risk then the transaction is stopped before it is complete. 4. Empower Consumers: There is a high demand for collaboration nowadays. No single institution can cope with fraud on its own. Clients, regulators, cardholders, VISA—we should all work together to fight fraud. Cardholders are the source of information. VISA has developed Alert Messages which help consumers track their transactions: if consumers don’t recognize a transaction, if it was not made by them, they inform their bank immediately. This concerns to all type of transactions, including those made via new devices. These are the four pillars which we have implemented strategically and continue to follow, improve and innovate. - There’s a lot of hype surrounding the virtual currency infrastructure Bitcoin, and a lot of talk about mobile payment platforms like Square, Google Wallet and PayPal revolutionizing the future of the digital payments industry. How would you rate the long-term staying power of these digital payment trends? - The whole world is going digital, and it is difficult to predict on each company and each method of payment. At VISA, we are looking towards this digital world and are co-operating with other companies such as Apple Pay and Samsung Pay. We carry out joint activities and together try to improve security. We should not only think about innovation from the consumer point of view: our task as risk

managers is to make innovations secure. You can innovate as much as you want, but at the end of the day innovation has many participants, many other institutions and data transmission aspects, and the data is the key. As soon as you own the data, you have the power, but the data could be compromised and that’s the risk. So our task is to make sure that sensitive data is protected. - What opportunities and challenges do you think will arise in digital commerce in Georgia over the next five to ten years? - We chose Georgia for our two-day event (VISA’s Risk Executive Council and Security Summit) for the Middle East North Africa and South-East Europe because among the region of 17 markets, Georgia is the most innovative one— contactless cards are widespread here. Almost 70% of banks issue contactless cards, and 90% of merchants accept them. In Ukraine, for example, most cards are not yet contactless and still rely upon magnetic stripes, so in terms of over the next five to ten years, Georgia is already 5-10 years ahead of Ukraine, which is lagging behind. And besides new technologies, Georgia was also one of the first markets to introduce the practice of tokenization, which is gradually being adopted across the CIS countries. Georgia is a pioneer, and in that sense, you are already in the future. - What are the difficulties in managing an emerging market like Georgia versus a more mature market? - I would ask the question the other way round: what are the privileges of managing an emerging market such as Georgia? Mature markets are the difficult ones to manage, because during the years of their development they have invested in technologies which are

The whole world is going digital, and it is difficult to predict on each company and each method of payment. At VISA, we are looking towards this digital world and are co-operating with other companies such as Apple Pay and Samsung Pay.

As I have mentioned, from the issuing point of view Georgia is a territory of innovation, a place where new technologies introduced and are in widespread use. getting out of date . Now they need new funds, since these are huge markets—like the United States, for instance, which are still investing in EMV chip technology. In Georgia, chips appeared ten years ago and the country is increasingly contactless, but in the U.S., chip technology remains a goal. Georgia is a small market, and as soon as something new appears, the country tends to adopt it immediately. Big markets, on the other hand, move slowly. Generally speaking, banks in emerging markets understand where they are lagging behind today, and try to predict the next big move investing into new technologies . That is why they appear to be ahead of their time, and to me this is one of the privileges of working in emerging markets. - What distinguishes Georgia in terms of VISA payments? How does retail fraud here compare to elsewhere? - As I have mentioned, from the issuing point of view Georgia is a territory of innovation, a place where new technologies introduced and are in widespread use. However, fraud does pose some challenges to acquirers. Many fraudulent merchants are targeting Georgia from abroad and are trying to do business here. The key problem is illegal activity of those merchants. Majority of them are FOREX and Binary Options merchants, as well as illegal pharmacy moving to Georgia. The banks start to work with them, but this leads to Georgian acquirers being identified under VISA risk analysis programs. We are monitoring this activity very closely, sending information to acquiring banks on violating merchants in order to help them terminate the illegal activities. According to VISA rules, transaction must be legal in both the acquirer’s and the issuer’s jurisdictions, and the transactions we are often seeing here are legal in Georgia but prohibited in the U.S. for example. Today there is lots of business between Georgia and the U.S., and banks should pay more attention to what is legal and what is not.


Ratings

September 18, 2017 #208

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Moody’s Upgrades Georgia’s Ratings to Ba2 from Ba3 Outlook Remains Stable

Moody’s Investors Service has upgraded the Government of Georgia’s local and foreign currency issuer ratings to Ba2 from Ba3. The outlook remains at stable. The rating upgrade and stable outlook are supported by Moody’s view that the Georgian economy’s resilience in the wake of the regional economic shock which began in 2014 demonstrates the increasing strength of the economy and institutions. Looking forward, ongoing economic reforms, supported by the International Monetary Fund, will mitigate some of Georgia’s underlying credit weaknesses, further boosting credit strength over time. However, material banking sector and external vulnerability risks continue to constrain the rating. Georgia’s foreign currency senior unsecured ratings have also been upgraded to Ba2 from Ba3. The localcurrency bond and deposit ceilings were raised to Baa1 from Baa3. The foreign currency bond ceiling was raised to Baa3 from Ba1 and the foreign currency bank deposit ceiling was raised to Ba3 from B1. In addition, the short-term foreigncurrency bond ceiling was raised to P-3 from Not Prime and the short-term foreign currency deposit ceiling was maintained at Not Prime. Georgia’s economy demonstrates resilience Georgia’s economy has proved resilient to a significant economic, financial and exchange rate shock in the region in 2014-16. Georgia’s GDP growth averaged 3.4% during this period, when many of its neighbors were in or close to recession. We attribute this resilience to effective macroeconomic policy management and strong banking supervision that allowed banks to continue to finance the economy. Looking ahead we expect Georgia’s economy to strengthen and its resilience to shocks to continue to be enhanced as ongoing measures to diversify and reform the economy bear fruit. Such measures include the ongoing process of diversification of trade and investment relationships, including through the Association Agreement (AA) and Deep and Comprehensive Free Trade Agreement (DCFTA) with the European Union (EU). These agreements will provide Georgia with technical and financial support to further develop its already strong institutions and further deepen political and economic relations. Closer ties and alignment with EU norms will also boost competitiveness through measures to improve customs procedures, food quality, education systems, and labor codes. Beyond its relations with the EU, Georgia has growing access to a diverse set of markets, through various recent and prospective trade agreements, such as those with a number of Commonwealth of Independent States members, Turkey, and potentially through the prospective free trade agreement with China. This will help to maintain FDI levels at close to 10% of GDP and will likely increase exports and economic growth in the medium term. We also expect that past microeconomic reforms, which have helped to boost the economy’s shock absorption capacity, will continue to positively affect the economy. These reforms include success in reducing corruption to low levels compared with most other sovereigns and significant reductions in the number of taxes along with simplified tax administration, as well as broadening the availability of online tax payment. Labor market reforms started in the last few years which ease restriction on hiring, work hours and redundancy will also boost the potential for enhanced productivity in the economy. Moreover, and beside the trade agreements, reductions in the number and level of customs tariffs have boosted export capacity by reducing the financial and administrative costs of foreign trade. This has reflected significant reductions in the number of products covered by import tariffs and cuts in a number of tariff rates leading to reduced import costs as well as simplified tariff rate administration. The business environment has also improved through reform of the system of licenses and permits which, for example, reduce the time to register businesses and receive permits for construction projects. Credible new reforms will further support credit strength, although key credit weaknesses remain The Georgian authorities have signaled their commitment to ongoing reform. The track record of implementation so far lends credibility to that commitment. Over time, a number of planned measures will support Georgia’s credit profile, although key credit weaknesses in the form of banking sector and external vulnerability risk will remain. Georgia has committed to further reforms supported by a US$285 million three-year IMF Extended Fund Facility (EFF) announced in April 2017. This program was not driven by any acute need for funding. Its main purpose is assistance focused on ongoing institution building and some key credit weaknesses including fiscal deficiencies and external imbalances and a still relatively narrow economic base. The program emphasizes structural reforms to generate higher and more inclusive growth. The focus will be on improved education, road infrastructure investment, more efficient public administration, and further improvements

in the business climate to boost the private sector’s role as a growth driver. The program is likely to boost institutional and fiscal strength by supporting improvements in the composition of government spending and revenues, from current expenditure toward capital investment to address infrastructure bottlenecks (including through the Government’s Spinal Network). The government will also shift the tax base from direct to indirect taxes. Such changes, if effective, will enhance the effectiveness of fiscal policy in supporting growth and generating savings. Fiscal reform is anchored around the objective of maintaining moderate government debt. In 2016, government debt was 44.5% of GDP. Importantly in the context of Georgia’s savings gap and reliance on external financing, the government has committed to introducing a funded pension in 2018, which will promote domestic savings as well as creating an institutional investor base for longterm lari assets. However, fiscal and pension reforms will only lift savings and materially reduce Georgia’s external financing needs over a relatively long period of time. For the next several years, a large current account deficit, at -13.5% of GDP in 2016, and very large net international liability, at 136.7%% of GDP, will continue to constrain the rating. Banking sector risk will also continue be a source of credit weakness reflecting the still high levels of dollarization in the system and consequent exposure of banks to currency movements. Lending standards are prudent and adequacy of capital and liquidity ratios meet or exceed internationally-agreed requirements. However, while some progress on larisation of the economy has been achieved, plans for further increases which would lower the contingent liability risk posed by banks to the sovereign will take some time.

Looking forward, ongoing economic reforms, supported by the International Monetary Fund, will mitigate some of Georgia’s underlying credit weaknesses, further boosting credit strength over time. Georgia’s large current account deficit, despite rising savings, and very large net international liability position represent significant exposure for the sovereign to potential negative turns in external financing conditions

The stable outlook indicates that the risks to Georgia’s rating are balanced We expect that the government’s measures will continue to boost economic growth and resilience, in particular through greater diversification of economic activities. Ongoing efforts to raise domestic savings and investment efficiency will complement increased diversity in exports and export markets, in part through the governments’ logistics and infrastructure spending plans. We also expect stability in both the domestic and geo-political situation, which will facilitate continued economic and fiscal reforms. These positive forces are balanced by the downside risks posed by still significant banking sector risk and uncertainties around the economy’s capacity to raise value adding in the economy due to constraints in the business environment including lack of clarity in areas such as insolvency law, land registration and the potential for vocational education improvements to boost the skilled labor supply. Georgia’s large current account deficit, despite rising savings, and very large net international liability position represent significant exposure for the sovereign to potential negative turns in external financing conditions. What could change the rating up Upward rating pressure on the rating could develop as a result of ongoing and effective reforms that sustainably raise domestic savings and reduce external vulnerability. Measures that bolster the resilience of the banking system further would also be credit positive. Finally, economic reforms that foster greater economic diversification and higher productivity growth would raise Georgia’s economic strength and potentially support the rating. What could change the rating down Downward pressure on the rating could develop from an increase in external vulnerability risks, notably a widening gap between domestic savings and investment, or an escalation of geopolitical risks. A deterioration in fiscal metrics could also put downward pressure on the rating. •GDP per capita (PPP basis, US$): 10,044 (2016 Actual) (also known as Per Capita Income) •Real GDP growth (% change): 2.7% (2016 Actual) (also known as GDP Growth) •Inflation Rate (CPI, % change Dec/Dec): 1.8% (2016 Actual) •Gen. Gov. Financial Balance/GDP: -1.4% (2016 Actual) (also known as Fiscal Balance) •Current Account Balance/GDP: -13.5% (2016 Actual) (also known as External Balance) •External debt/GDP: 107.8% (2016 Actual) •Level of economic development: Moderate level of economic resilience Default history: No default events (on bonds or loans) have been recorded since 1983. On 07 September 2017, a rating committee was called to discuss the rating of the Georgia, Government of. The main points raised during the discussion were: The issuer’s economic fundamentals, including its economic strength, have not materially changed. The issuer’s institutional strength/framework have not materially changed. The issuer’s fiscal or financial strength, including its debt profile has not materially changed. The issuer’s susceptibility to event risks has not materially changed.


8

PR Person

September 18, 2017 #208

Interview with Tata Khvedeliani, Head of Public Relations and Marketing Service of the MIA Police Security Department.

“I am a maximalist person by nature,I want to achieve more and more successes, so I’m working on myself, to be effective in all areas in which I work”

You Should Be Ready For Any Challenge When You Work In PR Department - Which media outlets do you follow? - The profession of PR specialist requires involvement and constant following of news, so I am starting a day by looking through all the mass-media outlets. First, I search for news related to my field. I follow both print and social media, as well as radio and TV channels. - Talk about the difference between PR and advertising. - PR is a public relations, strategic communication process. We present a product to the society through communication and various ways, which is intended to raise awarness. Advertising is one of the way, for what you pay. The activities of the public agencies are now fully about public. It’s important to communicate with people in order to avoid wrong or negative understanding of PR activity. - Describe some affiliate networks you’ve collaborated with and why you chose them. - I remember my experience of inclusion program of people with

“ I think every PR specialist has had a negative media attack In my case, this story has been corrected by correct communication with the public.

disabilities. I think, involvement in mentioned project contributed to my professional growth. I thought communicating with this part of the community would be very hard, based on common stigmatics, although I managed it. Nowadays, I can say I have a lot of friends with disabilities, I can use a gesture language, and refused all the difference. - How do you integrate social media with PR? - I believe that social media is actually one of the most important tool in the field of public relations. It is widely used to make announcements and to cultivate public opinion. - How would you present the results of your work? - I am a maximalist person by nature,I want to achieve more and more successes, so I’m working on myself, to be effective in all areas in which I work. - What would you do if a client or manager disagreed with your PR strategy? - Profession of public relations specialist becomes more popular day

by day. Consequently, demand for professionals in this field is increasing steadily. A trust is important, when I work for my supervisor, I need him to believe in my actions, so if the client or manager opposed my strategy, I will try to explain the need for the strategy and to convince him of its effectiveness. - Describe a time you had to manage negative media attention. - When working in Public Relations Department, you should always be ready for any challenge. I think every PR specialist has had a negative media attack In my case, this story has been corrected by correct communication with the public. - What’s interesting about our current PR work? What would you improve? - I really like this field and I’m glad I chose it. Communication is the most interesting and important. I like receiving the result of correct PR strategy. I would improve the leader approach towards PR, since it is a very wide area of strategic and is not just right to embark on only a few directions and work with them only.


September 18, 2017 #208

Investment

9 ninna gomarteli

VRex Immersive Inc Creates a Unique Way to Visit Places Virtually Innovative tech startup ”VRex Immersive Inc” let users have unique experience, connecting to places via VR. Team’s main target is to benefit in tourism field by storytelling application and keep experimenting. CBW had an interview with Nikoloz Gogochuri, Creative Director/ Co-founder of VRex Immersive Inc:

Fatema Z. Sumar, Regional Deputy Vice President of Millennium Challenge Corporation Celebrates SDSU Convocation in Georgia Fatema Z. Sumar, Regional Deputy Vice President for Europe, Asia, Pacific and Latin America in the Millennium Challenge Corporation’s Department of Compact Operations is visiting Georgia to participate in San Diego State University’s second Convocation ceremony. The Millennium Challenge Corporation (MCC) has a singular mandate to improve lives around the world: to reduce poverty through economic growth. In Georgia, MCC is working with the Government of Georgia to achieve this mission through strategic investments to strengthen the Georgian education sector. Thanks to this $140 million US government investment, Georgians will be ready to enter the labor market with in-demand skills, and help grow the Georgian economy. MCC is working with MCA-Georgia to implement education projects at the general, technical/professional, and higher education levels in science and engineering disciplines. In higher education, MCC is funding a unique partnership between San Diego State University and the Government of Georgia to deliver science and engineering bachelor’s degreesin partnership with TSU, GTU and ISU. The Millennium Challenge Corporation continues its activities with significant achievements three years into the five-year program. CBW had an interview with Ms. Sumar about current projects and achievements: Could you tell us the purpose of your visit in Georgia? I’m excited to be back in Tbilisi, Georgia today and celebrate the start of the school year for a third group of more than 200 incoming students atSan Diego State University in Georgia, doubling the number of Georgian and international students enrolled at SDSU since enrollment began in 2015. Students will pursue bachelor’s degrees chemistry, computer science, electrical engineering, computer engineering, and civil and construction engineering, using state-of-the-art facilities and

equipment purchased by the US government, with American-trained professors and a curriculum identical to SDSU’s in San Diego. We are looking forward to share the real success we’ve had in San Diego State University that supports advancing critical fields and STEM education in Georgia. Which other fields do you consider as critical, that need to be developed in Georgia? We want to support knowledge economy, in order for Georgia to become competitive not just in the region but also globally. Therefore, we are investing in students so that they have critical skills in the science and engineering fields, key growth sectors in Georgia. I am pleased to see that the Georgian private sector is partnering with us to support students through scholarships and internships, so that they acquire relevant job skills while they are studying at SDSU. These partnerships and the SDSU program will long continue past the MCC Compact term, which concludes in 2019. What are the results of training Georgian faculty? As part of MCC’s partnership with SDSU and the Georgian government, we are working very closely not just to enroll Georgian and international students in these programs but also Georgian faculty focused in STEM areas. Today we’ve trained over 50 Georgian faculty who are partnered with SDSU San Diego-based faculty to deliver courses to students in Tbilisi We’ve also worked on rehabilitation of modern laboratory spaces at our three partner universities. Major lab refurbishment works are complete, and construction at Ilia State University is underway for the new building which will be opened next year.

I am pleased to see that the Georgian private sector is partnering with us to support students through scholarships and internships, so that they acquire relevant job skills while they are studying at SDSU.

How would you evaluate two years of VRex Immersive Inc activities, when was the challenging moment for your team? Like any tech startup, VRex Immersive spends most of the time experimenting and searching for the best business model. You try something new and most of the times it does not work. That is a nature of startups. But when it does work, it catapults you to the next level. Challenging moments are almost every day. We are operating in a very trendy yet, a very new sector of tech: immersive technologies, Virtual Reality, Augmented reality. So the biggest challenge, I guess, is getting your prospects to believe in the technology and want your product. Even before that, the challenge is finding out what product would they want the most. Would you consider using this technology in other fields too, rather than tourism? Like I said, we spend most of the time experimenting. From the very beginning we have been experimenting with various fields VR/AR can be used for. Tourism is our main focus because we believe it could benefit from Immersive tech the most. We have also created VR/AR applications for education, cultural heritage, publishing, architecture etc. So yes, we do consider other fields as well, however, at this point tourism is our focus. In general, any tech startup must be prepared for sudden changes, pivots as we call them, so at any time we could switch to another field of business and focus there. It all depends on where we have the best/ most feedback from the market. What is the feedback you get from tourists? VR is a powerful storytelling tool. Immersive technology is the future of communicating visual material. Because of its immersive nature, users have unique experience when they try our application. Our software lets every user have their own experience with immersive content about a place, because they themselves choose what they want to see and where they want to go next. We’ve shown our application to thousands of people (including tourists and travel professional) and I can honestly say that most of them want to actually go to the places we show them using VR. Is filming process adventurous and unpredictable sometimes? Filming process is always unpredictable to some degree. That’s what makes it so interesting. We have been to places we didn’t even know anything about. During the filming we have seen amazing travel destinations. It all adds up and when you see the reactions of people experiencing all of it in VR it all clicks into place. Do you take part in international fairs/exhibitions? Yes, we often attend exhibitions and also our customers use our tech for promotion on such events. We have participated in many events in Georgia (Like Tbilisi travel expo, Expo Batumi and International Business Forum) as well as internationally (like ATM in Dubai and ITB in Berlin). Do you intend to add new features? Not only do we intend to add new features, we have the new features lined up already. We are in a beta stage of the platform and whatever feedback we receive from the market, we try to translate it into new features all the time. We will also add new products according to the technology penetration and market demand in future. We’ve heard you had a meeting with the Prime Minister, what are the plans that you’ve discussed? Well, we had a very important and interesting meeting. We discussed many things, from the state of our startup and the needs we have, to the general issues in the tech startup ecosystem in Georgia and legislation. The PM had very interesting ideas on what could be done and expressed support to VRex Immersive. We hope this meeting will be the beginning of a very productive collaboration.


business

10 Investments in Tsinandali Estate Exceeds 50mln USD Foundation of the 2019 classic music festival in Tsinandali Estate was marked by a concert of Israel Philharmonic Orchestra and Khatia Buniatishvili. A day earlier before the concert, the festival organizers held a news conference at Radisson Hotel. Minister of Finance Dimitri Kumsishvili attended the news conference, as well as founders of Verbier Festival Mr. Avi Shoshan and Mr. Martin Engström. As a result of successful cooperation between private sector and government of Georgia, starting 2019 Tsinandali Estate will grow into an international culture and education center. Foundation of a musics academy is one of the components of a big plan, which is being developed by Silk Road Group and its partners for more than 10 years. During this period, more than 50mln USD was invested in the Tsinandali Estate. Museum and its garden were rehabilitated, historical vineyards were restored, modern winery was built, as well as a concert hall for 1200 spectators. In 2018 Radisson hotel 140 suites will be also unveiled.

Foreign Scientists Acknowledge Georgia as Homeland of Winemaking Georgia is the cradle of viticulture and winemaking and this was substantiated by specialists from 7 countries after 3-year research works. The project was led by Patrick McGovern. Pennsylvania University Museum professor, biochemist and winemaking historian. On October 10-11 in Bordeaux, the city of wine civilization, as part of Georgia – Cradle of Winemaking exhibition, this scientific group will hold a meeting and introduce the research report to interested audience. The leading specialists have scrupulously examined rich archaeological materials of various periods, including ancient grape stones, deposited acids on clay and clay vessels that was identified as wine. Georgia is the first country invited to Bordeaux Wine Civilization Center.

Georgian Startup Invents Safe Alternative to Antibiotics Phage Nutraceuticals, the winner of Startup Georgia, held by of Innovations and Technologies Agency of the Ministry of Economy and Sustainable Development, started inventing a safe alternative to antibiotics. Project author Rati Gholijashvili introduced achievements to the representatives of the Innovations and Technologies Agency of Ministry of Economy and Sustainable Development. Phage Nutraceuticals is a biotechnological company that is involved in research and development by creating a safe alternative to antibiotics based on one century experience. Production laboratory is based on Biochefarm.

September 18, 2017 #208

Georgian Fitness Group to Open the First World Class Multifunctional Fitness Club in Tbilisi The worldwide known international brand ”World Class” will be opened in the fall of 2017, on the 4th floor of the Philharmonic Building in Tbilisi. The history of World Class begins in Scandinavia, in 1983. Over the last 34 years, the brand has been expanding widely in Western and Eastern Europe, as well as the Middle East. 84 World Class club operates today. Fitness Club Owner, ”Georgian Futures Group”, is a Georgian company based on private investment, working in the fitness industry development in Georgia and the Transcaucasian region. Investment for the first club amounts $ 3,000,000. Four more World Class clubs will be opened in Tbilisi in the future.

URBAN GREENS – Micro Herbs Startup by Tusa and Keta “We, two girls, have built a 30 square meter greenhouse near Tbilisi, ordered glass frames and started growing micro herbs under a vertical principle. This technology enabled us to receive more harvest on this small space. We have included nobody in the experimental process. We have studied and explored everything ourselves, contacted foreign experts abroad and received their suggestions”, Tusa Gharibashvili, co-founder of Urban Green micro herbs company and the idea author, told the Marketer. Jointly with her friend Keta Bezhitashvili, Tusa has introduced an innovative vision of culinary and food culture on the market. One of the principles of the company is to staff the company by only females. Tusa Gharibashvili, talks about the company foundation idea, orientation, working team shaping principles and consumer

communication channels for the Marketer. What phases has the idea shaping process passed and what was your experience when starting the company? -The idea of Urban Greens arose 2 years ago. In that period I was involved in culinary issues. Many chefs are my friends and they have inspired me to start working on this project. In the idea development process, one of my friends, who is co-founder of Urban Greens, Keta Bezhitashvili, helped me implement this idea. None of us had experience in this field, but we had serious motivation and ambition. How have you determined the staffing principle? -Without feminism motivations. I just think that flowers and micro herbs are so attractive and fluffy esthetically that a team of beautiful girls should work on it.

Harvard Business School Shows Interest in Georgian Experience of Implanting Blockchain Technologies in Public Registry Papuna Ugrekhelidze, head of National Agency of Public Registry (NAPR), met with Harvard Business School representatives Mitchel Weiss and Elena Kors on September 13. At the meeting the NAPR chairman updated representatives of Harvard Business School on details of implanting blockchain technology in registration process. Georgia is one of the first countries in the world, which has successfully applied blockchain technological achievement in real estate registration. This factor has raised the interest of the leading business school. The Harvard Business School representatives are preparing a document on introduction of blockchain technology

in real estate registration transactions in Georgia. The document will comprise the history of the project implementation, strong aspects and risk appraisals, implementation terms and other important issues. Harvard Business School will apply the case study prepared in Georgia regarding the ongoing blockchain project in curricula. The Georgian experience will be discussed in various events of the business school. Inclusion of Georgia’s successful experience in Harvard Business School curricula will raise the interest of international academic and business circles, improve international reputation of the country and popularize it.


Law

September 18, 2017 #208

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Georgian Land Government Admits Exceptions into Land Law – Legal Amendments and Expected Outcomes

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arliament of Georgia has discussed a bill of amendments to the law on Ownership of Agriculture Lands by a first hearing. In the transient period, the current moratorium about suspension of acquisition of ownership rights on agriculture land plots will not be applicable to commercial banks and microfinance organizations. The bill also grants discretional rights to Government of Georgia to pass corresponding decisions regarding exceptional cases. Parliament member Anri Okhanashvili noted that this bill keeps considering a land as a special resource that must be owned by Georgian citizens. At the same time, the submitted bill is to prevent a legal vacuum so as the constitutional property rights be protected. The bill will work in the transient period until an adoption of organic law, which will regulate the land-related issues, Okhanashvili pointed out. The bill obliges commercial banks and microfinance organizations to sell their own lands to Georgian citizens within 2 and 1 year period, respectively. The Caucasus Business Week (CBW) has inquired reasons for making exceptions for the finance sector and what to expect from the government’s decision. Beso Namchavadze, economist for Georgian Association of Reforms, explains that the Government has supposedly taken this decision to let commercial banks issue loans under land guarantees. This signifies the Authorities has decided to incentivize the banking-finance sector. “Foreign citizens hold huge ratios in Georgiabased commercial banks and microfinance organizations. There are only one or two commercial banks in Georgia, where foreign capital’s ratio is small. Without the mentioned amendments, landowners would not be able to mortgage their property at commercial banks to take loans. This gap would frustrate agriculture sector development. We know that commercial banks try to avoid taking lands as loan guarantees if these lands are not of strategic importance. Therefore, this decision is to raise the interest of commercial banks, otherwise, Georgian citizens would not be able to take loans for agriculture lands and commercial banks would not accept lands as loan guarantees, because commercial banks would not be able to acquire ownership rights on agriculture lands in case of bad loans and loan risks would increase. As a result, previously,

commercial banks used to issue loans for 10% interest rate, but now the rate would increase and agriculture land as a guarantee asset would become a high-risky asset”, Namchavadze said. As to reverse effect, Namchavadze fully agrees with the Government decision and says that bill will bring only positive results. Irakli Makalatia, head of Center of Economic Policy Experts, noted that in this case the Authorities become a monopolist of land sales and they will decide themselves to either sell and or not to sell the land resource to this or that client. According to his statement, coming preferences to microfinance organizations and commercial banks are preconditioned by the fact that the bankingfinance sector is the most developed direction in the country. Huge finances are circulated in this field and this factor preconditions state motivation too, he added. The Authorities are carrying out unjustified economic policy, as they preserve the right to sell land in exceptional cases. Since they have announced a moratorium on land sales, this restriction is to be applied to both private and state sectors. Moreover, the legislation should not comprise exceptions, the expert noted. “Both commercial banks and finance sector are private, but it is unjustified when private sector becomes a monopolist and determines the rules of game on the market. As to why insurance sector is not mentioned among exceptions, I think the Authorities set barriers when the number of private owners declines. Consequently, number of insurance service beneficiaries declines and insurance companies are not interested. We have

insurance products, but they are inefficient because of high interest rates and they are less applied. For the purpose of making agro insurance attainable, it is necessary that a great number of consumers exist. For example, if a person owns a 5-hectare land and its value is under 10 000 GEL, this property will not be insured. If this asset has real value, number of owners of similar assets will increase, competition will be intensified and insurance sector will be interested in developing new products and diversifying them”, Makalatia pointed out. About 60% of agriculture lands remains in state ownership and it would be better to transmit these resources to private sector, to Georgian citizens and they will decide to whom and how to sell their own lands, he said. “There are ungrounded fears as if Georgians will sell these lands and foreign citizens will settle the country. Today, foreign citizens buy lands because of low prices, but after privatization process, the land price will rise and the value of Georgian land will be commensurate with international tariffs. As a result, foreign citizens will encounter high prices. In similar cases, the price becomes a natural regulator for the people we are afraid of so much. As to financially strong foreign companies, they will pay several ten thousands of EUR in case of due interest”, Makalatia noted. At this stage, foreign citizens own about 5% of agriculture land plots in Georgia, that is 2% of total land fund. This is a very small figure and it cannot be hazardous for the country, Makalatia said. After amending the Georgian Law on Agriculture Lands Ownership, investors will not have attractive business environment, Makalatia added. “When investors enter the country, they have to conduct negotiations with not private sector, but the Government. And this is not an attractive environment for an investor and they prefer to communicate with the private sector”, Makalatia said. As to economic effects, the expert says that adoption of similar amendments will generate various negative processes, including a frustration in agriculture sector development, the expert said. “Today agriculture sector cannot be developed, because farmers lack for financial resources to cultivate the land. Therefore, the price of land assets should be high. If the price of one hectare is 10 000 USD, in this case commercial banks will lend at least 50 000 USD to farmers and this is

an unimportant sum to make something valuable in agriculture sector. The time has come to make land assets more expensive to attract additional financial resources in this way”, Makalatia noted. Rahim Abachi, director general of Chamber of Commerce of Iran, also talks about sales of agriculture lands to foreign citizens. According to his statement, after legal restriction of sales of agriculture lands to foreign citizens, two quite major Iranian investors refused to make investments in Georgia. The Georgian Authorities have taken incorrect decision and this step will bring quite negative outcomes in the future, he added. “Several investors were interested in making significant investments in the country. They intended to buy lands, but we failed to assist them. Foreign investors will not take risks of making investments in the country if they cannot have lands in ownership. We had two similar cases”, Abachi said. It will be wonderful if the law comprises exceptional cases, namely, if lands will be sold in case of large-scale investments. Sascha Ternes, head of supervisory board of German Business Association, noted that mistakes from restriction of agriculture land sales to foreign citizens may bring serious negative results and thwart agriculture field development for many years. Sascha Ternes told the Commersant radio station that the regulations should not thwart investing process. “The new law should not contradict bilateral investment agreement, including Germany-Georgia agreement. Therefore, it is our recommendation to maximally involve business in the issue resolution”, Ternes noted. Georgia needs foreign investments and agriculture sector is a good asset in this respect. At the same time, we should be sure that lands are not purchased for speculations, he added. There is threat that investors may lose trust. When the issue is of administrative regulations and exceptions, the process should be transparent to prevent arising additional questions, Ternes said. As reported, the bill submitted by Georgian Dream is being discussed in accelerated regime. According to United National Movement members, the ruling team has taken the decision that is directed against economic development of the country.


12

September 18, 2017 #208

Letterato to improve youth’s critical thinking abilities

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e live in the age of technology where information is largely available and knowledge – much more accessible. At the same time, human intelligence has become more important than ever. The ability to think critically, determine the quality and reliability of information and rationalize key decisions whether it refers to personal life or issues of public importance, are traits that will be more and more valued as the technological breakthrough accelerates. The quality of education closely linked with innovation and creativity plays a key role for the well-being of countries across the globe, reflected in the competitiveness and quality of life at large. According to UN’s Human Capital Index (HDI) Georgia ranks pretty well, falling in the segment of High Human Development. HDI measures average achievement in three basic dimensions of human development – a long and healthy life, knowledge and a decent standard of living. However, according to The Programme for International Student Assessment (PISA) survey 2015, despite some improvements, Georgia still performed below average in the areas of science, math and reading. Importantly, the PISA survey does not measure the performance Of 15-year olds against the school program, rather than their preparedness to full and essential participation in the knowledge society. Obviously, there is still significant room for improvement for Georgia in this area. The quality education as well as the ability of Georgian students to fully unleash their potential, are the goals that need to bring together the government, teachers, parents and students themselves. To address these goals, recently, Letterato – the Critical Thinkers’ Academy has been established in Tbilisi with the key aim to assist students enlarge their knowledge, acquire critical, objectivitybased thinking and widen their horizon in the areas of reading and arts beyond the regular school hours. The Academy offers three modules so far: the books and reading, critical

thinking and logical reasoning, and the history of arts. Each module is designed for respective age categories, such as fifth-eight grade and ninth-twelve grade students and serves two sub-goals: to increase students’ knowledge and equip them with important skills needed for better performance in both, professional as well as personal lives in future. According to Tamara Razmadze, the founder and the director of Letterato “The Academy also provides Georgian youth with the possibility to engage in the meaningful discussions with their peers, while equipping them with intellectual integrity, fair-mindedness, logical reasoning skills, and intellectual autonomy. These are the skills that are very much needed in today’s free society”. Beyond formal curricula, Letterato will serve as a platform for fact-based debating around different issues of high importance and social life, as well as meetings with various speakers successful in arts, politics and economy. The curriculum is based on innovative approaches, like simulations, learning through role-playing, case-based learning and practical exercises. “Obviously, children, especially teens are being less engaged in reading. This happens due to the fact of the dramatic boost of technologies and visual arts, in particular, filmmaking industry, over the last decades, and the availability of enormous information that instantly falls on us from different media channels, whether it is social, electronic or other kind of media. Everything is available, especially in visualized format and our youngsters have already adapted to this reality. They have become very ergonomicsoriented what information to consume, in which portions and in what time span. The raise of TV series for instance, can also be explained by this fact. On the other hand, these ready-to-use material whether this is a perfectly made movie based on an award-winning novel, or TV series with deep meaning and very impressive visualization, still kills

imagination and the ability to think independently. Alternatively, books and reading provide unique possibility to take a unique imaginative path together with a protagonist along a story, which cannot be reiterated by any other reader and make your own interpretation. That is why movies are not substitute for books and vice versa. Definitely, we observe incredible democratization of knowledge and accessibility of information, which is one of the greatest achievements of human civilization, but we also live in the era of superficial knowledge and ready-touse answers to all questions we may have. This leads to intellectual laziness, which is an opposite of critical thinking. That is why low-quality or fake information is so vastly circulated and accepted in today’s world. People often do not question the authenticity whatever is presented to them. The idea of Letterato was born observing the need to help our young generation to reimagine the world they live in and start questioning in a positive, even philosophical sense. We are striving to equip them with logical reasoning and critical thinking skills, the ability to analyze a topic from different angles, help them use their creativity, and then they conclude based on facts, not on so called “confirmation bias”. The teaching curricula are designed in a way that respond to the requirements of modern reality that makes the learning process really dynamic and exciting for youngsters” - Tamara Razmadze says. Although the Thinker’s Academy offers learning through playing, each course is quite intense. The history of arts classes, for instance, will guide it’s students through the whole history of arts, starting from cave painting, ending with visualized arts of today’s world. It will also introduce the students different cultures and help them to identify crosscultural commonalities, as well as diversity and uniqueness of each civilization and culture. The books and reading classes include approximately twenty selected works to

read throughout the academic year per class. And the critical thinking and logical reasoning classes offer intensive program with over twenty topics given for discussion and analysis, as well as logical reasoning exercises and debates after each topic. Good news is that the majority of tasks will be performed during the classes and students will not have to do their homework. According to Tamara Razmadze, Letterato

spurs to form a strong community around the Academy, through engaging its students, partners and peers in helping to cope, at least on a smaller scale, with one of biggest challenges of the country: young generation’s education and necessary skills to analyze, reason, communicate and collaboratively solve problems. As the Academy develops, more disciplines will be offered to its students.


wine

September 18, 2017 #208

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GWS brings the Feast of Bacchus back to Georgia (where it belongs) 13.09.2017 (Hvino News) Yes, you read it correctly: the legendary Feast of Bacchus belongs to the ancient Georgia as rightfully as to the ancient Greece and Rome. The explanation lies in the history, when the Kingdoms of Colchis and Iberia were part of the Greek civilization, and the Argonauts could have searched for the Golden Fleece in the same valleys where GWS now gathers the crops for its wine production. So it’s not without reason that the winery GWS decided to revive Feast of Bacchus in today’s Georgia, launching its new premium range TAMADA Grand Reserve in the refined atmosphere of unfading ancient classics. On September

9th, the legend came true on the GWS premises in Telavi, Kakheti, where nymphs and fawns mingled among VIP guests. Philippe Lespy, CEO of Georgian Wines and Spirits, greeted the guests - business partners, diplomats, government officials, international

media representatives and wine professionals such as Debra Meiburg, Master of Wine, or Alexander Barkhunadashvili, a 88-year old veteran of the Georgian wine industry. “Feast of Bacchus” featured a theatrical performance with pantomime, music and a tasting of the 4 new Grand Re-

serve still and Qvevri wines. “Wine is the one of the key pillars of the Georgian history and culture, closely intertwined with art, poetry, and songs. For Georgians, it associates with celebrations and rituals which we inherited from our ancestors from centuries ago and which we take as our sacred duty to pass on to our children. And so when Autumn comes, we celebrate the harvest, like the people of Colchis and Iberia celebrated the Dionysus and Bacchus festivals - explained Keti Kenkishvili, GWS Brand Ambassador - “We are accustomed to find Dionysus/Bacchus likenesses on the Greek paintings, sculptures and drinking vessels found at the European museums, but it

comes as a surprise for many to see him on a 2nd century AD mosaic in the remains of a Roman town in the village of Dzalisa near Mtskheta and makes one wonder how exciting it would have been to travel in time and be part of a Bacchus Harvest Feast held in the beautiful palace!” Georgian Wines and Spirits (GWS) is one of the oldest and most famous wineries in Georgia, founded in 1993 in the village of Achinebuli, Telavi district, on the basis of the “Telavi 2” winery built in 1976. The GWS has 400 hectares of vineyards, of which 280 hectares of red grape varieties and 120 hectares of white grapes. It bases its reputation on quality and integrity. © Hvino News


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September 18, 2017 #208

Brand History - Barambo

B

arambo is a market leader company. It is famous for diverse assortment of sweets. The company started ice-cream production in

2011. Company Foundation Idea – Previously, the Georgian market lacked for a Georgian sweets manufacturing company. In 2009, a young hardworking team decided to start production of top-quality Georgian chocolate for Georgian consumers. Initially, the company started production of ice-cream in waffle cups, Eskimo and family ice-cream. Later the company expanded assortment, added various lines and today occupies one of the leading positions in terms of ice-cream production on Georgian market. Currently, Barambo manufactures 70 varieties of ice-cream, and 150 varieties of chocolate/sweets. Barambo plant has no analogue in the South Caucasus in terms of scales, quality and production technologies. Modern European standards and top-quality Belgian raw materials, permanent control on production has enabled the company to attain the standards of the world’s leading countries in terms of product quality. Brand Establishment Process – The com-

pany ensures product quality control at all stages of production. Strict control is set on quality of raw materials, finished products are examined at high-technology laboratory, distribution network is kept under tight supervision. Starting the first day of Barambo foundation, the company management was striving for satisfying international standards of ISO22000:2005, which is based on HACCP principles. This standard comprises the whole chain of production – reception/storage of raw materials, production, storage of finished products and supply to consumers, control of food safety risks at all stages of this process. The company has prioritized the product quality. To this end, the company has installed cutting-edge European machineries. The company uses only top quality Belgian raw materials from the world’s famous company Barry Callebaut. In Sulkhan-Saba Orbeliani’s dictionary of old Georgian language, the word of Barambo means Bee Field - the place, where bees collect honey. The company name derives from the mentioned word. Barambo is the place, where people actively work like bees so as Georgian consumers enjoy yummy Georgian sweets.


September 18, 2017 #208

world

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SES Video Showcases Virtual Reality and Latest Ultra HD Features at IBC

BP-led Group Extends Huge Azerbaijan Oil Field Deal to 2050 BP signed a contract with the government of Azerbaijan today to extend a production sharing deal until 2050. A group led by BP agreed with the State Oil Company of the Republic of Azerbaijan (Socar) to continue developing the huge Azeri Chirag fields and the deep water portion of the Gunashli field (ACG) in the Caspian Sea. Under the amended contract, the government will receive a bonus of $3.6bn (£2.7bn) from the group of oil companies and Socar will increase its stake in the ACG fields to 25 per cent from 11.65 per cent. BP’s stake dropped to 30.37 per cent from 35.8 per cent, and it will remain the operator. Other companies in the consortium have also reduced their ACG shares. Chevron now holds 9.57 per cent, Inpex 9.31 per cent, Statoil 7.27 per cent, ExxonMobil 6.79 per cent, TP 5.73 per cent, Itochu 3.65 per cent and ONGC Videsh 2.31 per cent. “The terms of the new contract reflect the growing financial and technological potential of Azerbaijan and Socar. They also demonstrate the confidence of our foreign partners in the Azerbaijani economy, taking our effective partnership to a new level,” said Rovnag Abdullayev, Socar’s president. President of Azerbaijan Ilham Aliyev said the remaining oil reserves of the ACG oilfields stood at 500m tonnes.

The first section of North-South highway to become fully operational soon The first section of the North-South Highway, stretching from Yerevan to Artashat will soon become fully operational, Transport, Communications and Information Technology Minister Vahan Martirosyan said on Wednesday. According to the minister, the contractor is to be paid the last $ 3 million. He said now the contractor is eliminating the defects on this section of the road at his own expense. The goal of 556 km-long North-South Transport Corridor project is to upgrade Armenia’s main corridor road as part of a broader thrust to improve connectivity, and boost trade, growth and livelihood opportunities in the Caucasus and Central Asia sub-regions. The first two sections of the North-South transport corridor opened in December 2015. The first section that stretches from Yerevan to Artashat has become a six-lane road, while the second section which is from Yerevan to Ashtarak has become four-lane road. The transport corridor will stretch from the southern Armenian town of Meghri, on the border with Iran, to Bavra in the north on the border with Georgia. The North-South transport corridor will enable Armenia to mitigate the effects of the blockade imposed by Azerbaijan and Turkey. The Ministry of Transport, Communications and Information Technology plans also the implementation of separate smaller projects at various sections of the road in order to end the construction both in southern and northern directions.

SES Video will be showcasing cutting-edge technology developments at its booth 1.B51 at IBC 2017 in Amsterdam from 15 to 19 September. A demonstration in collaboration with Fraunhofer HHI will offer visitors the opportunity to immerse themselves in Luxembourg City, thanks to a live satellite transmission of 10K x 2K panoramic video content to the venue. The latest version of the Fraunhofer HHI Omnicam-360 camera will capture live scenes from the centre of Luxembourg, which will then be transmitted by ASTRA 2E at 28.2 degrees East directly to the SES booth. Visitors will be able to watch the scenes live with VR headsets, and experience being in the middle of the city while being at the show. Visitors will also be able to watch the scenes on a large flat screen which allows zooming in and out via a remote control through a 360 degree panoramic image.

The second demonstration, together with LG, ATEME, France Televisions and 4-Ever, will broadcast 100Hz High Frame Rate Ultra HD content via satellite at Astra 19.2 degrees East. The content will feature fast action scenes and show the benefits of 100 frames per second compared to the 50 frames per second, which is today’s standard in TV broadcasting in Europe. It will be received and displayed on LG’s OLED TV using a prototype HFR firmware. The third demonstration, together with Samsung, will showcase the world’s first live Ultra HD transmission of HDR10+ content via satellite. HDR10+ is Samsung’s new royalty free open standard for High Dynamic Range (HDR), which uses dynamic metadata to offer the best possible HDR effect for every scene by further reducing dimming and saturation in comparison with conventional HDR, which uses static metadata with a constant HDR effect.

Yandex, Sberbank agree to create e-commerce joint venture

Istanbul’s Atatürk Airport sees highest passenger rise among top five European airports Istanbul’s Atatürk Airport saw the highest increase in passenger numbers in July out of all five major European airports, the European airport trade body announced on Sept. 13. Other airports in Turkey also showed significant increase in passenger numbers in July, including Istanbul’s Sabiha Gökçen, the Antalya Airport and Ankara’s Esenboğa, according to the report. The performance of the top five European airports continued to improve during July, coming in at a growth of 6.3 percent, according to the report by ACI Europe, the European region of Airports Council International. Atatürk Airport led the league with a 17.6 percent growth in passenger numbers, followed by Amsterdam-Schiphol with 5.6 percent, Paris’s CDG with 5.4 percent, the Frankfurt Airport with 4.4 percent and London’s Heathrow with 1.2 percent. The report revealed that during the peak month of July, passenger traffic at all of Europe’s airports grew by an impressive average of 9.6 percent—in line with the dynamics of the previous months. “This performance is mainly attributable to the continued momentum in economic expansion, especially in the

Eurozone, as well as contained oil prices and the return of stronger demand for air services in Russia and Turkey,” the report noted. “July saw Turkey not only recovering from last year’s traffic losses but also expanding further, boosted by strong demand from Russia,” it added. During July, airports welcoming more than 25 million passengers per year (Group 1), airports welcoming between 10 and 25 million passengers (Group 2), airports welcoming between 5 and 10 million passengers (Group 3) and airports welcoming less than five million passengers per year (Group 4) reported an average adjustment growth of 6.1 percent, 14.2 percent, 10.2 percent and 11.3 percent in a consecutive manner. The airports that reported the highest increase in passenger traffic during July in Group 1 were Moscow’s SVO with 22.9 percent growth, Istanbul’s Atatürk with 17.6 percent and Istanbul Sabiha Gökçen with 12.7 percent. In Group 2, the Antalya Airport saw a 64.2 percent increase in passenger numbers, followed by Ankara’s Esenboğa with 42.2 percent, Warsaw with 24.7 percent and St. Petersburg with 23.6 percent.

Yandex and Sberbank signed signed a nonbinding term sheet to form a joint venture based on the Yandex.Market platform, according to Yandex. “The companies intend to combine the technological capabilities of Yandex and the infrastructure and technologies of Sberbank to develop a leading eCommerce ecosystem,” Yandex said. Sberbank will invest 30 bln rubles ($500.52 mln) into Yandex.Market, valuing it at 60 bln rubles ($1 bln) on a post-money basis, before taking into account any potential future synergies. The two partners will own equal stakes in the joint venture, up to 10% of the company’s shares will be allocated for an equity incentive pool for Yandex.Market management and employees. At the moment there are no plans to attract other investors to the project, Yandex press service told TASS. According to Yandex, if and when definitive documents are signed, the transaction will be subject to regulatory approval in the Russian Federation. The parties anticipate that the transaction will close by the end of 2017. There can be no assurance that the transaction will ultimately close. Yandex.Market will continue to operate under the current management team led by Maxim Grishakov, its Chief Executive Officer. “This proposed joint venture will create new benefits for our users. Sberbank’s banking and payments infrastructure will help us develop simple and secure payment solutions on the Yandex.Market platform and will allow us to introduce new features, such as consumer lending,” Maxim Grishakov, CEO of Yandex. Market, said.


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