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September 25, 2017 #209
September 25, 2017, Issue 209 - www.cbw.ge
Opinion Georgia is Global Leader due to Ratio of Indebted Citizens in Total Population Pg. 4
Christian Danielsson The EU Keeps Supporting SMEs with a New Accent
Victoria Zhizhko: PR is a Stream of Opportunities, Innovations and Creativity
Country of Employed Poor Only 18.8% of Employed Take 900 GEL and Higher Salary a Month
Whether Larization Program Bring Problems to Auto Importers and Developers Starting July 2017, business sector is obliged to ensure pricing in GEL. The mentioned law was developed by National Bank of Georgia (NBG). According to the new regulations, on the territory of Georgia prices must be indexed in GEL for sales of property, services or advertising campaigns. These regulations refer to any form of advertisement, offers and similar communication activities. Pg. 7
Barriers for cargo transportation in the Caspian region on example of Azerbaijan and Georgia • During recent years, transit cargo flow through the territory of Georgia significantly decline, up to 50% or more. • Oil terminals use of about 1/5th of its throughput capacity. • Number of port calls reducing in line with cargo flow reduction. • Traders and prime suppliers are not talking about barriers and problems; they find alternative routes, which are cheaper, safer, and faster. Pg.11
Portrait of Georgian Election Environment
The current election process shows that political parties have introduced candidates, who have professional experience, aspire for governance activities, keep a certain political niche and have public influence. It should be noted that our society knows their governance mechanisms, outcomes of economic and political activities, scales of social welfare achievements and professional development. However, it is fact that there is heavy social and economic situation and despair in the country. Pg. 9
For the First Time in History Georgia to Chair OGP
Giorgi Kvirikashvili has officially accepted the commissions from President of France Emanuel Macron at the highlevel event that was held in NYC, as part of 72nd session of UN General Assembly.
Parliament Approves New Chief Auditor
The Parliament of Georgia elected Irakli Mekvabishvili, former EBRD senior banker, as the new head of the State Audit Office for a term of five years. According to Georgia’s Constitution, the State Audit Office is an independent institution accountable to the Parliament.
Georgia’s Economic Growth Totaled 4.9% in 1H17
In the first half of 2017 Georgia’s economic growth marked 4.9%. Highest upturn was recorded in development sector (+18.8%) and hotels and restaurants sector (+10.9%). Communications sector ranks third with 8.2%.
Highest-paying and Lowest-paying Sectors in Georgia
According to Geostat, the highest salaries are recorded in the finance sector (2357 GEL), the development sector ranks second with 1938 GEL. The lowest salaries are recorded in the education sector (853 GEL).
Bank of Georgia Profits Shrank in August
Bank of Georgia profits declined by 21mln GEL in August 2017, after 65mln GEL growth in July. As of September 1, Bank of Georgia is the market leader due to 252.7mln GEL net profits and 45% market ratio (01.08.17 – 53%).
Commercial Banks Earn 114.9mln GEL from Currency Exchange Operations in 1H17
Commercial banks’ earnings from currency exchange operations has grown. In the first half of 217 their profits made up 114 953 959 GEL. The figure marked 58 382 400 GEL in the first quarter of 2017.
Danish Fund Allocates 5 Million USD Grant for Young Farmers
In the framework of the program, it will be allocated from 15 thousand to 100 thousand small and medium-sized grants for young entrepreneurs.
Chinese Company Buys 75% Stake in PIZ
Government of Georgia and major Chinese company CEFC signed a memorandum on understanding. Minister of Economy signed an agreement on on transmission of a 75% stake in Poti Industrial Zone to CEFC Chinese company.
Tskali Margebeli Launches New Lemonade Line – Shakara
Shaqara Lemonade will be sold in glass and plastic bottles (0.5, 1 and 1.5 liter). The price of Shaqara lemonade in 0.5 liter plastic bottle will be 1 GEL and in glass bottles – 1.50 GEL.
September 25, 2017 #209
Georgian PM addresses UN General Assembly
eorgian Prime Minister Giorgi Kvirkashvili has addressed the United Nations General Assembly members in New York, United States (US). This year marks the 25th anniversary of Georgia’s membership in the United Nations. As Kvirikashvili said over this period, Georgia has transformed “from a UN humanitarian aid recipient to a top reformer that recently was elected as the Chair of the Open Government Partnership”. When speaking about Georgia’s advancement in international rankings in the past five years, Kvirikashvili said: The Heritage Foundation ranks Georgia 31st in 2017 in terms of freedom from corruption, an improvement of 38 positions from 2012. The World Economic Forum’s 2016-2017 Global Competitiveness Report elevated Georgia by 77 positions since 2012. The World Economic Forum
ranks Georgia at 63rd in this regard, up by 28 positions from 91st. The World Bank ranks Georgia 26th with respect to the fight against organized crime, up from 67th position by 41 steps. Georgia - together with Ukraine and Moldova has signed an Association Agreement with Deep and Comprehensive Free Trade Area and achieved visa-free travel to the EU. At the same time, Georgia has become the first country in the region to sign a Free Trade Agreement with China’, Kvirikashvili said. On the one hand, we are integrating into the EU internal market and, on the other hand, we are bringing Asian markets closer to us. This enables Georgia to use the full potential of its free trade networks as part of one of the most exciting development ventures of our time”, he added. Speaking about the hot and frozen conflicts, state and non-state aggressions, Kvirikashvili said “Georgia is
no exception”. He said Russia “has intensified its policy of occupation and factual annexation of Georgian regions of Abkhazia and Tskhinvali/South Ossetia” in 2017 to “absorb Georgia’s occupied regions into Russia’s military, political, economic and social systems and accelerated its military build-up in both occupied regions of Georgia”. The Government of Georgia is providing new instruments to rebuild trust with our compatriots living across the occupation line. We are determined to make the benefits of Georgia’s European agenda available to the people on the other side of occupation line”, Kvirikashvili said. Our substantial package of initiatives for those under occupation include providing opportunities for acrossAdministrative Border Line trade and access to Georgia’s free trade opportunities in the global marketplace. We offer them healthcare, education, and other social benefits”, he added.
Georgia among special guests at China’s largest exhibition
eorgia is participating at one of the largest investment and commercial exhibitions in China as a special guest. Approved by the State Council of the People’s Republic of China, the China International Fair for Investment & Trade is China’s only international investment promotion event aimed at facilitating bilateral investment. Georgia has been granted an honored country’s status and a special exhibition space has been allocated for it. During the exhibition, different agencies - ‘Produce in Georgia’, the Ministry of Agriculture, the Ministry of Regional Development and Infrastructure the Ministry of Energy and the Foreign Ministry - will highlight the
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potential of Georgia’s business climate, investment and trade capabilities. In total 120 Georgian companies will participate in the exhibition. By participating at one of the world’s biggest exhibition we tried to make an important step forward for integrating Georgian economy and business with Chinese companies and Chinese business. Free trade deal with china enables us to maximally use these benefits,” said Georgia’s Economy Minister Giorgi Gakharia. Today, on the first day of the exhibition, a Georgia-China Business Forum was held, where Georgia’s Ministry of Economy Chinese corporation CEFC China Energy Company Limited signed a
Memorandum of Cooperation (MoC). CEFC China Energy Company Limited is a private collective enterprise offering energy and financial services. Within the framework of the MoC, 75 percent of Poti Free Industrial Zone shares is now owned by the Chinese corporation. Poti Free Industrial Zone is strategically located adjacent to the Black Sea port city of Poti – the largest sea port in Georgia. This brings significant logistics and supply chain advantages to companies looking for a straightforward and tax-friendly business environment. The Chinese corporation plans to further develop the Poti Free Industrial Zone by sharing its standard practices and latest technologies.
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 25, 2017 #209
Country of Employed Poor
Mikheil Dundua financier
Georgia is Global Leader due to Ratio of Indebted Citizens in Total Population
Only 18.8% of Employed Take 900 GEL and Higher Salary a Month
Merab Janiashvili Economic Analyst
However, existing gaps in statistics do not give precise picture and consequently due policy is not carried out. According to current conditions, 80% of population belong to poor class, due to ranking of their revenues. For economic and democratic development of the country, it is necessary that a major part of the society constitute middle class.
overty is one of the key challenges in our country. After the independence announcement in 1991, our country has faced many challenges. The situation was aggravated by wars and sharp economic crisis. A major part of our population remains impoverished since 1990s. Despite the poverty level is declining over the past period, the situation remains heavy. For instance, in 2004 the ratio of population below poverty line was 32% and the figure declined to 21% by 2016. It is interesting that, over the past period, unemployment indicators have also risen, however, increased employment does not make due effect on revenues. As a result, we have cases, when citizens may be officially registered as employees, but they remain poor and take certain social allowances from the Authorities. Employment statistics may be considered as one of the reasons for similar reality. For example, according to official information of Geostat: « An Employee (employed or self-employed) is a body of 15 years old and more, who has worked over the past 7 days before inquiry (for even one hour) for the purpose of taking income (salary, natural incomes, profits and so on), assisted members of other household economies free of charge or missed the working hours under various reasons, but was registered as an employed» - the employment calculation methodology on the Geostat website reads. A major part of the self-employed work in villages, in their own farmlands. For example, they own land plots or care for cattle and use products for their own purposes and sales. To put simply, a person, who lives in a village, is considered to be an employee, because, as a rule, everybody owns a land plot in villages (registered or in ordinary use). Therefore, this category of citizens are considered to be the employed. Official statistics proves this, because unemployment statistics is higher in cities and especially in the capital city compared to regions. For example, according to the 2016 indicators, unemployment level in Tbilisi is 22%, Kakheti Region – 5.4%, Samtskhe-Javakheti, Guria and Mtskheta-Mtianeti – 4.1%. It should be also noted that 5% unemployment is considered to be a good indicator, because it is impossible to ensure absolute employment environment. Official statistics of employment contains many gaps and poverty indicator proves this. Despite unemployment level is the highest in Tbilisi and, in general, the employed indicators are worse in cities compared to villages, poverty indicator is absolutely opposite. This signifies poverty level is higher in villages compared to cities. In 2004, 32% of Georgian citizens were below poverty line (city – 32%; village – 33%). In 2016, this indicator declined to 21%, but mainly as a result of improved situation in cities. For example, in 2016, ratio of population below poverty line was 16.9% and in villages – 25%. Naturally, unemployment leads to poverty, but we should not also forget low incomes of self-employed, because social background remains heavy despite low unemployment level in our region. Over the past years, poverty level has been reduced at the expense of Tbilisi, where, despite 22% unemployment, the quantity of those seeking social assistance is low, compared to other regions. Today, about 2/3 of the poor live in villages. The least quantity of socially vulnerable families live in Tbilisi and Samtskhe-Javakheti, the highest number is recorded in Shida Kartli.
«Georgia is a global leader due to the ratio of indebted citizens in total population, who owe loans to commercial banks», financier Mikheil Dundua has written on his own Facebook page. «Georgia has moved to the leading position in the world due to the ratio of indebted citizens, who owe money to commercial banks. Every 710 citizens of 1000 ones in Georgia owe loans to commercial banks. Moreover, it should be also noted that this indicator has included Georgia into the top 7 historical maximums of all times. This signifies, in previous years, higher results were registered only six times worldwide. This happened in 2016. The year of 2017 is not over yet, but the existing tendency suggests that this year the quantity of indebted citizens will beat new world record and hit a new historical maximum. Why? • In January-July 2017, retail loans portfolio in national currency rose by 1.223bln GEL, while the portfolio in foreign currency declined by 84mln GEL. This signifies that the retail loan portfolio of commercial banks have risen by 1bln GEL. • Domestic business crediting volume in GEL has increased by 175mln GEL and declined by 37mln USD in foreign currency, that is, the portfolio has increased by 80mln GEL in whole. • To put simply, this year the business crediting portfolio is lower than the retail crediting 12.5 times (!) and this is a very low figure. 2.In this situation commercial banks expand profits. Iნ January-July 2016 net profits of commercial banks constituted 347mln GEL, while the figure totaled 519mln GEL in January-July 2017 (growth — 50%). 3. Representatives of Development Bank of Germany, Frankfurt School of Finances, Intentional Monetary Fund and other international organizations think that the growing indebtedness is a sharp problem in Georgia. Solution: For the purpose of making GEL-denominated business credits attainable for our citizens, it is necessary to ensure long-term resources in national currency and this is available only through saving pension reform. Aspiration for making savings will not increase until we move to the saving system and this situation will last for ever. It is important that the Government plans to carry out serious reforms to boost investments thanks to pension system reformation. The project will be announced in near future. Ministry of Economy has performed huge job and deserved highest evaluation from international organizations. In the second half of 2018, Georgia will move to the saving pension system that ensures respectful and valuable high-paid pension age. This system is a fundamental part of market economy, while at this stage our country has only social pension. Saving pension system is also important, because it creates a huge amount of savings throughout the year and hundreds of millions of GEL are accumulated to collect savings, create cheap long-term resource in GEL and transform it into attainable business credit and investments. After implementation of this reform, Georgia will become an important country in terms of internal investments. Without saving system, we will not have due financial resources to solve many problems. We need long-term resources in GEL to make investments in economy and only saving pension reform enables this. There is no other mechanism», Dundua noted.
September 25, 2017 #209
The lowest ratio of state aid beneficiaries is recorded in Tbilisi, after Samtskhe-Javakheti Region, Ajara and Kvemo Kartli. The highest indicator of the registered poor is mainly recorded in highland and economically weak Racha-Lechkhumi and Kvemo Svaneti, Shida Kartli and Mtskheta-Mtianeti. But the deeper analysis shows that, almost in all regions, the number of social allowance beneficiaries and recipients is much higher in villages than in cities. Despite the fact, village residents are considered selfemployed in most cases, they ask for social allowances anyway. This signifies their revenues are not sufficient. It should be noted that in Racha-Lechkhumi and Kvemo Svaneti 40% of population receive social assistance, while, according to official statistics for 2016, unemployment level in this region is 10.8%. We have the same paradoxical situation in Shida Kartli Region, where 36% of total population ask for assistance, of which 18.6% receive social assistance. According to the employment statistics, unemployment in Shida Kartli is 9.2%. We have the same paradoxical situation in almost all regions with a great number of the employed poor. As to official indicators, according to Ministry of Health, by the beginning of 2017, we have the following situation in terms of distribution of revenues in Georgia: citizens with low and unregulated incomes and self-employed with monthly salary of under 900 GEL – 1 154 000 citizens. Citizens, whose rating scores range from 70 000 to 100 000 – 102 000 citizens. Adolescents between 6-18 years old – 503 000 persons; children up to 5 years old; students; pensioners; persons with disabilities, teachers; socially unprotected citizens – 1 700 000 persons. Citizens with high and medium incomes: with incomes of under 40 000 GEL – 32 000 persons. With monthly incomes of more than 900 GEL, but yearly incomes of no more than 40 000 GEL – 300 000 persons. To put simply, only 0.8% of population of Georgia receive more than 40 000 GEL income a year, while 8.7% of Georgian citizens receive more than 900 GEL a month. It should be also noted that according to the first quarter indicators, averaged monthly revenues of the employed is 1 024 GEL. This signifies only 8.7% of Georgian citizens receive salaries that stand near the averaged salary. If we compare the number of employees, we will receive the following picture: according to the 2016 report, there are only 1.998mln economically active citizens (workforce) in Georgia, of which 1.7633mln are employed and only 235 000 persons are registered as unemployed. This signifies only 178.8% of the employed citizens receive 900 and higher salaries a month, that is, 4/5 of the employed citizens receive less than the averaged salary. Everybody knows that poverty is a sharp problem in Georgia and inclusive development is one of the key promises of the Government. This signifies benefits from economic growth of the country should be shared to all social layers. However, existing gaps in statistics do not give precise picture and consequently due policy is not carried out. According to current conditions, 80% of population belong to poor class, due to ranking of their revenues. For economic and democratic development of the country, it is necessary that a major part of the society constitute middle class. As to inclusive development, regretfully, over the past years, benefits from economic growth are directed to pockets of only small part of our population.
“Nenskra HPP is of special importance for Georgian power system. First of all, it is a major project of 1bln USD. Secondly, Nenskra HPP will make its contribution to Georgian energy security. Today, hydro power is generated by onlyEnguri HPP. It is in good condition and it is rehabilitated time to time, but it was launched in 1980s and a part of it is located in the zone, which is not controlled by Georgian Authorities. This factor creates certain risks. Therefore, projects like Nenskra HPP, Khudoni, Namakhvani, Oni will minimize these risks. These projects comprise high cascades and huge reservoirs. This was the Government order”.
Deputy head of Partnership Fund
September 25, 2017 #209
September 25, 2017 #209
Qualifications, Skills, Technological Support The EU Keeps Supporting SMEs with a New Accent
ugeorgia.info interviewed Christian Danielsson, Director General at the European Commission’s Directorate for European Neighbourhood Policy and Enlargement Negotiations on the European prospects and support programmes for Georgian small and medium companies (SMEs). - We know very well that the EU makes enormous efforts to help Georgia on its path to enter EU markets and thus enhance DCFTA from both ends. - The Georgian economy like most economies are based on small and medium enterprises. To reduce unemployment, develop economy or capital, it is necessary to create optimal conditions for SMEs development. What is the situation in Georgia? We are closely watching this situation together with the Georgian government. The government’s priority should be the improvement of the business climate, In this context, there are several important issues. First, there is a need for technical support to SMEs enabling them to acquire potential to access the EU market. Another important issue is finances. SMEs can apply to banks for financial resources, but as we know, in this case specific tools are needed; SMEs have to meet specific conditions. In Georgia there definitely are prospects for their development. This encourages us to cooperate with the European Bank for Reconstruction and Development in order to make available the sources of external financing in local currency. In this regard, the stimulus for us is the government’s friendly policy. The local banks also try to create effective tools. I am confident that in both directions (technical support and access to finances) there is a lot to be done and I personally look forward to cooperation with relevant local organizations. - What are areas that EU is going to supports Georgian SME sector apart from already existing DCFTA Facility? - The Deep and Comprehensive Free Trade Agreement (DCFTA) establishes the framework of economic interaction between the EU and Georgia. This agreement almost completely opens the door for Georgia to the EU market. To effectively use this opportunity, it is necessary to create the abovementioned conditions in Georgia (availability of finance and technical support), as well as to identify competitive sectors and work to help them develop. It is also necessary for Georgia to show a significantly positive correlation between investments and economic growth. I see three directions the EU can support with different tools. First, it is transport and infrastructure. In this direction we have already had a joint project and we are still actively working. Second is the environment and its protection. Hazardous Waste Management is the matter that needs attention and we are firmly supporting Georgia in this direction. The third sector is agriculture. There is a reasonable possibility for Georgia to export agricultural products to the EU market. Georgia also has the ability to increase its product quality and production efficiency. These are the three main directions where the EU can be an important player supporting Georgia.
- Do you think the whole concept of assistance delivery needs rethinking so that Georgian SMEs become stronger? - I think we always need to ask ourselves whether the policies we pursue are right or wrong. If you look at the current instruments through which direct and indirect EU support is implemented, you would notice that the financial and technical elements of the programs are already active. Our support is also channeled to the agricultural sector. We are trying to help the companies/farms operating in this sector to become more efficient, for instance, through creating cooperatives. In Georgia it is necessary to develop a skills and this issue is directly linked to your question, so the EU can also work in this direction; we can intensify support in the direction of developing the skill of the local workforce, which, in turn, is essential for SMEs development. It necessary to support young Georgians so that they receive qualifications to satisfy the market demand. It should be noted here that the development of skills is important not only at the academic level, but throughout the entire career; as we know, today’s demand for skill will certainly change in future. - Do you think that there is a stronger need to link ENPARD to the rest of the production sector, notably the SME sector to help cooperatives grow further and turn into sound enterprises with a strong value chain? - The ENPARD is limited to the agriculture sector and will continue to work in this field; I think this sector of economy has it clear specificities – it is necessary to support numerous farmers, in terms of their skills development and access to export markets. Other development needs were identified in the agriculture sector, for example, as we mentioned earlier,
the farmers’ skills, infrastructure and so on. I cannot see that this particular program (ENPARD) can also cover other sectors, but we should not be limited to specific programs, the main thing is the commitment that the EU is showing in Georgia. Next year a special focus will be on business environment, current or potential human resources, how we can jointly develop their skills and finally develop these resources and integrate them into the economy. These three elements will be more or less useful for our cooperation. These are the directions of cooperation that we have discussed with the Georgian friends while discussing future relations, as well as the ways of effective implementation of these plans. - What practical advice would you give to help Georgia to see more progress in entering the EU market? - It is very difficult to answer this question. I can say that there are several Georgian companies that are successfully using the European market opportunities. Georgian wine is sold in Paris today. The Prime Minister of Georgia, along with other members of the government, is at the exhibition in Bordeaux, which means international recognition of Georgian wine quality, which was not the case 10-15 years ago. Today everyone in the European Union know that Georgian nuts are one of the best. So, there are specific niches on the EU market which the Georgian competitive products have a potential to reach with technological support in the course production . In addition to the consumer production, the role of tourism sector is also worth mentioning. I am amazed to see the number of tourists in Georgia. Investment in tourism infrastructure is needed to attract tourists not only from the region, but from all over the world, which will be bring enormous benefits to the Georgian economy.
September 25, 2017 #209
Whether Larization Program Bring Problems to Auto Importers and Developers
tarting July 2017, business sector is obliged to ensure pricing in GEL. The mentioned law was developed by National Bank of Georgia (NBG). According to the new regulations, on the territory of Georgia prices must be indexed in GEL for sales of property, services or advertising campaigns. These regulations refer to any form of advertisement, offers and similar communication activities. It should be noted that the regulation refers to only business bodies – the legislation determines both legal (LLC; stock company and so on) and physical bodies (individual entrepreneurs). When signing an agreement, it is not forbidden to index the service prices
in USD or any other foreign currency. These changes are not applicable to the agreement conditions. For example, you can sign an agreement, where the amount will be indicated in USD - “100 USD equivalent in GEL” and this practice will not violate the law. As reported, the mentioned regulation is mainly applied to real estate market, because the mentioned market operates with USD, in practice. Moreover, dollarization coefficient is high in vehicles trading sector too. The Caucasus Business Week has contacted auto importers and developers to inquire whether these regulations have brought problems. We have clarified that the obligation for in-
According to the new regulations, on the territory of Georgia prices must be indexed in GEL for sales of property, services or advertising campaigns. These regulations refer to any form of advertisement, offers and similar communication activities.
7 dicating prices in GEL has slightly influenced real estate market and sales, while this cannot be said about the market of auto importers. «A part of development companies asserts that real estate market prices have risen, but this factor has not affected the sales. Another part thinks that prices have not increased, but sales indicators have shrunk. As reported, as part of dedollarization government program, new obligations were imposed on development companies. They have to indicate real estate prices in GEL. These amendments came into force in July 2017. Archil Jakeli, founder of Iveroni development company, says that the company sales have shrunk, but seasonal factors should be also taken into account. It is difficult to say that this slowdown was brought by GEL pricing obligation, because over the past period many other negative processes have taken place, however, Larization has brought certain results anyway», Jakeli noted. According to Iveroni founder, GEL depreciation and increased prices on fittings is another reason for a contraction in real estate sales. «If this situation is maintained, we will receive serious problems. This is undesirable process. Fittings prices have suddenly increased by 10%», Jakeli said. The ratio of fittings in a black framing is about 20-30% and developers have very difficult situation, as they cannot raise prices because of huge market competition, he said. “Construction works have rise in value by 15% because of expensive fittings. Moreover, technical regulations enacted before January 1, 2017 have also increased value of construction works. Moreover, we have pre-elecion period and business sector is facing serious challenges”, Jakeli said. This and other important factors may provoke a suspension of investment projects, he added. Malkhaz Kunelauri, projects manager of Redco development company, says that Larization program has raised the price of apartments by about 200 GEL on 1 square meter, but this fact has not made negative effect on sales. “We have the same dynamics on sales. We are mainly oriented on foreign clients and they buy property in USD anyway”, Kunelauri pointed out. Increased prices of fittings is also problematic, but we hope this tendency is of temporary character and Redco company will not have to revise prices, he noted. Giorgi Surguladze, head of Caucasus Auto Imports company, explains that GEL-denominated pricing has brought no negative outcomes. The company introduced GEL-indexed pricing from the very beginning, he added. Sales are further rising over the past period compared to the previous year, he added. «The directions of Azerbaijan and Armenia have intensified activities. Reexports direction has risen. Higher activity is discerned on Georgian market compared to the previous year», Surguladze said. Misha Alkhanishvili, head of Association of Auto Importers, also agrees that the mentioned regulations have not brought problems, because auto importers have met the new reality prepared and made corrections in compliance with the legislation. «Prices have not changed, only conversion has taken place. They will take into account devaluation factors and risks and carry out price conversions with small risks, but this will not an important change», Alkhanishvili said.
September 25, 2017 #209
Interview with Victoria Zhizhko, head of PR offices of Tskali Margebeli and Marneuli Food Plant.
“There is much difference between PR and advertisement. PR is a long-term process for creating positive, sometimes even negative reputation, and you depend on media outlets.”
PR is a Stream of Opportunities, Innovations and Creativity -Which PR companies inspire you? -Today there are many successful PR agencies worldwide, but I would emphasize Ketchum with about 100-year history of success and many innovative projects, strong crisis management expressed in multiple cases of cooperation with the USA and Russian Governments. According to my information, this company has won the most number of Cannes Lion awards in 2017. -Which media outlets do you follow? -My working regime is based on 24/7 principle and I think Internet is the most optimal variant for me in his situation. It unites television, printing media, social media. All required information may be found in seconds. You remain in the heart of developments every time. -Talk about the difference between PR and advertising. -One of the most frequent and legitimate questions in Georgian reality. There is much difference between PR and advertisement. PR is a long-term process for creating positive, sometimes even negative reputation, and you depend on media outlets. In this case I do not mean ordered articles that are advertisements. PR is frequently perceived erroneously. Independent reaction from the society and feedback are is the most important things in this respect. You only assist in shaping opinion. To be short, PR represents planned and continuous efforts for shaping friendly relations between organization and society.
Crisis PR management is to identify and appraise expected crisis situations that may have direct affect on organization, its reputation, relations with consumers and other important factors.
We have opposite picture in case of advertisements. You pay money for media space and time, the target specific segment chosen by you. This is a controlled method for placing news and messages in mass media. -Describe some affiliate networks you’ve collaborated with and why you chose them. -I would emphasize two important projects: Festival of Marinades and Jams, a joint project by Marneuli Food Plant and Nabeghlavi, The Festival was held in 13 cities of Georgia in 2014. This two-month festival used to visit in various cities on weekends. The Festival included an entertainment program, various competitions and naturally, tasting and sales of products, a special band was playing live music. Another project was implemented in education field. In 2013-2014 Tskali Margebeli, Nabeghlavi mineral water bottling company, financed English language courses in for 6 pupils in Guria Region. This project was a part of the company’s social responsibility. Main goal was to incentivize education efficiency of pupils. -How do you integrate social media with PR? -Social media is one of the important elements of PR. It is integrated with PR and has everyday contact with it. In Georgia social media is one of the developed fields and consequently, one of the most applied directions for PR activities. -Describe a time you had to manage negative media attention.
-Similar attacks happen quite frequently. I have heard about war between specific company and media, however, I did not have similar practice in my career. Naturally, there may be little negative reactions, but I think moderate criticism is useful. It should not be excessive and inadequate and full of aggression. In general, it is better to stay cale and substantiate your response in similar situations. -How have you worked with a team to handle a PR crisis? -Crisis PR management is to identify and appraise expected crisis situations that may have direct affect on organization, its reputation, relations with consumers and other important factors. Therefore, it is necessary to stay concentrated on all details, preliminarily determine expected feedback and stay ready for constructive criticism. It is an important factor to acknowledge and correct own mistakes, be peaceful and organized to correctly direct your forces for problem resolution. -What’s interesting about our current PR work? What would you improve? -PR field brings a plenty of opportunities, permanent novelties, innovations, interesting projects, much brainstorming and creativeness. I would improve awareness about PR field in Georgia. Regretfully, today many citizens cannot differ PR from marketing, advertisement and we have certain problems with awareness. Fortunately, these gaps are narrowed stage by stage and PR is finding its own natural place.
September 25, 2017 #209
Portrait of Georgian Election Environment Rati Abuladze Professor, Doctor of Economics
he current election process shows that political parties have introduced candidates, who have professional experience, aspire for governance activities, keep a certain political niche and have public influence. It should be noted that our society knows their governance mechanisms, outcomes of economic and political activities, scales of social welfare achievements and professional development. However, it is fact that there is heavy social and economic situation and despair in the country. Therefore, I would like to continue that the existing political potential is not sufficient for the country, because inefficient governance resources cannot ensure economic growth, while old political environment cannot create due scales of development. We should mentioned a portrait of Georgian political environment: • All political parties resemble each other in hyperbolic rhetoric, horizons of promises, election technologies, general plans and approaches, maneuvers for shifting attention from key problems, identical ways for problem resolution, political foundation and resources. Laura Thornton, head of NDI Georgia office, noted that Georgia is tired of all political parties; • The existing political forces cannot ensure efficient governance for overcoming economic problems. We do not see genuinely efficient steps and strategic approaches that would at least quieten the society and encourage citizens, even if they would not be able to resolve problems; • Because of social and economic problems, the society is unable to make influence on governance and political environment; Naturally, this factor provides greenhouse effect for this environment. • It is difficult to assert what damage the country will receive from old governance and political environment (in long-term and shortterm perspectives). Stimulation of inefficient staff policy will cause social outbreak and lead the country to huge confrontation; Consequently, it would be better that Mayorship candidates substantiate: • How do they plan to implement the proposed economic programs (directions) in a depopulated country. Migration scales are bigger in regions because of heavy social and economic conditions; • Whether proposed approaches interpret
I would like to note that the political environment may be shaped by new political word, new political resources, new political technologies, by setting end to demagogy and disinformation. Otherwise, the society will lose political belief for ever, trust towards political parties and hope for better future.
demands and the will of people. Whether their programs will resolve current challenges before the society and whether their programs are politically attractive; • What kind of governance do they plan to apply to reduce debts and social-economic inequality; • What will be the scales of economic policy. Everybody knows that the higher mobility of political staffs, the lower the hope for overcoming social-economic problems. Moreover, the higher activity of new faces and academic society (that is precondition of progress), the higher the influence of political system on them; • What will be their governing criteria and standards. Discourse of political system shows that, like the history, when nobles used to conceal peasants, today economists are also «hidden», as well as young intellectual and academic resources. Amid ignoring this resource, both economic environment problems and social challenges before intellectual environment grows; Based on the above-mentioned we should note the following: The role and importance of academic resources should strengthen in the country. As noted by Martin Gross: «“We live in a world in which politics has replaced philosophy». Amid the current «political turmoil», the academic resource should analyze and appraise political environment for shaping proper governance environment in the country; Political programs, plans, promises «should be judged» in academic way. Academic tone is required for changes and development in Georgia; The society will not long have the moral resource to remain in «economic repression», because it is generated by not objective actors, but the outdated policy and inefficient governance environment; The lack of political confidence should be also taken into account. The electors hold valuable experience through political cabinet (the mentioned experience include: care for people, competences, attained goals, tribalism, problem resolution efforts). Confidence in them complies with experience; In whole, the society should transform Georgia’s political history through formation of new political environment. Finally, I would like to note that the political environment may be shaped by new political word, new political resources, new political technologies, by setting end to demagogy and disinformation. Otherwise, the society will lose political belief for ever, trust towards political parties and hope for better future. However, as noted by Richard Hassen: «Epoch of Demagogy and Disinformation Takes Roots in Highest Ranks of the Authorities».
PASHA Bank to partner Caspian Energy Georgia’s new project This year Caspian Energy and Caspian European Club opened their representation in Tbilisi - Caspian Energy Georgia. The latter will be engaged in arrangement of business forums, CEO lunches, trainings, seminars, round tables and other business activities. Caspian Energy is an international journal spread in over 50 countries of the Eurasian continent, Near East, USA, East Asia and Asian-Pacific Region. Caspian European Club is the largest and dynamically developing regional organization that brings together over 5000 member companies and organizations from 50 countries around the world operating in the Caspian, Black Sea and Baltic regions. PASHA Bank, a provider of corporate and investment banking services to large and medium-sized enterprises, will partner Caspian Energy Georgia’s new project. The project involves organization of a series of meetings for CEOs of Georgia and Azerbaijani companies. This year three meetings are planned in scope of “CEO Lunch Tbilisi.” The meetings will serve networking purposes and provide comfortable space for sharing experience, updates and projections of the participating companies. PASHA Bank, operating in Azerbaijan, Georgia and Turkey, has a successful cooperation history with Caspian Energy in scope of Caspian Energy Forum, which was held in Tbilisi back in 2014. The forum was focused on all aspects of energy integration of the countries of the Caspian, Black Sea and Mediterranean regions into global energy markets as well as the development of the hydro and geothermal energy sector of Georgia and its prospects. It was attended by the President of Georgia, Mr. Giorgi Margvelashvili, as well as representatives of local and neighboring governments and enterprises active in energy sector. “We highly assess the work carried out by the Caspian Energy and the events it holds. We are confident that Caspian Energy Georgia will bring the cooperation of business circles of Azerbaijan and Georgia to a new level”, Shahin Mammadov, Chairman of the Board of Directors and Chief Executive Officer of PASHA Bank Georgia, commented. Mammadov also stressed the importance of conduction of the meetings in scope of “CEO Lunch Tbilisi” in particular and noted that this will promote establishment of business contacts among the attendees, thus contributing to the expansion of the economic cooperation. “PASHA Bank Georgia has become official sponsor of “CEO Lunch Tbilisi” events that we plan to hold this year. By supporting the resumption of the activity of Caspian Energy Georgia, the Bank once again highlighted the significance of cooperation established thus far with Caspian Energy Club”, First Deputy Chairman and Chief Executive Officer of the Caspian European Club and Caspian American Club, Telman Aliyev, said. He noted that Prime Minister of Georgia, Giorgi Kvirikashvili, and the Ambassador Extraordinary and Plenipotentiary of Azerbaijan to Georgia, Dursun Hasanov, are among the honorable guests expected to attend the event. The first “CEO Lunch Tbilisi” will be held on September 29th at Courtyard Marriott followed by two more lunches scheduled on October 27th and November 24th. Registration for participation is available at the following link: http://www.caspianenergy.org/index.php/ceo-lunch
10 Anaklia City Signs Cooperation Memorandum With South Korea IFEZ
RehabGlove – Winner of Seedstars 2017 to Get a Chance to Win 1 Million USD
On September 21 in city of Incheon, Memorandum of Understanding was signed between Anaklia City JSC and Incheon Free Economic Zone (IFEZ). The memorandum was signed by Mr. Kim Jinyoung, Acting Commissioner of IFEZ and Ms. Ketevan Bochorishvili, CEO of Anaklia City JSC. During next two days within the framework of the visit the delegation from Anaklia City JSC is going to hold meetings with the governors of leading Korean companies.
Tbilisi innovation competition Seedstars 2017 was held on September 16, at Innovation and Technology Park. The best startup title was gained by RehabGlove. RehabGlove is a stroke rehabilitation glove that improves motor function and the rewiring of the brain. Every year 15 million people worldwide suffer from stroke and many lose control of one of their hands. RehabGlove is an affordable consumer device compatible with Virtual Reality that assists patients who have suffered a stroke, in hand rehabilitation process by applying supportive forces on their fingers. While most rehabilitation processes are done inside hospitals and cost thousands of dollars, RehabGlove allows users to recover without leaving their homes for under 500$.
Fordham University Interested in Establishing BlockChain Technology in Georgia In NYC the event dedicated to preparing for BlockChain technology summit organized by Fordham International Humanitarian Affairs University (USA) has discussed and analyzed Georgia’s experience of establishing BlackChain technology in real estate registration transactions. By initiative of the event organizers, Georgia’s experience will be discussed at the BlockChain International Summit too that will be held in NYC on November 10. The event support is provided by UN programs and funds: UNDP, UNICEF and other international organizations. Experts, speechmakers, representatives of academic circles, government and private sectors invited from various countries will discuss performed job, pilot and real regime projects for employment of BlockChain innovative technology. Georgia is one of the first countries in the world that has successfully applied BlockChain technology in real estate registration transaction and that’s why the summer organizers are interested in Georgian experience.
Run For Peace! – the Race Started with this Motto from Aghmashenebeli Avenue On the 17th of September, the race took the start of “Run for Peace” from Davit Aghmashenebeli Avenue, organized by the Corporate Georgian Sports Federation and Georgian Confederation of Martial Arts. The event was arranged within the framework of the project “Run Georgia”, in which participated martial arts sportsmen, as well as any interested person. The gathering of athletes and amateurs began in the morning with more than 500 volunteers participated. Among them were Mikheil Kavelashvili, Chairman of Sports and Youth Affairs Committee, Ministry of Sports and Youth Affairs, Tbilisi City Council representatives, Partner Organizations and Media.
September 25, 2017 #209
Experto Announces Former CMO for TBC Bank, TeliaSonera and Magticom to Join Firm as a Partner EXPERTO CONSULTING LTD. – a Tbilisi-based business consultancy which pioneered Market. Entry Services in Georgia – announced today that Gary W. Koeb, has joined the firm as a Senior Managing Partner. Experto is a professional services consulting firm based out of Georgia with an international network of Allied Partners and Consultants primarily in the CIS, Middle East and Eurasia focused on facilitating business and trade. “Gary has a long-standing relationship with Georgia, as well as the CIS, Middle East and Eurasia. His equity participation with Experto is a significant vote of confidence in our Go to Market Strategy and will help significantly broaden our management team’s abilities to bring in new clients, take on new consulting assignments, and
diversify the sectors which we operate,” said Ludovic Girod, Experto Founder and Managing Director. Gary’s experience in Georgia cuts across two of the very largest and most dynamic sectors: Telecom and Retail Banking. Prior to joining Experto, Gary was the Chief Marketing Officer for TBC Bank, TeliaSonera Eurasia (Geocell), and Magticom. In the U.S., Gary was a founding principle of a highly successful sales and marketing consulting firm, working with such well-known American companies as, Kodak, Intel, SAS, Sprint, Sun Microsystems, Oracle and many others. Gary is the author of “Retail Fee Income Strategies” and the co-author of “RevenueStorming.” In the U.S., he was a frequent speaker on sales and marketing topics and the developer of the highly successful “Marketing Alignment Lab.”
Beijing’s Biggest Network to Sell Georgian Wines Cheers Wines, the network of stores of imported wines in Beijing, plans to start sales of Georgian wines for the first time. For the purpose of making Georgian wines popular, Cheers Wines will hold free tasting and presentations at its 45 stores. Beijing residents are able to taste and buy Georgian wines at wines stores of Cheers Wines starting September 19. Cheers Wines experts visited Georgia in September 2016, by invitation of National Wine Agency. Founded in 2008 by Swiss father and son Tien and Claudia Maguiers, Cheers Wines is very pop-
ular network in Beijing. The family wine business history started in 1898. Besides wine imports, Cheers Wines also conducts educational courses in winemakig to introduce various wine cultures to interested persons. China remains a strategic exports market for Georgian wines. In JanuaryAugust 2017 Georgia exported more than 5mln bottles, up 51% year on year. China ranks second among Georgian wines exports markets.
September 25, 2017 #209
Director of Trans Logistic LLC – Maritime services and Transportation company in Georgia
• During recent years, transit cargo flow through the territory of Georgia significantly decline, up to 50% or more. • Oil terminals use of about 1/5th of its throughput capacity. • Number of port calls reducing in line with cargo flow reduction. • Traders and prime suppliers are not talking about barriers and problems; they find alternative routes, which are cheaper, safer, and faster. Which are the main Barriers for cargo transportation and for companies to become regional logistics providers? What are Solutions for improving position of companies registered in the region, and changing declining cargo volumes and negative statistics to positive and growing numbers? There are following Barriers: tax code, infrastructure, one way tariff preferences, geopolitics & state interests, personal interests, and internal transport rates, which prevent resident company’s, regional transport and corridor efficiency and development: But there are Solutions to barriers: changes in taxation, optimization, both way tariff preferences, free transit, IT platform, and review tariffs, which governments and relevant authorities may consider, in order to transform challenges to opportunities: We will review each of barrier, and same time seek possible solution to it: Barrier – Tax Code Most of regional shipping, logistics, and trading companies prefer registration in low tax, tax free or offshore jurisdictions. Why? Reason is simple: • Tax exemption for international business operations. Barrier in Georgia: • Companies registered in Georgia, are subject to nonresident tax 10-15% from total cost of service, for the services received from companies registered in countries, with whom Georgia don’t have double taxation avoidance agreement. • Ship owners in Georgia are subject to Property tax, which is 1% from cost of property. For shipping industry, which is capital-intensive business, such taxes are not acceptable. Result: • Operating from Georgian company as international logistics provider, or trader, or ship owner and operator is unprofitable and unreasonably expensive. Solution to Tax Code In order to avoid migration of regional service companies, changes in tax code required. Some exemptions already exist in Georgia: • Free Industrial Zones (Poti, Kutaisi, Tbilisi - Georgia) • Free Tourism Zone (Kobuleti - Georgia) • Estonian Taxation model (From Jan. 1, 2017 - Georgia) Above exemptions are not enough for Service companies, as they need legislation, designated for international business operations of trading, logistics, and shipping segments. Georgian tax code, until 2010, was exempting ship owners flying with Georgian flag, from Property tax, but after several amendments, that exemption disappeared. Barriers – One way tariff preferences • On general tariffs for transportation of cargoes originating from Caspian sea countries (Kazakhstan, Turkmenistan, Azerbaijan) to Georgia - Black sea, discounts are granted, and preferential tariffs considered. • For transporting cargoes from Black sea Georgian terminals and railway to Caspian sea countries no discounts granted and no preferential tariff scheme exists. Sometimes West to East rates are 3 times higher, than East to West. • It is difficult to find backhaul cargoes, after cargo delivery from East to West. Probably because of no incentives in force, to attract additional volumes. Why do traders prefer to deliver cargo from Black sea to Caspian sea countries through the Volga-don canal by ships, in spite of using terminals and railway through Georgia and Azerbaijan? The question can be another argument that sea freight is cheaper. Solutions to One way tariff preferences - Both way preferential tariff for transportation • For increasing efficiency, market needs both way preferential tariff for transportation. Most of campaigns and forums, concentrate facilitation of the trade and transport from East to West, from China to Europe, but efficiency requires both way movements. • Transporting cargoes from Black sea Georgian terminals and railway to Caspian sea countries must be promoted, along with relevant preferential tariffs, and mechanism, in order to attract additional volumes and make our corridors: TITR, Lapis Lazuli, more efficient.
Barriers for cargo transportation in the Caspian region on example of Azerbaijan and Georgia possible solutions and future prospects Barriers – Infrastructure Is the Caspian ferry connection, bottleneck for TITR and OBOR? • Caspian ferry (13 vessels), connects Kazakhstan and Turkmenistan, to Azerbaijan, for further transportation of cargoes by rail through Azerbaijan, Georgia, and Turkey to Europe. Annual transportation capacity of Caspian ferries equal 95,000 railway wagons or 4,5 million tons of cargo. In average annual quantity of railway wagons carried presently, amount half of capacity, or sometimes up to 70%. Countries and market players expect huge amount of cargo flows from TITR and OBOR, but remaining free capacity on Caspian ferries today is only about 1 million ton from Kazakhstan and another 1 million ton from Turkmenistan, which includes also neighboring markets and corridors. Unless, new solutions will be developed in Caspian connection. It is also important to consider, that the weather conditions on the Caspian Sea adversely affect the sea traffic and the predictability of transit time. Does Georgian terminals lack flexibility to respond market needs? • Batumi/Kulevi terminal use only about 18-24% of its capacity • Shore tanks in Georgian terminals, are mainly designated for handling Crude oil. However, due to competition of pipelines: such as Atasu-Alashankou (connecting Kazakhstan with China); Makhachkala-Novorossiysk (connecting the terminal on the Caspian Sea from Makhachkala to the Black Sea terminal in Novorossiysk, Russia); the BTC oil pipeline (Baku-Tbilisi-Ceyhan, connecting the Azerbaijan Sangachal terminal from the Caspian Sea, with the terminal in Ceyhan, on the Mediterranean Sea in Turkey); the pipeline from the Neka terminal in Iran (connecting the Caspian terminal and feeding country’s northern refineries); the CPC pipeline (the Caspian Pipeline Consortium connecting Kazakh oil fields with the Black Sea terminal in Novorossiysk, Russia); and the possible barriers, the volume of crude oil transportation through Georgian railway and terminals, decreasing every year. • There are shortage of CPP (clean petroleum products) shore tanks in Georgian terminals for accepting large volumes (aframax tanker parcels of 80-85 thousand tons) of Gasoline, Gasoil, Jet fuel cargoes, as well as shortage of DPP (dirty petroleum products) tanks with heating for handling large volumes (aframax tanker parcels of 80-85 thousand tons) of Fuel oil and Vacuum Gasoil simultaneously. Solution to Infrastructure Optimization of Caspian connection required, to increase efficiency of ferry connection, in order not to limit throughput of transportation corridors TITR, Lapis Lazuli, and neighboring countries surrounding corridors. Optimization of Georgians terminals required, to respond to market needs. • Modernization of three major Kazakhstan refineries, will increase volumes and depth of processing, creating excess production of Clean petroleum products (CPP). [Source: Kanat Bozumbayev, Minister of Energy of Kazakhstan]
Consequently, it creates need for more clean storages at transshipment locations, for accumulating export volumes for foreign markets. Barriers – Geopolitics & Interests • BTC (Baku-Tbilisi-Ceyhan) pipeline source oil from Caspian sea countries, and deliver to Turkish Mediterranean port Ceyhan. • BTC throughput capacity 1,2 million barrel/day equivalent of about 50 million ton per year. • Presently pipeline is loaded with about 28 million ton per year. • Main source for BTC is ACG (Azeri-Chirag-Guneshli) field, producing Azeri light Crude oil. Production peak was in 2010 about 820 000 b/d, there after have production has stable drop. In 2016 production was about 660 000 b/d. • Consequently, BTC operators are working to attract additional volumes from other producers in Caspian sea countries: Turkmenistan, Kazakhstan, and Russia, but such efforts to attract volumes should not directly or indirectly influence the alternative route options. Supplier’s choice to deliver Crude oil using Azerbaijani and Georgian railways and terminals must not be limited. What does efforts to fill up BTC pipeline, means for Caspian producers, and alternative routes? Recently market players start or planning diverting volumes which was previously transported by BTC or Georgian railway and terminals, to alternative routes, as described above, such as Neka, Makhachkala, actively developing CPC pipeline as well with support of Tengiz field and Kashagan production increase in Kazakhstan. Solution to Geopolitics & Interests • Exploration companies in Caspian sea countries must have freedom of choice, of alternative routes (Pipeline or Railway and Terminal) in other words Free Transit. • Railway transport, enables exploration companies to market its Crude oil with a brand name. • There are lot of unique brands in Caspian countries, with well known names: Kumkol, Buzachi, Tengiz, Cheleken, Okarem, Kiyanly, and suppliers must have freedom of choice whether they go as blend in pipeline or with a brand name to end users using railway transport and transshipment terminals. On the other hand, certain refineries too should feel comfortable receiving standard quality and brand Crude oil. Barriers – Personal Interests • As an emerging international trade and transport hub, competing commercial interests, whether political or private, are increasingly been seen to disadvantage or damage the free flow of goods and services to the detriment of primary suppliers, with profound impact upon the economy. • In other words, in the region, and corridor, there are certain commercial organizations, which has influence on transit logistics. They have administrative and political power, and often they use
What does efforts to fill up BTC pipeline, means for Caspian producers, and alternative routes? Recently market players start or planning diverting volumes which was previously transported by BTC or Georgian railway and terminals, to alternative routes, as described above, such as Neka, Makhachkala, actively developing CPC pipeline as well with support of Tengiz field and Kashagan production increase in Kazakhstan.
it, to support personal interests in certain commodity trades, and for the companies they are associated with. As a result, we see continuous drop of cargo volumes through our corridor, in favor of alternative routes, which has negative impact on service companies, terminals, ports, economy, and overall development of the region. Solution to Personal Interests • Once upon a time in Georgia, it was very difficult to buy a train tickets, book hotel room, or receive public services. Today it is in the past, with internet services and applications development. Georgia became very efficient, providing electronic services to its visitors and citizens. • Accordingly, transportation industry too, requires development of IT solutions, and only fair and open IT platform development, will enable increase transparency and simplify administrative procedures, for smooth organization of transportation business, which will benefit free flow and trading development throughout the region. • Fair and open IT platform, must be monitored by independent institutions to prevent possible intervention, and that would then overcome personal interests and preferences, and benefit free flow of goods and services. Barriers – Internal Transport Rates • Why does companies prefer trucking of oil products, instead of railway transportation for intra- country or cross-country deliveries? Because railway tariff is in average 3 USD per ton higher, compared to transportation by trucks. For cross-country deliveries, railway cost is sometimes two times higher then trucking. Solution to Internal Transport • Shifting of road freight to rail, would have positive impact for: • Efficient transport system facilitation for market players. • Environmental impact, by achieving GHG emission reduction. • Unloading of roads, overloaded by vehicles. • Reduce governmental expenditures on road repairs. • In order to increase attractiveness of rail versus trucks, it is important to Review and lower internal rail transport rates and have other innovative mechanism and marketing campaign promoting rail versus trucks. • There is another big challenge, such as increasing speed of rail transport, and it goes far away, with deeper needs of capitalintensive projects, which would improve overall efficiency. Opportunities of innovative approach and Value added solutions based on FTA’s of Georgia Free Trade Agreement (FTA) involves lifting trade barriers between countries. Georgia has FTA’s or duty free entry agreements with many countries: • CIS countries: Ukraine, Belorussia, Moldova, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan; • CIS and Neighbors: Turkey, Azerbaijan and Armenia; • GSP - Generalized System of Preferences with USA, Canada, and Japan; • DCFTA – Deep and comprehensive FTA with EU countries and FTA with EFTA countries; • Peoples Republic of China; • Future prospects of FTA with India and USA; FTA’s of Georgia has to be the backbone for development of value added services through the country, converting into the platform of trade and logistics, developing logistics centers, processing, blending of commodities, and many other solutions for connecting commodities and services between Europe, USA and Asia. Conclusion • If no Solutions will be confronted to Barriers, in spite of huge opportunities, Georgia will continue to see diminishing cargo flows, but in the meantime, alternative routes will be developing, and our corridor will transform from potential Hub to Cul-de-sac. • “Big problem is a big opportunity. If there is no problem, there is no solution, and no reason for a company to exist” [Source: Vinod Khosla]
September 25, 2017 #209
“ Gepra Begins Agile Transformation
he PR & Marketing Communications Company Gepra is beginning its Agile transformation. One of the pioneers on the Georgian communications market, the company aims to enrich its service offering by migrating to innovative project management methodologies. According to Gepra’s CEO, the company is starting to move to a more modern, flexible system – Agile. It is a versatile methodology that enables an organization to increase work profit efficiency while simultaneously lowering
decision-making and project implementation times. Overall, it ensures an efficiency boost in both the development and implementation of innovative products and services. “At this point, we are talking with a number of groups for implementing specific directions in the Agile methodology. We are currently down to choosing between Scrum and Kanban, and we’ll be making a final decision sometime in October,” – said Eka Zhvania, the CEO of Gepra. The changes happening within the company are part of Gepra’s transformation strategy.
Gepra is changing from a boutique agency into a consulting “niche buster” company
The leader in PR and marketing communications in Georgia is planning a partial change in its profile. According to statements from within the organization, the changes are sizable and represent their first case since 2007 where the transformations relate to the entire company, as opposed to only a number of certain services or products. “A new business model has been developed, with more changes touching on our brand, positioning, and visual identity. The company structure for management and consulting fields has also gone through certain changes, along with top-to-bottom transformations underway for business processes and services,” – stated Eka Zhvania. “The transformations that we started in Gepra are, first and foremost, the result of shifts we see on the global market. Trends are changing in ways that challenge even the largest companies. Long-term leaders of the PR field have begun their own restructuring processes in order to avoid defeat in the turbulent battle. More and more organizations turn their aims towards universal offerings, disagreeing with rendering services to self-serving businesses. Professional service providers in consulting have ceased separating various fields and products. Even Bain and McKinsey have started taking over marketing, while the Big Four of auditors are now specializing towards Information Technologies.” “Complete universalization – this is the realistic state of the market today,” – adds Gepra’s head of the transformation process, Soso Galumashvili. The team at Gepra assumes that the
transformation process, which they began three months ago, will take four more months to complete. At this stage, the company has finished primary strategic work and, starting from the New Year, Gepra will start adopting niche fields in consulting. The company is not getting specific on the types of services and products that will be added to their portfolio, but they are confirming that the aforementioned will definitely go beyond PR and marketing communication services. “We grew, and in that growth we accumulated experience that will allow us to issue a completely new value proposition. As a result of our analytical work and extensive research, we managed to find the exact vacant niches that, on one hand, have not been occupied, and on the other – are poised to gain high market demand in the nearest future. We view Gepra as a pioneer setting new trends on Georgia’s professional service providing market, whilst remaining a leader in the PR & Marketing Communications field,” – stated Soso Galumashvili. According to him, the main target groups for the ongoing transformations within the company are the organization’s service consumers, who will see a much more streamlined, accessible, and flexible set of products, along with an assurance of their utmost inclusion in all stages of project implementation. “Gepra is changing, it is changing from a boutique agency into a consulting “niche buster” company. 15 years of experience and a clear indicator of growth are the best foundations for carrying out such transformations.” – stated Eka Zhvania.
September 25, 2017 #209
Business bubbles on at winemaker near Ukraine war zone
Leading Turkish construction in Russia sees major inspection The Russian authorities have carried out a search at the St. Petersburg headquarters of Renaissance Construction, a large-scale Turkish contractor, seizing computers and other accounting documents. Russian news agency Interfax said the raid was linked to corruption claims, a report that was denied by Renaissance executives in a statement to Hürriyet on Sept. 18. “The St. Petersburg office of the company was reached as part of general research in Russia and officials said there were no charges against Renaissance,” said the statement by the company. However, Russian Federal Security Agency (FSB) released a brief statement backing the information provided by Interfax, saying an operation was held against the Renaissance in St. Petersburg as it broke the Russian currency rules. FSB says the company broke a foreign currency law, transferring 100 billion rubles, roughly $1.7 billion, abroad. The research was for collecting evidence to an upcoming lawsuit, said the FSB. Sources close to the company, meanwhile, told Hürriyet that a rival firm’s complaint might be behind the operation on Renaissance. Founded by Turkish businessman Erman Ilıcak, Renaissance operates in 24 countries as a contractor and investor. It became one of the most vulnerable firms following the now-resolved jet-downing crisis between Russia and Turkey due to sanctions imposed by Moscow on Turkish businesses.
Astana’s international green technologies centre to help Kazakhstan transition to a green economy The international green technologies centre to open in Astana next month will help Kazakhstan transition to a green economy and will focus on renewable energy throughout Central Asia, Kazakh Energy Minister Kanat Bozumbayev said at the recent Eurasian KAZENERGY forum, Kazinform reports. “An international centre of green technologies and future energy investment projects will be created on the basis of EXPO in the coming month. Its tasks include transforming the energy sector and the transition to a green business. It will cooperate with the industrialised (Organisation for Economic Cooperation and Development) OECD countries, with Russia, China, the United States, India, and countries of Latin America. The centre will become a worthy continuation of EXPO’s practice. The centre will be focused not only on Kazakhstan, but on the entire Central Asian region,” said Bozumbayev. Delegates of the two-day forum also discussed sustainable energy source management, climate change and carbon dioxide emissions reduction. The gathering also discussed energy efficiency and smart energy as well as nuclear and uranium industry development. Kazakhstan is the world’s leading uranium supplier and that market is expected to grow, said Bozumbaev.
Deep in the bowels of a former gypsum mine in east Ukraine, winemaker Rafail Nasyrov scrutinises a bottle of sparkling rose. Hundreds of thousands more line a winding labyrinth of underground tunnels and caves. “This is a 25-hectare (60-acre) natural bomb shelter,” Nasyrov tells AFP. The winery is located in Bakhmut, a government-held town, just two dozen kilometres (15 miles) from the front line in Ukraine’s low-level war, where the army and Russianbacked rebels continue to lob deadly artillery barrages at each other. The town spent around a month under rebel control in 2014, and in 2015 the front line was so close that the town came under rebel shelling. But despite more than three years of fighting that has claimed some 10,000 lives, Nasyrov’s employer, Artwinery, has never stopped production. The firm bills itself as the largest Eastern
European manufacturer of sparkling wines that uses classical methods similar to those for making champagne. And while the 72-metre (238-foot) deep tunnels have helped keep workers safe during the conflict, they also offer the perfect conditions for making bubbly. It is thought that it was the unique microclimate of the gypsum mines, which stopped being used before World War II, that saw Soviet authorities order the opening of the plant in a region that never had any vineyards. “There is a version that after World War II, it was Joseph Stalin who issued the decree to make champagne here,” Nasyrov, dressed in a white lab coat, says. Wine production began at the site in 1950 when it was called the Artemivsk wine factory after the former name of the town. The company name was changed to Artwinery last year under Kiev’s drive to remove communist remnants.
Russia is reportedly going around sanctions and supplying North Korea with fuel Azerbaijan to finance half of Iran’s Rasht-Astara railway The Islamic Republic of Iran Railways (RAI) has said that Azerbaijan will provide Iran with 500 million euros worth of loan for completing the Rasht-Astara railway segment as part of the International North-South Transportation Corridor. “Keeping in mind the mutual benefits of the Rasht-Astara railway for the two countries, the government of Azerbaijan has agreed to finance the project,” Nourollah Beiranvand, the deputy for planning and investment at RAI told Trend. He denied the recent rumors that suggested Baku would fully finance the Rasht-Astara segment. Beiranvand, added that the half of required amount for completing the railways section will be provided by Azerbaijan and Iran is expected to provide the second half. “The finance will come in the form of loan,” Beiranvand said, adding that the invested sum will be later subtracted from the revenues of the project. Astara railway station Beiranvand further touched upon the project for the construction of Astara railway station and said the Azerbaijani side has agreed to invest in the building of the station and cargo terminals. The Azerbaijani officials had earlier
agreed to provide 60 million euros for developing railway facilities in Astara city (Iran). According to the official, about a half of this amount is projected to finance the construction of a 1.4 kilometer-long railway in Astara as well as the railway station building. The remaining half will go for the construction of four terminals of fueling, general cargo, grain and containers, he said. Rasht-Qazvin To complete the railway links of the transportation corridor, Iran had earlier agreed to construct inland railway segments in northern parts of the country in order to extend its railway network to the border area with the neighboring Azerbaijan through the two cities of Astara on both sides. The initial plan included Qazvin-Rasht and Rasht-Astara railway segments. In the meantime, Azerbaijan has launched a construction project to extend its railway into Iran’s territory which is going through the final tests and will be implemented soon. Director of Technical and Infrastructural Department Maziar Yazdani said in June that the terminal would be operational in “two months”. However, the project still remains unfinished.
At least eight North Korean ships that left Russia with a cargo of fuel this year headed for their homeland despite declaring other destinations, a ploy that US officials say is often used to undermine sanctions. Reuters has no evidence of wrongdoing by the vessels, whose movements were recorded in Reuters ship-tracking data. Changing a ship’s destination once underway is not forbidden, and it is unclear whether any of the ships unloaded fuel in North Korea. But US officials say that changing destination mid-voyage is a hallmark of North Korean state tactics to circumvent the international trade sanctions imposed over Pyongyang’s nuclear weapons program. Changing course and the complex chain of different firms — many offshore — involved in shipments can complicate efforts to check how much fuel is supplied to North Korea and monitor compliance with a cap on fuel imports under UN sanctions. “As part of North Korea’s efforts to acquire revenue, the regime uses shipping networks to import and export goods,” Marshall Billingslea, an assistant secretary of the Treasury, told the House Foreign Affairs Committee this month. “North Korea employs deceptive practices to conceal the true origins of these goods,” he added. “Pyongyang has been found to routinely falsify a vessel’s identity and documentation.” The eight vessels identified in the tracking data set sailed from the far eastern Russian port of Vladivostok or nearby Nakhodka and registered China or South Korea as their destination with the Information System for State Port Control.
Brand History -
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Schuchmann Wines Georgia E uropean management, Georgian Product – this is a key concept of the company. With western education the company team members produce absolutely Georgian products. Schuchmann Wines Georgia produces wines for all categories of consumers with various tastes. The company portfolio unites both light, aromatic summer and joyful red wines, as well as reserved precious, golden line, special wines for gourmand clients – these wines require a little more depth, analysis and thought. Key strategy of the company is: “We Make Quality, not Quantity”. Idea of Company Foundation - Schuchmann Wines Georgia was founded by German and businessman Burkhard Schuchmann in 2009. Having fallen in love with Georgia, Georgian traditions and wines, he bought vineyards, arranged château and launched bottling one of the favorite and popular wine varieties for wine lovers. Initially, the company used to produce about 4-5 varieties of wines. Exports indicators were also unimportant. At the beginning, we had Vinoterra, a small wine cellar, where wines were bottled in small volumes. At this stage, the company bottles more than 20 varieties of wine, Nutsa Abramishvili, director general of Schuchmann Wines Georgia, noted. The years of 2012-2013 were a decisive period
for the company. In that period, the company extended production and diversified markets. As a result, the output increased, exports markets and wine assortment were expanded. Today, the company wines are sold in about 25 countries. Company Success Formula – Wine is our primary product and key business direction. Our company launched operation in this segment. However, our active involvement in various other fields have preconditioned our success, including in wine tourism, Wellness , gastronomic direction, as well as international tourism company Schuchmann Travel. In a short period, these directions have raised the interest in our company, as well as our active efforts and various aggressive marketing campaigns on international market», Nutsa Abramishvili pointed out. Key Problem – The company had projects that were suspended because of various obstacles. At the same time, the company considers
these obstacles in different way – if some projects were suspended because of difficulties, we think, those projects were not relevant in those specific periods. At the same time, one day those suspended projects will be implemented anyway. «Consequently, we consider all challenges positively that enable us to gain experience. Therefore, these difficulties are forgotten in a short period and I would not specially emphasize them», Nutsa Abramishvili said. History of Company Logo and Name – In general, the brand of Schuchmann takes origin from the name of benefactor Burkhard Schuchmann. Consequently, the surname is repeated in the brand. It is very important that the brand always meet high quality standards in any segment, be it winemaking, service,or wine spa. Brand and logo of Schuchmann is important in all directions, Nutsa Abramishvili noted. «It is very important that the company name
is related to Mr. Schuchmann, who thinks it us huge honor for him to apply his own name in all our directions», Nutsa Abramishvili noted. Why Schuchmann Wines Georgia - «I believe we serve consumers with refined taste. They genuinely appreciate our gastronomic novelties, know elements of our wines. Consequently, we serve consumers and guests of refined taste. Therefore, we always note that the company management members are number one , who consume our own products and use services. Consequently, we are very pretentious and exacting people. If we like and fine something acceptable, then it is acceptable for everybody. We believe that we are frontline segment of this success and this is the answer to the question - Why Schuchmann. We create products and services for gourmand people, who appreciate tastes and feelings. Tastes in gastronomy, taste and aroma in wine, and feelings in wine spa. We produce all the services that make people feel happy.
September 25, 2017 #209
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