Caucasus Business Week #291

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July 15, 2019 - www.cbw.ge

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“The right strategy will enable Georgia to satisfy at least 80% of grain demand through domestic production in 2-3 years”. Does Georgia need an Antidumping Law – the Opinions of Specialists and World Experiences

Danish Artist illustrates Different Aspects of Georgia to Encourage Tourism

GEL Depreciation lowers Inflation Rate

How the National Bank swerved from Smoothing Mortgage Loan Regulations


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Russian Airlines to bear $47 million Losses from Flight Ban

Passenger Flow increased by 30% in Batumi International Airport

Russian airlines are expected to bear 47 266 000 USD losses from flight ban with Georgia, the Russian Transport Minister noted.

In 6 months, Batumi International Airport has increased by 30% with regular and irregular flights.

Ex Deputy Economy Minister appointed as GIG Director General

Government to co-finance Bank Loan Interests for Existing Small Hotels The Government will ensure co-financing on bank loan interests for existing small hotels, and the state will serve as the guarantor for the construction of new ones, Georgian Prime Minister Mamuka Bakhtadze told representatives of the Business Association at the meeting.

Olivier Russo appointed as Head of Investment Board of Pension Agency The investment board of Pensions Agency has held its first meeting. Olivier Russo has been appointed as a chairman of the Investment Board.

VAT Reform - Changes to the Tax Code The Ministry of Finance of Georgia published a draft law on amendments to the Tax Code. Field experts, representatives of business or other target groups can submit their suggestions and proposals to the agency.

Georgia and Serbia sign Trade-Economic Cooperation Document Tbilisi has hosted the first meeting of Georgia-Serbia intergovernmental commission on trade-economic cooperation.

Lasha Mikava, who was deputy Economy Minister in 2018-2019, has been appointed as GIG director general.

Natia Turnava: Credit Guarantee System will be Completely switched to the Tourism Industry and Hotel Business “The credit guarantee system will be completely switched to the tourism industry and hotel business in order to prevent suspending the development and expansion projects,” – said Natia Turnava at 1TV, Minister of Economy and Sustainable Development.

EU and Government of Georgia sign EUR 28 million Security Sector Support Programme for Georgia In the framework of the 16thGeorgia's European way Conference in Batumi, representatives of the European Union and the Government of Georgia signed the first ever EU support programme on security sector reform for Georgia.

Georgian Prime Minister and Bulgarian Deputy Prime Minister consider Direct Flights In the recent years, Georgia has achieved significant progress, Deputy Prime Minister Ekaterina Zakharieva of the Republic of Bulgaria stated during meeting with Georgian Prime Minister Mamuka Bakhtadze. The parties also discussed prospects of direct flights between Tbilisi and Sofia, a step toward further boosting the development of people-to-people contacts and tourism cooperation.

The Editorial Board Follows Press Freedom Principles Publisher: LLC Caucasian Business Week - CBW Director: Levan Beglarishvili WWW.CBW.GE Address: Aleksidze Street 1 Sales: Mob: +995 591 01 39 36 Email: caucasianbusiness@gmail.com Editor: Nutsa Galumashvili. Mobile phone: 595 380382 Copy Editor: Ellie Rambo Reporters: Nina Gomarteli; Mariam Kopaliani; Merab Janiashvili, Economic columnist: Andria Gvidiani; Technical Assistant: Giorgi Kheladze;


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GEL Depreciation lowers Inflation Rate According to Geostat, the national statistics service of Georgia, in June 2019, compared to May, inflation rate made up -1%, while annual inflation rate constituted 4.3%, down from 4.7% in May. Prices on food products and soft drinks have declined by 3.9%. Prices decreased in the following subgroups: vegetable and garden plants (-27.9%), fruits and grapes (-5.8%). At the same time, prices increased on sugar, marmalades and other sweets (+1.3%), milk, cheese and eggs (+0.7%). The transport group recorded 0.9% upturn with 0.1% effect on total inflation rate. The group recorded 1.1% upturn in purchase of transport and 1.0% growth in exploitation of personal transport. Healthcare group registered 0.8% upturn in prices. Namely, prices on medical products, equipment and devices rose by 1.9%. As to annual inflation rate, 6.5% upturn was registered in the group of food products and soft drinks, 20.1% growth in the group on strong drinks and tobacco; 3.2% rise in the transport group, 5% upturn in the group of entertainment, holidaymaking and cultural events; 2.9% growth in health sector. „A report for the month of June has been published. Surprisingly, prices have decreased compared to the previous month. Naturally, we should be glad, because prices have decreased, the central bank has go closer to the target indicator, solvency of our citizens has increased and there is not bad process. But what happens in reality. The previous month recorded 4.7% inflation rate and this is an essential inclination form the target rate. Based on the June developments, essential devaluation of the exchange rate and historical rise in fuel prices, the inflation rate was to further incline from the target rate, even more so our consumer basket is mainly replenished by imported goods. However, Geostat reports that the inflation rate remains around 4.3%. How is this possible? The point is that prices rose on eggs, sugar, milk, sweets, other essentials, transport and healthcare, but prices declined on vegetables and garden plants. This last component has lowered the common

level of prices in the country, Paata Bairakhtari, vice president of Association of Young Financiers and Businessmen (AYFB) noted. Otar Nadaraia, chief economist of TBC Bank, forecasts that the 2019 inflation will essentially incline from the target rate. GEL is expected to further fall to 3.00 point. The NBG forecast for the inflation inclination from the target rate has become useless. The rate will rise, but the figure will not become two-digit, the economist said. 6-7% inflation rate would be maintained amid 1 USD=2.82 GEL. He expects the 2019 inflation rate to hit 8-9% and the GEL exchange rate to fall to 3.00 point against USD. The 5% inflation rate would be maintain amid 1USD=2.70 GEL The NBG vice president asserts that at this stage it is not necessary to revise the NBG policy, but if the inflation process deepens, then the central bank will take corresponding measures. “The inflation rate report was published several days ago and the rate makes up 4.3%, including the effect from cigarette excise growth is 1.3% and this is the socalled exogenic factor, without which the inflation rate would be 3%. Our target indicator is oriented on long-term objectives. Therefore, we supervise the inflation rate tendencies in the future and consequently, we will take decisions based on these indicators. On July 24 we will hold the policy committee meeting and based on the existing information if we detect price growth risks, naturally, we will tighten monetary policy. If we see that the declining demand may bring apposite outcomes, we will smooth the policy�, Archil Mestvirishvili said. By Merab Janiashvili


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to concede this component. “Before these regulations, the co-participation ratio was 20%, anyway, and today we have returned to the old benchmark”, Abuladze said. In response to the question of when the development sector will regain the old benchmark regarding sales, when the reduction of transactions will stop, and when the sector will grow, Abuladze said that the development market will see changes

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in the autumn. “It is summer now, and everybody leaves for holidays. Nobody has the time to buy apartments. The improved regulations will have an effect after this summer. Nonresidents are expected to grow sales before autumn. I think the National Bank has delayed the introduction of improved regulations. The ratio of bad loans in the development business makes up 0.98%. I have no idea why these regulations were introduced. Before taking this decision, NBG representatives were to meet with developers”, Abuladze said.The development sector expects prices to rise.

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Commercial banks plan to develop new products for GEL-denominated mortgage loans. Namely, commercial banks will use in-house models for appraising the solvency of borrowers in the case of 20% co-participation in GEL-denominated mortgage loans. According to the National Bank’s decree N281/04 passed on December 24, 2018, in line with article 6 of the provision on retail crediting, commercial banks are entitled to examine a client’s solvency under in-house procedures. In the first months after the enforcement of responsible crediting regulations, the banking system focused creating an accurate reflection of regulations and supervision of market activity. After the completion of this process, the banking system is able to move towards a new stage which will allow for the more efficient appraisal of the borrowers’ revenues, solvency and offer healthier mortgage products to consumers. As a result of the combined efforts of representatives of the Georgian Banks Association, members of commercial banks and the

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Namely, the price of 1 square meter is expected to grow by 100 USD in ongoing projects by the end of 2019 because of new regulations. As a result, the amount of sales will rise and will return to the pre-regulation benchmark, Abuladze noted. “The problem is that there are two independent processes: 1. the National Bank has narrowed the number of clients and new

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National Bank of Georgia (NBG), commercial banks will develop new products for GELdenominated mortgage loans. Namely, commercial banks will appraise the solvency of borrowers under inhouse regulations in the case of 20% co-participation in GEL-denominated mortgage loans. These products will diversify mortgage products, including the issuance of mortgage loans for development projects, the Association’s representatives noted. The Caucasus Business Week (CBW) has inquired as to whether fewer crediting regulations could resolve the current problems in the developmental sector, and whether transactions will increase. Tornike Abuladze, the executive director of the Georgian Developers Association, noted that simplified mortgage loan regulations have brought positive effects to the construction and development business. Developers and commercial banks adhere to the same position, which differs from the NBG position, he said.This was the most important article, and the NBG was

regulations in the development sector decreased the number of issued licenses, as well”, Abuladze said. The National Bank has not streamlined some components, including the maturity period of mortgage loans. The longest maturity period was 20 years, before regulations, but now this period has shrunk to 15 years. Moreover, when clients were taking a mortgage loan to buy an apartment, it included expenses for repair works, home appliances, and furniture, too. Now, this component was neutralized, and borrowers should take separate loans for each process and this regulation worsens their credit indicators. “When you have taken one loan to buy an apartment, but want to take loan as well for redecorating and repair, you may face problems”, Abuladze pointed out. The third issue is that the NBG has not conceded to commercial banks, and developers are related to issuing USDdenominated loans. “It would be better to issue USD-denominated loans to those who receive incomes in USD”, Abuladze said. As is commonly known, starting May 7, 2018, after the enforcement of the NBG regulations, commercial banks cannot issue loans without income documentation. Responsible crediting requirements were enforced for the Georgian finance market on January 1, 2019. The development sector is an important field, and is a major contributor to the state budget; however, enforced banking and development regulations have almost halved sales in 2016-2017. TBC Bank has already launched a reform of regulations. TBC Bank Director General Vakhtang Butskhrikidze told BMG that consumers will receive simplified mortgage loans in 1 week. At this stage, meetings with the NBG will continue.


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“The R ight Str ategy w to satisf ill enab y at lea le Geor st 80% o through gia f Grain Domes Deman tic Prod d uction i n 2-3 ye ars”. “The right strategy will enable Georgia to satisfy at least 80% of grain demand through domestic production in 2-3 years”, according to representatives of the Lomtagora company. According to 2019 reports, Lomtagora harvested 11 tons of grain on one hectare, a record volume. How will this change the market, and how important is domestic grain production in Georgia, where imported grain dominates? Lomtagora’s Director, Kakha Lashkhi, explains that these results were achieved thanks to 20-years of tireless efforts. “We have achieved this result step by step. It would be difficult to have such a success at once, because there were unfavorable conditions. Our empirical experience has brought this result”, Lashkhi said. The Lomtagora company has the ambition to enter

the Guinness Book of World Records. “Georgia has made serious progress in terms of grain growing. Consequently, we have ambitious plans for harvesting 28 tons of grain on one hectare”, Kakha Lashkhi said. Irakli Rekhviashvili, Deputy Director of Research at the Lomtagora Company, explains that the company has already tested two grain varieties to grow high-level yields. We also have a third perspective variety, from which the company will receive more output. The existing grain varieties give real grounds for optimism. The weight of one grain is about 7-8 grams. Based on the biological parameters of this grain variety, and according to our reports, we will have a dramatic breakthrough and success”, Rekhviashvili said.


Does Georgia need an Antidumping Law – The Opinions of Specialists and World Experiences The Georgian authorities plan to enforce antidumping laws on January 1, 2020. The antidumping law will protect domestic production from import dumping. The law was prepared in compliance with World Trade Organization (WTO) principles and requirements, with the aim of safeguarding domestic production from dumping imports and the accompanying losses, Deputy Economy Minister Genadi Arveladze said. What does dumping mean? Dumping is a trading operation when this or that product is supplied to the market with a lower price when compared to the original cost, with the aim of ejecting competitors from the market. Economic experts explain that, primarily, major importers are able to carry out similar market interventions. Some domestic manufacturers think that the absence of an antidumping law helps shape a more favorable environment for imports when compared to domestic production. This factor is one of the reasons why Georgia’s negative trade balance has exceeded 4 billion USD, economic experts noted. Does Georgia need an antidumping law? Field specialists have two different positions regarding this issue. Those who object to the antidumping law assert that law enforcement will critically narrow the interest of foreign investors. Moreover, Georgia has already adopted an antitrust law, and no additional regulations are required. In 2017, the WTO deputy

director general Yi Xiaozhun expressed skepticism regarding the antidumping law. Antidumping law enforcement has not increased trade turnover in any WTO member country, he noted during his visit to Georgia. “You should not expect the antidumping law to increase trade turnover, or protect industry”, the WTO Deputy Director General noted. As for supporters of the antidumping law, Shota Gulbani, the President of the Association of Young Financiers and Economists (AYFB) says that the necessity of antidumping law enforcement in Georgian arose many years ago. Domestic egg and poultry manufacturers, as well as the grain and flour industry face problems with overcoming dumping prices. Any business or industry may face the same problems without protective measures in trade, Shota Gulbani said. Vakhtang Charaia, the head of Tbilisi State University Center for Analysis and Prognosis, also backs the enforcement of the antidumping law. The antidumping law means that foreign importers will not be able to stifle domestic manufacturers through dumping tariffs, he said. Eventually, domestic business will get an opportunity to develop, create new jobs, and strengthen the economy, he noted.

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As for the global practice, according to specialists, the existing theories regarding trade hold that dumping is an unfair trade practice, but, according to WTO regulations, this practice is not banned. According to WTO regulations, the country hoping to combat a dumping is entitled to enforce protection mechanisms, if dumping cases and the correlation between dumping imports and losses to domestic industry are confirmed. According to specialists, the General Trade Directorate of the European Commission supervises dumping charges in the EU, the International Trade Commission, in the USA, the Ministry of Trade in China, the Frontier Agency in Canada, the Trade and Industry Ministry Department for Commerce in India, and the Economic Ministry handles imports in Turkey. The US President Donald Trump instructed the International Trade Commission to retaliate for Chinese dumping steel imports. In the event of the adoption of the antidumping law, the Competition Agency will supposedly provide supervision for dumping activities. All other details about the antidumping bill remain unknown. By Zurab Khachapuridze


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Ekaterine Siprashvili: "A Customer has the most Power Today" Interview with the Head of the Marketing Department at "Dio" LLC, Ekaterine Siprashvili. Tell us about how you got into the field of marketing, and what factors played an important role in choosing this profession? I have a degree in business administration, and I studied marketing. Then, I decided to apply for GIPA’s Public Relations Master Program. At the beginning of my career, my first steps were in sales, and this experience has taught me a lot of things that I find useful for planning the right marketing strategy. Diversity, interesting news, observing people, listening to the user - ie market research, including all kinds of promotion, and a colorful profession - that’s how I see marketing. A profession that constantly challenges, and gives you the chance to constantly make new discoveries. That’s very interesting for me. In regards to technological changes, what challenges do you face as the head of a marketing service? I think, especially in this era, watching the world from a marketing perspective is very interesting. This is an era of communications and commerce. Today, the customer has the most power. The best way to get information quickly on a social media network that allows marketers to plan effective campaigns, share news and information quickly to potential customers in different ways. What has changed in the field in the last 5 years, and what changes are expected? It’s such a lively field that it’s constantly changing and developing. Many things have changed over the last 5 years, especially the transforming digital space. Traditional media has been replaced by the internet. In comparison with previous years, many of them previously used channels which are no longer active - it has allowed us to make interesting and effective marketing campaigns on a small budget. The user has become more informed in everything, so we have more motivation to take care of them, to think outside of the box to exceed the expectation. Each customer's satisfaction is of the utmost importance. Social networks influence the behavior of the user, and make decisions faster, and share their experiences faster. Facebook groups are becoming more influential. A large number of people join different groups, and receive information from other people. The majority of companies will plan their communication campaign for these groups, as the segmented group will be easily accessible, and information will be distributed to the specific target. Today, video content, influencers, bloggers play an important role. What important features should a marketing manager focus on, and what are their roles in an organization? The marketing manager's role is quite im-

portant in the company, especially in such a competitive market. It is important to correctly distribute scheduled time, strong characters, creativity, logical & analytical thinking, adaptability and tHE ability to simultaneously deal with several problems. The knowledge of social sciences, flexibility, humor and the ability to do independent, creative work is essential. One must be oriented towards self-development, follow innovations, novelties and catch up with changes.

are based on high quality, tasteful products, taking users’ wishes into consideration. I am very happy that the "Dio" user is highly qualified, educated and tasteful. We take care to maximize the level of customer satisfaction. No matter what we do, the user is the main priority. Therefore, taking care of them daily, thinking about offering innovations is an integral part of everyday work.

What are you doing to help the organization keep up with new trends and use innovative approaches in the field of marketing?

Interesting.

"Dio" is a very interesting company with 70 products. The company tries to offer customers a product and service that will foster a unique environment, maximum comfort, and at the same time, will be of a high quality, and will fully take into account modern standards. That's why we have to take different actions to reach the audience. I often read online publications, watch or listen to the news in the field, I learn about global giants in this profession, so that neither I or organization lag behind. What’s your organization’s business model regarding PR and marketing? At all stages of the development of "Dio", it was important to create a business model that was designed to meet customer requirements. We create something the customer values, which

One word that describes your work.

The most useful advice you’ve ever received in your life? Make some time for self-development every day, and walk forward, otherwise competitors will catch up in a blink. Think of a person who inspires you, professionally. I can not name one person. The sources of my inspiration are always a specific campaign, interesting work and challenges.


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Business News

Another Radisson Hotel set to arrive in the Heart of Historic Tbilisi

Sustainable Development reports. Georgian Airways to add Directional Flights to Yerevan From Tbilisi

Radisson Hotel Group announced the signing of the first Radisson-branded hotel in Georgia, further driving the expansion of the group's upscale brand across Europe, the Middle East & Africa (EMEA). The Radisson Tbilisi City Centre is set to arrive in Georgia's capital in 2021.

Georgian Airline - Georgian Airways added flights in the directions of Batumi-Yerevan-Batumi. It also increases the frequency of flights from Tbilisi to Yerevan.

attended college in Tbilisi and started making her own wine just four years ago. She was named to Forbes' 2019 30 Under 30 Europe list on Tuesday.

Produce in Georgia reached the Agreement Hollywood Film to be filmed in Georgia

Kakhaber Vepkhvadze appointed as the New Director of Magticom The largest mobile operator of Georgia - "Magti" has a new director.According to the Business Registry, Levan Vashakidze was replaced by his deputy Kakhaber Vepkhvadze.

With the intensive work of the Agency "Produce in Georgia", the purpose of the project was implemented and one of Hollywood's films will be shot in Georgia. Nominal Coins to be discovered at Gonio Fortress During the archeological diggings, 7 silver and 2 bronze coins are discovered. As experts note, one, with the name of Septimus Severus, is produced in 210 and is conferred to the nominals of the rare discoveries. As specialists say, the detailed information will be revealed after cleaning the coins. Revenue from International Trips in 6 month reached USD 1.5 Billion

Georgia set to import Wheat from Kazakhstan Minister of Economy and Sustainable Development of Georgia, Natia Turnava, held a meeting with the Chairman of the Board Rinat Akberdin and the Director Nurbek Daibekov of the large Kazakhstan state corporation – the Prodcorporation. Import of the Kazakh wheat to Georgia was the main topic of the meeting. Georgian Wine Entrepreneur featured on Forbes Top 30 Under 30 List Baia's Wine - one of the most coveted labels coming out of Georgia today. It's helmed by 25-year-old Baia Abuladze, a fourth-generation winemaker who grew up on the family farm,

The revenue from international trips in the first 6 months of the year reached USD 1.5 billion which is an increase by 7% in comparison to the same period of 2018 – National Tourism Administration of Ministry of Economy and

QuickCash AI to become a Winner of Emerging Europe Awards Georgian Financial Technologies Company QuickCash AI is a winner of "Innovation Initiative 2019" and has become a member of the first trio. Adjarian Khachapuri appeared in Argentine Popular Food Network Buenos Aires's prestigious restaurant network offers customers Adjarian Khachapuri. Traditional Georgian dish has already appeared in the menu of Almacén de Pizzas.


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Danish Artist illustrates Different Aspects of Georgia to encourage Tourism

Danish artist Livija Viksna Yde is working on illustrations series about Georgia, that shows gained impressions after living there for two years. Her works exhibit all kinds of insights like Georgian wine, youth in Georgia, cuisine, nature, celebrations and daily life in general. As the artist explains, she was encouraged to work on this series after current events occurred, thus joined the campaign ''Spend your Summer in Georgia'' as an advertisement to visit Georgia. ''I wanted to present Georgia for possible tourists who have not decided where to spend their summer yet, by showing different aspects of the country. It felt natural to join the tourism campaign because I have another ongoing series about Georgia where I am also presenting the country to people who are curious about it, however, that series is so far more focused on architecture, legends, and political stories, and my approach is not so touristic. In this current series, I have tried to make the best touristic presentation I could in a very small amount of time. Because everything was (and still is) happening so fast in Georgia, I was working very dedicatedly on it. I also wanted it to show the best of the country, but still keep it minimal without exaggeration - people tend to ignore or forget things if there is too much of it, and when you are deciding where to go on vacation I think you should just present it short and sweet. I have tried to make the series a little bit funny. For instance, in my presentation of the alphabet, I show it as graffiti on the wall, which is very characteristic of Tbilisi. The sentence I wrote is an old Georgian folk song and it is means “If you say something bad about us, we will cut your heart out with a knife”. The folk song is a very positive song, the lyrics are so tempestuous, and I think it catches the spirit of Georgia very well - people sometimes say some really strong things, but they mean it with love, and maybe you should not take offense. Another way I have shown the spirit of Georgia is in my presentation of Georgian art, where I added the legend of artist Pirosmani, who sold everything he owned to buy flowers for a girl he fell in love with. I think this story presents Georgia as a whole because when people love

you, they really love you with their whole heart. I have an ancient church which is on the UNESCO List, but at the same time I thought it was important to show a more modern and youthful aspect of Georgia, so I have the festival 4GB which takes place on a space rocket factory. It is for electronic music, which is a genre that has become very popular in recent years in Georgia, and which captures the very hopeful and progressive spirit of Georgian youth. I was discussing the color scheme with some people. Normally I would say that the colors I use are not so “catchy”, actually I was suggested to work more in grayscale, and I am also intending to do so. But because this is a touristic advertisement concerning people from all over the world it had to look very “tasty” and cozy, so people seeing it would immediately think: “Wow, Georgia looks like a nice place, let’s go there!”. Putin’s flight ban was quite shocking, so of course, I wanted to support the campaign, there was really no other way. I have some other projects which I am working on but put everything aside to work on this series. For me it is really upsetting that he does something like this, it is really obvious that it is to hurt Georgia’s economy. In Russian media, it is presented as if demonstrating Georgians are crazy and hate Russians when in reality they are fighting for their rights. I myself have spent a lot of time in Georgia, and I loved the country. I made many great friends there, I was always very warmly received, the nature is so beautiful and you are never bored there. Personally, I recommend that you go! I did not expect my series to be so popular, but I am really happy that it happened. Georgia is like a second home to me, so it is really important for me to support the country. By Nina Gomarteli


Trump: HUAWEI will be able to use American Products again

President Donald Trump said he’ll allow Huawei Technologies Co. to buy products from U.S. suppliers, in a concession to China after talks with the country’s President Xi Jinping, „American companies are again allowed to sell their products to HUAWEI“ - Trump said at a news conference following the Group of 20 summit in Osaka, Japan. „There is not any major problem of national importance. Many top companies operate in the USA, which launch the leading technological equipment

each year. Therefore, we will let them cooperate with HUAWEI and the restrictions will be lifted“, reads the statement. However, the American President does not specify the names of the companies yet. Their list is expected to be published soon. Ren Zhengfei, the Founder and Executive Director of HUAWEI, has commented on Trump’s statement. „The statement of President Trump are good for American companies. HUAWEi is also willing to continue to buy products from American companies“, Mr Ren said in

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a statement to the Financial Times. „But we don’t see much impact on what we are currently doing. We will still focus on doing our own job right“. In the first quarter of 2019, HUAWEI increased the volume of sales and even exceeded the sales of the world-leading Apple Company. Based on the given data, HUAWEI is driven and expected to also overtake Samsung in this respect by 2020. However, restrictions imposed by the US Administration, which came into force on May 16, contributed to the minor changes in the company’s plans. Negotiations between the USA Administration and the representation of HUAWEI are consideration currently, with the hope that HUAWEI smartphones will be able to regain the permit for receiving the Android system updates. HUAWEI products and services are available in more than 170 countries and are used by a third of the world's population. There are 16 research and development centers operating worldwide in the USA, Germany, Sweden, Russia, India and China. HUAWEI Consumer BG is one of three business units of HUAWEI, mainly focusing on the production of smartphones, personal computers, tablets and cloud services. The HUAWEI Global Network is based on 20 years of experience in the telecommunications business and serves the production of innovative technologies to customers around the world.

HUAWEI Founder: We are cooperating with US Partners again

HUAWEI founder and executive director Ren Zhengfei spoke with international Internet edition CNBC about HUAWEI's future development and relations with American partners. In the interview, Zhengfei emphasized the contribution of American companies to the development of HUAWEI: „Partnership with them is very important for us, and this cooperation counts already 30 years. The relationship and partnership between the two parties are above the politics“. During the interview, the HUAWEI executive director paid special attention to Google, noting that if HUAWEI does not use an Android operating system, Google will lose 700-800 million users, which is a huge loss. Consequently, continuation of their partnership is in the interest of both companies. „HUAWEI orders chips from American suppliers. Our

partners are doing their best to fulfill their obligations and seek to obtain a permit from Official Washington. If there is agreement, HUAWEI will continue purchasing American chips. Even if HUAWEI does not get enough products from its partners, the company in any case has its own resources to produce them itself“, said Zhengfei. The HUAWEI founder also noted that such radical actions and attacks were not expected from the US government, yet the company was able to prepare for a hard time. According to Zhengfei, in the next few years, the volume of production may be reduced and the income from sales may be less than the expected figure in 2019 - up to $30 billion less. However, it is expected that in the near future, the company will return to growth rates and offer even better services to society. „On the background of current developments, I'm amazed by the efforts of our staff: they have become

more energetic and work more than ever. We will together do our best to win this sanctions battle“, he stated. Speaking about cyber security, Zhengfei noted that years of experience have proved the company's credibility. „HUAWEI is responsible for providing connectivity between 3 billion people, connecting banks, business and government. Over the past 30 years, 170 countries have been given access to HUAWEI services and this link has never been violated, which makes it very clear for network security“ - noted Zhengfei. He also touched upon intellectual property issues and noted how important it is for a company’s development to respect ethical standards. “HUAWEI has always operated with appropriate ethical standards, even when it was a small company. Simply put, HUAWEI could not be what it is today without strong business ethics,” he told CNBC. Speaking about the development of the sector and the sphere, Ren Zhengfei emphasized one of the main directions that will be further developed in the coming years. "Artificial intelligence (AI) will be the main driving force for people over the next 20-30 years. AI strengthens human capabilities but does not change them. Society is getting more and more complex; challenges are more serious, and in the future, some tasks will be directly regulated by AI. We need to be tolerant towards innovations. AI is not something negative: it's a continuation of people's capabilities,” the HUAWEI founder said. To close, he touched on HUAWEI's smartphone sales forecasts. “Initially, sales fell by about 40%, but this process was quickly regulated, and the indicator has already decreased to 20%. So the situation will improve little by little. Do we have another way of development? To tell the truth, I have not thought of such a thing yet. We believe in only one road and follow it step-bystep - we will not stop until we reach the peak of our industry!”


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