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February 18, 2019 - www.cbw.ge

#271

WEEK

Georgia Meets Pension System Reformation Unprepared p.2 TBC Bank Chair and Deputy Chair asked to Resign from Unit by Regulator

p.4 As Visitor Inflow Declines, Tourism Sector Revenues Grow

p.6 Payment for Labor How Much Salaries are Paid in Armenia, Georgia and Azerbaijan p.10 Russian Threats in Georgian Economy


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TBC Bank Chair and Deputy Chair asked to Resign from Unit by Regulator TBC Bank received a letter from National Bank of Georgia (NBG) with the request that the head of the supervisory board and deputy head of the supervisory board leave the board membership within two months.

Georgia’s Annual Income Per Capita Increased Georgia ranked the 8th in the world by the revenue growth per capital within the last 20 years (1998 – 2018) but despite this, Georgia is still a low-income country. Both circumstances are interesting, the 1st – how we turned out on the 8th place and the 2nd – if the country is one of the leaders of 2 decades, why has not Georgia become rich, – Forbes.ge reports.

Visa-Free Agreement on ID Card Travel between Ukraine and Georgia to Come into Force on March 1

Georgia’s Revenues from Tourism Sector in January made up 164.5 million USD

Georgia and Ukraine have agreed to provide their citizens the opportunity to travel between the two countries without a passport, only using ID-cards that contain a contactless electronic carrier. The agreement will be effective from March 1, 2019.

In January 2019 revenues from international tourism made up 164.5 million USD, up 8 million USD year on year (+5%).

Georgia rejects 100 million EUR Assistance Program by EIB Georgia has refused the 100 million EUR agribusiness project approved by European Investment Bank (EIB). Polish Gembiak-Mikstacki plans to make Investments in Georgia The mentioned information was released at the business forum in Poland. The Doing Business in Georgia forum was held in the city of Poznan on February 12. The event was organized by Foreign Ministry of Georgia, Georgian Embassy in Poland and the Vielkopolska Region Development Fund.

Three Companies Interested to purchase Georgian Post Three companies are interested in acquisition of Post of Georgia, the company director general Levan Chikvaidze told BM.Ge. The value of Georgian Post will be specified by the audit, Chikvaidze said.

GALT & TAGGART forecats $3,6 Billion Income from Tourism Sector According to GALT & TAGGART’s prediction, Georgia’s income from tourism will amount to $ 3.6 billion in 2019.

28 Schools to be Built and 83 Rehabilitated throughout Idea As Georgian Prime Minister Mamuka Bakhtadze stated at the briefing before today’s Government meeting, 28 schools will be built and 83 will be rehabilitated throughout Georgia. The project involves 50 million GEL worth of work.

Giorgi Shvelidze won Main Prize of American Cinematographers Society On February 9, American Cinematographers Society Award – ASC Awards took place for the 33th time, and at the 100th anniversary of the event, the film Namme’s camera man Giorgi Shvelidze won the main prize.

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;


Why is a Powerful Processor Important in Smartphones & the Advantage of HUAWEI Recent successes have demonstrated that overcoming challenges and offering innovations to consumers has become HUAWEI’s distinctive calling card. HUAWEI's flagship models, created with high quality artificial intelligence, a powerful battery and unique charging function, continue to convince us that the company is the leader among smartphone manufacturers. A few years ago, when HUAWEI entered the Georgian market, focus was put on budget models, in 2015-2016 on average price, and now the spotlight is well and truly on HUAWEI’s flagship models. Compared to other brands, HUAWEI’s superiority is proven through its high-quality products, modern design and ideal combination of technical data and affordability. In Georgia, as in other countries, smartphone users are divided by taste: for some the most important consideration is price; for some, brand and prestige; for others the technical characteristics are paramount. HUAWEI uses its own Kirin processors in its smartphones, turning their phones into faster and more customer-oriented devices. The first flagship smartphone in the budget segment was the HUAWEI Honor 8 with a Kirin 950. Later, the first HUAWEI P10 and HUAWEI P10 plus appeared on the market – with a faster charging function which allowed the battery to work a whole day on a 30-minute charge thanks to the 8-core Hisilicon Kirin 960 processor made by HUAWEI. This was followed by the HUAWEI Mate10 Pro and HUAWEI Mate10, with artificial intelligence based on the Kirin 970 processor, which ensured quick and uninterrupted operation of mobile functions and

maximally saved the user's time and energy. That's why the powerful 4000 mm-amperes battery became one of the main features of the fastest smartphone which, with the Kirin 970 processor, works for two days in standard mode. The battery charges to 20% in just 10 minutes and up to 58% in only 30. The HUAWEI Mate10 Pro screen is equipped with an IP67 protection quality that ensures waterproofing for up to half an hour in water up to 1 meter in depth. One of the key features of the HUAWEI P series smartphones HUAWEI P20 and HUAWEI P20 Pro is the Kirin 970 processor that provides the highest efficiency, speed and stability of the system. "We are entering a new era of technology, one of the main features of which is artificial intelligence, which brings us completely new opportunities”. The new Kirin 980 processor welcomes a new era of mobile technology and artificial intelligence development. The world's most powerful nanoprocessor, the Kirin 980's capacity exceeds that of its predecessor by 70%. Compared to the 10nm processor, the 7 nm processor brings 20% more efficiency and consumes 40% less energy. The HUAWEI Mate20 and HUAWEI Mate20 Pro are equipped with the Kirin 980, seeing the quality of smartphones improved at a lower energy consumption. In 2017, HUAWEI showed the world the opportunities presented by the microprocessor Kirin 970. In 2018, the company offered users an upgraded processor - Kirin 980, characterized by distinctive capabilities in correspondence to artificial intelligence and innovative capabilities in general, which astonished HUAWEI loyal consumers.

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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 HUAWEI's three business units, mainly focusing on Smartphones, personal computers, tablets and cloud services. HUAWEI Global Network is based on 20 years’ experience in the telecommunications business and serves to provide innovative technologies to customers around the world.


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As Visitor Inflow declines, Tourism Sector Revenues Grow Georgia’s Revenues from the Tourism Sector in January Constituted 164.5 Million USD In January 2019, revenues from international tourism made up 164.5 million USD, up 8 million USD year on year (+5%). Note that in January 2019, the inflow of interactional tourists declined by 0.1%, but the number of tourists increased. As a result, revenues increased. According to the national tourism administration, January of 2019 recorded 487 fewer visitors as compared to January 2018. A total of 529,165 visits were registered in January 2018, and the figure declined to 528,678 visitors in January 2019. The reporting period recorded a contraction in one-day visits, too. A total of 151,0040 one-day visits were registered in January 2018, and 131,279 one-day visits in January 2019. At the same time, the number of tourists rose by 5.9%, and totaled 305,939 ones. According to the tourism administration, at the beginning of the year, the inflow of Iranian tourists shrank considerably. In January 2019, as compared to the same period in 2018, the inflow of Iranian visitors declined by 41%. In January 2018, a total of 14,322 visits were carried out from Iran to Georgia, but the figure stood at 8,424 in January 2019. At the same time, the number of visits declined from Azerbaijan by 3.4%, from Armenia by 5%, from Turkey by 20.2% and from India by 5.9%. From among the top 15 countries, international visits increased from the Russian Federation by 16.8%, Ukraine by 3.6%, Israel – 132.1%, Kazakhstan - 35.9%, Philippines - 29.8%, Germany - 46.6%, the USA – 31.5%, Saudi Arabia – 72.7% and Poland – 130.5%. The so-called swine flu is named as one of the key factors behind the declining inflow of visitors from Iran. The Iranian Foreign Ministry has urged citizens of Iran to abstain from visiting Georgia. Moreover, in 2018, a total of 3,224 citizens of Iran were not admitted to the country. As a result, the Government of Iran expressed serous discontent. On December 10, 2018, the speaker of the Foreign Ministry of Iran, Bahram Kasemim, told reporters that citizens of Iran had received clear recommendations to abstain from visiting Georgia. According to Iranian media agencies, this was the official response of Teheran to the steps taken by the Georgian authorities. Along with the decline in tourism inflow, the frequency of flights from Iran halved in January. According to the Civil Aviation Agency of Ministry of Economy, a total of 38 flights were made from Iran to Georgia in January 2019, while the figure made up 71 in January 2018. According to the agency, at the end of 2018, the

frequency of flights was growing. In NovemberDecember 2018, a total of 132 flights were made from Iran, up 11 flights year on year. At this stage, two airlines perform regular flights from Iran to Georgia. Note that, according to the 2017 report, the averaged expenditure of international visitors per visit made up 889 GEL, while citizens of Iran spend 1812 GEL on average. “In January 2018, revenues from the tourism sector rose by 25%, while this year growth was marked at 6%. The declining number of visits from Iran is reflected in the number of tourists, as the inflow from Iran decreased by 41%. At this stage, the inflow of visitors from Iran has dropped to the 2017 level, when about 8,000 visitors were arriving in Georgia from Iran, but the figure rose to 30,000 visitors in 2019. And all these factors will influence the pace of growth in the first quarter of 2019”, Eva Bochorishvili, head of the GALT&TAGGART reporting department, said. According to preliminary indicators from the National Bank of Georgia (NBG), in 2018, revenues from international tourism made up 3.2 billion USD (up 18.4%), up 498 million USD year on year. According to the 2018 January-September report, revenues from international travel made up 2.571 billion USD (+20.5%), up 437 million USD year on year. It should be noted that in 2018, foreign visitors spent 2.1 billion GEL via credit cards. Transactions of 2.122 billion GEL were made by payment cards issued by nonresident banks in Georgia, up by 63 million GEL compared to the same period of 2017. Foreign visitors spent 2.059 billion GEL via bank cards. In 2018, the country hosted more than 8.5 million international visitors and 4.7 million tourists. At the same time, in January-November 2018 (according to the newest attainable information), Georgian citizens spent 1.6 billion GEL by credit cards in foreign countries, up 31% year on year (1,217,737,000 GEL in January-November 2017). The year on year growth constituted about 1.8 billion GEL. It is interesting that more than 4.7 million tourists spent 2.1 billion, while a country with 3 million citizens has spent almost the same sum abroad. This signifies Georgian tourists spend much more abroad than foreign tourists spend in Georgia. By Merab Janiashvili


Georgia meets Pension System Reformation Unprepared The government of Georgia has launched a partlymandatory contributory superannuation system on January 1, 2019. The Parliament adopted the due law on July 21, 2018. After system enforcement, the special pension fund will manage the savings of Georgian citizens. The aforementioned money will earn a certain yield, and Georgian citizens will get back the accumulated money after retirement. The objective of the reform is to shift the burden of pensions onto citizens from the state budget, and this reform covers a quite long period – 40 years or more. Under the project, the pension fund will collect 6% from monthly salaries, of which 2% will be covered by the state, 2 % by employees and 2% by employers. The country has met the process of pension system reformation unprepared, Zurab Lalazashvili, a managing partner for BDO, noted. The pension agency must be staffed with qualified specialists to successfully implement the reforms, he said. Our people should make sure that their savings will be managed reasonably, they will receive benefits and their savings will not be lost in a long-term perspective. “At this stage we have regulations, but we do not see specific steps. Therefore, it is difficult to make conclusions. The process may be developed very well. Let’s see what happens. However, I would also like to note that technical problems have already appeared. Prior to system enforcement, I was saying that we had a situation we were unprepared for. Neither infrastructure nor people were prepared. And they were assuring us that everything would work”, Lalazashvili noted. The regulation should include a formula for calculating pension savings, he added. “There is an entry and under the regulation, pension fees must be paid, and all sources that are identified as salaries. But there are cases when the issued money did not represent benefits of this nature, but they are identified as benefits anyway. Similar cases are taxed by income tax, and legislators have affixed pension fees to the income tax. As a result, we have received many cases that seem unjust”, Lalazashvili noted. In response to the question of whether the country has met the new pension system reforms unprepared. Lalazashvili goes on to explains that the idea of creating the pension fund is right in itself, because it can bring positive economic results in the long-term perspective. Despite this, it should be noted that the current situation in terms of pension system reform, leaves the impression that the country has reached this step unprepared, he added. Lavrenti Chumburidze, head of the Georgian Federation of Professional Accountants and Auditors, says that pension system reform was an inevitable and necessary decision, but the existing format has many defects, and the current format should be revised. “The country has met this process unprepared. There are technical problems, but these problems are resolvable. In general, when making a system analysis, I have the impression that many aspects are structured for attracting as much money as possible. I can name two samples: problem 1 – why is it necessary to sign a contract with a person in the case of single-time

cooperation, and to pay a single-time fee? This is the wrong way. Problem 2: - payments should be optional for citizens over 40 years old, but they are obliged to pay for 3 months, and only after three months can they withdraw from the system. The authorities were to give these 3 months in advance for planning”, Chumburidze said. The current pension scheme raises a lot of questions, he added. Natia Tsipuria, an accountant for the Caucasus Road Project company, also talks about defects in the pension system reform project. The disordered website is the least problem, she noted. It was desirable to provide all the information, and only after that, launch the process, Tsipuria explained. “It is not surprising that the website does not work in order, because it should be balanced. This problem is resolvable. In reality, the major problem is that a lot of employees protest against their involvement in the system, because they do not trust it. This system should have been optional, not obligatory. This is a very serious moment for the company, because employees frequently protest that they have no interest in the pension fund, and they want to take salaries without salary deduction”, Tsipuria said. Another problem consists of the invaluable operation of the agency, because the agency personnel cannot provide valuable answers to people, she said. “The process caused chaos from the very beginning, and companies had to submit declarations every day. Representatives of companies were calling the agency to learn when to submit declarations and pay the due sum, but the agency personnel answered that payments were to be carried out after the issuance of salaries. And people had to submit declarations chaotically, and this is stupidity”, Tsipuria said. Pension reform problems are discussed on the social network of Facebook, too. Namely, members of the group “Forum on Tax Issues”, who are mainly accountants, write that the existing state of the pension system reform is unacceptable. The Caucasus Business Week (CBW) submits comments by several accountants: “This reform was launched at the wrong time. They were supposed to ask people. It is unclear where these sums go, and who is responsible for returning this money, if nothing to say about the disordered website, where operators give different and inaccurate answers and so on”. “The major problem is that we do not know the exact time for submitting a declaration. The agency provides different answers at various times. They say that we should submit declarations on salary issuance day, but maybe I have problems with the internet, must I pay a fine? It took 2 days to complete uploading a declaration on the website. There should be an option for correction. Maybe I was not supposed to indicate to one of the former employees, and I submitted his declaration by mistake. There are a lot of similar things. “I can explain what I do not like: 1. The law on the pension fee is unconstitutional, because it is not a tax, under the law, but citizens are obliged to pay it. This signifies they have added the function of a tax to the pension fee 2. This money is remitted to the agency account, not to the state treasury. Therefore, the responsible body for returning the mentioned sums is the Pension Agency, not the state, and this factor generates distrust in the society. If the agency fails to appraise the risks and loses the invested funds, the government may call the agency management to account, but nobody will return the lost or embezzled funds. 3. The abolished pension and social tax and the practice of appropriating funds in previous years gave grounds to think that previous precedents may be repeated. 4. The agency has not introduced a wellbalanced program for long-term perspective, with the mechanism for returning the accumulated funds. They have introduced a superficial and unsubstantiated program. In a lot of European countries, the authorities have debts before pensioners, and pensioners cannot fully receive the funds accumulated by them because of the absence of money, and it is unclear what roles the agency has in Georgia amid our unstable economy? 5. The pension law conflicts with the tax code, and it is not represented in the declaration forms of other taxes and

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therefore, it generates difficulties in the process of submitting a declaration. I am saying nothing about the disordered website”. Levan Surguladze, the Pension Fund director, disagrees with the aforementioned considerations, as if the country and the pension agency meet the reform unprepared. He told the CBW that the initial stage revealed technical problems, but they will be removed in the near future. “All systems work in order. The agency has met the process ready, and launched operations in a legal timeframe on January 3, 2019. There were a lot of calls, and we have answered all of them. We did not expect such activity. Today, the call-center is represented in a wider format. As to the disorders in the system, this is a new system, which works in an overloaded regime. It took two days to move to the renewed version of the website and this process caused certain problems. And now all these problems are removed. At this stage, personal accounts are generated by the system. This is a single-time process. Personal accounts will be generated for about 700,000 persons. This process requires computer resources, and we plan to strengthen these resources. We have already purchased two powerful servers, and in early March all technical problems will be removed”, Surguladze said. As for public trust and the lack of information, Surguladze says that there was a certain information vacuum, but the agency has been working on an intense regime since December. Training courses are being held for accountants. We have already trained 600-700 accountants, and this process continues. We plan to hold trainings in the regions too, the Pension Agency director noted.


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According to Geostat, the national statistics service of Georgia, in Georgia the averaged monthly salary makes up 1125.5 GEL. There are the following high-paid sectors in Georgia: • Finance and insurance sector – 2354.3 GEL (26.5% annual growth). • Vocational, scientific and technical directions – 1867.9 GEL (8.6% annual growth) • Information and communications – 1785 GEL (18% annual growth). It is interesting that, according to the 2018 indicators, men receive much higher salaries (1360.6 GEL) than women (851.9 GEL). It should be noted that today 38% of able-bodied citizens of Georgia receive salaries and about 12%-13% of ablebodied citizens remain without stable incomes. What situation do we have in Armenia in this direction? According to the statistics office of Armenia, the lowest salary in Armenia starts from 55 000 Dram, that is about 115 USD. The finance sector is the high-paid field in Armenia, like Georgia. Averaged monthly salary in Armenia’s finance sector is 350-370 thousand Dram that is 700-850 USD. Like bankers, insurance sector, brokers, traders and credit consultants,

h c u M a, w ni o e H m n r r o n A ija b a di a L b r r i e a o f e P Az t n ar nd e m ies a a y Pa alar rgi S Geo

high salaries are issued in the mining field. The highpaid

contracted military service is very popular in Armenia. For example, a common soldier in the armed forces of Armenia receives 250 USD, middle rank officers – 191 280 Dram (400 USD) and a general receives 580 000 Dram, about 1200 USD. Lower salaries are reported in the service sector. Minimum salaries of employees at hotels and hostels start from 180200 USD. The same situation is reported in agriculture sector and

secondary schools. At the same time, high salaries are issued to IT specialists. In this field salaries start from 380 00 Dram, that is about 800-900 USD. According to the statistics service of Azerbaijan, in 2018 minimum salaries constituted 538.8 Manat, that is about 316 USD. High-paid sectors are as follows: oil and gas extraction sector – 3 185.2 Manat (about 1800 USD) - state sector (2 220 USD) and private sector (2 200 USD).

Finance sector – 817 USD in state sector and 934 USD in private sector. Technical field ranks third in terms of salaries – 562 USD a month on average. It is worth noting that, according to the 2018 indicators, 1 538.2 million citizens of Azerbaijan take salaries, including 887.2thousand citizens in state sector and 651 thousand citizens in private sector. The oil and gas extraction field employs 33.6 thousand citizens of Azerbaijan. By Zurab Khachapuridze


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Museum of Illusions to open in Tbilisi – New Space for Visitors A Museum of Illusions will open in Tbilisi soon. This will be a unique, interactive space with interesting visual and educational experience for visitors. The museum combines optical, perspective and other illusion and puzzle rooms, where adults will be able to participate in didactic games. In other words, at this Museum you can laugh, scream, take photos, and do anything forbidden in other museums. Natali Ananiashvili, Marketing Director the Exhibition Space noted that the museum will open at Betlemi Street N10, and offer about 80 illusion-based exhibits to visitors. The Museum’s concept radically differs from the classical conception of a museum, and this is a new type of unique space for the public . “Visitors are able to get information on human sight, perception and science through attractive and entertaining installations at the Museum. The space also includes a game room and a store of souvenirs, where visitors of all age categories are able to play games, compete with each other, learn new games, and buy original gifts, basically wooden gifts for memos and motility (didactic toys and puzzles), which develops and stimulates creative thought”, Natali Ananiashvili said. The Museum is designed for all age categories and generations. The museum also allows visitors to hold birthday events for children aged 5-15. The birthday event program includes a tour of the museum, didactic games, puzzles and so on, Natalia Ananiashvili said. The Museum also offers to host corporate events, meetings, presentations. It should be noted that the Museum of Illusions is considered a rapidly growing place for education and entertainment worldwide. They have been built in 14 cities, and in the future 8 new branches will

open, including in Tbilisi. “The Tbilisi Museum of Illusions is a part of global project on the Georgian market. The museum concept remains unchanged for every country. It represents exhibits equally in all countries. Only the sizes of the museum format differs. In comparatively smaller museums, there is not enough physical space for all rooms or attractions. The museum’s space is 250400 square meters. The Tbilisi Museum will offer a collection of represented exponents from its major space”, Natali Ananiashvili said. This Museum will open in Tbilisi, because the country lacks locations where people are able to spend their days off in a pleasant and distinct environment. “At the same time, there is much interest in Georgia in the tourism sector. Two key ideas, based on the domestic market and audience survey, have led us to open this museum. We needed the existing and successful model. Then we explored various samples, visited them and we contacted the authors of this idea, visited the Zagreb Museum, explored the statistics of the country, and took the decision to become a member of the Museum of Illusions. The general collection of the museum accounts for about 80 exhibits, and visitors are able to see the full assortment at the Tbilisi Museum. The collection is renewed on a permanent basis. All museums, including Tbilisi and other franchised locations , must follow these renovations

and offer new effects and puzzles from time to time”, Natali Ananiashvili noted. The visiting hours will be from 10 to 22 o’clock every day, she added. Note that the first Museum of Illusions opened in Zagreb in 2015, following a 2-year preparatory process, a market survey, creating exhibitions. It turned out that the Museum of Illusions is the most rapidlygrowing network worldwide, with more than 80 unique visual and educational installations, adapted to domestic and tourism segments from any age category. At this stage, a Museum of Illusions functions in a lot of cities, including Ljubljana, Vienna, Muscat, Belgrade, New York, Toronto, Berlin, Athens, Dubai, Hamburg and so on.

The Tbilisi Museum of Illusions is a part of global project on the Georgian market.


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Gocha Archvadze: "Technology's Progress is very Important for Marketing Development" Interview with Head of Marketing and Network Sales at LTD GFC KULA, Gocha Archvadze. Tell us about how you got into the field of marketing, and what factors played an important role in choosing this profession? I’m a food machinery engineer by education, my first job was in this field. As for marketing, it’s an acquired profession, which is to Kula’s merit. I’ve work for this company since the very first day, it’s already been 10 years. I took the position of Distribution Head at first, and got into marketing without any initial intention. I got into this field, and started to attend seminars, trainings. I learned a lot of interesting things about marketing and most importantly, Company Kula’s director Mr. Vano Goglidze shared precious knowledge to me. In regards to technological changes, what challenges do you face as a head of marketing service? Internet-marketing, marketing systematization, that’s where most challenges are. The progress of technologies is very important for marketing development. What has changed in the last 5 years in the field, and what changes are expected now? Once again, digital marketing has caused a lot of change, and we should expect novelties in this direction. What important features should a marketing manager hold their focus on, and what are their roles in an organization? The role of marketing manager is very important in the organization. Most importantly diligence: it’s hard work to create a product and it takes even more to sell it. A Marketing Manager and, not only marketing, a General Manager, should have all the good qualities,

and should always try to acquire and develop new and lucrative features. What steps did you take, as an organization, to catch up with new trends, and use innovative approaches in the field of marketing? Trainings, exhibitions, master classes, conferences in and out of Georgia, we try to catch up with marketing and general technological or informative changes and advances. What’s your organisation’s business model in terms of marketing? Introducing innovations, creating the kind of product that’s only available at your company. Our customers know about this very well, as we constantly spoil them with novelties, that’s why they look forward to news from us. Meanwhile, we shouldn’t forget about the most important - unchanging high

quality. Another important issue is price, so we have decided to divide into segments and focused on the cheapest segment. However, this hasn’t been reflected in the quality, but by reducing packaging expense. The company always tries to make our product available to all segments of the userbase. One word that describes your work. Interesting. The most useful advice you’ve ever received in life? Move only forward, whatever happens, even with small steps towards your goal. Who inspires you the most? Philip Kotler.


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Business News

Average Wages of Employees Citizens in Georgia

ny “Lisi Development” (JSC “Lisi Leak Development”) with BB rating. At the same time, Scope Ratings GmbH renewed company rating forecast for B + positive perspective.

Average monthly salary of 46% of employees in Georgia is below 400 GEL, while 1% of Georgian citizens receive more than 8 333 GEL salary a month.

Tech Park to open in Adjara “Government of Autonomous Republic of Adjara pays special attention to youth, students, innovations and technologies. Therefore, in the near future TechnoPark will open in Adjara to provide new opportunities for young people”, Tornike Rizhvadze, head of Adjara Government told Business Morning.

French Luxury Bakery Ladurée opened in Tbilisi Georgian customers will have the opportunity to enjoy French taste in “Ladurée” restaurant since February 2019, on Abashidze street # 21a.

BetLive Turnover exceeds 277 million GEL Annual revenues of the gambling business in Georgia exceeds 4 billion GEL. Major representatives of the mentioned field started publishing their financial reports.

Trading Space opens for Georgian Products in Belarus

Hari – How does the First Georgian Application for Companion Traveler Work? The first Georgian application for Companion Traveler has been developed, the idea author Nika Bazadze told BM.GE. The startup was introduced about 1 month ago. The application is for the drivers without commercial purposes.

The Center of Georgian Culture will open in Minsk, the capital city of Belarus, where Georgian products will be sold. The Government of Georgia will spend 600 000 USD on repairing and equipping the building, which will be managed by Georgian Natural Products, subsidiary of Partnership Fund of Georgia. This Belarus-incorporated company will work on popularization of Georgian products.

Scope Ratings GmbH awarded Lisi Development with BB Rating Georgia to use Blockchain in Public Sector on Wider Level Prime Minister of Georgia, Mamuka Bakhtadze speaks about the necessity of integrating blockchain in public services on a wider level. Georgian International Insurance Conference takes Place in Tbilisi Georgian International Insurance Conference, the most important event on the Georgian market dedicated to insurance and reinsurance, and a top-level platform for the exchange of business insights to take place in Tbilisi.

International rating company Scope Ratings GmbH awarded the real estate developer compa-

Patrick Franzen: Blauenstein Georgia to open New Store in Tbilisi Georgia-Swiss company Blauenstein Georgia plans to open a new store in Tbilisi, plenipotentiary ambassador of Switzerland in Georgia Patrick Franzen noted.


10 February 18, 2019 #271

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Wood and Furniture Sector Overview

11 February 18, 2019 #271

According to National Forestry Agency, the total area of Georgian forest fund as of April 2015 is 2.8 million hectares, or 40% of the territory of the country. This is quite a high figure as the world average is 27% and for Georgia neighboring countries it equals to 15%. From 6500 different varieties of barked trees in the world, 4100 can be found in Georgia, half of which are endemic (for example Eastern Spruce, Georgian elm, Megrelian Birch, etc.). 153 from them is only characteristic for Georgia (average number for European countries is 63). The biggest part of the whole forest fund (43%) consists of Beech trees.

local customers than natural wood, but still, wooden furniture is widely demanded by middle and upper class locals. There are more than 700 wood processing plants and more than 200 furniture producer companies in Georgia. Most of them are local micro and small enterprises but there are foreign companies from China, Iran and other countries too who are actively operating in this sector.

As it can be seen, import amount grows annually since 2015 on average of 15% per year. Main imported wood products are particle board (HS code 4410) and wood fibreboard "MDF" (HS code 4411) used for furniture manufacture, Plywood (HS code 4412) and wood in the rough condition (HS code 4403) for construction purposes. There is no import or excise tax on wood in Georgia and to reduce legal and illegal wood cutting in the country and to stimulate import processes, the government also plans to implement a new regulation and release imported wood from VAT. The main destinations for exported wood are Iran, Italy, Turkey, Austria, Russia and Saudi Arabia. A Short term and long term license to forest use for wood processing works on the territory of Georgian government is issued by the State Forest Agency of the country. It is issued to the tender or auction winner person/company by the Chairman of the Agency or by the person authorized by him. To export wood products from Georgia, a person/ company shall provide the document proving the origin of the product to the customs. It can be a document proving a purchase or a license, if a company already owns one for wood cutting and processing works. No additional permission is required. All other documents are general ones for all kinds of products going for export.

Wood Processing Furniture Importer Plants Companies Hualing Group - was founded in 1988 in China entering Georgia in 2007 and since then worked in many different sectors. They are significantly contributing in development of Georgian wood industry. In 2008 company obtained wood processing license for 20 years with the right to annually process 88 000 cubic meters of wood. At present, annual harvesting volume is 30 000 cubic meters. Timber is exported from Poti port which is located near the free industrial zone. 95% of timber is exported to Central Asia, Egypt, Iran, Iraq and the United Arab Emirates and the remaining 5% is sold on domestic market. Furthermore, the end product of timber is exported to Turkey, Armenia, China and Dubai. Kazbegi-Pshaveli - The company was founded in 2003, the main direction of activity is wood processing and realization and after restoration of forest area. In 2005, company opened a wood processing plant in village Pshaveli. The capacity of the plant is 10 thousand cubic meters per year. Crp Wood – a wood processing factory was established in 2009 in Kutaisi by Caucasus Road Project. Company produces wood products for local as well as for international markets. The company offers panels and sip panels, doors, cottages, bridges and other wood solutions for different projects.

Furniture Producer Companies Wood processing and the amount of furniture produces grows annually in the country. However, the imported furniture products still take about 50% of the local market. Furniture is mostly imported from Turkey and China and wooden products are the most demanded among them. The most popular material for furniture production in Georgia is MDF which is mostly imported from Turkey. It is cheap, easy to process and more affordable for

Trade Center Saba - is operating in Georgia since 2005. Currently there are 5 furniture salons with total shopping space of 49000 square meters uniting hundreds of small Georgian furniture producers together. The trade center is projecting imported products as well but mainly locally produced products ranging from low to upper class product quality.

Georgian Furniture Cluster - unites around 30 furniture producers, self-employed artisans and small enterprises. The agglomeration covers an area of 3,5 ha, employing 1,200 people. Annual output of the cluster reaches USD 20 million, almost half of the recorded industry output. The main task of Georgian Furniture Cluster is to increase the competitiveness among cluster members and to enter into the international markets. Embawood – was founded in 1996 in Azerbaijan. The company produces furniture in Georgia since 2007. In 2008, Embawood opened the second factory in Georgia, which produces semi-finished furniture. Currently, the company has owns 7 factories in total located in Georgia, Ukraine and Kazakhstan. 31 stores are located in Georgia employing 1 200 people in total. Embawood owns chain shops of furniture with different names, such as: Embawood, Ideal Dizain, Madeyra and Dolche Noche. Randi – is a local furniture producer established in 1995. The main area of the company's activities is the production and realization of different profile furniture and doors. The company employees about 150 people.

Belux – operates in Georgia since 1997. Company's main activity is importing and retailing all kinds of furniture and home accessories from 277 manufacturers from seven different European and Asian countries. Currently there are 4 furniture salons in Georgia with total shopping space of 23,500 m2. Belhouse – the company imports furniture from 4 countries of Europe: Belarus, Italy, Poland and Ukraine. The company represents a lot of different brands in Georgia, such as: Fameg, Gamma, Paged, Dommino, Maridex, Molodechnomebel, Szynaka, Rondo, Mayerline, Bydgoskie, Swarzedzhome, Klose, Brw, Kler, Vileykamebel, Korsak, Vero, Laguna, Zov, Zlatamebel. There are three branches in Tbilisi and one branch in Batumi. Pantsilion – was established in 2002 and was initially focused only on furniture import in the country from Europe. In 2007 they opened a new factory in Georgia and started their own production. For the moment company provides both products, the imported and the local ones too to the market. Opportunities exist in several directions of wood processing and furniture production market. Country lacks high quality raw materials for an affordable price as the local production doesn’t always meet international quality standards. As many Post-Soviet countries, Georgia needs modern equipment to offer better quality products to local and international market. Only certain companies with big foreign investment are able to profit from modern wood processing machinery. Government movement to simplify the import processes, exclusion of wood products from VAT will make this sector more attractive for local and foreign investors to invest in. By Giga Goliadze


12 February 18, 2019 #271

Profile for Caucasian Business Week

Caucasus Business Week #271  

1. #Visa-Free Agreement on ID Card Travel between #Ukraine and #Georgia to Come into Force on March 1 2. Why is a #Powerful Processor Import...

Caucasus Business Week #271  

1. #Visa-Free Agreement on ID Card Travel between #Ukraine and #Georgia to Come into Force on March 1 2. Why is a #Powerful Processor Import...

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