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February 25, 2019 - www.cbw.ge



Levan Surguladze: Pensions Contributions are Safer than Other Assets

p.6 Trust is becoming a New Currency for Business and Life

p.4 Unemployment Declines

p.2 Mamuka Khazaradze: "I have made Decision to quit TBC Bank"

p.10 Prices and Georgia’s Karma

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TBC Bank’s 2018 Profit rises TBC Bank Group Plc reported a 21.5 percent jump in full-year earnings, as lending remained strong on the back of a strong macroeconomic performance.

National Bank President to deliver Speech on TBC Bank Case at Parliament of Georgia Koba Gvenetadze, president of the National Bank of Georgia (NBG), will deliver a speech on the TBC Bank case at the parliament of Georgia on February 26.

TBC Bank withdraws all Court Cases against the National Bank of Georgia TBC Bank withdraws all court cases against the National Bank of Georgia and will pay approximately GEL 1 million, which was previously requested by the NBG and disclosed by TBC PLC on 9 January 2019. In addition, TBC Bank continues to cooperate with the NBG to further improve the quality of the Bank’s corporate governance.

EIB allocates Additional 250 million EUR for Georgia’s Infrastructure Development Maia Tskitishvli, Vice Prime Minister of Georgia and Minister of Infrastructure, and the Deputy Infrastructure Ministers have met with Vazil Hudak, vice president of European Investment Bank and other representatives of the Bank.

Partnership Fund to finance Poultry Farm in Kaspi with 1.5 million USD Poultry farm construction works in the village of Metekhi, Kaspi municipality, will start in spring 2019. The farm will supply 250 tons of chicken meat to the market starting September 2019, LLC GLC director and founder Giorgi Verulashvili told BM.GE.

Georgia’s Foreign Trade totaled $ 826.8 Million in January In January 2019, Georgia’s foreign trade turnover (without undeclared trade) amounted to USD 826.8 million, which is 1.2 percent more than in the previous year.

Natia Turnava: "Georgia supports Development of South Gas Corridor" Mamuka Khazaradze: "I have made Decision to quit TBC Bank"

“Georgia supports the development of the South Gas Corridor. It is important that Europe will receive natural gas via the mentioned corridor, which will pass the territory of Georgia.

“I will spend all my energy on implementing Anaklia project, which is of vital importance for our country. I hope I will have the opportunity to complete this project. On Tuesday, as I promised to the Parliament and our society, I will attend the parliament committee hearing to introduce the case details to them in peaceful environment”.

Court of England undertakes Essential Discussion of Case – Roman Pipia against BGEO Group

Vazil Hudák: "Priority Issue is to attract Foreign Direct Investments to Georgia"

Court of England has undertaken essential discussion of the case – Roman Pipia against BGEO Group. Namely, Roman Pipa claims for compensating losses and unreceived profits as a result of illegal appropriation of Rustavi Azot by BGEO Plc. (about 944 million USD).

Minister of Economy and Sustainable Development George Kobulia held a meeting with the Vice-President of the European Investment Bank, Vazil Hudák and the accompanying delegation. Deputy Ministers of Economy and Sustainable Development Natia Turnava and Ekaterine Mikabadze also attended the meeting.

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;

George Chogovadze: "Approximately in One Year we will have One of the most Beautiful Airports in Europe" Construciton of Kutaisi Interntional Airport’s new terminal has reached the second phase. The construction site was visited by Giorgi Chogovadze, CEO of United airports of Georgia. As part of the second phase works, roofing and façade works will be fulfilled at the new terminal. The exterior works will be finished. Kutaisi International Airport will have an entirely unique green roofing, where outdoor green veranda will be arrenged, Chogovadze said. „The airport expansion works have moved to active phase. The second phase works are underway for coating and

roofing the building. Engineering systems will be arranged in the third phase. Special machineries and furniture will be installed at the new terminal. Approximately in one year we will have one of the most beautiful airports in Europe”, Giorgi Chogovadze said. The terminal landscape designing works will start soon. After completion of the construction works, the phase for connecting the new and existing terminal will be underway. As a result, the airport will have 7 Gates and serve 1000-1200 passengers an hour. The new terminal was designed by Dutch architectural company

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UNStudio. The airport development analysis was prepared by IATA consulting. Kutaisi Airport alone in 2018 transported 617,342 passengers based on data United Airports of Georgia, with this representing an increase of 52% versus the traffic throughput of 2017. The result also means that Kutaisi overtook Batumi to become the second busiest airport in Georgia.

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Unemployment Declines According to early indicators from Geostat, the national statistics service of Georgia, in the fourth quarter of 2018, the unemployment rate in Georgia rose by 0.1% compared to the previous quarter, and constituted 12.3%. As for the annual indicator in 2018, compared to 2017, the unemployment rate declined by 1.2% to 12.7%. According to Geostat, over the past 9 years, the annual unemployment rate is declining. At the same time, the lowest indicator of unemployment was recorded in 2018 over the past 15 years.

2018, as compared to the previous quarter, the unemployment rate declined by 0.4% in rural settlements. A 0.5% contraction was recorded in urban settlements. It is worth noting that the unemployment rate is higher among men. In the 4th quarter of 2018, the rate was by 2.6% higher in men compared to women. At the same time, the reporting quarter recorded a 0.3% contraction in the unemployment rate among women, while the rate increased by 0.6% among men quarter on quarter. The level of activity is higher among women compared to men. In the 4th quarter of 2018, the aforementioned indicator stood at 55.6% among women and at 72.8% among men. The indicator declined by 0.5% among women, and 1.1% among men quarter on quarter. According to Gogita Todradze, the executive director of Geostat, the unemployment rate in 2018 has declined in both categories year on year. Namely, the rate decreased by 1.1% among men, and totaled 13.9%, while the rate declined by 1.5% among women, and made up 11.2%. According to the aforementioned report, in “It is important that in 2018, for the first time in the fourth quarter of 2018, economically active independent Georgia, the number of employees residents accounted for 63.6% of all ableexceeded the number of self-employed citizens. bodied adult citizens. As compared to the At the same time, the employment structure has previous quarter, the rate of activity of our also improved – the number of self-employed population and employment rate declined by is declining and the number of hired employees 0.7%. In urban areas, employment is 0.2% lower is growing. Considering that, on average, one compared to the previous quarter, while in rural hired employee creates 2-2.5 times more value, zones the employment rate decreased by 1.3% compared to the self-employed, this change quarter on quarter. signifies that this new structure is equivalent in At the same time, the ratio of self-employed total number to the structure of employees, with in the 4th quarter of 2018 constituted 48.7% of about 50 000 self-employed�, Soso Archvadze the total quantity of the employed, down 0.1% said. quarter on quarter. According to Geostat, the unemployment rate is lower in rural areas. In the 4th quarter of

Levan Surguladze: Pensions Contributions are Safer than Other Assets Interview with Pension Agency Chief Levan Surguladze Starting January 1, 2019, The Contributory Superannuation Scheme was launched in Georgia. What are the advantages of similar schemes, and why have we introduced a contributory pension system in Georgia at this specific time? I would ask why we have not we introduced this system earlier? We had to take this decision much earlier, and we would have a much better economy today. This reform focuses on two goals and benefits. In the long-term perspective, this reform should ensure a financially independent life during their retirement age. In the short-term perspective, for the first time in Georgia, large-scale investment capital will be created in the country. We forecast the collection of about 1.5 billion GEL in two years, and 5 billion GEL in 6 years. 80% of these funds will work in the Georgian economy, that is, the accumulated financial resources will be invested in reliable financial instruments. Today, we lack similar instruments, because we have an undeveloped capital market. After we accumulate investments resources, the companies will be able to use this money for their needs, such as expansion, creating new job places. Consequently, they will have to become financial transparent, well-organized, audited companies, and ensure reliable financial instruments, where we will place all these components in a diversified way. This scheme will foster the creation of new job places, expand companies and their business, promote economic growth, increase salaries and social allowances. All these benefits will be attainable for everybody, if they participate in the contributory superannuation scheme or not.

In Reality, you pay only 1.6%, an Employer pays the same Ratio, and the Government allocates 2.8%. We can already talk about companies and citizens involved in the contributory superannuation scheme. How much interest are business companies showing, how many companies have already joined this scheme? How many citizens do you expect to engage in this pension scheme? As of February 18, we have registered 40,329 private companies, the majority of all active companies. At this stage, we have raised about 5 million GEL for the contributory superannuation scheme. We expect that about 500,000 personal pension accounts will open. And all these activities will take place during a month. This is much more activity than we expected, and we have optimistic expectations for the future. The success of the pension system reform

depends on the quality of public trust, although we have many negative experiences in Georgia in terms of lost savings. How would you persuade citizens that their contributions are safe? How do you guarantee that the financial resources accumulated for 15-20 years will not be lost one day because of a wrong decisions? We understand that we have had a very bad experience. There were certain precedents, but 30 years ago. The failed precedents used took place 300 years ago and even 3000 years ago. Therefore, it will not be correct to reject this development. The pension fund will be based on the best western standards, including in regards to the administrative part of accepting and managing pension contributions, and implementing the independent and investment process. We will set up an investment board in the near future. The board will be staffed with high-ranking and experienced specialists. One more independent structure will also be arranged – the Risks Control Structure, which will control each transaction. At the same time, under the legislation, pension contributions will be placed on individual pension accounts. The scheme participants are able to check how much money they have accumulated on their own accounts, where and in which investment portfolio these shares are placed, how this portfolio is structured, what is the value of these shares, and so on. These assets are safer than all other assets, such as apartments, vehicles, deposits at commercial banks. Pension contributions are not subjected to any enforcement mechanism, that is, neither court nor any other enforcement mechanism is applicable to the pension contributions, even if a person owes debts to a commercial bank, the government or any other body. This is the safest, untouchable and inheritable asset, under the basic law. Under the current version, citizens over 40 years old and self-employed persons are not obliged to participate in the pension system, and this category accounts for 60%-70% of the whole population of Georgia. What steps will the Pension Agency take to attract these citizens? Do you think the government should offer additional benefits to self-employed citizens to engage with the new pension scheme? Under the legislation, all citizens engaged in the pension scheme enjoy equal benefits. This means that a 2% contribution is paid by an employee, 2% contribution by an employer, and 2% contribution by the Government. This scheme is equally applied to all participants. The only thing that we should ensure is a valuable information campaign, so that every citizen realize and understand benefits of the contributory superannuation scheme. I think this component has a decisive role, and our citizens will join the scheme gradually, along with improving their perception. If you have a 1000 GEL salary, 2% of this sum accounts for 20 GEL and after taxation you would take only 16 GEL. If you direct this 16 GEL to the Pension Scheme, it will be transformed into 20 GEL, and this sum will be replenished by 20 GEL from your employer, and 20 GEL from the govern-

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ment. This means that you will get 60 GEL on your pension account instead of 16 GEL. This is a fourfold, and 275% proceeds from risk-free investment. This is an unprecedented opportunity to rapidly grow your savings. We should also take into account that these resources will be invested, and annual benefits will grow. There are a lot of successful and failed examples of contributory superannuation system worldwide. Which system is closest to the Georgian system, to draw parallels about how this process runs in other countries? The contributory superannuation system runs in almost all countries – the USA, Asia. The difference is that the pension contributions start from 8%-10% there, while in Georgia this amount is only 2%. Moreover, I could not find a country where the Government is involved in the process in this volume or more. In reality, you pay only 1.6%, an employer pays the same ratio, and the government allocates 2.8%. This is quite a generous donation from the government. Some economic experts have staged criticisms of the investment component. They say that the pension agency should not invest funds in state securities. What would you say in response? What is the international experience in this respect, and is it possible to direct the accumulated funds into state bonds? Investment portfolios must be maximally diversified. This means that pension contributions must be invested in reliable financial instruments, and they must be directed to various assets, including to state T-bill obligations, Georgian state bonds, bonds issued by international finance institutions, including into EBRD GELdenominated bonds. These resources may also be invested in bonds of such Georgian companies as TBC Bank, Bank of Georgia, Electrosystem, Georgian Railway. We have a wide variety of options. In the first 5 years, we will create low-risk portfolios, and the accumulated resources will be placed in similar bonds. Doubts and questions, as if these resources were to be be invested in state T-bills, are ungrounded.

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Trust is becoming a New Currency for Business and Life What is it necessary to hold successful communication with public? I would highlight three important components in this regard. Setting up clear goals and objectives is the basic cornerstone on which successful communication campaign should be built. This is usually the first line in any communication strategy of the organization or in the PR brief that comes to PR agency. The other two cornerstones would be good planning of the campaign and ‘big idea’ that stands behind. And there is a very important ‘link’ in between, without which success may not come despite clear understanding of goals, big idea and great planning. I would refer this link as ‘understanding the target audience’. Before planning the communication campaign, any PR pro should dedicate some time to listening to the representatives of the target groups. It is ‘a must’ and can be done in different ways - via research, media or social media monitoring or simply holding face-to-face meetings with stakeholders. When you know explicitly what your organization wants to communicate and what your audience expects to hear, when you find the crossing point between these two and plan the communication campaign around it, it is highly likely that your message will be heard, and goal and expected results will be successfully achieved. Tell us about your most successful campaigns, and what was the key to success? I’m really proud of many campaigns that I have implemented with my team during 16 years of career in PR and Communication. I would underline several of the success stories. When I worked in headquarters of Noblet Media in Kyiv, one of my clients was Procter&Gamble (P&G). They had a global launch of their new Gillette razor for men called Gillette Phenom – a revolutionary product for that moment with different innovations. The client wanted to build a communication campaign around phenomena features of new Gillette and to connect their product in minds of consumers to something really phenomenal. The month of the launching coincided with natural phenomenal event - total solar eclipse which was ideally and fully visible from Barnaul. As a result, for the launch of Gillette Phenom we organized a press trip for journalists from leading media to this destination to see the phenomenal solar eclipse. During several hours of the flight ‘Kyiv-Barnaul’ journalists got information about new product features and the technology that stands behind the new Gillette Phenom. And apogee of the trip became the solar eclipse which they observed right from runway of airport. This was unique and unforgettable experience for every participant and this was key to success! We received amazing and diverse media coverage as a result of this press trip with the story of Gillette Phenom, supplemented by remarkable photo material of total solar eclipse. The communication goal of the launch campaign was successfully reached. 7 years ago, I moved to Tbilisi to represent Noblet Media in the South Caucasus. This was a new challenge but with this amazing new period in my career started. During these years we implemented a great number of memorable and meaningful communication projects with my local team. For example, the one I would like to mention – ‘Digital village’ - was conducted for satellite operator SES and its partner in

Georgia DTH platform ‘MagtiSat’. One of the biggest advantages of ‘MagtiSat’ is obviously the possibility to get a TV signal in every corner of the country, even in the most remote areas, as TV signal comes directly from satellite to home equipped with dish and doesn’t require any cable or other infrastructure. To demonstrate this advantage, we suggested to fully digitalize Ushguli village in Eastern Georgia, which is the highest inhabited place not only in the country but also in the whole Europe. Just in 3 days, MagtiSat satellite dish was installed on every house of Ushguli (up to 60 households) and village turned into the most “digitally connected» place in terms of TV broadcasting. To communicate this news to wider public, we brought journalists from national media to Svaneti. First, they attended a press conference in Mestia where SES, MagtiSat and municipality representatives announced the project. Then we took journalists to Ushguli where they could see the fully digitalized village, take video and photo. They also interviewed happy customers who lived at the altitude of 2200 m and enjoyed same superior quality TV signal as we did in Tbilisi or in other big cities. This project was a mixture of CSR and PR, and a unique flavor of Ushguli made it really special. What three tips would you offer someone just starting out. That’s an important question as industry is growing and developing, and

demand for young PR pros is growing too. First, I would like to quote Dan Edelman, who is often called ‘a father of PR’. He started his PR company in the early 1950s, which stills bears his name and today became the world's largest privately held public relations firm. Noblet Media is Edelman’s affiliate and represents today firm in 6 markets including Georgia. The advices he used to give to young PR professionals many years ago are as relevant today as they were at those times. First 5 advices are: 1)Read. Every Day. Devour important books. Newspapers, magazines, and blogs 2)Learn to write. Well. 3)Remember the importance of networking. 4)Volunteer. Do work for a hospital, art or music institution, or nonprofit organization. 5)Continue your education throughout your life. Take classes at night. If you are interested in others, you can explore them in the book ‘Edelman and the Rise of Public Relations’ by Franz Wisner or you can visit the Noblet Media Georgia office as we have his recommendations demonstrated on the wall. From my side, I would say the following to those who just start their path in communication field: • Open widely your eyes and ears, absorb and analyze information around you, it will help greatly when your time to communicate on behalf of company or brand will come. • Be very open-minded – only this way you will see the chances around you and will be able to turn challenges into opportunities. • Be flexible - industry is changing constantly and so do communication tools, methods and platforms; what works today may not work tomorrow, so flexibility and ability to follow this rapidly changing field is crucial. What has changed in the PR industry over the last five years? Apart from shift to the digital era, which is absolutely obvious, I would say that one of the biggest changes comes from diversity of types of content.

Today PR pros can pitch their messages to target audience with far more diverse contents than 5 years ago – various audiovisual materials, podcasts, animations, infographics, stories, gifs, etc. - this all makes communication process interesting and exciting as ever before! This variety of content and instruments brings another change - content provided by PR professionals becomes more and more customized. You can’t cover anymore a wide range of media means with distribution of single press release. Instead, you should develop a very precise message practically for every media and pitch your story (or story of your client) in an individual and unique manner using most appropriate PR tool in each concrete case. In other words, communication process becomes much more personalized. What are your prediction on PR industry, what challenges will this field face in 5-10 years? I believe that technological progress will keep affecting PR industry and will bring even more diverse instruments and tools for PR pros. Although it might sound unimaginable several years ago, it is highly expected that AI will be used widely in PR industry soon. Another change will come from the changing needs of audience. By 2025 the millennials will make up 75 per cent of the world’s working population. They are a new generation, having started work in the age of social media and used to using their voice. They already have different views on companies and brands, and they don’t just want to know about what your company/ organization/brand does, but they want to know more where you stand on important issues. Addressing these needs and communication with this core group will influence the industry. As for the challenges, I believe that in the world of fake news and propaganda, getting trust to your information will become the main challenge. At the same time, for communication people it is crucial to understand what sources of information their TA trusts and believes and this is changing every year. For example Edelman Trust Barometer 2019 study revealed that trust has changed profoundly in the past year—people have shifted their trust to the relationships within their control, most notably their employers. Globally, 75 percent of people trust “my employer” to do what is right, significantly more than NGOs (57 percent), business (56 percent) and media (47 percent). This is interesting to compare with the same study of 2018 which revealed a world of seemingly stagnant distrust. Trust is becoming a new currency for business and life. Trust drives who we do business with, how we make important decisions and who we allow into our lives. This is challenging but it is compelling to find the way to provide welltrusted content to your audience.

Region 7 February 25, 2019 #272

Armenian government earmarks about $400,000 for environmental expert examination at Amulsar Gold Mine

Trade turnover between Georgia, Azerbaijan exceeds $ 97mln

Executive Director of Business Armenia Foundation resigns

Iran plans to bring Trade Turnover to $5B with Azerbaijan

Turkey set to begin Oil and Gas Drilling off Cyprus

Radisson Blu Hotel, Vadistanbul, opens in Turkey Russia Considers to Cut-Off Internet

Marriott International Celebrates MultimillionDollar Refurbishment of Sheraton Grand Tbilisi Metechi Palace

Hungarian start-up Codecool raises 3.5 million euros of new funding

Azeri energy company SOCAR acquires EWE Turkey

Putin says Russia is ready for another Cuban Missile Crisis if the US wants one and has the edge with a first strike Turkish citizens spent over 2B liras on Valentine's Day

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Ani Tsitskishvili: "It takes Greater Effort to attract the Attention of a Target Audience Compared to Previous Years" Interview with Head of PR and Marketing at Luca Polare, Ani Tsitskishvili. Tell us about how you got into the field of marketing, and what factors played an important role in choosing this profession? The main appeal of all of my jobs since school has been communication with people. During years, I realised that it was the part I loved the most in my career. My dream profession was to become an actress, I even performed at the theater. My dream job and my current job have one thing in common: one communicates with dozens of people while on the stage, while one connects with thousands of people through a brand in the fields of PR and Marketing. You can do it in numerous, different ways, as well as in the theater. In regards to technological changes, what challenges do you face as the head of a marketing service? It’s challenging to keep up with trends, and to always thrive to develop yourself. What’s trendy today, may be inefficient tomorrow, and you must be ready for such a rhythm. What has changed in the field in the last 5 years, and what changes are expected now? A lot of innovative platforms have been created, and therefore communication channels have been replaced. Most importantly, our customers’ actions are now different, and that automatically causes us to use new approaches and instruments. It takes greater effort to attract a target audience’s attention, and furthermore to provoke an emotional bond with the brand. What important features should a marketing manager hold their focus on, and what are their roles in an organization? First of all, one should love relation-

ships in general. It’s probably very hard to plan any campaign without feeling this, that will be directed to people. As for professional skills: Being organized, analytical skill, being detail oriented. It’s crucial to think outside of the box, and not to be afraid of novelties.

Luca Polare, as a brand, aims to make people happy. That’s why all of our moves, whether it’s in marketing or across the company, are planned considering the users’ wishes.

What steps did you take, as an organization, to catch up with new trends, and use innovative approaches in the field of marketing?


Besides the fact that marketing teams always aspire to higher qualifications, we have an international marketing company, which allows experts tp consult us on different directions, and share international experiences and tendencies, based on which our marketing plans.

‘’If you can’t change a given task, you must change the ways to solve it.’’ I was very young when I received this advice, and I implement it successfully in private, as well as my professional life, since then.

What’s your organisation’s business model in terms of marketing?

One word that describes your work.

The most useful advice you’ve ever received in life?

9 February 25, 2019 #272

Business News

Lado Apkhazava among 10 Finalists of World’s Best Teacher in 2019

ed in the capital, on specific locations, “said Deputy Mayor of Tbilisi Sophio Khuntsaria.

Georgian teacher Lado Abkhazava is among the 10 finalists of the world’s best teacher in 2019. Hollywood actor Hugh Jackman declared finalists of “Global Teacher 2019”.

BDO appraises Efficiency of Enterprise Georgia Program

Barambo set to enter Chinese Market in Fall

The report has exposed the following indicators: GDP created by the beneficiaries – in 2014-2018 the mentioned companies have created more than 164 million GEL GDP, including 54% by expanded enterprises and 46% by startups. 79% of the GDP was created by Tbilisi-based enterprises, as 60% of the surveyed companies are located in Tbilisi. Revenues received by beneficiaries – 85 beneficiaries engaged in the program have received revenues of 390 million GEL in 2014-2018.

In the autumn of 2019 Barambo is set to enter the Chinese market – “Commersant” was told at the company.

Competition on Borjomi Park concept announced Competition for the development of the concept for Borjomi Central Park was announced. According to the municipality, the main goal of the competition is to maintain and develop the historical and cultural functions of the park.

Tbilisi to host Startup Grind International Conference Georgian Wines received Highest Awards at the Competition in Japan According to the National Wine Agency, Georgian wines of various denominations in Japan, international competition “Sakura” won following awards: 2 double gold, 15 gold and 7 silver medals. The double golden owners became “Shalva Gvaramadze’s Winemaking” – “Saperavi” and “Winemaking Vaziani” line “Makashvili Wine Cellar” – “Kisi 2017”.

Georgia will host the Global Startup Grind conference annually in the footsteps of San Francisco, London and Barcelona.

Food Trucks to take over Tbilisi within Night Economy “Another project will be implemented within the night economy. So called Food trucks will be locatCrystal attracts 10 million GEL Investments Crystal company has signed a memorandum with DWM (USA) and Incofin/AGRIF (Belgium) international investment funds. As a result, the company will receive 10 million GEL investments in addition. Mariam Kvrivishvili announces Meeting Week with Tourism Business Mariam Kvrivishvili, the new head of tourism administration, says that tourism sector is very large and therefore, meeting with each representative of tourism sector will be necessary.

Tbilisi in Magnum Books-Presentation and Exhibition of Martin Parr’s Book Held Thanks to cooperation between Tbilisi City Hall and TBC Bank, a presentation and Exhibition – “Tbilisi in Magnum Books” of a book titled “Martin Parr Tbilisi” authored by a famous British photographer, Mr. Martin Parr was held at TBC Gallery.

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Over the past period, the current developments in the Georgian finance sector were being widely discussed in our society. The reasons are not positive – at this stage, everybody talks about tightened regulations that have brought serious negative effects, and the new norms are aim curb the accumulation of unreasonable loans, but it turned out that loan-taking procedures became stricter for all categories. As a result, the new regulations have brought about a crisis period for the development sector, too. Meanwhile, home appliance stores lost 50% of their sales. In a word, besides careless borrowers, the whole economy is bearing serious losses, and this is only the beginning. Let’s remember the 2008 global crisis, when commercial banks dramatically cut crediting volume – as a result, sales shrank, stores were closed, plants decreased production and started firing staff, and so on. In a word, this is the principle of dominos. If something changes, serious problems are ahead. However, there is one main problem, which is the real reason behind the current situation neither the insatiability of the Georgian financial sector, which is an indisputable reality, nor the evident short view of the National Bank management. The key and fundamental problem is that there is a surprisingly low level of financial sophistication in Georgia. In the Soviet Union, one saying was widespread: “A loan is bad because you take the property of others temporarily, but you return your own property eternally”. Apparently, the majority part of Georgian citizens do not remember the second part of this saying – the repayment of loans. Even in the Soviet period, Georgians were accustomed to unreasonable spending of money. However, in that period, this money was coming from the central budget of the Soviet Union. Therefore, embezzlement could not create serious problems. Many years have passed since then, and the Soviet Union collapsed, and the easy money sources disappeared, but the habit of embezzlement remains. Because of the very low financial culture, people in Georgia do not know how to spend money reasonably. With low incomes, this habit brings catastrophic results. Sometimes, it is unbelievable that people

may demonstrate such indifference in their relationship to money – that they simply, and without a second thought, take so many loans, and this has no reasonable explanation. Sometimes this money is spent on useful affairs – the purchasing of real estate, business expansion or treatment of ill patients. However, an analysis of the debt pardoning state program that the

government announced in the 2018 pre-election period, shows that similar positive samples are very few, and there are hundreds of thousands of citizens in Georgia who have taken loans of about 2000 GEL unreasonably. This is a mortgage loan, which is not a business credit, and this is not a treatment of an ill patient. They take loans for mobile phone, TV sets, vehicles, holidaymaking, wedding, birthday gifts, casinos and so on. People enslave themselves because they buy something that is not vitally important. I will take this loan today, and do something tomorrow – this is a key principle of their thought in this case. “The principle of doing something” leads them to take new loans at commercial banks, first, and then at microfinance organizations, then at online companies, then from usurers. Interest rates grow and grow and, in the end, borrowers have to pay the price of an apartment for an

initial 2000 GEL loan. The lowest financial culture, widespread short-term views and habit lead to following one’s own whims, and are revealed not only in taking irresponsible loans. Sometimes, the so-called ‘Swindled Depositors’ hold protest rallies. I do not mean the 1990s, when capitalism was a new thing and inexperienced people used to entrust their savings to evident swindlers. 30 years have passed, but nothing has changed. They tell unbelievable stories about selling apartments, bank loans, money transfers that their relative make from abroad, savings of tens of thousands of USD – all these monetary resources were directed to financial pyramid schemes – today in the 21st century. Gambling games are one more destructive sector, one of the key sources of a lot of small debts. Betting houses and casinos are always nearby. Georgian citizens have preserved the habit of irresponsible spending of money. A casino is a means of entertainment in normal countries, but in Georgia it is considered as a mean for earning money, although nobody has ever made a fortune in a casino. At the same time, there are armies of persons impoverished and bankrupt at casinos. Amid small revenues and a lack of money, Georgian citizens spend more money on gambling games than on food. Among Georgia’s top 50 companies, 4 operate in the gambling business, and only 3 ones represent the industrial sector. Not Putin and Russian Imperialism, but Real and Barcelona are Georgia’s major enemies, earthquakes and volcanos do not bring real tragedy, but European and World Championship Football. In this situation, and among such citizens inclined to self-destruction, it is not surprising that it is of vital importance to dramatically cut crediting opportunities. And, as a usual, along with careless and irresponsible people, hard working people also bear losses. Apparently, this is Georgia’s karma. By Tengiz Ablotia

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12 February 25, 2019 #272

Profile for Caucasian Business Week

Caucasus Business Week #272  

1. #National #Bank President to deliver Speech on #TBC Bank Case at #Parliament of Georgia 2. #George #Chogovadze: "Approximately in One Yea...

Caucasus Business Week #272  

1. #National #Bank President to deliver Speech on #TBC Bank Case at #Parliament of Georgia 2. #George #Chogovadze: "Approximately in One Yea...