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March 4, 2019 - www.cbw.ge



p.7 Where and How Many – Taxes in Georgia, CIS Space and Worldwide

p.4 Georgia’s Credit Rating Improves

p.6 TBC Bank Case

p.10 Country of Ferroalloys and Tourism

p.10 Country of Ferroalloys and Tourism

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EU launches Rural Development Project in Akhmeta Municipality

New Program to build and upgrade 100 km of East-West Highway

EU launched a new rural development project in the Akhmeta municipality of Georgia. Entitled “Promoting Inclusive and Participatory Local Development in Akhmeta Municipality”, the project introduces a bottom-up, inclusive rural development approach that fully engages all communities in the municipality.

Georgia will be better connected to the EU and enjoy safer travel conditions within the country thanks to financial and technical aid from the EU.

Over 90% of Subscribers will be Gasified in 2019-2021 Deputy Minister of Economy and Sustainable Development, Natia Turnava introduced the 2019-2021 Gasification Action Plan to the Prime Minister’s Adviser for the Regional Development, Sozar Subari and the Regional Representatives.

Government allocates 4 million GEL for Technical Assistance of Farmers Government of Georgia has approved a new program to ensure co-funding of mechanization process for farmers in Georgia.

Mercedes Vera-Martin: Fitch’s Rating proves Sustainability of Georgian Economy At the meeting with Georgian officials the IMF mission positively appraised the fact that Fitch Rating international rating company has improved Georgia’s sovereign credit rating from BB- level to BB level with the outlook of Stable.

Vocational Training in Schools for Additional Opportunities for Georgian Youth Up to 10,000 Georgian teenagers have received vocational training as a part of their secondary school education under the initiative “Vocational Skills in Schools,” implemented by the Ministry of Education, Science, Culture and Sport of Georgia.

TBC Bank received 34 million USD Credit Resource On February 28, TBC Bank has received 34 million USD credit resource from the European Investment Bank (EIB). The funds will be spent on small and medium business financing of bank clients in Georgia.

U.S Embassy: TBC Case Result can have Significant Implications for Georgia’s Reputation The U.S. Embassy to Georgia is closely following developments surrounding TBC Bank. “The conclusion of these matters, how that conclusion comes about, and how it is explained can all have significant implications for Georgia’s reputation as a place in which to invest and do business,” the Embassy told the Accent News Agency.

Georgia expects to receive 6.6 billion USD Revenues from Tourism Sector in 2025 National Bank staffs Selection Commission of Pensions Agency’s Investment Board The selection commission of the investment board of the Pension Agency has been staffed. The National Bank of Georgia has put forward the candidacy of BDO managing partner Zurab Lalazashvili as an independent member of the selection commission. The commission also includes Minister of Economy, Minister of Finance and Health Minister, parliament members – Irakli Kovzanadze, Akaki Zoidze and Zurab Chiaberashvili.

According to the 2025 tourism strategy, Georgia will receive 6.6 billion USD revenues from tourism sector by 2025, Mariam Kvrivishvili, head of National Tourism Administration, noted.

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;

Georgia celebrates Rare Disease Day on February 28 The 10th event dedicated to World Rare Disease Day was held in Holiday Inn hotel in Tbilisi. The meeting was organized with the support of the Georgian Foundation for Genetic and Rare Diseases. This year, the Fund declared cystic fibrosis (mucoviscidosis) as a priority in 2019. Invited doctors, members of the Association of Patients, Health Care System Respondents and other civil society representatives once again talked about the severity of the disease and the treatment problems existing today: "Join us to make the voices of vulnerable diseases understandable and important." The main purpose of the event was to increase public awareness of rare diseases, to ensure timely diagnosis of disease and its proper management. The meeting aimed to improve diagnostics and provision of access to treatment. During the meeting, discussions were held on rare disease management- past and future, rare inherited metabolic diseases, rare neuromuscular diseases, rare pulmonary diseases, rare diseases in hematology, rare rheumatological diseases, rare forms of congenital abnormalities of

sexual development, rare bone diseases and skeletal dysplasia, rare genodermatoses, rare forms of behavioral and mental disorders, and more. The Georgian specialists and international experts who were invited as moderators discussed criteria for inclusion on the national definition of rare diseases. "A disease is rare when it appears in less than 1 in every 2000 persons. Today, more than 6,000 different types of rare illnesses exist in more than 60 million people in Europe and the US,” said the Executive Director of the Georgian Foundation for Genetic and Rare Diseases, Doctor of Medicine, Professor Oleg Kvlividze. “Due to the small prevalence of these diseases, medical knowledge and experience are also limited and these patients remain vulnerable in terms of diagnosis, treatment and research benefits in the health care system.” "Cystic fibrosis is one of the most frequently inherited diseases and evidently reduces the duration and lifespan of patients without adequate treatment,” noted PaediatricianGastroenterologist, Doctor of Medicine Tsitsi Parulava. “Cystic fibrosis mainly damages

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the respiratory and digestive systems where the thin mucosa causes respiratory and digestive problems. Early diagnosis and proper treatment of cystic fibrosis is vital for patients to survive.” There is a State Program for Cystic Fibrosis in Georgia, which is a step forward, but the program needs further improvement. That is why the Georgian Foundation for Genetic and Rare Diseases has declared cystic fibrosis a priority for 2019. Rare Disease Day has been observed since 2008 and its main goal is to raise public awareness of the diseases and to show the severity and difficulties facing patients and their caregivers as a result of this disease.

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Georgia’s Credit Rating Improves Fitch Rating Improves Georgia’s Sovereign Credit Rating to BB Level after 7-Year Break The Fitch International rating company has raised Georgia’s sovereign rating from BB- to BB level. Fitch has improved the sovereign rating by one point. The outlook is stable. In September 2017, another international rating company, Moody’s, improved Georgia’s sovereign credit rating to Ba2 from Ba3. This information was released by Ministry of Economy. According to Fitch, the rating’s improvement was thanks to the stable macroeconomic environment maintained in 2018 and growing steadfastness against external shocks. According to the report, despite shocks in the region, Georgia’s economy is growing at a high pace, and the exchange rate has maintained stability, and the National Bank of Georgia (NBG) has managed to replenish the reserves. Here are the key positive factors improving the rating: • External vulnerability of the country is decreasing stage by stage, and the aforementioned tendency will continue in the future. • 2018 economic growth was listed at 4.8% as a result of growing private investments and external demand. • Fiscal policy is compatible with a policy of reduction of state debts in relation to GDP. • The rating company stresses that foreign private investments will fully finance the current account deficit. FDI recovery is also expected in 2019-2020 as a result of free trade agreements, major investments in the transportation sector, and Anaklia seaport development. • The rating improvement is supported by an attractive business environment and quality of governance. Georgia ranks 6th worldwide in terms of Ease of Doing Business. • The banking sector also recorded

positive tendencies, thanks to high indicators of liquidity, quality of assets and profitability. “We have managed and lowered the current account deficit. The historical problem of our economy is that Georgia has become an importsdependent country. We have managed this, and changed the situation, and this signifies that we firmly and correctly followed the road to further reduce this deficit, which represents one of the key sources of poverty in Georgia”, Prime Minister Mamuka Bakhtadze noted. “The most important argument for why Fitch has taken this decision is that in the second half of 2018, despite the depressed economic period in the region, we managed, and made the Georgian economy more stable and resistant to external shocks. We have achieved this by implementing the right policy, especially with the Larization strategy. An attractive business environment and valuable state priorities is one of the key factors for improving the rating, as well as the fact that Georgia ranks 6th in the World Bank’s Doing Business rating. Georgia is a leading reform-minded country. The strength of our economy is based on a diversification policy, good fiscal and monetary policy, and scrupulous fulfillment of IMF program”, the Prime Minister noted. Georgia’s credit rating had not changed since 2011, and, according to

S&P, the rating was BB-. This is a low rating for a medium-income country. Moody’s turned out to be the only rating company that improved our positions. Namely, the agency improved Georgia’s sovereign credit rating to Ba2 from Ba3. It should be noted that, on the Fitch scale, Georgia’s rating was BB- over the past 7 years. Despite the rating improvement, it does not reach investment grade and stays speculative, anyway. For the purpose of transforming Georgia’s rating to investment level, it should stand up to at least BBB level, up two stairs. “Only two positions remain in order to get an investment rating that will assist us to overcome key problems forever”, Mamuka Bakhtazde noted when commenting on improving Georgia’s credit rating. Georgia is the only country in the region with an improved rating, Bakhtadze added. It is worth noting that the improved rating enables the country to attract international credit at lower interest rates. As noted above, the BB level is not an investment-grade rating, and Georgia has to win two other positions to become an investment-friendly country. By Merab Janiashvili

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Business Ombudsman’s Position satisfied Fully or Partly in 65% of Cases finished in 2018 THe Business Ombudsman of Georgia, Irakli Lekvinadze, has summarized the 2018 performance of his office, and given the report to the Prime Minister, government members, representatives of the private sector, business associations, economic associations, representatives of the chambers of commerce, parliament and government, donor and international organizations and experts. In his interview, Business Ombudsman Irakli Lekvinadze talks about important projects implemented in 2018, and future plans for 2019. Mr. Irakli, how would you appraise the year 2018, and what important projects would you name? First, I would list the new electronic portal, which was launched at the Business Ombudsman’s Office in 2018, with the support of the International Finance Corporation (IFC) and Swiss State Secretariat for Economic Affairs (SECO). The new portal enables entrepreneurs to keep in communication with the Business Ombudsman in digital format. The portal has simplified the process of application to the Business Ombudsman. The portal enables us to supervise the status of submitted applications, and the monitor the process of specific cases. We have provided an active job with various domestic and international organizations for sharing the experience and deepening cooperation and signed 4 agreements regarding mutual cooperation (Chamber of Commerce and Industry of Georgia, Geostat, Competition Agency and German Economic Association (DVW). We provide active cooperation with various international organizations, Georgia-accredited diplomats and foreign investors for strengthening cooperation, information exchange and institution building. In 2018 I participated in about 20 high-level international conferences and forums in Georgia and abroad. You have mentioned the electronic portal. We know that the Business Ombudsman’s office has started collecting statistics through this portal. What was the situation like in 2018? The electronic format of communication has enabled us to gather statistics. In 2018, more than 1000 meetings were held with business sector representatives. The office discussed 316 cases, prepared 167 mediations, recommendations and conclusions in 2018. The recommendations of our office were fully or partly satisfied in 65% of cases finished in 2018. In terms of number of applications, Adjara is a leader, after Tbilisi. The business ombudsman’s office opened its representation in the Adjara Region in 2018, and appointed its resident representative there. The 2018 statistics shows that the majority of applications refer to Ministry of Finance and various structures under the Ministry of Finance. You have mentioned Adjara. How visible is your office in the region, and what does the local private sector applications to your office deal with? We held various meetings with representatives of the Adjara business sector in April and November of 2018, with the support of the Chamber of Commerce and Industry of Georgia, the IFC and USAID project “Governance for Development”. At the meeting, we introduced a report on the performance of our office and future plans for representatives of the local business sector. We also updated them about mechanisms that we can employ for their support, if necessary. The most acute problem in the regions is related to land registration and financial resources. After Adjara, the majority of applications are submitted from the Kakheti Region. With the support of partner donor organizations, we will hold meetings with representatives of small and medium business sectors in 2019, too.

Besides regional meetings, do you cooperate in other directions, too, with international and donor organizations? We have already started a working process, and the Business Ombudsman’s office acts as a leading chain in the 2019-2020 national counter-corruption action plan for business honesty. The action plan is based on the recommendation of the Organization for Economic Cooperation and Development (OECD). We plan to hold specific projects, including in partner countries, to deepen collaboration with similar institutions and share in their experience. What key challenges would you name in the business sector, and what priority directions will you follow in 2019? We have determined our 2019 priorities based on the current challenges in the business sector, including the efficient resolution of business disputes in the court system. For the purpose of growing court efficiency and business sector support, in 2018, we submitted a bill to the Parliament to expand the rights of the Court Friend of the Business Ombudsman’s Office, and besides the Constitutional Court of Georgia, this mechanism will be applied in the system of common courts, too. This component will enable our office to back the business sector in their disputes with administrative offices, namely, to submit recommendations and/or appoint a lawyer in the legal dispute case. We also strive for strengthening the mediation component, and establishing an arbitration court. It is an efficient mechanism to resolve business disputes through mediation, because the mediation enables us to resolve disputes as soon as possible, based on bilateral concessions, without protracted trials and excessive financial expenditures. With the support of donor and international organizations, in 2019, we held trainings for the staff of our office and government officials for upgrading their skills and qualifications in mediation issues. We plan to further enhance this direction in 2019, and engage in implementing the new phase of promotion of alternative mechanisms for disputes resolution in Georgia in 2019-2020, as part of the new initiative of the European Union and UN Development Program (UNDP). Bureaucracy in the middle chain of the public sector remains a major challenge for the business sector, as well as adequate and proportional regulations for business opportunities. To resolve these challenges, we aim to prioritize an increase in transparency between public and private sectors, and introduce Regulatory Impact Analysis (RIA) system. The year 2018 has brought many regulations and new legislative initiatives. The Business Ombudsman’s office was participating in discussions on labor safety, food product labeling, bank regulations, and other important regulations for the business sector. What results have you achieved, and how were business interests taken into account? The past year was very active in terms of new regulations and new legislative initiatives. With positions agreed with the business sector, and thanks to close cooperation with administrative offices, we tried to optimize the regulatory burden so that the private sector might have a reasonable timeframes for implementation. We have engaged in discussing new regulations for retail crediting. A lot of business associations have applied to us for mediation with the National Bank of Georgia (NBG). We have accepted a lot of requests, and applied to the NBG with recommendations. We managed to make the new regulations smoother, and achieved a postponement of their enforcement. We have also participated in the working process on the Labor Safety Bill, and the Parliament fully ac-

cepted 2 recommendations out of 4. We continue to participate in discussion on tobacco control and food labeling regulations, draft laws on agriculture lands, and gambling business regulations. In general, how would you appraise the existing business environment in Georgia, and what steps were taken for the improvement of the business climate in 2018? I believe the year of 2018 has brought dynamic and positive results for the Georgian business sector. There is a businessfriendly climate in our country. Low transactional expenditures, a favorable geographical location, and Georgia’s positioning in international trade relations, based on free trade agreements with our friendly countries, ensure the formation of attractive business environment in Georgia. In 2018, I would say a simplification of VAT refunding procedures, electronic taxpayer resident reformation, the advancement to the 6th position in the Ease of Doing Business rating of the World Bank (WB), starting cooperation with arbitration court of France and small business sector reformation (new preferential regime of taxation). What factors necessitate the Business Ombudsman’s Office’s engagement with the process, and what are the issues with which the business sector appeals to you most often? What mechanisms do you employ for assisting entrepre]neurs in Georgia? The production process always outlines challenges that require state reaction. The private sector frequently makes inquiries regarding tax administration and complicated bureaucratic procedures, various decisions and regulations affecting business production in the country, which require new assessments and revision due to new requirements. In similar situations, our office mediates between the private sector and the authorities. Based on consultations with the private sector, our office prepares recommendations and meditations for the state sector. Thanks to close cooperation with the administrative offices, we try to resolve issues on behalf of the business sector. Moreover, for the purpose of protecting business interests, our office has appointed a permanent representative in the investor’s board, the Board of Disputes of the Procurement Agency, Board of Disputes of Ministry of Finance, and the state commission for examination agreements on the management of state-owned properties. And finally, I would like to have your take on the TBC Bank case. Will this case affect the business climate and investor moods? Naturally, all similar cases have an influence on the business environment. Any cases that relates to businessmen, any speculation damages the business environment. Such cases require more information and transparency in our society, in the business sector. Investors are very sensitive to such cases and, therefore, they should have comprehensive information. I believe an enhancement of communication with international investors will only bring positive effects. It is important that the investigation process proceed transparently, and at a high professional level. A protracted process will leave more space for speculations and damage the business climate.

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TBC Bank Case

Mamuka Khazaradze’s Withdrawal raises more Questions The TBC Bank case has turned out to be a highprofile matter over the past month. The story of one transaction raised more questions in terms of business freedom and democracy in the country. One part of our society asserts that we are witnessing an act of political revenge, while another part adheres to a different position. According to specialists, Georgia’s investment reputation and the perspective of the Anaklia project are at risk. Even the US Embassy in Georgia has released a special statement regarding this issue. Namely, according to their information, the US Embassy is carefully supervising developments around TBC Bank and the final outcome, and the provided explanations will make an essential impact on Georgia’s reputation. The US Embassy released the aforementioned mentioned statement regarding the situation. “We are supervising the developments around TBC Bank. The final decisions and provided explanations will have an essential impact on Georgia’s reputation in terms of investment inflows and doing business”, the US Embassy statement reads. “The businessmen who are persecuted by the Prosecutor’s Office abstain from saying more , and at this stage, but even the existing statements seem alarming”, the former president of the National Bank of Georgia (NBG), Roman Gotsiridze, noted that regarding the briefing that Mamuka Khazaradze, TBC Bank Supervisory Board Chairman, and his assistant Badri Japaridze held several days ago. “In practice, Mamuka Khazaradze has said that the 5-year effort at attracting financial resources for the Anaklia Seaport project may become useless. In May-June, six huge financial institutions, in practice, agreed to set up a 600 million USD foundation for funding the Anaklia project. If this process continues, naturally, the mobilization of financial resources will cease, and the Anaklia project will become questionable. When similar, major banks and financial institutions reject a project, a lot of years will pass until other financial institutions will show interest in the same project”, Gotsiridze noted. Business Law specialist Akaki Chargeishvili says that this case has raised a lot of questions. Namely, according to the NBG, in 2008, two companies were mentioned in the case on charges of money laundering. This fact raised a lot of questions. Even if the bank’s founders have spent this money on the bank’s authorized capital, then NBG or the bank’s founders were to publish the decision about growth in authorized capital. The business law specialist focuses on one important issue, namely the examination and supervision by NBG. According to Chargeishvili, from the functional point of view, this component refers to both NBG and financial supervision services taking part in money laundering. Moreover, the NBG demands, and it is a requirement of the Georgian legislation, too, that commercial banks carry out an audit on an annual basis. Without this audit, the bank reports cannot be approved. Moreover, commercial banks are obliged to prepare quarterly reports on them and publish.

“Therefore, the key question is, which auditor company conducted the 2008 audit? Therefore, the conclusion submitted by the auditor companies in that period should be found to clarify where this case is, as is reflected in the auditor’s report, and why no reaction was provided regarding the case in due time. It is interesting which auditor company has concealed this fact. Maybe we have a bigger crime. It is possible that the bank founders have not committed a crime at all, and I will not violate the assumption of innocence, but, for a valuable appraisal, all accompanying results and factors are also very important”, Chargeishvili said. It is also interesting what recommendations were issued by the auditor, and how the detected shortcomings were eradicated in the following years, he said. The Caucasus Business Week (CBW) has learned that the Deloitte International auditor company and PwC company carried out an audit of TBC Bank in 2008. None of these companies have made comments on the issue for the Commersant. We should find out what factors have led Mamuka Khazaradze to leave TBC Bank, what was the last straw, and then we should make a diagnosis – what happens in the country – expert Gia Khukhashvili commented on Mamuka Khazaradze’s withdrawal from TBC Bank in this way. “Khazaradze’s decision to leave the bank raises more questions and the fact is that certain circumstances have made Khazaradze leave the bank”, Khukhashvili said. “From the standpoint of state interests his decision is clear, because we appreciate more our affairs and achievements in this life and, in this case, our personal interests seem secondary. Therefore, we can understand his decision from the human point of view, but this decision has raised more questions regarding this issue. What factors have led him to this decision?” We should examine what has lead him to this decision, what was the last straw, we should identify this to conclude what happens in this country, because this is not the personal problem of Mamuka Khazaradze. This issue has become a systemic problem for state development, the investment environment and rule of law. We should make a valuable diagnosis for this disease, which has preconditioned the mentioned decision”, Khukhashvili said. As for the prospect of the development of Anaklia Port,, according to Khukhashvili, this is quite a depressing outcome, because current developments may frighten investors. “When similar, serious accusations are made in the pre-contractual phase, the issue of attracting investors with whom negotiations were underway, becomes questionable. Similar accusations generate serious risks, and we should supervise and analyze how these risks may be averted”, Khukhashvili noted. The majority of bankers abstain from making comments on the TBC Bank case. Only Cartu Bank and Halyk Bank representatives have made exceptions. Nikoloz Geguchadze, head of the Halyk Bank Supervisory Board noted that he does not make comments on other commercial bank, when he does not know details. “I have no information about details, therefore, my comment cannot reflect the reality. Therefore, I abstain. However, I note that I do not think

pressure is being applied. The banking sector requires a cautious and careful attitude”, Geguchadze noted. Cartu Bank Director General Nato Khaindrava says that the situation with a specific bank is never reflected with other banks. Consequently, this situation will not affect the banking sector. “This is a certain specific situation. TBC Bank states that this is false information and, therefore, I cannot make a comment, as I have no confirmed and exact information”, Khaindrava said. As reported, Mamuka Khazaradze and Badri Japaridze attended the meeting of the parliament’s Committee for Sectoral Economy and Economic Policy several days ago. The NBG President, Koba Gvenetadze, also visited the Parliament. However, the meeting was thwarted after the NBG President’s speech, as a result of the sharp protest from opposition factions. Mamuka Khazaradze released the following statement after the thwarted meeting: “We are suffering from an orchestrated attack. We were made to leave the Bank, but we will not concede our dignity and justice. Today’s meeting was convened to make explanations and relieve the situation. Media, society and parliament members were to clarify what has happened. We are suffering from an orchestrated attack. We were made to take the decision to leave the bank, but we will not concede our dignity and justice”, Mamuka Khazaradze released this statement after the parliament’s committee meeting. The prosecutor’s general office has released a special statement on the mentioned case. “Considering the high public interest, we would like to notify our citizens that the investigation on the legalization of illegal incomes have identified the following circumstances: As is commonly known, on August 2, 2018, the Office of Prosecutor General started investigation of the case on legalization of illegal incomes, due to the crime determined under subparagraph C of p art 3 of article 194 of Georgian Criminal Code. The investigation was launched, based on written information, that the Financial Monitoring Office submitted on August 1, 2018, under legal regulations. Till now, the investigation proofs have outlined the following scheme: in April-May 2018, TBC Bank issued a 17 million USD loan to Samgori M and Samgori Trade companies related to Mamuka Khazaradze. On the same day, the aforementioned 17 million USD was completely transferred to the personal accounts of Mamuka Khazaradze and Badri Japaridze, while the companies had taken the loan from TBC Bank for replenishing working capital, not for issuing the sum to Khazaradze and Japaridze in the form of a loan. This means that the previously mentioned 17 million USD issued from their own bank was transferred to the personal accounts of Khazaradze and Japaridze on the same day. After this transaction, the following developments took place: in October-November 2008, loan maturity was extended for a period of one year, without any substantiation, to companies businessmen involved with Mamuka Khazaradze, while loan payment had not started. However, after about a month, on December 31, 2008, before coming to the loan payment schedule, TBC Bank: 1. Classified the aforementioned loan as a bad loan

(hopeless) without substantiation; 2. Ahead of schedule, determined by bank regulations, the bank wrote off, i.e. shifted, the loan to an external balance account, whilst the loan amount had not been paid; 3. The bank has not requested that the bailsmen compensate the sum; 4. Did not write off the sum on the account through accepted regulations, and did not expropriate the mortgaged property. It should be stressed that the loan was classified as hopeless, but TBC Bank continued crediting the relevant companies and issuing loans to them based on other credit agreements. Moreover, in 2012, TBC Bank entirely exempted the companies from bank liabilities in the following way: TBC Bank replaced the companies with the company incorporated in an offshore zone a month earlier, without any loan security, and this new company had no financial assets in Georgia. Under the agreement signed with the foreign company, the company assumed the obligation for returning 17 million USD and, at the same time, the company acquired the right to request the sum from Khazaradze and Japaridze. Moreover, in the same period, TBC Bank freed real estate from its mortgaging obligation. It should also be noted that the offshore company was represented by a Georgian citizen, P. Gh., who was a member of TBC Bank crediting committee by this time, when TBC Bank issued 17 million USD to Samgori M and Samgori Trade. Moreover, this person worked at one of the highranking managerial positions at TBC Bank, when the offshore company replaced Samgori M and Samgori Trade. An act of acceptance and delivery was signed with the mediating company, acting between the offshore company and Samgori M an Samgori Trade providing services on September 28, 2012. At the same time, it should be also noted that loans from Samgori Trade and LLC Samgori M were written off, while these companies hadn’t paid a penny for serving the loan, and this loan has not been returned to the Bank till to this day. Moreover, Mamuka Khazaradze and Badri Japaridze have not paid their loan obligations for LLC Samgori M and Samgori Tarde. The investigation continues, the case-related persons are interrogated, and additional documents are searched and examined. Considering the public interest, the office of the Prosecutor General will provide comprehensive information to the public”, the statement reads. We remind you that the office of the Prosecutor General is investigating the case on the legalization of illegal incomes by TBC Bank. According to the investigation, in April-May 2008, LLC Samgori M and Samgori Trade took a 17 million USD loan from TBC Bank under the pretext of replenishing the working capital. The companies issued the loan to Badri Japaridze and Mamuka Khazaradze in the form of a loan on the same day. According to the prosecutor’s office, it should be noted, that in the same period Samgori M and Samgori Trade have not paid the sum, and later these companies were placed in an offshore company, and to this day this sum has not been returned to TBC Bank.

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Where and How Many – Taxes in Georgia, CIS Space and Worldwide One of the liberal and attractive systems – this is how international organizations and experts characterize Georgia’s taxation system. Georgia ranks 6th among 190 countries of the world in the Doing Business rating thanks to low taxes, economic experts say. Under the Tax Code adopted in 2005, only 6 taxes run Georgia, namely: value added tax (18%), income tax (20%), and profits tax (15%), as well as excise tax, customs duty and property tax. It is worth noting that before the New Tax Code, there were 21 taxes in Georgia. Starting 2017, Georgia introduced the so-called Estonian model of profits tax, according to which, companies are exempted from profits tax in case of reinvestments. Different taxation regimes run

in free economic zones and there are 3 economic zones in Georgia: Hualing Kutaisi FIZ, Poti FIZ and Tbilisi FIZ. Companies registered in these zones are exempted from profits and excise taxes. The advantage of a free economic zone is that there is zero tax on the so-called corporate tax and there is no requirement for minimum capital. It is quite easy and convenient for foreign citizens to buy real estate in Georgia. Foreign residents pay no taxes in case of purchasing a house, apartment or residency in Georgia. They are taxed only if they decide to lease the acquired real estate. In this case property owners have to pay 5% of the profits to the state budget. According to the report by the World Bank (WB) and PWC analysts, Georgia is leader in Post-Soviet and CIS space in

terms of low taxes. The total tax rate in Georgia makes up 16.4%. Armenia ranks second in CIS space. Fiscal burden in this country accounts for 19.9%. Kirgizstan ranks third with 29%, Kazakhstan is fourth with 29.2%. The heaviest tax burden among CIS countries is recorded in Belarus (51.8%), Ukraine (52.2%) and Tajikistan (81.8%). Compared to Georgia and Armenia, high tax burden is recorded in Azerbaijan too (39.8%). In all other PostSoviet countries this indicator is as follows: Russia – 47.1%, Estonia – 49.4%, Lithuania – 42.6%, Latvia – 35.9%, Moldova – 40.2%, Uzbekistan – 41.1%. As to Turkey, its tax rate makes up 40.9%. It is interesting that the averaged indicator of the total tax rate worldwide makes up 40.8%, including 24.2% in Near East, 35.2% in Central

Asia and Eastern Europe, 36.6% in Asia-Oceania, 38.9% in North America, 40.6% in EU, 42.1% in Central America, 46.9% in Africa and 55% in South America. The world’s highest total tax rate is recorded on Comoro Islands, where the fiscal burden exceeds 216%. High fiscal burden is reported in Argentina too – more than 137%. Bolivia and Eritrea rank third with 83.7%. By Zurab Khachapuridze

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Tamar Jincharadze: "No Company or Business can achieve Results without Proper Marketing" Interview with , Head of Marketing Department of Hotel Chain "Ambassadori" and Public Relations and Marketing Manager of the co-working spaces "Terminal" and Vere Loft, Tamar Jincharadze. Tell us about how you got into the field of marketing, and what factors played an important role in choosing this profession? I had already selected this profession when I got into the faculty of journalism, as there was no such program as marketing and public relations. These two professions are very close to each other. I worked as a journalist for about 10 years. This experience has helped me in my future, as I have been reporting various fields and business activities during my time as a reporter, analyzing their successes and mistakes, which was very helpful for the future. In regards to technological changes, what challenges do you face as the head of a marketing service? I wouldn’t call it a challenge, on the contrary, communication channels with customers are simplified. If it was very difficult to provide information on a specific product to a user, as well as to get useful feedback , all this is available in the internet era. Thus, I think our profession is becoming more flexible, along with technological development, which gives even greater opportunities. What has changed in the field in the last 5 years, and what changes are expected now? The language of flyers and banners was replaced by social networking posts, the print media replaced by internet media. Digital marketing allows us to introduce a particular product to any market segment, whether to someone living in Yerevan or Malta. The new technologies facilitated the calculation of results, statistics and defining future risks that prevent possible errors. As for changes, I don’t know what inventors are planning, but this field develops so rapidly, I’m sure a lot novelties are yet to come. What important features should a marketing manager focus on, and what are their roles in an organization?

This field does not only require mathematical skills. The most important thing is human qualities like communication, awareness, sensitiveness, feeling the market segment, knowing a product well, and much more. The role of marketing in any organization is very important. Let’s say, the engine is very important for a car, but no matter how good the engine is, it wouldn’t be worth anything if it didn’t run, so no less important are the wheels. No company and business can achieve a result without proper marketing.

ized approaches.

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

‘I’m the busiest, when I’m taking a rest’’- I don’t remember where I read it.

In reality there is no new or old trends. In parallel with the developments in this country, technology and economy, customer requirements are also changing, and therefore there is no written formula. Any business is idiosyncratic, and requires individual-

What’s your organisation’s business model, in terms of marketing? My companies operate in the service sector, so a customer’s comfort is most important. One word that describes your work. Constant communication. The most useful advice you’ve ever received in life?

Think of a person who inspires you professionally. I do not have an inspiring person in mind, my source of inspiration is interesting and innovative challenges.

9 March 4, 2019 #273

Business News

Simetria to attract about 60 million USD Investment for Shovi Resort Development

of Wine”. Ministry of Environment Protection and Agriculture disseminates this information.

Simetria, real estate development company has signed a general agreement on cooperation with Kazakh Business Group, which holds 60% of the Shovi Resort territory.

Tiny Georgian Toy Company Dadari making Big Difference Dadari, based in Tbilisi, is much more than just a toy company. Of the firm’s seven employees, three have learning disabilities. All of the firm’s products comply with EU standards.

Coffee Factory Capsulo from George Khmaladze Studio nominated at EU Mies Awards Coffee factory “Capsulo” from George Khmaladze Architects Studio was a nominee of Eu Mies Awards 2019. Factory was a nominee but it did not make in top 5 finalists of Eu Mies Awards. The winner of international competition will be announced in April 2019. Dirsi’s Startup Space – a Place for Successful Start!

Georgian Capital to arrange Major Network of Private Schools in Georgia

The company’s objective is to support startups and small businesses. AS Georgia-Dirsi’s new product is aimed at fledgling entrepreneurs, startups and small manufacturers, who are being offered co-working space, workshop space, etc.

Georgian Capital plans to arrange a major network of private schools in Georgia, the report published by the investment group reads.

Georgian National Museum presents Exhibition Evolution & Decadance Georgian National Museum presents the exhibition Evolution & Decadence by Sandro Dalakishvili and Nina Pery at Tbilisi History Museum.

Legalhub-New Co-Working Space for Lawyers opened Legalhub is a newly opened co-working space. Everyone can use it as an office, but founders focus on lawyers. Austrian Director sponsors Film on Tusheti with 31 000 EUR The Austrian director has allocated 31 thousand euros from his budget for filming the film on Georgia.

Georgia – Homeland of Wine – Special Website created in Japan

Kerten Hospitality – Operator of International Hotels enters Georgia

In Japan, a special website – georgia-homelandofwine.com was created in connection with the implementation of the project “Georgia – Homeland

Kerten Hospitality, operator of international hotels has entered Georgia. According to BMG, two hotels will open in Tbilisi and Kvareli under the management of Kerten Hospitality in 2019 and 2020. Namely, a 17-suite hotel will open in Tbilisi and 80-suit hotel will open in Kvareli.

10 March 4, 2019 #273

Country of Ferroalloys a nd Tourism

Over the past years, all thos e who reside in Georgian Dre Georgia and w am does runs ho visit from abro within this fr amework – im ad to see thei proving the in Approaches sh r relatives, feel vestment climate, simpl ould change in s as if poverty ifying taxes, att the ed ucation sector has overwhelmed ra in cting more vestors, build , which results Tbilisi, where in g in m un or e hotels, more qualified peop street beggars pipelines and le, and this and street selle more hydroele factor frustrat rs run amok. Th ctric power plants. es the develo e general situ pment of ation other sectors, in the capital There is no es because these city seems to se nt ia se l ha ct in ve ors lack for du novation in th become more model – this is is e specialists. depressing. a repetition of The new mod At a glance, th th m e el is based no od ex is el tin is feeling has with differen g t on figures and ch t rhetoric. Let’s no real grounds exports statis arts, but it calls see the – Tbilisi is full tic s an for er d of ad co icating the m street beggars, mpare it to th indicators – in ain anchor, th e 2005 street peddle that period fe tr e ad rs and iti absolutely diso on al, ancestral So rroalloys, copp ores, wine an rdered marke viet-Gruzin er d filbert rank m in ts, but ds this situation et ed . first. Today in 2019 has always ex we have the sa The authoriti isted, and I would no me situation ferroalloys, co es under Saak t say all these – pper ores, win ashvili to ok the first an circumstance e and filbert. What does th d short steps, s have worsene e economic cr and N d. ea The reason fo nd er is th is mean in als were transf Georgia? Wor r such genera ormed into ld properties l Homo sapien pessimism se ar e pr ch s, but today th ices are declin anging, ems unclear, is does ing, global pr but a not suffice. W valuable anal ices of ferroalloys an e should go de ysis would ca d copper ores ar eper. st light A nd on everything th is is a real proble e decreasing, exports are sh – the feeling of m. There is rinking, curren no deep bo stagnancy an dy to cy ta are reducing, ke further step incomes d hopelessne the GEL is de s. ss is the It is ridiculous sharpest feelin preciating, an everybody is to imagine th g in today’s G d di scontent. at G eorgia. eo Overall public rg ia n Dream is ab What does a go depression re le to bring od economic flects the re vo existing stagna lu tio na si ry changes. Th tuation mean in Georgia? Th ncy and stands e union e world situat of careerists w till – when, at a glan ion is changing demand is gr ithout initiativ ce, nothing di , ow ing, exports of e, and do sastrous happens, but gs bo dies. And nor ores are grow ferroalloys, everybody ha does the Unite ing, currency s N at difficulty brea io d na l in M flow is growin ovement have the GEL is ap thing. g, preciating an the potential for that; they Therefore, be d ev er co re ybody is ntent. And th ggars even in main wedded is is the whole Tbilisi to their old appr streets are pe economy of Georgia. oaches – simpl rceived more ne ifying, gatively. im The key prob pr ov in g, building mor It should be no lem is that, st e hydropower ted that in 20 arting 2012, plants, more Georgia fell in 04-2010 this model was qu hotels, and se to absolute st ite successful ll more agnation. fe Figures abou rr oa lloys. , because it replaced the to t miraculous economic tal chaos befo In growth surpri on e w or re that period d, this is a blin but everything se nobody, ex , d alley. The has its end – th cluding current model Ministers and e model introduced by of developmen P members of Saakashvili ha the ruling t rules ou party. t ex treme deterior s already fulfilled its m ation, but it ca ission, and th en In this situatio su nnot re pr e taxation regi ogress. may be simpl n, everybody me ified further, thinks A about what sh nd ap pa it re is ntly, everythi possible to build more ho ould be done ng will remai tels, attract m to drag the country ou the same fore n ore tourists an sell more ferr ver. The Georg t of this abyss. d oa lloys, but noth ian people There are diverse solutio ha ve re ac hed a certain ing of the aforementione ns, but their au precipice of d efforts will thors miss a key factor. development, bring efficien results. and they cann t ot overcome The main thin it. It is expected to And again, fo g is that, not on remain at the rget the pathet ly the government ra le current ve l. W e will keep bu ic professors in economics, n into a blind ilding hotels who can write alley. The problem se lli ng and fe rr thousands of oalloys. is deeper and multivolume concepts that more complicated – Maybe the w will never wor No wise prog or the current m ld is arranged k. rams are requ odel of in this way development – someone w ired – the next of the country model of deve as born to conq lo ha ue pm a blind alley. s reached r Mars, and so en m t eb is od go y ing deeper to spin wheel and removing s. the remaining As is common barriers. For example, chan ly known, the ging the deep current trajectory of de By Tengiz Abl ly regressive and obsolete velopment w otia village lifesty as shaped by the previo le , en us authorities ag la ri rg cu in ltu g re, stopping su . The concept of a Model of bsidization, th Development enlargement e of cooperatio sounds very pathetic in its n, minimizing elf, and everyb role of fairs an the od d y thinks of several volum markets. es of works w Village reside ith charts and nts should no figures. t have an optio They should n. either become In reality, the farmers, who model of deve w ill sell their prod lopment is a simple affai uc ts no t at the Tbilisi r – the issue is underground several key stations, but se principles that ll products to may be laid do major distribu wn on one tion compani page. es, promoted the Governm by ent or go out Several basic of business. approaches w The new mod ere outlined el calls for the under the rule endless of Saakashvili exploitation of and this direction is in non-existent op effect even to portunities, bu t creating new day: we create an effici opportunities ent and unco , and no t on ly the investm rrupted bureaucracy, ent simplify proc cl im at e su edures, attract ffices foreign invest ors and develo for that. p what can be developed – po wer sector, to urism, transit. Everything is simple, withou t intricate formulas. This model w orks even today, an d everything that

11 March 4, 2019 #273

The Winners of the Co-Financing Grant Program of Innovations and Technologies Agency of the Ministry of Economy and Sustainable Development are revealed A tota of 20 winners were named within the program. Each of them received a grant of 100,000 GEL. The decision was made by the Investment Committee, which is staffed by high-level international venture investors. Some of the winners shared the details of their ideas: Mariam Solomnishvili, CEO of Agrolab: In 2018, more than 230,000 tons of grapes were produced in Georgia, and about 87 million bottles of wine were exported. In 2017, 270 companies have exported wine, in 2018, it was 284 companies. Georgian wine represented more than 500 different international exhibitions and tasting events in various countries around the world, including the EU, Japan, USA, China, South Korea and others. More than 100 wine tours for media and wine professionals were organized. In order to improve the quality of wine and alcoholic beverages, in 2017, legislative amendments were written in “The law of Georgia on Vine and Wine”. The National Wine Agency Tasting Commission conducted 190 tastings for the purpose of organoleptic testing wine. The existence of research laboratories in the local area has gained vital importance. The laboratory represents an intermediary means for the export of the product. Considering this, the advantage of the laboratory is its massive role in the production of one particular product. It combines all products that are created not only by one entrepreneur, but also within the space. In addition, it is not only about improving the service sector within the country, but also to promote the development of wine produced in the country for the promotion of economic development. Our project implies the arrangement of such agrodirectional laboratories. In the laboratory, simultaneously happens when receiving wine samples, the researching of physical-chemical indicators, analyzing, making recommendations, giving transmission and consulting services to farmers. The idea of creating such an arranged laboratory was caused by problems that exist in the local area. In Kakheti, the region where most of the population, cultivating and viticulture is the main activity, the ability to examine the product’s validity and quality can only be found in the capital, which complicates the working process. Problems are found in the product of the grapes, , wine, where the active involvement of laboratory research required at all stages of production, in which deficits are directly proportionate to the product’s final quality. Taking into consideration the fact that the founding company will be the only typical institution in the Kakheti region, and t is oriented to create conditions for promoting the agro-food sector, where local wine making companies, creating a flexible working environment for small family wine cellars or cooperatives, the expansion of active agribusinesses, promoting production and the provision of

laboratory services. It is important to note that one of the most important issues in the field of spatial and technical basis for practical work/learning, which will include representatives of the field (a field specialist), as well as students. This implies the company’s connection with educational institutions. For the purpose of promoting a productive education, practical exercises will be conducted for students in higher educational institutions, as well as vocational college students. In Kakheti, people interested in studying this field just receive theoretical knowledge, as the opportunity to realize the theory as practice doesn’t exist. In this regard, our company will provide a great opportunity to increase awareness in this specific direction, to train qualified staff to employ, and to give them a proper education. There will present new methods and technological achievements to them, strengthening practical skills, retraining/qualification and certification. Giorgi Kekelidze, Founder & CEO of Daraba: DARABA is the first online Art Gallery or Georgian art marketplace, where an artlover can easily find and buy original art, no matter their taste or budget. DARABA will help Georgian artists sell artworks globally by creating a website and offering global shipping services to art buyers. Furthermore, DARABA will be very active offline as well, and will organize innovative exhibitions to animating the paintings. The main reason behind starting the company is to support Georgian artists, like my father did almost 30 years ago with the same company name, DARABA. Additionally, I was always into art, and DARABA is just perfect food for my soul. Tell us about your team and work process. Currently, we are in a process of finalizing our team. I have great team members already, with whom I have worked previously. On top of being true professionals, they are my friends, and most importantly, share DARABA’s mission to support Georgian artists. We already started working to have our website, Daraba.ge finished in the summer, and to organize the first animated exhibition of Tutu Kiladze. Who’s your target audience? Our target audience are foreigners, mostly tourists traveling in Georgia, as they are currently the main art buyers. However, I think that Georgians will also start buying artworks after we offer them a website with built in filters to easily search and buy only Georgian art. Moreover, in order to make art affordable for many people, and especially appealing for Georgians, Daraba will

charges at least two times at a lower sales commission fee than fees offered by traditional galleries. What are your plans for the future, how do you plan to grow this company? We plan to be a fast growing company. In the near future, we will be present at TAF, and organize our first exhibition in summer. By the end of 2019, we want to have most of Georgian artists consolidated on our website and already actively selling globally. Vakhtang Iashvili, CEO of TTM: The Company TTM Group was founded at the beginning of 2018 by its founders Vakhtang Iashvili and Dimitri Abashidze to cope with one of the most important global problems sources of regulation- violations and road accidents caused by speeding. The statistics published by the World Health Organization (WHO) is alarming: approximately 1.3 million peoples die and 20 to 50 million people get injured annually due to road accidents. 30% of traffic accident arise from overspeeding. The TTM Group has invented a dynamic speed limiter TTM-Update V2018.001, which, based on the information received from a GPS tracker, will control vehicle speed in concrete speed zones. If the vehicle overspeeds, the limiter will activate automatically, thus preventing the driver from speeding the vehicle beyond the set limit. For 12 months, the main team members, hired consultants and experts had worked to design a device, which would be universal for all types of vehicles with petrol, diesel, hybrid or electrical engines. This device will be the most up-to-date offer to limit vehicle speed, and will enable the GPS tracking companies to offer updated and improved service to their customers The users of the device will be car rental and land transportation companies, public transport and fleets of taxis, corporate vehicle fleets, as well as physical entities. The device will allow them to: Provide a high standard of their own and passenger safety, automatically observe the speed limit, avoid fines, optimize fuel and depreciation expenses, and reduce unforeseen material Damage. In order to achieve its goals, the Company joined a UG Startup Factory Acceleration Program, which provides the team with a free working space, necessary consultations, trainings and up to date networking. The company is actively involved in a startup ecosystem, and regularly participates in interesting and useful arrangements. It also cooperates with relevant branch consultants,, and is oriented towards permanent growth and development. By Nina Gomarteli

12 March 4, 2019 #273

Profile for Caucasian Business Week

Caucasus Business Week #273  

1. Over 90% of Subscribers will be #Gasified in 2019-2021 2. Georgia #celebrates Rare Disease Day on February 28 3. #Georgia’s Credit #Ratin...

Caucasus Business Week #273  

1. Over 90% of Subscribers will be #Gasified in 2019-2021 2. Georgia #celebrates Rare Disease Day on February 28 3. #Georgia’s Credit #Ratin...