Issue no: 1164/187
• JULY 2 - 4, 2019
• PUBLISHED TWICE WEEKLY
PRICE: GEL 2.50
In this week’s issue... Weekly Entrepreneurial News @entrepreneur.ge NEWS PAGE 2
Georgian Wine Industry: Implications of a Russian Embargo BUSINESS PAGE 6
US Companies Sidestep Trump Regulations, Continue Cooperation with HUAWEI
BUSINESS PAGE 6
ON THE GEORGIAN ECONOMY Minister Turnava on the outlook for the tourism sector and GEL
Tbilisi Startup Bureau Takes Aim at Georgia’s Entrepreneurship Economy
BUSINESS PAGE 8
Georgian Wine Industry: Implications of a Russian Embargo
May 2019: Average Hotel Prices & Hotel Price Index in Georgia BUSINESS PAGE 10
Production of Electric Cars to be Launched in Kutaisi
BY SIMON APPLEBY
BUSINESS PAGE 11
ussia has certain economic leverage over Georgia, as last year Georgian exports to Russia accounted for around 15% of total exports by value. A disproportionate amount of Georgian exports to Russia are wine, brandy, foodstuffs, and mineral water. The threat of a renewed trade embargo has people in Georgia’s agriculture, beverage and food sectors worried. A review of export data reveals that, should a comprehensive embargo on Georgian wine exports to Russia be imposed, there will be winners and losers in this scenario.
Gault&Millau Launches Gastronomic Guide to Georgia BUSINESS PAGE 11 Prepared for Georgia Today Business by
The imposition of “special controls” on eight Georgian wineries by the Russian Federation’s sanitary authorities is thought to be a “shot across the bows,” to warn the Georgian government and Georgian people that anti-Russian sentiment will have economic consequences. That the government of the Russian Federation may have contributed to these negative sentiments through its actions is beside the point; Russia has certain economic leverage over Georgia, as last year Georgian exports to Russia accounted for 15% of total exports by value. A disproportionate amount of Georgian exports to Russia are wine, brandy, foodstuffs, and mineral water. Continued on page 6
COMMODITIES CrudeOil,Brent(US$/bbl) GoldSpot(US$/OZ)
GEORGIA TODAY JULY 2 - 4, 2019
The World Is Entering a Climate Crisis – Georgia Needs to Act @entrepreneur.ge Gamarjoba! I’m the Editor-in-Chief of the Georgian edition of Entrepreneur magazine and I’m here to share the top weekly Entrepreneurial news with you: Mana has been producing tea in Saguramo village for two years. The enterprise was launched by Irakli Ghurtchumelia, who states that the product is distinguished with premium quality Georgian materials for which it aims to create a strong presence on the market. Production started with four tea varieties, which expanded to 12 different premium-quality teas, 10 tons of tea produced annually, and four export destinations: the Czech Republic, Slovakia, Poland and Latvia. Black and Green tea with lemon were presented on the market by Mana this year. The company plans to diversify markets and add other tea varieties to its offerings. Agrokiziki has something new for healthy productlovers. Launched by the Gonashvili family in 2011 with an initial focus on animal food production, it now has a brand shop in Tbilisi. Brothers Beka and Bidzina Gonashvili primarily aimed to promote its products by supplying to enterprises. The launch of Tserti (წერტი) comes as the result of cooperation with partner farmers where, along with meat, dairy and other Agrokiziki products, it is possible to purchase the goods of partner farmers, all of them Georgian and totally natural. AIGROUP is to start producing electric cars in Georgia designed by Zviad Tsikolia, who was named among 50 courageous entrepreneurs in 2018. Tsikolia notes his passion for working on Georgian production, particularly in transport. The industrial complex of AIGROUP is to be launched on 100 hectares in Kutaisi. The electric car enterprise promises 300 workplaces for locals at the first stage and will have a final capacity of 40,000 cars. The project is implemented in partnership with the large Chinese corporation ‘Changan.’ Follow the Entrepreneur Georgia Instagram page to get the latest updates from Georgian Entrepreneurs. For doing business with Georgian Entrepreneurs, write us on email@example.com
BY AMY JONES
limate scientists warn that our planet is heating faster than they previously predicted. As earth heads towards breaking point, Philip Alston, UN special rapporteur on extreme poverty and human rights, stated last week that the impacts of global heating could undermine basic rights to life, water, food, and housing as well as democracy and the rule of law. Following the worldwide trend, Georgia’s biodiversity and climate are also changing. The International Union for Conservation of Nature Red List includes 29 mammals, 35 birds, 11 reptiles, 2 amphibians, 14 fish and 56 woody plant species on Georgia’s list of endangered species. The UN has listed habitat loss due to logging, water pollution and intensive grazing, as well as the unsustainable use of biological resources as the main danger to Georgia’s biodiversity In addition, the average temperature in Tbilisi has increased by 0.7 degrees over the past 50 years. The Georgian government has implemented some initiatives to protect biodiversity, protect the environment and encourage sustainable development. In 2019, the state budget for biodiversity increased to 720,000 GEL, according to the UNDP. On 28 June, the National Environment Agency, the Ministry of Environment Protection, the Ministry of Agriculture and the UNDP signed an agreement on the fourth national climate change framework and second two-yearly report. The agreement aims to tackle climate change in Georgia on a national level, in accordance with the requirements of the
Image source - Geocell
Paris Agreement, a UN framework on climate change to deal with greenhousegas-emission mitigation. Despite small steps by the government, environmental protection measures in Georgia remain limited in part due to a lack of infrastructure. For example, in June, Tbilisi City Hall installed recycling separation bins along Rustaveli Avenue. Yet, with lacking infrastructure and education, the waste is not necessarily recycled. GEORGIA TODAY have witnessed waste disposal workers throwing the separated recycling waste into a mixed general waste bin. Europe experienced record temperatures this weekend as a heatwave swept across the continent. Temperatures in Montpellier in the south of France hit 45 degrees, the same as you would expect in the US’ Death Valley during August. As the affects of climate change are being felt, it is beyond time for citizens and governments to act.
HOW TO BE MORE ENVIRONMENTALLY FRIENDLY IN GEORGIA Minimize plastic consumption Many businesses in Georgia use large
amounts of plastics: takeaway coffee cups, plastic bags, straws. A report by the EU in 2018 found that around 900,000 tons of waste are generated annually in Georgia, of which more than 75% goes to landfils. To reduce the amount of plastic that ends in landfill, take your own alternative with you such as reusable coffee cups, metal straws and canvas bags. Take public transport or walk The pollution in Tbilisi caused by poorly maintained vehicles and congestion could be minimized if more residents choose to walk, cycle or take public transport. In addition, carpooling could reduce the number of cars on the roads. Avoid meat Although many Georgian dishes include meat, Georgian cuisine can be easily adapted to a vegetarian lifestyle. Lobio, khachapuri, ajapsandali, salads, and a number of other dishes are meat free. In addition, Tbilisi has numerous vegetarian and vegan restaurants such as Kiwi Vegan Cafe, Mama Terra, and Hummus Bar.
GEORGIA TODAY JULY 2 - 4, 2019
Writers Boycott National Foundation of Georgian Literature
Photo: Writers' House/Facebook
BY ANA DUMBADZE
eorgian writers, translators, and publishers have boycotted the newly established organization “National Foundation of Georgian Literature” and rejected the decision of the government and the Minister of Education, Science, Culture, and Sport of Georgia whereby LEPL “Georgian National Book Center” and LEPL "Writers' House" were merged and LEPL “National Foundation of Georgian Literature” was established. The Order on the Establishment of the National Foundation of Georgian Literature was released on June 18 and came into force on June 20. The “Georgian National Book Center” and the “Writers’ House” were thereafter abolished. Writers, translators, publishers and former employees of the abolished organizations are demanding the restoration of the abolished organizations and the abolishment of a newly established entity instead. "Our boycott will be comprehensive and noisy. The international writer’s community will be involved in it and we will seek alternative ways to publish our books - this will be a temporary measure before our full victory, until the restoration of the status quo in the field and before returning to the full working process. This is the individual protest of writers. Every subscriber is personally
responsible for their position, condemns the unification of the "Writers’ House" and "Georgian National Book Center" as one organization and boycotts the newly established “National Foundation of Georgian Literature”, reads the statement released by Georgian writers. Georgian authors note that in recent times they have seen the "unbelievable process" of ignoring writers and their opinions. According to them, at this stage, the need for preparation for the Paris 2021 Book Fair are being completely ignored. Additionally, they say, the meetings they are invited to by representatives of state or the sphere, are "an attempt to obtain writers' consent for a picture created by them". "In recent years, we have the impression that people who work in our sphere are punished for their honest service to our country. But Georgian writers, as a unity of artists, among them individual artists, do not recognize the right of the authorities, such as ministers and their deputies, to change our working environment”, reads the statement released by writers, translators and publishers, which is being signed by representatives of the sphere. The information regarding the abolishment of the “Georgian National Book Center” and the “Writers’ House” and establishment of a new, large-scale organization was spread on May 3. Many writers immediately claimed that the decision was political. They also noted that it was the revenge of the government for the writers’ "disobedience."
Youth Employment Festival to Be Held in Tbilisi BY MARIAM MERABISHVILI
he Social Service Agency will hold a festival to support the employment of young people in the exhibition center ‘ExpoGeorgia’ on July 5. About 60 companies will offer more than 1000 vacancies to festival attendees. Jobs will be offered in the insurance, banking, consumertrade, pharmacy, energy and railway spheres. Adolescents will also be able to join internships and state subsidy programs. Youth aged 18 to 36 and students and graduates of higher and vocational schools can participate in the Employment Festival. During the festival, job seekers and employers will be able to communicate quickly and easily. The aim of the festival is to help young people meet company representatives and to encourage those offering internships and subsequent employment. Representatives of the Social Service Agency will also introduce attendees to state programs and services promoting employment. The one-day festival will start at 12 PM in the 3rd pavilion of Expo-
Source: Social Service Agency
Georgia and will last three hours. Information about the festival will be forwarded to adolescents looking for jobs who are registered at worknet.gov.ge, the labor market management information system. Attendees should bring along their ID card and ideally an up-to-date CV.
GEORGIA TODAY JULY 2 - 4, 2019
June 2019 Agri Review
he share of the rural population in the total population decreased slightly, from 42.6% in 2015 to 41.3% in the beginning of 2019. The share of agriculture in total GDP has also declined, from 9.1% in 2015 to 7.7% in 2018. While production figures have gone up, there was a 6.4% increase in
to the change in total CPI. The main drivers were price fluctuations in the following sub-groups: vegetables (+8.1%), fruit and grapes (+7.1%) and milk, cheese, and eggs (-5.7%) From an annual perspective (May 2019 vs. May 2018), the prices of food and non-alcoholic beverages increased by 7.9%, contributing 2.43 percentage points
of total agriculture export income for the country in 2019 so far, but like Georgian wine, its prime destination is Russia (in value terms, 46% of mineral water exports was directed to Russia in 2018). For detailed monthly dynamics of HHI in Georgia’s agriculture exports by countries, see the Figure 3 below.
Figure 2. Exports and imports of potatoes
Figure 1. Self sufficiency ratios in 2018 and 2017 (%)
Source: MoF, 2019
Source: GeoStat, 2019
agricultural production in 2018 compared to the previous year. Production in the plant-growing sector increased by 10.9%, and animal production experienced an increase of 2.1% compared to 2017. Looking at the self-sufficiency ratio, the highest decrease was for grapes, followed by vegetables, and the highest increase was for meat, followed by maize (Figure 1). Revenue from the sales of agricultural products in 2018 has increased compared to the 2014-2017 period, both in percentage and absolute terms. Increased production is the most likely reason for this result. Another possible explanation would be that other sources of income aside from selling agricultural products contributed to households’ income, but since there were no significant structural changes observed in the country in recent years, increased production is most likely responsible for the increased sales revenue.
PRICES On a monthly basis, the country’s price levels barely changed. The Consumer Price Index (CPI) in May 2019 was 0.5% higher than the previous month. While in comparison to May 2018, CPI experienced a significant 4.7% increase. For food and non-alcoholic beverages, the month-over-month prices increased by 1.2%, contributing 0.37 percentage points
to the change in total CPI. In May 2019, the sharpest price changes on an annual basis were observed within the following subgroups: vegetables (+33.7%), fish (+13.5%) and fruit and grapes (-19.9%).
POTATOES - IN THE SPOTLIGHT In May 2019, prices in the category of vegetables increased by 8.1% compared to the previous month. On an annual basis, prices in this group experienced a significant 33.7% increase. According to GeoStat data, annual prices increased mostly for potatoes (67%), onion (64%), cabbage (60%), cucumber (57%), and pepper (56%). According to trade statistics, the import value and quantity of potatoes during January-May 2019 decreased on an annual basis. In January-May 2019, the quantity of imported potatoes decreased by 47%, from 15.9 thousand tons to 8.3 thousand tons. Within the same period, the import value amounted to 1.5 mln. USD, 82% lower than the 8.1 mln. USD of January - May 2018. On the other hand, the quantity of exported potatoes in January-May 2019 almost tripled from 0.4 thousand tons to 1.1 thousand tons compared to the same period of the previous year. The corresponding increase in export value was 39% (from 0.15 mln. USD to
0.2 mln. USD). (Figure 2). Meanwhile, annual publication of Agriculture of Georgia 2018 (GeoStat, 2019) suggests that the domestic production of potatoes in 2018 increased by 32% from 180.1 thousand tons to 237.5 thousand tons compared to 2017. It appears that the increase in domestic production led to a decrease in imports of potatoes and an increase in exports resulting in a supply shortage. This shortage is likely to be the major cause of the increase in prices. As to international prices, starting from January 2019, international prices have been increasing for five consecutive months. In May 2019, the Food Price Index, measured by the Food and Agriculture Organization (FAO), increased by 1.2% compared to April 2019. From an annual perspective, we still observe a downward trend in world prices: the FAO Food Price Index decreased by 1.9%, compared to May 2018. Annual price decreases were observed for vegetable oil (-15.4%) and cereal (-6.0%), while prices for meat (0.9%) and sugar (0.4%) remained almost unchanged compared to the corresponding month last year. Meanwhile, dairy prices are close to the five-year maximum since 2013. In May 2019, annual prices for dairy increased by 5.1% reflecting increased import demand in anticipation of a tightening in export availability from Oceania due to declined production. Concerns over milk production in Europe put additional upward pressure on dairy prices.
2018 to February 2019. The biggest importer of Georgia’s agriculture produce has been Russia, who accounted for slightly less than one third of the country’s annual agriculture exports (in the June 2017-May 2018 period), but this average increased by 3 percentage points in the last 12 months’ (June 2018-May 2019), leading to the change in total index. The concentration rose gradually in terms of product concentration since the end of 2017 too (HHI=0.11 in December 2017 versus HHI=0.18 in May 2019) and the decline in hazelnut exports is to blame. Citrus, the production of which, like the hazelnut, was affected by the stink-bug invasion, also lost part of its share in Georgia’s total agriculture exports, but the change is more moderate. Parallel to these negative changes, Georgian wine enjoyed record exports in 2018 (approximately 200 mln. USD), the importance of which rose in the country’s agriculture exports, and its average share in 2019’s agriculture exports exceeds the 30% margin. As far as the second biggest item in Georgia’s list of agriculture exports is concerned, mineral waters have generated roughly one fifth
Georgia joins the International Olive Council Under the auspices of a working visit to the Kingdom of Morocco, the Minister of Environmental Protection and Agriculture of Georgia, Levan Davitashvili attended a session of the International Olive Council held in the city of Marrakech. The council brings together 20 leading olive oil-producing countries around the world. At the session, Georgia was accepted as a member of the International Olive Council. For more information follow the link: h t t p : / /m e p a . g o v. g e / G e / N e w s / Details/9537 New Project worth two million EUR starts in order to support Georgia’s rural and agricultural development A new project for rural and agricultural development has been launched by the Ministry of Environmental Protection and Agriculture of Georgia and the United Nations Food and Agriculture Organization (FAO). Austrian Development Cooperation (ADC) will allocate two million euros to finance the project, which aims to develop rural development policy in Georgia, improve value chain, sustainable use of natural resources, and support environmentally friendly agricultural activities. For more information follow the link: h t t p : / /m e p a . g o v. g e / E n / N e w s / Details/9532/
Figure 3. HHI of Agriculture Exports of Georgia by Countries
TRADE HIGHLIGHTS Georgia’s agricultural export has been fairly diversified in terms of destination for the past years (Herfindahl-Hirschman Index (HHI) with a value less than 0.2, which is considered a sign of a high diversification), but the concentration has increased markedly from October
Source: GeoStat, 2019
SUBSCRIBE! 1 YEAR SUBSCRIPTION - 60 GEL (6 ISSUES) Money Back Guarantee! firstname.lastname@example.org
+995 32 229 59 19 10 Galaktion Street
Tel: (995 32) 2 45 08 08 E-mail: email@example.com
GEORGIA TODAY JULY 2 - 4, 2019
Turnava Meets with Banks & Hotels Amidst Tourism Crisis BY SAMANTHA GUTHRIE
inister of Economy and Sustainable Development Natia Turnava is moving quickly to prevent an economic crisis and avoid the collapse of one of Georgia’s biggest industries, tourism, in the midst of Russian bans on flights to Georgia and anti-Georgian fearmongering in Russia. Last week, Turnava announced that the government was working on a package of financial assistance for companies operating in the tourism sector as part of their anti-crisis plan. Moscow’s flight ban, which will begin on July 8, will leave an estimated 155,000 Russians unable to use tickets they already purchased. 3,500 people who booked tours to Georgia with travel agencies in Russia have already had their trips cancelled. The ban is expected to hit the Ajara region particularly hard. “No matter how diversified our market is, the share of Russian tourists is high, at 25%. Therefore, we cannot say that this is not a problem. We expect the loss of around $750 million of income. But now we are working on ways to reduce the expected impact,” said Turnava last week.
Continuing her plan to keep the tourism-reliant economy moving during the high summer season, Turnava met on Wednesday with representatives of two industries that interact intensively with tourists from Russia: hotels and banking services. Meeting with representatives from international brand-name hotels, Turnava discussed how the new challenges in the sector can be overcome, and how the ministry can support the private sector. After the meeting, she told reporters, “We discussed with the representatives of the brand hotels how we can help them in logistics – it might be new flights, charter flights, financing of certain transfers, some financial support and using the existing financial mechanisms we have. It is important that the field is balanced in evaluating the process since it is about revealing new opportunities for attracting tourists from different markets, as well as about maintaining the traditional market and the Russian market as well.” The Ministry of Economy says the meeting aimed to help businesses “find ways of softening the negative effect [of the flight bans] that is a challenge to the tourism industry.” Turnava also declared Georgia an “open, hospitable country, a safe tourist destination and an open market for Russian tourists.”
Image source: Ministry of Economy and Sustainable Development
After meeting with representatives of commercial banks, Turnava explained that “We are talking about the challenges that our tourism industry faces...It is possible to find various financial support schemes and financial products, including credit-guarantee mechanisms, to
overcome the challenges we face at this point. Very soon, we will be ready to offer our tourism industry a certain plan.” They also discussed a planned initiative to reduce the negative impacts of the flight ban, focused on small and medium-sized enterprises.
“Representatives of the commercial banks positively assessed the initiative of the Minister... confirmed their active support, and expressed hope that the directions of the tourism sector will be soon established via joint efforts,” reported the Ministry of Economy.
Minister Turnava: Further GEL Devaluation Not Expected BY THEA MORRISON
eorgia’s Minister of Economy and Sustainable Development, Natia Turnava, says that the Georgian national currency GEL (Lari) is not expected to further devaluate against the US Dollar and Euro, in the long-term perspective. The Minister explained that the factors that impact the Lari exchange rate can be divided into two groups: macroeconomic and expectation. She says the macroeconomic parameter shows that the GEL rate will not depreciate in the long-term perspective. However, she stressed that after Russia banned flights to Georgia, which will directly affect tourism, the largest sector of foreign currency inflow in Georgia, this negatively reflected on the exchange rate. “Of course, political processes reflected on the currency, but we will work on this so that the problem is neutralized,” she said. Following the Russian embargo imposed by the Russian President Vladimir Putin
We'll soon be ready to offer our tourism industry a plan
It is about finding new opportunities for attracting tourists from different markets, as well as keeping the Russian market Photo source: agora.ge
on June 21, Turnava met with the representatives of all commercial banks operating in Georgia. The Minister discussed with the banking sector the establishment of a plan that will reduce negative impacts on the economy and particularly on the small and medium (SME) segment in the tourism sector. “We are talking about the challenges that our tourism industry faces with commercial banks. It is possible to find various financial support schemes and financial products, including creditguarantee mechanisms, to overcome the challenges we face at this point. Very
soon we will be ready to offer our tourism industry a certain plan,” she said. Moreover, ways of overcoming the challenges in tourism were discussed with the representatives of brand hotels. “It is important that the field is balanced in evaluating the process since it is about revealing new opportunities for attracting tourists from different markets, as well as about maintaining the traditional (Russian) market,” she said. Georgia’s National Statistics Office has released rapid estimates of the economic growth of January-May 2019, according to which the estimated real Gross Domes-
tic Product (GDP) growth rate in May 2019 equaled 4.7% and the average estimated real GDP growth equaled 4.9% for the first five months of 2019. Geostat says that in May 2019, the estimated real growth compared to the same period of the previous year was posted in the following activities: real estate, renting and business activities, trade, hotels and restaurants. A decrease was registered in manufacturing and construction. Minister Turnava said the provided statistics are quite good, adding that so far the economic growth is high. “However, we cannot predict if the
economic growth will remain the same in the next months,” she noted. Ivane Matchavariani, Minister of Finance, also spoke about the GEL rate, noting the situation on the local currency market is the reflection of recent developments and negative expectations seen countrywide in the past week. “The expectations are certainly heavy. I hope these expectations will not come true in the full scale. What happens to the GEL today is unambiguously a reflection of the given expectations,” he said. Matchavariani also noted that the National Bank of Georgia (NBG) is doing its best in this regard. “I hope radicalism and hysteria will decrease soon, though there are grounds for them currently,” he added. At present, according to the National Bank rate, one US Dollar equals GEL 2.8687 while one Euro costs GEL 3.2657.
GEORGIA TODAY JULY 2 - 4, 2019
Georgian Wine Industry: Implications of a Russian Embargo Continued from page 1 The Georgian wine industry’s vulnerability to trade embargo by Russia stems from several issues: • Despite 13 years of urging by two government administrations to aggressively diversify markets, many wineries have opted to “pick the low hanging fruit” and reactivate their old trading networks in Russia, and excessively rely on a single market. • The brand recognition of Georgian wine in general, and individual brands, outside the former Soviet Union, is still rather weak (although this is improving steadily). • Georgian wines are rather expensive compared to rival products. This is a feature of the fragmented supply chain, lack of vineyard mechanization and hence high production cost of grape, fragmented processing base, and poor economies of scale. • Chaos in foreign land ownership regulation has driven potential foreign equity investors out of the estate winery segment. Estate winery owners seeking to expand have had to rely on government grants and bank debt, instead of equity investors. • Without access to foreign capital, consolidation in the industry has stagnated, with a knock-on effect on economies of scale. In 2018, 245,000 tons of grape were processed by 292 winemaking companies; for a country with a tiny domestic consumption base, that is a lot of wineries. By comparison, La Rioja in Spain has 600 wineries drawing grape from 12,000 growers and 45,000 ha of vineyard, but it is at the heart of an enthusiastic wine-drinking country of 47 million people with huge loyalty to that appellation. The availability of various grants and subsidized loans over the past five years has enticed many urban professionals to mortgage their urban properties and engage in their dream of owning a small winery or vineyard with borrowed
RU= Russia, ROW = Rest of World, EU = EU + EEA , EA = East Asia, CISER = CIS, Ex-Russia Source Data: UN Comtrade
CISER = CIS ex-Russia, EA = East Asia, EU = EU+ EEA, ROW = Rest of World, RU = Russia Source Data: UN Comtrade
money. Most small-scale wineries have little capability to invest in brand development and distributor search outside Georgia, other than basic social media presence and participation in wine fairs with government co-funding. Formation of marketing co-operatives amongst clusters of small wineries has not yetbeen very successful. On the bright side, quite a number of wineries owned by prudent businesspeople have turned down relatively easy money in the Russian market since 2013 and invested heavily in expanding in non-traditional markets. Mid-sized winery Giuaani from Manavi has its own
wine shop in Urumqi, Xinjiang Uyghur Autonomous Region, China. Large winery Tblvino for some years maintain that Russia is only a modest part of their total turnover. Boutique negociants like Mukado have established their own online wine trading platforms in Japan and China with local partners, and coupled with substantial in-country promotions, are making satisfactory progress in those markets. Analysis of the past five years’ export data is sobering. The reliance on the Russian market for absorbing Georgian wine production is substantial, over 60% in 2018. It is apparent also that Russia has been
absorbing much of the lower end of Georgian wine output, as indicated by average price per liter. It is also interesting to note that prices into the East Asian market have softened in the past five years, but most wine-exporting countries to China have noticed this trend, with the exception of New Zealand and Australia. On the bright side, the East Asia market for Georgian wine has quadrupled in dollar terms in only five years. That is not an unusual growth curve when a product is well-promoted, and priced and positioned correctly in that part of the world. Given that the East Asia wine market (ex-Japan) is still growing quite fast, and presuming that investment in brand recognition and distributor search continues to be effective, the East Asia market for Georgian wine could conceivably quadruple again in another five years. That would account for about $100 million in exports, almost the same as what Russia accounts for now. I am familiar with one respected large-scale winery owner who claims he could sell his entire output several times over in China, as his brand is well-developed there, and he has been turning down quite lucrative Chinese offers for his entire output for some years in order to maintain his presence in Europe and some other markets. Companies like his are well-positioned to survive and thrive in the wake of a Russia embargo. One note of gloom is that a substantial proportion of Georgia’s wine output is of rather basic quality table wine destined for Russia, which is not competitive with French, Spanish or Italian table wines which deliver well on the price/ quality spectrum. The sanctions Russia had imposed on EU wine exporters left Georgia in a privileged position in this segment of the Russian market, and these types of wines may have trouble finding a home in another market, especially as they are mostly white (East Asian markets are predominantly red). The CIS-ex Russia market has not
shown much growth in the past five years, but weak currencies (and war in Ukraine) have not been helpful. The EU market is showing slow and steady growth, mostly in the Baltic States, Poland, and Germany. That trend should continue. From a very low base, the US market is accepting more and more Georgian wine, and a Free Trade Agreement with the USA should assist that process. It is to be hoped that the current intimidation of Georgian exporters by a key export country’s government does not persist and that normal trading can continue. Should an embargo eventuate, there will be a substantial disruption of the industry for 5 years or more as Russia-dependent wineries struggle to place the product in non-traditional markets. More prudent operators with existing diversified markets will be in a position to capture underutilized grape supply chain at a more reasonable cost and to acquire distressed or bankrupt wineries and vineyards to expand their business and improve their economies of scale. If faced with a crisis, the National Wine Agency will have to prioritize its marketing activities based on the fastest return on investment. Activities in Europe and CIS-ex Russia may have to be deemphasized in favor of faster-growing markets. Investment in brand development and recognition, distributor search and in-country promotional events in East Asian markets, with both government and private companies covering the costs, should balance supply and demand faster than pursuing market share in mature markets with a surfeit of their own quality, inexpensive wine. About the author: Simon Appleby is an Australian veterinary scientist and agronomist, and has been operating Hong Kong-based agribusiness group Yu Feng Nong Holdings since 1997. His companies are engaged in M&A consulting, agricultural engineering, farm and asset management.
US Companies Sidestep Trump Regulations, Continue Cooperation with HUAWEI BY MARIAM MERABISHVILI
merican companies are still selling millions of dollars of products to HUAWEI, despite a Trump administration ban on the sale of American technology to the Chinese telecommunications giant. Such decisions help HUAWEI to continue to sell strategic products such as smartphones and servers. In addition, this fact emphasizes that even for Trump’s Administration, it is not easy to restrict companies that are labeled as being a “national threat.” The first wave of prohibitions was misleading for many suppliers of HUAWEI because at that point they were not well-aware of US trade controls, and the transportation of products was suspended on this basis. Later, when the involved parties better understood the legal details, they were able to determine which products could be sold in
China. One of the most striking examples is that of the largest US memory card maker, Micron Technology, which was one of the first to publicly prove its right to resume business relations with HUAWEI. "The company was forced to stop supplying products to HUAWEI, but two weeks ago the process was renewed after close investigation of the relevant laws. We found ways to continue our partnership within the law," said Micron Executive Director Sanjay Mehrotra. These issues were addressed by law firm Akin Gump's Partner Kevin Wolf, who said American companies are free to keep cooperating with HUAWEI if their products are not manufactured in the US. “A memory card can still be delivered to HUAWEI if its production is made outside the US and does not contain technology that threatens national security,” he said. American companies are not the only source of important technologies, but within the new regulations, they themselves are in danger of losing an impor-
tant business partner. That is why some companies are considering transferring production to other countries in order to shirk existing regulations. Micron's decision was joined by other
leading companies, such as INTEL who have also found a way for their products not to be classified as American. However, INTEL has yet to make an official statement on this issue.
Against the backdrop of US companies protesting Trump's prohibitions, HUAWEI’s founder and executive director Ren Zhengfei spoke about the contribution of American companies to the company’s development during a meeting with media. “Partnership with them is very important for us, and this cooperation counts already 30 years. Consequently, the relationship and partnership between the two parties are above politics.” HUAWEI products and services are available in more than 170 countries and are used by a third of the world's population. There are 16 research and development centers operating worldwide in the USA, Germany, Sweden, Russia, India and China. HUAWEI Consumer BG is one of HUAWEI's three business units, mainly focusing on Smartphones, personal computers, tablets and cloud services. HUAWEI Global Network is based on 20 years’ experience in the telecommunications business and serves to provide innovative technologies to customers around the world.
GEORGIA TODAY JULY 2 - 4, 2019
EU & 6 EP Countries Set Action Plans to Protect Environment
Image source: EU
n 27-28 June, the European Union, Armenia, Azerbaijan, Belarus, Georgia, the Republic of Moldova and Ukraine met to define priorities, targets, and specific actions to work together and further protect the environment and actively use opportunities for greener development. Under the EU-funded ‘European Union for Environment’ (EU4Environment) program, high-level representatives from Eastern Partnership (EP) countries, European Union Member States, European Union institutions, international partners (OECD, UNECE, UN Environment, UNIDO, and the World Bank), took part in an inaugural event in Brussels. The event provided the opportunity for all partners to agree on country-specific work plans to improve and implement policies that can spur environmentally friendly economic growth, and enhance societies’ resilience and citizens’ wellbeing. “Our cooperation on environment with the Eastern Partner countries is stronger than ever and is already bringing tangible benefits to the daily lives of citizens across the region,” said Katarína Mathernová, Deputy Director-General for Neighborhood and Enlargement Negotiations at the European Commission. “Together the EU, its six Eastern Partners are working to increase our joint ambition to tackle environmental protection and climate challenges. There is no time to lose. Today's meeting has brought all partner together to agree on the next steps forward.” Armenia, Azerbaijan, Belarus, Georgia, the Republic of Moldova and Ukraine are committed to actively implementing the Sustainable Development Goals and other international commitments, including those tackling climate change under the Paris Agreement. In addition, within the framework of the Eastern Partnership, the European Union together with all partners have also agreed to certain targets under the ‘20 Deliverables for 2020’. In this context, the EU4Environment program is sup-
porting the countries to transition towards greener, more efficient and sustainable economies, as well as to addressing environmental challenges. Complementary measures will be implemented under EU4Climate program. EU4Environment builds on the achievements of past EU-funded programs, which brought important policy changes and enterprise-level measures. For example, previous work has contributed to the adoption of new laws on the environmental assessment of strategies, plans and investment projects in Azerbaijan, Belarus, Georgia, Moldova and Ukraine. More than 400 enterprises received expert advice to identify green solutions that result in annual savings of some EUR 10 million. The six EPs also identified additional nature conservation areas four times the size of Belgium. EU4Environment is a project funded by the EU with EUR 20 million, to support Armenia, Azerbaijan, Belarus, Georgia, the Republic of Moldova and Ukraine to implement the Paris Agreement on Climate Change, improving climate policies and legislation, and reducing the impact of climate change on people’s lives. EU4Environment is working with the six countries to preserve and better use their natural capital, increase people's environmental well-being, and grasp new development opportunities. For example, businesses, particularly small and medium-sized enterprises, are being supported to save energy, water and materials. Leading international experts are also advising national administrations on better environmental governance, such as assurance of compliance with laws, effective use of public finance and building of administrative capacity. For more information on EU4Environment: https://www.euneighbours.eu/en/east/stay-informed/ projects/eu4environment About the EU4Environment Regional Assembly meeting: http://www.oecd.org/environment/outreach/inauguraleu4environment-regional-assembly.htm
Paragraph Resort & Spa Shekvetili Awarded 'Hotel of the Year' by Marriott Int'l TRANSLATED BY KETEVAN KVARATSKEHLIYA
arriott International has awarded Hotel Paragraph Resort & Spa, located in Georgia’s seaside resort Shekvetili, with the Top Franchise Hotels Award 2018. Paragraph has been selected among the best 300 hotels in Europe. The annual award ceremony was held on June 26 in London. "There are nearly 300 franchise hotels across Europe, and winning in this nomination indicates that the attitude of our team towards the hotel, its guests and the brands of Marriot of Autograph satisfies all the demands of the clientele and even exceeds the expectations due to Marriott network services and Georgian hospitality," stated Morten
Skumsrud, Vice President Operations Franchise Europe at Marriott International. According to the official results of 2018, Marriott International named Paragraph Resort & Spa Shekvetili the first amongst other European hotels of the Autograph Collection, nearly a year after its launch. The status was measured according to the customer-satisfaction index, with Paragraph maintaining leading position before hotels in London, Milan, Barcelona and other European cities. Paragraph Resort & Spa Shekvetili is the first yet very successful project in the portfolio of the Georgian Co-Investment Fund in the hospitality and real estate direction. The 220-room hotel integrates a 1600 sq.m aquarium, 115-meter long swimming pool built into the sea, children’s playgrounds, a winter garden, large-scale conference halls and restaurants. The total investment value of the project exceeds $100 million.
Image source - Spend your summer in Georgia
GEORGIA TODAY JULY 2 - 4, 2019
Tbilisi Startup Bureau Takes Aim at Georgia’s Entrepreneurship Economy
BY SAMANTHA GUTHRIE
he Tbilisi Startup Bureau is not, as the name suggests, a government agency, but is in fact itself a startup, founded by two young men with the goal of supporting the development of entrepreneurship in Georgia with a focus on technology. The Bureau is yet another example of active Georgian residents seeing a gap in the economic and social fabric of the country, and taking the initiative to fill it. Instead of waiting for government policies to support entrepreneurship to have an effect, Hayk Asriyants and Guri Koiava decided to chart their own course through the at times cut-throat, at times cooperative world of startups in Georgia. GEORGIA TODAY sat down with the founders to discuss what they are doing, their vision for their company, and why everyone should be paying attention to the South Caucasus entrepreneurship scene. Asriyants and Koiava began toying with the idea of creating their own business in the autumn of 2017, and by April 2018, they had established Tbilisi Startup Bureau. The pair’s initial idea was to create a business accelerator, but realized that before an accelerator could really be viable as a private, standalone entity, they needed to strengthen Georgia’s startup industry. Today, Tbilisi
Startup Bureau is a private company that aims to develop the startup ecosystem in Georgia by supporting other private companies to get off the ground, encouraging entrepreneurship, and launching conversations between established business leaders and new businesses. Asriyants, 33, is originally from Yerevan. After working in the telecommunications industry for several years, and being active in organizing and hosting entrepreneurship related events in Armenia, he moved to Tbilisi in 2011. In his words, it’s “a classic story...I came here as a tourist, fell in love with the city and the country, and decided to stay.” It “felt natural,” he says, to cross the border and bring these entrepreneurship-focused programs with him, to engage a new audience. The other half of the team, Koiava, is 30 years old, from Tbilisi. An MBA from Riga Business School and an early career at a Youth NGO in Latvia and the Georgian National Tourism Administration as leisure, travel and tourism professional prepared him to reach out to an international audience and lead marketing and sales efforts. After bringing several large-scale music festivals to Georgia, Koiava sought out a new challenge, to push himself into a more engaging, selfled environment.Tbilisi Startup Bureau now runs several programs, aimed at a variety of audiences. Their most popular program is ‘Fuckup Nights Tbilisi,’ an edutainment-type event that draws a mixed crowd, both from the startup community and those interested in hearing stories of failures and recovery from successful business people from around the region. Their latest event, last Thursday, was part of an occasional Englishlanguage series, and featured one of Georgia’s biggest celebrities, basketball player and entrepreneur Zaza Pachulia, and Turkey’s Ambassador to Georgia, Fatma Ceren Yazgan. They partner with governmental and non-governmental organizations, including Enterprise Georgia, the Ministry of Environmental Protection and Agriculture, Georgian Farmers’ Association, Young Farmers’ Association, the Geor-
Image source: Tbilisi Startup Bureau
gian Innovation and Technology Agency, and Tbilisi City Hall. They have organized several hackathons, including the worldwide 48-hour NASA Space Apps Challenge. Last October, Tbilisi Startup Bureau brought a group of young people to Abastumani to tap into the trend of space science, and think critically about how NASA’s open data can be used to solve problems here on earth, from wildfires and water shortages to how internally displaced persons and ecological migrant affect the environment. The Night Economy Hackathon, sponsored by Tbilisi City Hall, invited participants to contribute ideas to grow Tbilisi’s after-hours business potential. The Future Agro Challenge event in May focused on issues of food waste, hunger, and how agriculture can be attractive to young people, introducing modern technologies. They have also organized a PechaKucha Night in Georgia: an event series that began in Japan to encourage creators and artists to be more entrepreneurial. When asked about their business phi-
losophy, Asriyants explains that they believe in cooperation: “it’s not a zerosum game.” The team, though, does believe that private businesses can do a better job of guiding and supporting entrepreneurs than the parade of nongovernmental organizations that are currently active in the field, particularly in rural areas. “Non-governmental organizations don’t understand the struggle of entrepreneurship, of starting a business,” they explain. Tbilisi Startup Bureau has its fingers in many pies and they plan to expand further. They want to equip people with the hard skills they need to start a business and encourage them to take the risk, they want to reach out to rural areas and underprivileged communities that don’t have access to infrastructure or even a reliable internet connection, they want to be active in every part of the startup ecosystem, from developing and architecting the social and economic infrastructure to advocating for public support for underdeveloped components. Eventually, they plan to give life to their
original idea, a business accelerator. Musing on why Georgia has a lack of entrepreneurship in the first place, Asriyants and Koiava say that people are, of course, risk-averse. They want to do what they know already works, perhaps shedding light on the phenomenon of copy-cat businessessuch as hair salons, second clothing shops and dentists lining the same street. “Part of it is culture...a conservative mentality,” says Asriyants. While they have not yet landed on the perfect formula for convincing someone to take the risk, to become an entrepreneur, they say a good place to start is focusing on youth and those “startups who want to disrupt an industry, who want to innovate, who have big ideas.” Women are also a target group: “We believe in the economic empowerment of women, we want them to start businesses…. we believe that one of the problems of Georgia is that women are not engaged.” Asriyants enthuses, smiling, “We want to make entrepreneurship attractive to everyone!”
HUAWEI Founder: We Are Cooperating with US Partners Again BY MARIAM MERABISHVILI
UAWEI founder and executive director Ren Zhengfei spoke with international Internet edition CNBC about HUAWEI's future development and relations with American partners. In the interview, Zhengfei emphasized the contribution of American companies to the development of HUAWEI: „Partnership with them is very important for us, and this cooperation counts already 30 years. The relationship and partnership between the two parties are above the politics“. During the interview, the HUAWEI executive director paid special attention to Google, noting that if HUAWEI does not use an Android operating system, Google will lose 700-800 million users, which is a huge loss. Consequently, continuation of their partnership is in the interest of both companies. „HUAWEI orders chips from American suppliers. Our partners are doing their best to fulfill their obligations and seek to obtain a permit from Official Washington. If there is agreement, HUAWEI will continue purchasing American chips. Even if HUAWEI does not get enough products from its partners, the company in any case has its own resources to produce them itself“, said Zhengfei.
The HUAWEI founder also noted that such radical actions and attacks were not expected from the US government, yet the company was able to prepare for a hard time. According to Zhengfei, in the next few years, the volume of production may be reduced and the income from sales may be less than the expected figure in 2019 - up to $30 billion less. However, it is
expected that in the near future, the company will return to growth rates and offer even better services to society. „On the background of current developments, I'm amazed by the efforts of our staff: they have become more energetic and work more than ever. We will together do our best to win this sanctions battle“, he stated. Speaking about cyber security, Zheng-
fei noted that years of experience have proved the company's credibility. „HUAWEI is responsible for providing connectivity between 3 billion people, connecting banks, business and government. Over the past 30 years, 170 countries have been given access to HUAWEI services and this link has never been violated, which makes it very clear for network
security“ - noted Zhengfei. He also touched upon intellectual property issues and noted how important it is for a company’s development to respect ethical standards. “HUAWEI has always operated with appropriate ethical standards, even when it was a small company. Simply put, HUAWEI could not be what it is today without strong business ethics,” he told CNBC. Speaking about the development of the sector and the sphere, Ren Zhengfei emphasized one of the main directions that will be further developed in the coming years. "Artificial intelligence (AI) will be the main driving force for people over the next 20-30 years. AI strengthens human capabilities but does not change them. Society is getting more and more complex; challenges are more serious, and in the future, some tasks will be directly regulated by AI. We need to be tolerant towards innovations. AI is not something negative: it's a continuation of people's capabilities,” the HUAWEI founder said. To close, he touched on HUAWEI's smartphone sales forecasts. “Initially, sales fell by about 40%, but this process was quickly regulated, and the indicator has already decreased to 20%. So the situation will improve little by little. Do we have another way of development? To tell the truth, I have not thought of such a thing yet. We believe in only one road and follow it step-by-step - we will not stop until we reach the peak of our industry!”
GEORGIA TODAY JULY 2 - 4, 2019
On Georgia’s Dependence on Wheat Import from Russia 3. United States: $5.4 billion (13.6%) 4. France: $4.1 billion (10.3%) 5. Australia: $3.1 billion (7.7%) 6. Argentina: $2.5 billion (6.2%) 7. Ukraine: $2.4 billion (5.9%) 8. Romania: $1.2 billion (3.1%) 9. Germany: $1.2 billion (2.9%) 10. Kazakhstan: $965.4 million (2.4%)
BY THEA MORRISON
n January-May 2019, 171 tons of wheat and meslin, a mixture of rye and wheat, was imported into Georgia. Based on the official statistics of the Georgia’s National Statistics Office, out of total 171,000 tons of wheat, 117,000 were imported from Russia and 54,000 tons from Kazakhstan. So far this year, Georgia has not imported wheat from any other country. The data of the first five months of the year read that out of 117,000 tons of wheat and mesin imported from Russia, 44,422.3 tons were imported by sea, 46,772.7 tons by motor transport and 25,875.3 tons by rail. To note, in 2018, 575 thousand tons of wheat and meslin were imported to Georgia: 482,000 tons from Russia, 88,865 tons from Kazakhstan and only a small part from Ukraine and Turkey. Since 2014, the largest share of wheat import in Georgia comes from Russia. Some economic experts believe that after the travel ban with Georgia imposed by Russian President Vladimir Putin on June 21, and tightening of the Georgian wine export to Russia, wheat export to Georgia might also face a threat. Ketevan Kublashvili, Director General of Agricom Company, which is the main wheat importer in Georgia, says that today there is a real risk that Russia will also place an embargo on imports of wheat, not only on imports by truck, but by railway and sea too. “However, this will not be done openly. They [Russia] will just make export procedures harder and create problems
Image source: Word Grain
when issuing documents. This will be very bad as the citizens of Georgia will be affected if it happens,” she said. Kublashvili says the risks are real, as Russia knows Georgia is nearly 100% dependent on its wheat. “Especially during the last 3-4 years, we have become completely dependent on Russian wheat. Practically 60% of imported wheat from Russia comes via truck through the Zemo Larsi check-
point,” she specified. Levan Silagava, Head of the Association of Wheat Groups, also spoke about the danger of Russia closing the wheat market. Silagava believes that the main leverage Russia could employ is complicating the procedures for document procurement when exporting wheat. “Where these documents are usually prepared in a day and a half, for some
TBC Bank Prices $125 mln Inaugural Additional Tier 1 Capital Notes
countries they will tighten the procedures and postpone this to several days, which is too long. We talked to our business partners in Russia and they say this possibility is a hot topic there. So there exist real risks,” he said. Below are the top 10 wheat exporter countries in 2019: 1. Russia: US$8.4 billion (21.1% of total wheat exports) 2. Canada: $5.7 billion (14.2%)
World Bank Appoints New Regional Director for the South Caucasus
n Wednesday, 26 June JSC TBC Bank (the "Bank"), the largest bank in Georgia by all key metrics, successfully priced a debut US$125 million 10.75% yield Additional Tier 1 Capital Perpetual Subordinated Notes issue (the "Notes") off an orderbook which peaked at over USD230mn, and represents the largest and lowest yield Additional Tier 1 issue ever to have been priced by a Georgian issuer. The Notes are being offered and sold in accordance with Rule 144A and Regulation S. The Notes are expected to be listed on the regulated market of Euronext Dublin on or about 03 July 2019 and to be rated B- by Fitch. An application may be made to list the Notes on JSC Georgian Stock Exchange, making it the first dual-listed
international offering of senior unsecured Additional Tier 1 Capital Notes from Georgia. J.P. Morgan, Renaissance Capital and UBS Investment Bank are acting as Joint Bookrunners and Joint Lead Managers for the Notes, and TBC Capital is acting as Joint Lead Manager. Baker & McKenzie LLP and Dentons Georgia LLC are acting as legal advisors to the Bank, while Latham & Watkins LLP and BGI Advisory Services Georgia LLC are acting as legal advisors to the Joint Bookrunners. Vakhtang Butskhrikidze, Chief Executive Officer of TBC Bank commented: " Yesterday we have priced the first ever U.S.$ 125million Additional Tier 1 Capital Notes in our history. We are very proud to see continued interest from the international investors towards TBC Bank. This is the second issuance we are
successfully completing this month. Total amount raised through the two issuances will equal USD 425 million, and the funds will be allocated toward the further development of the Georgian economy. TBC Bank’s corporate, retail and SME clients will benefit from the increased opportunity to continue financing their household and business activities.” This announcement is not intended to be a public offer or advertisement of securities in Georgia, and is not intended to be an offer, or an invitation to make offers, to purchase, sell, exchange or transfer any securities in a public offering in Georgia, and must not be passed on to third parties or otherwise made publicly available in Georgia. Any failure to comply with this restriction may constitute a violation of Georgian securities law.
Relations between Russia and Georgia have become tense again following the large-scale anti-Russian rallies launched in Tbilisi, and later in the regions, on June 20. The protests were sparked following the arrival of a delegation of Russian MPs in the Tbilisi parliament building to attend the Inter-parliamentary Assembly on Orthodoxy (IAO). When the president of the Russian delegation used the Parliament Speaker’s chair to address the audience, opposition MPs and protesters forced the IAO session to be relocated to Radisson Blu Hotel, after which a decision taken to wrap up the session and for the Russian delegation to leave the country. That evening riots, during which protestors tried to force their way into the parliament building, 240 people were injured and more than 300 were detained. The next day, Vladimir Putin issued a decree banning flights to Georgia and a day after that the Russian Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing released a negative statement against Georgian wine, saying the quality of wine and other alcoholic beverages imported from Georgia “is deteriorating by the year,” forcing them to “tighten control on Georgian products.” Eight specific Georgian wine companies were mentioned as “not meeting the mandatory requirements.”
ebastian Molineus has been appointed World Bank Regional Director for the South Caucasus effective July 1, 2019. In this position, Mr. Molineus will oversee the Bank’s program in the three countries, Armenia, Azerbaijan, Georgia, and will lead the development and implementation of the Bank’s Country Partnership Strategies in these countries in coordination with development partners and civil society. Mr. Molineus will be based in Tbilisi, which hosts the Bank’s Regional Office for the South Caucasus. Mr. Molineus, a German national, joined the World Bank Group in 2002 as Project Manager in IFC’s Moscow office. He has since held positions both at IFC and the World Bank with a focus on corporate governance, capital markets, as well as financial and private sector development. He is currently Director in the Finance, Competitiveness & Innovation Global Practice. In his new position, Mr. Molineus’ top three priorities will be to: (i) lead the Bank’s engagement with governments, stakeholders, and partners in all three South Caucasus countries; (ii) oversee the delivery and implementation of the Bank’s financial, advisory, and convening services , and guide the future direction of the programs, including formulation of Strategic Country Diagnostics and Country Partnership Frameworks; and (iii) work with the International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) to strengthen World Bank Group delivery. Mr. Molineus was selected to this position through the Bankwide competitive managerial selection process. He will succeed Ms. Mercy Tembon, who successfully served as the Regional Director for the South Caucasus from September 2015 to June 2019.
GEORGIA TODAY JULY 2 - 4, 2019
May 2019: Average Hotel Prices & Hotel Price Index in Georgia trips in Georgia increased by 14.2%, and among the international travelers, the proportion who stayed in Georgia for 24 hours or more (classified as tourists) increased by 18%.
PURPOSE OF VISITS AND MOST VISITED REGIONS BY INTERNATIONAL TRAVELERS IN GEORGIA
Graph 1: In the graph, average prices for standard double rooms in 3 and 4-star hotels and guesthouses are given by region. 5-star hotel prices are provided above
n Georgia, the average cost of a room1 in a 3-star hotel was 128 GEL per night in May 2019. While the average cost of a room in a 4-star hotel in Georgia was 219 GEL per night and the average cost of a room in a guesthouse2 was 76 GEL per night. The average cost of a room in a 5-star hotel in Georgia in May 2019 was 494 GEL per night. In Tbilisi, the average price was 612 GEL, followed by Adjara â€“ 479 GEL, Samtskhe-Javakheti - 375 GEL, and Kakheti - 375 GEL. In May 2019, according to the booking. com website, the prices of registered accommodation in Georgia are mainly between 1-150 GEL range - 71% of registered accommodation. While the prices of 22% of registered accommodation are between 150-300 GEL, 4% - 300-460 GEL, 2% - 460-610 GEL, 1% - 610 GEL and more.
HOTEL PRICE INDEX In May 2019, in Georgia the hotel price index3 increased by 6.7% compared to April 2019. The 3-star, 4-star and 5-star hotel price index increased by 4.1%, while for guesthouses, the price index increased by 11.4%. In May 2019, compared to April 2019, the number of international travelers trips in Georgia increased by 12%, while among the international travelers, the proportion who stayed in Georgia for 24 hours or more (classified as tourists) increased by 21.8%4. In May 2019, compared to May 2018, hotel prices in Georgia increased by 3.4%, this was mainly due to the prices of guesthouses. The prices of 3*, 4*, 5* hotels decreased by 2.5%, while the prices of guesthouses increased by 15.9%. In May 2019, compared to May 2018, the number of international travelers
Table 1: Percentage change of prices in May 2019 over April 2019 and over May 2018
In the first quarter of 2019, the main purpose of visits made by international travelers in Georgia was holiday, leisure and recreation (35.8%), this was followed by the purpose of visiting friends and relatives (21.6), while the least share of visits were made with purpose of health and medical care (3.2%). These shares are almost the same as in the first quarter of 2018. In the first quarter of 2019, the majority of visits made by international travelers in Georgia was made in Tbilisi (42.7%), this was followed by Kvemo
Graph2: visited regions by international travelers
Kartli (17.4%), Adjara (16.1%) and Mtskheta-Mtianeti (13.4%). While in other seven regions of Georgia only 10.4% of visits were made. To compare the first quarter of 2019
with the first quarter of previous year (2018), the share of visits made in Tbilisi and Kvemo Kartli increased, while the shares of visits in other regions decreased5.
1 The results are based on the surveying of standard double hotel room prices of 3, 4, 5-star hotels and guesthouses in 10 regions of Georgia. Hotels were chosen arbitrarily according to random sampling principle. The study contains 71% (312) of all 3, 4 and 5-star hotels and 25% (456 guesthouses) of all guesthouses registered on www.booking.com The 3, 4 and 5-star hotel price data was collected by contacting hotels individually, while the prices of guesthouses were taken from booking.com. The average prices are arithmetic mean of standard double hotel room prices. 2 Guesthouse: a type of accommodation that is characterized by having a small number of rooms and services are usually offered by the resident family. 3 The calculation of the hotel price index is based on the recommendations given by the International Monetary Fund (IMF). The elementary aggregate price index is calculated by Jevons index (Consumer Price Index Manual-Theory and Practice (2004), Practical Guide to Producing Consumer Price Indices (2009)). 4 Source: GNTA 5 Source: Geostat 6 * Preliminary results
Georgia's Foreign Debt Increases BY MARIAM MERABISHVILI
ccording to the National Bank of Georgia, the country's total external debt amounted to 17.8 billion US dollars (48.0 billion GEL) as of 31 March 2019, which is 110.1% of the last four quarters of the GDP. In the first quarter of 2019, Georgia's gross external debt increased by $10.2 million. Of this, due to operational changes, foreign debt was 5.6 million, due to changes in price $50.2 million and due to other changes it increased by $23.6 million. At the same time, due to the debt change, debt was decreased by $69.1 million . The state external debt amounted to
$7.4 billion (20.0 billion GEL), accounting for 45.9% of GDP, from which the debt of governmental sector is $5.4 billion (14.4 billion GEL, 33.1% of GDP). The National Bank's commitments amounted ot $376.4 million (1.0 billion GEL, 2.3% of GDP) and state enterprise bonds and loans, respectively, amounted to $810.3 million (2.2 billion GEL, 5.0% of GDP) and $886.2 million (2.4 billion GEL, 5.5% of GDP). The external debt of the banking sector amounted to $4.2 billion (11.4 billion GEL, 26.2% of GDP), external debt of other sectors $5.4 billion (14.7 billion GEL, 33.6% of GDP) and intercompany debt $2.4 billion (6.5 billion GEL, 14.9% of GDP). 89.7% of the total external debt is denominated by foreign currencies. Georgia's net external debt amounted to $10.4 billion (28.1 billion GEL) as of
Source: National Bank of Georgia
March 31, 2019, accounting for 64.4% of GDP in the last four quarters. Of this, the net foreign debt of the state sector is $3.9 billion (10.6 billion GEL), which is 24.2% of the GDP. In the first quarter of 2019, the external debt of the National Bank of Georgia increased by $7.2 million. Due to operational changes, foreign liabilities of the National Bank increased by $8.0 million, while due to the exchange rate, saw debt reduced by $0.8 million. At the end of the first quarter of 2019, the total liabilities of the National Bank constituted $376.4 million. Of this, $200.2 million is a special right of assigning debt (NSU) which does not have a term of repayment and practically no obligation to pay for it will come until Georgia is a member of the International Monetary Fund.
GEORGIA TODAY JULY 2 - 4, 2019
Production of Electric Cars to be Launched in Kutaisi
n June 26, Georgian Industrial Holding Aigroup held an official presentation in Kutaisi, within the framework of which the attendees found out more about the electric car manufacturing factory to be built in Kutaisi, western Georgia. At the beginning of the event, a multimedia show was arranged, followed by speeches delivered by the Minister of Economy Natia Turnava, Chairman of the Board of Directors of the company Airgroup Kakha Guledani, other representatives of the company, as well as industrial and transport designer Zviad Tsikolia. “Some time ago, Georgia's Prime Minister Mamuka Bakhtadze promised Georgia that we would be the first electric car manufacturer in the region. Today, I am honored to announce this project and say that we are fulfilling the promise. Georgian Company Aigroup, with the help of the leader of the industry in the region, Chinese company ‘Changan,’ are starting construction of the first electric car manufacturing factory in the region,” Minister Turnava told the gathered attendees, among them representatives of governmental agencies, local authorities, diplomatic corps accredited in Georgia, business and media. Aigroup is to construct an industrial complex on 100 hectares in Kutaisi. The first project is an electric car factory where about 300 local residents will be
employed, and the capacity of the enterprise will be 40,000 electric cars. “At the beginning of 2020, the world will see the first electric cars manufactured in Georgia. At the first stage we will employ 300 local residents, expanding to 3,000 people countrywide,” Guledani noted. At the first stage, four models of electric car will be produced in the factory. Electric cars with the inscription ‘Made in Georgia’ will be distributed to the markets of EU countries, becoming Georgia’s main product for export to the EU market. Aigroup announced that 18 months after the factory becomes operational, it will have 5,000 electric cars on the market. With this project, Kutaisi is regaining its old status as a machine-building capital, soon to become the 8th city in the world where the service of sharing electric cars will be available. With prices of electric cars needing to be affordable for the local segment, social and public leasing services will be offered. Besides an electric car factory, the new industrial complex will also include a factory for solar panels and other hightech factories, making it the most important hub in the region. The main goal of the ambitious project is Georgia’s energy independence. Within the framework of the program, projects of the future will be implemented, which will make Georgia equal to countries
where doing green business and the creation of alternative sources of energy are priorities. Aigroup is the first industrial group in Georgia to develop a global approach towards the challenges of the 21st century, and a vocational college founded by Aigroup will prepare and train staff for further employment. “Ecology is our priority. We are introducing world tendencies in Georgia,” said Giorgi Khurodze, the Director General of the company Aicar. “The establishment of a healthy, environmentally clean business is the main direction of all the companies united under the name ‘Aigroup.’ The first part of construction will be completed in 2019, from which we will manufacture the first electric cars. Next, painting, welding and other factories will be added to the complex. We also plan to create a factory for car batteries. The aim of the project is to prepare Georgian production quickly and get it on foreign markets.” Industrial and transport designer Zviad Tsikolia will be working on the design of the first Georgian electric cars. “It was a dream of mine for Georgia to produce electric cars. I’ll be working on the design of cars that will be sold not only in Georgia but worldwide,” the designer said. According to renowned Italian expert and industrial designer Giancarlo Perini, who visited Kutaisi and accessed the project, the project is set for success. “Development of electric car produc-
tion is the choice of the new generation and modern states. If you look at tremendous investments in the leading industries around the world, from Germany to China, we really have to expect that in future, more and more modern technology and related systems and infrastructure will be improved and developed. Great opportunities for employment will be created in Georgia, especially considering that the country has many creative and talented people, designers and engineers who will definitely contribute to the development of
various industries,” Perini said. A Memorandum of Understanding was signed in May 2019 between Aigroup and the Changan Corporation, which is of Chinese origin with a track record of 157 years in the industry. The memorandum was signed by the Minister of Economy and Sustainable Development Natia Turnava, Chair of the LEPL National Agency of State Property of the Ministry of Economy and Sustainable Development Giorgi Dugladze, representatives of Georgian company Aigroup and Chinese company Changan.
Gault&Millau Launches Gastronomic Guide to Georgia
astronomy and tourism are very closely linked and having good gastronomic traditions, something which Georgia can clearly boast, plays a significant role in tourism development. Now, through the Gault&Millau Georgia guide, the world will come to know more about the country’s unbelievably delicious cuisine, distinguished restaurants and celebrated chefs. On June 27, the presentation of the Georgia-based version of the world’s most prestigious and influential gastronomic guide ‘Gault&Millau’ was held at Wyndham Grand Hotel Tbilisi. The guide includes the best restaurants and chefs in Georgia, evaluated by the
international team of Gault&Millau. The book was released in collaboration with Georgia Today Group and will be available in 15 countries, so that food lovers and travelers worldwide will have a wonderful opportunity to discover the renowned Georgian cuisine through comprehensive and trustworthy information about the must-visit restaurants in the country. The presentation of Gault&Millau’s first book about Georgia was held in a warm and friendly atmosphere. In addition to relaxing live music, a delicious dinner was hosted by celebrated chefs featured in Gault&Millau Georgia, giving guests the chance to personally sample dishes prepared with rare fantasy and professionalism.
PUBLISHER & GM
George Sharashidze COMMERCIAL DEPARTMENT
Commercial Director: Iva Merabishvili Marketing Manager: Sesili Tikaradze
Editor-In-Chief: Katie Ruth Davies
The event was attended by representatives of the diplomatic corps, tourism and culinary sectors. GT spoke with a few of them to grab their impressions on the release of the first Gault&Millau gastronomic guide about Georgia. “It is very important that Gault&Millau has been established here in Georgia,” said former Swiss Ambassador to Georgia Lukas Beglinger. “It shows the quality of Georgian cuisine, which, of course, is popular with those who know it but a mystery yet to be discovered for many tourists. Gault&Millau stands for quality and it is very important for Georgia to become more famous worldwide. We’ve had wonderful dinners here in Georgia and thanks to Gault&Millau, we will have more opportunities to do so. It is also very important to know which restaurants are especially good, which a little bit less so, so it this a big success and big progress.” French Ambassador to Georgia Pascal Meunier was also among the honorable guests at the event. “Gastronomy is linked with high-quality tourism. France is a country which attracts many tourists for its beautiful landscapes and cultural heritage, but gastronomy also brings a lot of people. I’m very happy to see that Georgia, which is considered a cradle of wine and which was the guest country of the first exhibition in Bordeaux and which had a suc-
Journalists: Tony Hanmer, Zaza Jgarkava, Maka Bibilashvili, Dimitri Dolaberidze, Vazha Tavberidze, Nugzar B. Ruhadze, Samantha Guthrie, Amy Jones, Thea Morrison, Ana Dumbadze, Ketevan Kvaratskheliya Photographer: Irakli Dolidze
cessful gastronomic dinner organized in Paris, tries to attract the attention of people with its gastronomy, because while people like to travel for different reasons, they also enjoy beautiful scenery and good food,” he told us. Marianne Lecerf, the Head of the International Group of Gault&Millau, was very enthused during the launch event. “I’m very proud that Gault&Millau is being celebrated this way tonight in this fabulous location. I see that people [here] are interested in gastronomy, and this is very good news for us. Gault&Millau want to evaluate the gastronomy in Georgia and let the world know that something is happening [here]. People now have a new book describing the best chefs in the country: we will publish it, we will spread it around the world, and we will let everyone know what Georgian chefs are doing for global gastronomy!” she said. “The fact that Gault&Millau’s guide has been published in Georgia is very important, as it represents one of the best platforms for the country to integrate its cuisine with world gastronomy,” said David Songhulashvili, MP of Gurjaani, Kakheti region. “This sector is the main basis for the development of tourism and the establishment of such platforms will further contribute to the development of tourism in Georgia,” he said.
Website Manager/Editor: Katie Ruth Davies Layout: Misha Mchedlishvili Webmaster: Sergey Gevenov Circulation Managers: David Kerdikashvili, David Djandjgava
Itsik Moshe, President of the IsraelGeorgia Chamber of Business and founder and Chair of Israeli House, noted that such initiatives can help to find a new shape for the local cuisine to make it even more attractive for foreign travelers. “I welcome the initiative of today’s event. I believe that now we will find a new “shape” for Georgian cuisine, a shape which is exciting for many foreigners. Interest in Georgia and its cuisine is growing and such activities as [this guide] are important for the country's tourism development. This is just a beginning for the tourism sector: the country has much more to show the world and such initiatives will further contribute to the development of its potential.” Gault&Millau is a well-known French restaurant guide founded by two restaurant critics, Henri Gault and Christian Millau, in 1965. Gault&Millau rates on a scale of 1 to 20, with 20 being the highest. Restaurants given below 10 points are rarely listed. The points are awarded based on the quality of the food, with comments about service, price or the atmosphere of the restaurant given separately. Based on this rating, high-ranking restaurants may display one to four toques. Since 2017, Gault&Millau has reviewed dozens of restaurants in Tbilisi and is still looking for new restaurants to discover.
1 Melikishvili Str. Tbilisi, 0179, Georgia Tel.: +995 32 229 59 19 E: firstname.lastname@example.org F: GeorgiaToday ADVERTISING & SUBSCRIPTION
+995 555 00 14 46 E-mail: email@example.com
Reproducing material, photos and advertisements without prior editorial permission is strictly forbidden. The author is responsible for all material. Rights of authors are preserved. The newspaper is registered in Mtatsminda district court. Reg. # 06/4-309
July 2 - 4, 2019