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Issue no: 1182/196

• SEPTEMBER 3 - 5, 2019

• PUBLISHED TWICE WEEKLY

FOCUS

ON THE PRIME MINISTER PAGE 2

Bakhtadze resigns

PRICE: GEL 2.50

In this week’s issue... Weekly Entrepreneurial News @entrepreneur.ge NEWS PAGE 2

TBC Bank Co-founders Release Statement BUSINESS PAGE 3

Georgian Railway Workers Reach Agreement with Employer BUSINESS PAGE 7

Is Georgia Doing Enough to Grow Its Gambling Industry? BUSINESS PAGE 9

Kurt Volker: There Will Be a Reaction if the Anaklia Project Doesn't Go Forward

Euronews Discovers Ajara’s Tourism Potential CULTURE PAGE 11

Scotland Defeats Georgia at Dinamo Arena

EXCLUSIVE INTERVIEW BY VAZHA TAVBERIDZE

A

s controversies surrounding the Anaklia Deep Sea port show no signs of abating, GEORGIA TODAY spoke to Kurt Volker, Executive Director of the McCain Institute for International Leadership, to find out more about what Washington and the proverbial West might be thinking about the Anaklia conundrum. “Georgia, a small country wedged between Russia and Iran, is a potential transit hub for commerce from Central Asia to Europe and from Europe to Central Asia,” Volker tells us. “It is a way of linking Georgia’s economy to a global economy and the way of linking that economy of Central Asia to global economy through Georgia. So, it has great potential to be an additional element in creating economical alternative, stability, growth and attraction for further investment in Georgia and region. It also has tremendous potential as a project that will strategically reinforce Georgia’s independence as a growing economic power.”

SPORTS PAGE 11 Prepared for Georgia Today Business by

Markets Asof30ͲAugͲ2019

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SECRETARY OF STATE POMPEO ISSUED A RATHER BLUNT WARNING AGAINST POTENTIAL CHINESE INTEREST IN ANAKLIA PORT. WHAT DID HE MEAN AND WHY SHOULD WE BE WARY? The Chinese come with cash and say they will invest, so it might prove tempting for some countries. However, China is not a democracy, it is an authoritarian government; it seeks to have a unilateral advantage economically in global trade. What they do is not about creating an open international trading order; they use preferential deals through stateowned companies to gain an advantage. It’s a real risk for countries like Georgia and accepting the funding might lead to losing a high degree of independence and potential for independent growth and prosperity. Continued on page 6

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NEWS

@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: Have you been to K2 yet, a popular café hidden in a Batumi yard, in a part of the city packed with terraced houses? Founders Levan Khujadze, Paata Dzidziguri and Vladimer Todadze had a strong belief that the café would establish itself as one of the best places for meetings and making new friends. And it has! When a construction company was denied permission to build a residential block on the site, the authors of K2 set to making the territory ideal for music festivals and other arty events. They created the art-dive interior with the help of friends, keeping the genuine feel of the original building. It is the modest environ that attracts guests most of all. GuestMe, a Georgian gastronomic platform and a startup launched for tourists, is set to begin operating this September. It will enable housewives to host tourists with their own cooking and give visitors the chance to discover genuine local cuisine and gastro-culture in the heart of Georgian families, taste specialties and participate in the preparation process. In addition, the service is to be pocketfriendly. Founders Tornike Pkhovelishvili and Tinatin Dekanoidze were inspired by the idea of establishing effective communication between tourists and their hosts and offering something new for those seeking unique experiences. EYE is an interactive museum taken out to the city streets, which is to introduce 3D mobile models presenting tourists with fast briefs on intangible culture, urban traditions, historic facts and legends. The creator is Vato Ghudushauri, a 2nd-year student at the Business and Technology University who is working as an artificial intelligence engineer. He plans to move the EYE app to the global market, launching it in a number of European cities and making it an inseparable part of traveling the world. Follow the Entrepreneur Georgia Instagram page to get the latest updates from Georgian Entrepreneurs. For doing business with Georgian Entrepreneurs, write us on business@entrepreneur.ge

GEORGIA TODAY

SEPTEMBER 3 - 5, 2019

Bakhtadze Resigns as Prime Minister after "Fulfilling his Mandate" BY ANA DUMBADZE

M

amuka Bakhtadze, now the former Prime Minister of Georgia, made the first comments on his resignation at a meeting with media representatives. Bakhtadze stated that he first discussed leaving his post with state officials, including the leader of Georgian Dream Ruling Party Bidzina Ivanishvili, in spring. As the former PM noted, he had final consultations with the political team of the Ruling Party yesterday. “I made a decision to resign. I had the first conversation in this regard with state officials at the end of spring, including the party's leader, Bidzina Ivanishvili. Naturally, these conversations continued. I also had the final consultations with our political team yesterday. The goals that I had while serving at this post, for the achievement of which my team gave me the mandate and trust, have been implemented. A strategic development framework for the country has been created and implemented. I decided to resign because I believe that I have fulfilled my mission at this stage,” Bakhtadze said. When asked if one year and two months is enough time for being a Prime Minister, Bakhtadze answered that this period

had indeed been enough to accomplish the goals for which he was elected. “I’m focusing on goals. This time was enough to accomplish the goals for which I was elected to this post," he said, adding that no government can be successful while there is a challenge of occupation and poverty in the country. "No government, regardless of the results achieved, will succeed while there is a challenge of poverty and occupation in the country. It would be very wrong for any government to consider itself successful when there is even one such challenge in the country,” he said.

Bakhtadze admitted that initially, Georgian politics was the last place he imagined himself. “The very last sphere I imagined myself working in was Georgian politics, but for the purposes I mentioned, we made a joint decision at the time. This was enough time to prepare this strategic development framework, start implementing it and ensure its sustainability, which is supported by our laws and international agreements today," Bakhtadze said. Early on Monday, Bakhtadze announced his resignation through social media.


BUSINESS

GEORGIA TODAY SEPTEMBER 3 - 5, 2019

TBC Bank Co-founders Release Statement

BY ANA DUMBADZE

C

o-Founders of JSC TBC Bank, Mamuka Khazaradze and Badri Japaridze, have released a joint statement, saying that the Prosecutor’s Office has summoned the representatives of the diplomatic corps to a closed meeting on September 6, where the findings related to the Khazaradze-Japaridze case, prepared by two international experts hired by the same Office, will be introduced. “The Prosecutor's Office is trying to shift the responsibility for their politicized decision, which has no legal basis, to the diplomatic corps," the statement reads. In their statement, the co-founders of TBC Bank remind the Prosecutor’s Office that according to the Georgian Constitution, the only legitimate space where the prosecution can present evidence and prove a person's guilt is in a court trial. “We demand a transparent investigation of the case, in compliance with all the standards guaran-

teed by the Constitution of Georgia and international human rights law. If the authorities wish to involve international experts in the investigation, these experts should not be lawyers hired by the Prosecutor's Office, irrespective of their qualifications, but lawyers with independent international authority who will be able to provide complete and comprehensive information on the case and be able to create their own opinion regarding the current case independently,” the statement reads. The Prosecutor’s Office officially charged Mamuka Khazaradze and Badri Japaridze on July 24 for money laundering, having launched an investigation into the fact on 2 August 2018. “Mamuka Khazaradze and Badri Japaridze are charged for the laundering of $16,754.000, as a result of which they received a large amount of income,” said the Prosecutor General's Office. The Tbilisi City Court ordered 700,000 GEL bail from each of them on July 26. "Co-founders of JSC TBC Bank, Mamuka Khazaradze and Badri Japaridze, paid the bail ordered on them by Tbilisi City Court – 700,000 GEL each," announced Khazaradze’s lawyer, Zviad Kordzadze.

Tightened Labor Safety Law Takes Effect in Georgia

Image source: bm.ge

BY THEA MORRISON

F

rom 1 September 2019, the tightened Law of Georgia on Labor Safety took effect which means that labor safety will apply not only to the dangerous, heavy and hazardous labor fields, but to all sectors of economic activity throughout the country. The goal of the changes was to define the main requirements of labor safety and the general principles of preventive measures in the workplace. The legislative amendments envisage the creation and operation of a system of effective working mechanisms for enforcement and inspection. From now on, employers are obliged to appoint or invite a certified labor security specialist to their company in order to comply with labor safety standards. The information posted on the Labor Inspectorate website reads that if an employer has 20 or fewer employees he/she can personally perform the duties of labor security specialist. However, if an employer has from 20 to 100 employees, he or she must have at least one labor security specialist, and if the employer has 100 or more employees, the company needs to have at least two labor security specialists in the workplace. “The labor security specialist must undergo a relevant accreditation program,” the website of the Labor Inspectorate reads. The changes are expected to prevent violations of labor safety norms and ensure the introduction and management of labor safety measures.

Under the same tightened law, the mandate of the labor inspectorate was extended and the Labor Inspector is now entitled to inspect any workplace at any time, without prior notice. Until September 1, 2019, a supervisory agency was authorized to control business activities, including entering the enterprise, requesting documents, suspending the operation of the enterprise, sealing the property, examining the enterprise, checking the quality of the goods produced, only on the basis of an order issued by a judge. But from now on, the Labor Inspector has the authority to check any workspace subject to inspection, at any time of day or night, in order to ensure effective implementation and enforcement of the labor safety norms. Preventing the supervisory body from carrying out inspection will result in a fine of up to GEL 4,000 for an individual and up to GEL 14,000 for a person registered as a VAT taxpayer. Employees are entitled, among other things, to claim and receive compensation for injuries received at the workplace, including injuries resulting from occupational illness. Until now, the law covered only the hazardous, harmful and dangerous labor fields. Georgian Parliament adopted a Law on Labor Safety with the third and final reading on March 7, 2018. According to the law, sanctions for the breach of safety norms were tightened, and fines were increased from 100 to 50,000 GEL. The law now applies to all sectors of economic activity, including the labor relations regulated by the Organic Law of Georgia Labor Code of Georgia and the Law of Georgia on Civil Service.

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BUSINESS

GEORGIA TODAY

SEPTEMBER 3 - 5, 2019

5G Use in Georgia Might Force the Country between China & the US

BY EMIL AVDALIANI

A

lready one of the most discussed topics in the modern world, the majority tend to think that 5G will be more a revolution than a mere technological development. Simply put, 5G will be fundamentally different from its predecessor, 4G (LTE - Long-Term Evolution): it will be brand new radio technology. Initially, vastly higher speeds will not be noticeable as it is likely that 5G will be used by network operators just to boost capacity on existing 4G networks and ensure a consistent ser-

vice for customers. Ultimately, the speed capacity you get will be contingent upon the spectrum band the operator runs the 5G technology on and how much your carrier has invested in new masts and transmitters. For Georgia, like anywhere across the world, the new fifth-generation mobile internet connectivity will promise faster data download and upload speeds, and much wider coverage from across the globe. In Georgia, where the fastest 4G mobile network operators on average offer about 45Mbps (megabites per second) with a chance of reaching 1Gbps (gigabites per second = 1,000Mbps), 5G could give the country browsing and download speeds about 10 to 20 times faster.

Currently, only four companies in the world possess enough technological prowess to supply the components necessary for building a 5G network: Huawei and ZTE in China, Ericsson in Sweden and Nokia in Finland. It is notable that the US companies are absent from this hi-tech race. What’s more worrisome for the US is that among those companies, only the market leader Huawei possesses the most modern and cheapest technology to date. Given that Georgia has relatively liberal laws and economic policies in comparison with East European countries, with the right vision and practical policies it could easily reap the benefits of 5G for its economic development. In fact, Georgia can become a leader in the region.

Experts predict that the introduction of fifthgeneration wireless internet will begin in about a year. Thus it is likely that intensive discussions on 5G will start from late 2019. Moreover, it is also possible that, like in most European countries, in 2020 Georgia too will experiment with the launch of 5G internet, though for the moment it is impossible to provide any specific details. Among the Georgian companies, Magti is arguably best poised to become a leader in the new industry. Magti as a network is much stronger than Silknet and has traditionally been more aggressive in investments and development of up-to-date technologies. 5G technologies could also be applied to Georgia’s defense sector. Faster communication with the outside world will also make it possible to collect the information needed for a better defense of state borders, internal security, etc. It also carries risks as other, much larger and better developed states will be able to use the 5G technologies to smuggle technologies and information from Georgia’s vital state sectors. However, this is a relatively smaller issue in comparison with wider geopolitical problems Georgia could see due to the application of 5G. Consider the following fact: China has pushed its companies to play a leading role in 5G after it was left out of play in the development of 3G technology, and with only a limited role in 4G development and standards set-up. As said above, there are four companies spearheading 5G development. The US is worried that China might use this superiority for military and economic purposes incompatible with US practices. Being an ally of the US in the region and simultaneously enjoying rising economic relations with China might become problematic for a Georgian government in the future as Tbilisi may face the dilemma of having to choose between Washington’s support and the use of China’s technological advancements.

Japanese Vogue Writes about Georgia

BY NINI DAKHUNDARIDZE

V

ogue's recent Japanese issue honored Georgia with an article. The Georgian National Tourism Administration (an institute of the Ministry of Economy and Sustainable Development) hosted Japanese Vogue’s journalists in Georgia. This autumn's Japanese issue of the famous fashion and lifestyle magazine writes about Georgia’s touristic potential, its cuisine, legendary wine, and Old Tbilisi. The representatives of international media visited Georgia within the frames of Mercedes Benz Tbilisi Fashion Week.


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BUSINESS

GEORGIA TODAY

SEPTEMBER 3 - 5, 2019

Kurt Volker: There Will Be a Reaction if the Anaklia Project Doesn't Go Forward Continued from page 1

RUSSIA IS ALSO FAR FROM A MODERN DEMOCRACY, BUT THE GEORGIAN GOV’T HAS BEEN ENCOURAGED TO TRADE WITH THEM DESPITE THE ONGOING CONFLICT. HOW DO YOU MAKE THE DISTINCTION? That’s inevitable, since Russia is a neighbor. China is not a neighbor; you don’t have the natural degree of trade you have between Georgia and Russia where you have personal, historical relationships. At the same time I do think the Georgian government and people should be thinking about the future of the country, and so much of linkage to Russia’s economy is about the past, the economic ties that were developed during the Soviet period which are not necessarily favorable to Georgia, not helping it to connect to a wider global economy. By contrast, the relationship and trade with the EU, which are growing substantially, do bring Georgia into a modern global supply network. That's where the future of Georgia lies.

LET’S DISCUSS THE AMERICAN INTEREST. HOW WOULD THE US USE THE EXISTENCE OF SUCH A PORT [ANAKLIA] IN THE REGION? It’s not about the US making use of this port, it’s about Georgia. A port with deep sea capacity means that ships there will therefore be able to carry large amounts of cargo. And that means that you could take any goods anywhere: connecting Afghanistan on logistics and supplies, mining, manufactured goods, food stuff. It creates the capacity to link the region to the rest of the world and you can gain somecompetitive advantagesfortheregion. The US is just one big player in the global economy that is interested in trade- we’ve seen what happened with the BTC pipeline which brought oil from Azerbaijan via Georgia to Turkey and created global interest in that energy supply.

WHAT NATO PROSPECTS CAN BUILDING THIS PORT OFFER GEORGIA? Georgia has done very well in reforming its military, contributing to security alongside NATO in places like Afghanistan. The US bilateral military relationship with Georgia has continued to develop over the past several years and Georgia has also done a lot of work in areas that are important for NATO membership and the development of democracy, market economy, law, rights of minorities, respect for neighbors and so on. In short, it has made a lot of progress. But it is not there yet and you know last year's presidential elections did not get good reviews from the ODIHR, so there’s an opportunity ahead of the 2020 elections to make this a really credible firstrate European-level parliamentary elec-

Georgia is likely going to have to invest in national security capacity itself to make sure this port is safe

tion, and the fact that it will be straight proportional representation makes it even more interesting as a potential stabilizer of Georgian democracy. The analogy I draw is that in 1999, the Baltic states were seeking NATO membership and everybody thought it was impossible; they were too close to Russia, indefensible, too costly, not ready. But by 2001 and 2002, when NATO was getting ready to enlarge again at the Prague Summit, it was impossible to think of enlarging NATO without the Baltic states because they had done the most work, they were the best performers and committed to actually developing society in the right way and being like other NATO members. It was impossible not to bring them in. Georgia is in an interesting point: it can’t join NATO today, but if things go right in the next years, it’s going to be harder and harder to say that Georgia cannot join the alliance. As for the port project, I think to the extent that it provides a source of income, growth, independence and stability, and while Georgia reinforces its capacities to be a capable country, I think it makes Georgia a stronger candidate.

RUSSIA CLAIMS THE ANAKLIA PROJECT COULD SEE US AND NATO SUBMARINES COMING IN. This is a typical example of how the Russian propaganda machine works. There’s nothing in this project that is driven by war considerations or the involvement of the US military; this is about the economic development of Georgia and region.

BUT DOESN’T IT HAVE ALSO A MILITARY SECURITY DIMENSION, CONSIDERING IT’S A DEEP-SEA PORT? Georgia is likely going to have to invest in national security capacity itself to make sure this port is safe.

YOU MET WITH BIDZINA IVANISHVILI EARLIER THIS YEAR. HOW MUCH DOES HIS VISION FOR THE PORT COINCIDE WITH THE US VISION? There are obviously issues around financ-

ing for the project - they say that the consortium has been unable to secure sufficient financing and they're asking too much from the government for a private project- so, conflicting narratives. I had various meetings in Georgia to learn more about it and said that for the country it is important that the project go forward. Instead of a standoff, and people arguing who's to blame, it should really be a shared interest of all Georgians that this project goes forward. Some form of public/private partnership with international investment is what's going to be needed to bring it to fruition and that's what I hope all the actors will be able to support.

WHAT WAS IVANISHVILI’S POSITION? DOES HE AGREE WITH THE US TAKE ON THE PORT? I don’t want to characterize his personal take on it, as I also met the Anaklia consortium and others. I did not find anyone who would disagree with the notion that the completion of this port is strategically important for Georgia. As I said, there are differences in explanations over why the financing hasn’t come together so far. But in terms of the strategic importance of completing the project and delivering it, I think everybody is in agreement.

YOU EMPHASIZE INVESTOR ATTITUDES TO THIS PROJECT. IS THE CONTI GROUP’S LEAVING THE CONSORTIUM AN “INCIDENT” OR A TESTAMENT THAT SOME INVESTORS ARE WORRIED THAT THINGS ARE NOT GOING AS WELL AS THEY HOPED? You know there's a cost to money over time and if time goes by and the project is not moving ahead, an investor's going to look at it and say ‘I can't afford to leave my money on the table any longer, I've got to do something else with it.’ It’s a normal investment decision. It's unfortunate, because it was a great opportunity; now it has to be rebuilt, the opportunity has to be stitched back together, be it with this investor or another. It ought to be a signal to everybody, gov-

ernment, private investors and consortium alike, that they've got to work together to pull this project off. If this project does go forward successfully and external investors are able to see it come together, it’s going to be a tremendous encouragement to businesses and banks and other foreign investors to further invest in Georgia because this will create economic opportunities. On the other hand, if they’re unable to work together to create a strong public-private international partnership, it's going to have people questioning whether Georgia can pull off projects like this, can they play a bigger role or is it going to be a bit more of a backwater? I don't think Georgia is by any means destined to that kind of secondary status; I think this can be done but I think that there will be a reaction if it doesn't go forward.

THERE IS A CLASH OF NARRATIVES AROUND THE TBC CASE IN REFERENCE TO THE ANAKLIA PORT. WHAT DO YOU MAKE OF IT? What this illustrates to me is that you do not have a cooperative arrangement, you don't have an agreement or a deal for public-private partnership where you have a private consortium: you have government resources and you have external investors who are still arguing with each other. Between the consortium and the government there are these conflicting narratives as to who's right, who's wrong or what's been done and what's not. I'm convinced that all of these narratives are partially true, but that's not the point. I think there are difficulties in financing because of the legal challenges going on, I think there are difficulties in securing public financing as well.

DO YOU BELIEVE THERE IS ALSO GOVERNMENT PRESSURE? I don’t know. When you speak to the government, they confirm they want to see the project completed and are giving money to the project, giving time extensions to the consortium so they can raise the money needed. But what needs to happen is to move ahead: we need the private sector companies and the government and international financers to

The completion of this port is strategically important for Georgia put this together as a single project.

THE US EMBASSY VOICED ITS CONCERNS ON THE TBC CASE, BRINGING UP THE TIMING AS A FACTOR TO BE QUESTIONED, THOUGH THE INCIDENT WAS SAID TO HAVE HAPPENED IN 2008. DO YOU SHARE THESE CONCERNS? I haven't seen what the US Embassy said. I've spent a lot of time in the former Soviet space and you can always find people who did something and there's some level of corruption or misjudgment or whatever it might be, and people spend a lot of time looking back and going in for retribution, political retribution of some kind. Take what happened after 2012, I think Georgia lost about three years when it could have been advancing but instead was tied in knots because of the prosecution of people from the former government. What Georgia really needs to be doing is focusing on the future rather than going back into the past digging up old cases. Just to give you another example; everyone is making a lot out of the Rustavi 2 case, where ownership has passed from former owners to previous owners. But we shouldn't confuse the two issues: one is ownership and another is the concept of free media. These things do happen- it's in everyone's interest, including the government's, to make sure there is a diversity of views expressed in free and independent media because without that it's a detriment to Georgia's democracy and aspirations as a country.


BUSINESS

GEORGIA TODAY SEPTEMBER 3 - 5, 2019

Georgian Railway Workers Reach Agreement with Employer

Image source: Georgian Railway

BY THEA MORRISON

G

eorgian Railway employees will no longer go on strike, as the process of negotiations with the company administration was successfully concluded. Georgian Railway and the Georgian Railway New Trade Union announced that the mediation process was facilitated by the Ministry of Internally Displaced Persons from the Occupied Territories, Labor, Health and Social Affairs of Georgia and as a result of it, the salaries of the workers will be increased from December 2019 instead of the previously announced March 2020. The company notes that during the mediation process, the parties exchanged detailed information on the needs of the employees as well as the company’s capabilities in this regard. The parties found a mutually acceptable solution and an agreement was achieved. “As a result of an agreement reached with the management, the Georgian Railway New Trade Union waived the right to strike and consequently no strike will take place. The controversial issues have been resolved,” the statement reads. Georgian Railway says that the 10% increase will start in December 2019 and from October 2020, in connection with the Day of Railway Workers, those employees whose salary does not exceed GEL 1250 will additionally receive a monetary gift to the amount of 200 GEL, independently of the bi-annual premiums at New Year and Easter. In addition to this, annually from June 2021, after publication of the audited financial results, negotiations will be held for the purpose of a segment review of wages, taking into account the profitability of the company.

Employees will receive a bonus of 200 GEL twice a year

Georgian Railway will raise the salaries of 12,500 workers by 10% The New Georgian Railway Trade Union reports that as a result of the mediation, it was determined that at the end of the year, 12,500 workers of the Railway will receive equal bonuses, divided among all employees, to the amount of GEL 333 per employee. They also say the company will increase the salary budget by an additional GEL 3 million from December and by GEL 15 million in total, which will enable the raising of salaries of 12,500 workers by 10%. “With the purpose of examining the labor law, including labor safety legislation and industrial injuries, as well as accidents, the Georgian Railway New Trade Union will participate in investigative activities of such cases in order to ensure full compliance with workers’ labor rights and safety standards,” the statement says. The Union says when there is more unity, there is more solidarity. “We can achieve anything together,” they stated. The labor dispute began on July 9, 2019 at the Georgian Railway. The Union’s main demand was the increase in salaries by 50% for those employees whose salaries had not been increased since 2013. They said 4,500 rail workers were ready to strike. However, Georgian Railway said a 50% increase in salaries was unrealistic and they were ready to increase by 10% from 1 March 2020. Georgia’s Ministry of Internally Displaced Persons from the Occupied Territories, Labor, Health and Social Affairs called on the Georgian railway and its employees to sit for negotiations. After conducting separate meetings with the Trade Union and the company administration, the sides managed to reach the agreement.

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BUSINESS

GEORGIA TODAY

SEPTEMBER 3 - 5, 2019

July 2019 Tourism Update: Average Hotel Prices

I

n Georgia, the average cost of a room1 in a 3-star hotel was 148 GEL per night in July 2019, while the average cost of a room in a 4-star hotel in Georgia was 224 GEL per night and the average cost of a room in a guesthouse2 was 73 GEL per night. The average cost of a room in a 5-star hotel in Georgia in July 2019 was 482 GEL per night. In Tbilisi, the average price was 588 GEL, followed by Samstkhe-Javakheti - 380 GEL, Adjara – 453 GEL, and Kakheti - 399 GEL.

HOTEL PRICE INDEX In July 2019, in Georgia the hotel price index3 increased by 0.2% compared to June 2019. The 3-star, 4-star and 5-star hotel price index increased by 2.7%, while for guesthouses, the price index decreased by 5.7%. In July 2019, compared to June 2019, the number of international travelers visiting Georgia increased by 25.8%, while among the international travelers, the proportion who stayed in Georgia for 24 hours or more (classified as tourists) increased by 20.9%4. In July 2019, compared to July 2018, hotel prices in Georgia decreased by 6.5%. The prices of 3*, 4*, 5* hotels decreased by 8.7%, while the prices of guesthouses decreased by 2.8%. In July 2019, compared to July 2018, the number of international travelers visiting Georgia increased by 5.8%, and among the international travelers, the

Table 1: Percentage change of prices in July 2019 over June 2019 and over July 2018

Graph2: International traveler trips from Russia in Georgia

proportion who stayed in Georgia for 24 hours or more (classified as tourists) increased by 1%.

number of international travelers from Russia amounted to 1.4 mln, 23.8% more compared to 2017. The share of Russian international traveler trips in total number of international traveler trips in Georgia increased from 12.6% to 16.2% from 2016 to 2018. The share of international traveler trips from Russia by air in total number of international traveler trips from Russia to Georgia increased from 23.4% to

31.1% from 2016 to 2018. In 2016-2018, the expenditure of international travelers from Russia to Georgia was increasing. In 2018, Russians spent 1.8 bln GEL in Georgia, 66.8% more compared to 2017. The share of expenditure spent by Russians in total expenditure spent by international travelers in Georgia increased from 18.2% to 23.6% from 2016 to 2018. “In July 2019, compared to July 2018

and June 2019, the number of international traveler trips from Russia to Georgia decreased by 6.4% and 4.5% respectively. In July 2019, compared to July 2018, the number of international travelers from Russia traveled by air decreased by 48.8% (by 21,012 traveler), while by land, by railway and by sea increased accordingly 7.1% (by 8,833 travelers), 85.5% (by 1,082 travelers) and 57.9% (303 travelers).”

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 accomodation 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 6 * Preliminary results

INTERNATIONAL TRAVELER TRIPS FROM RUSSIA TO GEORGIA In July 2019, compared to July 2018 and June 2019, the number of international traveler trips from Russia to Georgia decreased by 6.4% and 4.5% respectively. In July 2019, compared to July 2019, the number of international travelers from Russia traveling by air decreased by 48.8% (by 21,012 travelers), while by land, by railway and by sea it increased accordingly 7.1% (by 8,833 travelers), 85.5% (by 1,082 travelers) and 57.9% (303 travelers). From 2016 to 2018, the number of international travelers visiting Georgia from Russia was increasing. In 2018, the

Graph 1: In the graph, the 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

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BUSINESS

GEORGIA TODAY SEPTEMBER 3 - 5, 2019

9

Is Georgia Doing Enough to Grow Its Gambling Industry?

BY HANNAH DUNN

G

eorgia is not a large country, yet its gambling industry holds its own among the bigger resorts of the world. Nestled in the Caucasus Mountains, this former Soviet state is home to 3.7 million people, one third of whom reside in the capital Tbilisi. The country’s first casino was constructed there in 1920, although games had been played in Georgia since the previous century. It wasn’t until the early 1990s that the industry really took off, but since then, it has largely plateaued in comparison with other countries. Let’s delve into the detail of Georgia’s gambling market and consider how it could reap the benefits of today’s industry.

GAMBLING IN GEORGIA: A RECENT HISTORY The state of Georgia’s economy towards the end of the twentieth century was not a healthy one. Many Georgians were unemployed and looking to emigrate to somewhere with more job potential. Those who stayed turned to gambling as a way to try and make some money.

The huge growth of online gambling, worth more than $70 billion worldwide, has forced Georgia to look at modernizing its gambling laws

As the demand began to outweigh supply, the casinos stepped up their operations. This created an avalanche of new employment opportunities – everything from working on the casino floor or in the restaurants and bars, to programmers and developers in head office, and those responsible for marketing and advertising. These casinos developed their own training courses to bring new workers up to speed quickly, and they offered the best salaries and highest job security around. The casinos became desirable places to work and began to support a large section of the population. While native Georgians were still spending time in the casinos, they were not the only players. Georgia is bordered by Russia to the north and Turkey, Armenia and Azerbaijan to the south. Gambling is banned in all of these countries, except for in Russia, where it’s legal in four specific locations. This hasn’t stopped their citizens wanting to play though, and when Georgia negotiated a visa-free travel deal with Turkey and Azerbaijan, it opened up the possibility for them to play in Georgia. Gambling tourism has been huge for Georgia; however, it has brought with it some other problems – largely due to the industry being unregulated. Problem gambling quickly became an issue, particularly among younger people. In the past few years, the government has been battling to draw up new rules and regulations which would limit the exposure to under 25s and help to make it harder for people to deposit large amounts of money at casinos. The huge growth of online gambling, worth more than $70 billion worldwide, has forced Georgia to look at modernizing its gambling laws. Georgia initially toyed with the idea of banning all online gambling, yet recently they have moved more towards regulation instead. Many Georgia-based online casinos are accessed by citizens of other countries. For example, the country’s mostvisited online casino registers around 4.5 million unique logins each month. With the population of Georgia only being 3.7 million, it’s easy to see how much foreign money flows into the country as gambling revenue. Banning online

gambling all together would be a costly mistake; however, increasing the tax on profits seems like a very effective way of capitalizing on it.

WHAT COULD GEORGIA LEARN FROM OTHER MARKETS? This is just one approach it could take. Let’s look at what else Georgia could learn from other gambling markets, where alternative rules and regulations are in force.

THE UK It’s a similar solution to the one used by the Government in the UK. The gambling industry there is thriving, bringing in revenues to the tune of £15 billion, despite being heavily regulated. The market is controlled by the Gambling Commission, which grants licences to operators from across the world. However, it regularly fines or even bans online casinos which don’t meet its strict rules relating to identifying players and their sources of funds, anti-money laundering measures, and high technical standards. This state of play has led to huge competition in the UK market, with various international operators vying for the millions of players out there. Online casinos are going further than ever to win over customers, making their games more engaging and their welcome bonuses and promotions more appealing. One good example might be the highly regarded 888 casino, which is considered a top-notch online casino in the UK. UK-based casinos are also obliged to promote responsible gambling, presenting numerous self-exclusion options to users. ID checks, both online and at land-based casinos, are mandatory, with players having to prove that they are old enough to gamble. Systems are also in place to monitor activity and cut off betting opportunities if the player is judged to be spending recklessly. Responsible online operators have maximum deposit periods to safeguard their users and help reduce the risk of anyone gambling their way into debt. While Georgia and the UK both tax the profits companies make from gambling, there is a vast difference in the amounts. Georgia has recently doubled the tax its casinos pay from 5% to 10%,

but the UK is already charging 15%, with an increase to 21% planned to happen later this year. This tax affects both online and land-based casinos wishing to market to UK citizens. The revenues from these taxes are ploughed back into the treasury and used to fund the education, transport and emergency services budgets– and every penny counts when it comes to investing in Georgia’s challenging economy.

RUSSIA Alternatively, Georgia might choose to look across its northern border, to Russia. However, this might be considered a step back, as it wouldn’t necessarily have a positive economic impact. Here, there are four regions where gambling is legal: Altai Krai, Krasnodar Krai, Kaliningrad Oblast and Primorsky Krai, alongside national state lotteries and sportsbooks. This enables the Kremlin to effectively manage the industry while still benefiting from the economic gains of gambling tourism. This state of play is relatively new in Russia, where gambling was prohibited under Soviet rule. When the ban was lifted in 1989, casinos began to spring up everywhere: by 2002, there were over 50 in Moscow alone. Concerned about the links between gambling and organized crime, Vladimir Putin decided to change the law to the current state of play in 2009, representing something of a halfway-house compromise. When it comes to online gambling, Russia’s position is very clear: it is completely banned. Playing casino games online has been outlawed since April 2017.

UKRAINE Georgia’s lawmakers might also look for inspiration across the Black Sea, to Ukraine, which is rumored to be considering bringing in Russian-style gaming zones. However, these will be much more geared towards gambling tourism than Russia’s, restricted to entertainment complexes, cruise ships and hotels within them. Currently, though, gambling is illegal in Ukraine, with the exception of poker, which it classes as a national sport. According to recent research, the cur-

Georgia’s mostvisited online casino registers around 4.5 million unique logins each month. Banning online gambling all together would be a costly mistake rent ban has meant it’s missed out on more than $1.5 billion per year. This would have brought in around $300 million in tax revenue.

SUMMARY Georgia may seem like an unlikely place for a thriving gambling culture, but the country has fully embraced the industry as a major contributor to its economy. While the casinos provide stable employment for citizens, they also rake in a large amount of foreign income. Tbilisi has become a popular destination for businessmen in the oil industry, and its casinos provide opportunities for them to relax after work or celebrate after concluding important business deals. The increase in tax is such a small amount that it should have very little effect on the casino’s profits, while providing a boost to the government’s budget. When they have finished drafting the new laws to put in place protection for vulnerable young gamblers, Georgia will have put in place all the pillars needed to ensure a successful and sustainable gambling industry that is able to compete with the rest of the world.


10

POLITICS

GEORGIA TODAY

SEPTEMBER 3 - 5, 2019

The Lastest Tskhinvali vs Tbilisi Debate BY GT TEAM

E

katerina Biazrova, Head of the Press Service of the “State Security Committee” of the occupied “South Ossetia”, on Sunday reported through Sputnik that one of their drones had been shot down by the Georgians near the “border.” “On the morning of September 1, an unmanned aerial vehicle owned by the South Ossetian law enforcement agency was conducting video surveillance near the state border,” she told them. “At about 10 am, shots were fired at the drone from Georgia's Kobi settlement without warning. As a result, the drone crashed near the border between South Ossetia and Georgia," Biazrova said, adding that the Security Committee had informed the EUMM about the incident. “We consider it necessary to state that the above is a direct provocation," she added. This comes as tensions have been rising following the recommencement of Russia’s illegal creeping borderization along the Tskhinvali (“South Ossetia”) occupation line. The de-facto authorities of Tskhinvali, responding to the Georgian side’s decision not to remove a police blockade near the village of Chorchana, situated close to the occupation line in Khashuri Municipality, demanded a technical meeting on Friday. “The area has always been a territory controlled by the central government of Georgia and we have full rights to arrange a blockade there," government representatives stated. The European Union Monitoring Mission (EUMM) in Georgia released a statement on the developments in Chorchana village where occupation forces had mobilized military equipment and personnel. The document notes that in order to reduce tensions and monitor the situation on site, the EUMM monitors were to maintain a 24-hour presence at the administrative borderline (ABL) in the village. “Today, the Head of Mission, Mr. Erik Høeg, visited the area to assess the situation. The Missionmanaged hotline is being actively used to exchange information between all actors and to reduce the potential for inadvertent escalation,” read their statement released Friday. Prior to the meeting between Tbilisi and Tskhinvali representatives, the de facto foreign ministry claimed the Georgian side's actions "consciously

and demonstrably aggravate the situation," which "creates a serious threat of destabilization throughout the region." They also touched on the August 2008 War in their latest statement, saying that “Georgian armed aggression in August 2008 was preceded by the Georgian side constructing military facilities across the entire territory of South Ossetia”. The South Ossetian side claimed that "In case of further escalations, counter actions will be used to protect South Ossetia's territorial integrity. Full responsibility for the possible consequences goes to the Georgian government and its Western partners."

However, following the meeting, the news was good, with Maria Kotayeva, the Head of 'State Committee on Information and Press' of the region of Tskhinvali (South Ossetia), stating “There will definitely not be a war. Georgia will not attack South Ossetia, as it will be unfavorable for Georgia itself in the first place. Even though Georgian politicians dream of returning Abkhazia and South Ossetia, no-one is going to repeat the steps made by the desperate Saakashvili.” Kotayeva claimed that the developments at the ABL represented an attempt by the Georgian government to focus society off their “inefficient work eradicating domestic social issues.” In addition,

she strongly focused on the agreements of South Ossetia and the Russian Federation, outlining that aggression towards South Ossetia will be assessed as aggression towards the Russian military forces located on the territory of the region. Kotayeva went on to criticize Georgian President Salome Zurabishvili and stated that Georgia is not a reliable partner on the international political arena. “Salome Zurabishvili, as well as her predecessors, promised to return South Ossetia and Abkhazia. But there is no need to pay attention to such silly, empty promises,” she said. Kakhaber Kemoklidze, Chief of Staff of Georgia's new National Security Council (NSC), told reporters that the meeting had been held constructively and that the sides had agreed on further steps to de-escalate the situation. “The meeting was held in a very constructive environment. The parties agreed that concrete steps should be taken to de-escalate the situation. The decision was shared by all the representatives. A further technical meeting will be held next week, this time in the village of Ergneti. At this technical meeting, we will once again reiterate the positions we hold. Despite the different positions, the overall pathos and purpose of the meeting served to complete a de-escalation of the situation. This is a very big step forward in the right direction, the implementation of which will be launched from today,” Kemoklidze said. In response to the aforementioned drone crash, Official Tbilisi responded to the accusations denying that the drone had been fired upon from their side of the occupation line. The State Security Service told Radio Liberty that on September 1, Tskhinvali’s drone crashed into the unmanned aerial vehicle of an individual, as a result of which both fell to the ground. "The Georgian central government has a constructive attitude and pays huge importance to ensuring the current stable environment at the occupation line,” the Security Service said. The Service then showed media representatives the unmanned aerial vehicle that crashed on the territory of Kareli municipality to prove that there was no firearm damage to it. “This is the drone that crashed yesterday in the Kareli municipality. Some unfounded allegations were spread after the crash, according to which the drone was shot down by our police unit. This allegation is groundless and false. We are showing this item to you to prove that there is no trace of firearm damage,” said Irakli Antadze, Deputy Chief of the Information-Analytical Department of the State Security Service.


CULTURE

GEORGIA TODAY SEPTEMBER 3 - 5, 2019

11

“Time to Upgrade” at Euronews Discovers Ajara’s Tourism the Art Villa Garikula Potential BY LORRAINE VANEY

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n August 30, the Art Villa Garikula held its annual International Festival of Contemporary Art “Fest i Nova” in honor of the Brothers Zdanevich. The festival is an international platform for joint projects with local and international artists-inresidence. The 11th edition, named “Time to Upgrade," welcomed artists from the United States and from the Russian Federation. Through diverse mediums, the artists explore the relationships between technology, time and human consciousness. This year, the French Pavillon presented the Franco-Georgian artist Alexandre Bavard-Tsouladze for his first exhibition in Georgia. Curated by Guela Tsouladze, “Futur Inévitable” reflects the artist’s approach to his Georgian roots and to his dystopic vision of the future. Two silhouettes, fixed in raw concrete, blind and covered with veils are standing on traditional Georgian carpets, looking like vestiges from the present time. The contrast of colors and styles is striking, symbolizing the hazardous combination of past and future. “Time again and again follows its own rhythm reminding us that we are only passages.” said the artist. Born and bred in France, Alexandre Bavard-Tsouladze explores and develops his dystopic vision of the future in many ways, from street art to performance and from costumes design to exhibitions. The common thread of his various projects revolves around the question of identity, often

he management of Euronews, an international TV channel, has discovered the tourism potential of the region of Ajara. Tinatin Zoidze, Chairperson of the Tourism and Resorts Department of Ajara met with the representatives of the media platform to discuss the prospective of further cooperation between the Department and Euronews. The Tourism Department of Ajara has been promoting the region’s tourist products on an international scale

through Euronews for the past few years. Video blogs and commercials about Ajara’s sea and mountain resorts have been presented on a number of Euronews TV shows, including Metropolitan, Cult, Focus, and Adventure. Aside from Euronews, promotional commercials about Ajara have also been broadcasted on Deutsche Welle, BBC National, Geographic Travel Channel and local German TV channels, including RRL and N-TV. Within the scope of the visit, the representatives of Euronews also held meetings with the Mayor of Batumi, Deputy Finance and Economy Minister of Ajar and Management of Batumi International Art House Film Festival (BIAFF).

of the game was handled ‘horribly’ by the Georgian team. However, both Haig and captain of Georgian team, Mikheil Nariashvili, agree that "we should forget this match and focus on the next game." The captain of the opponent team evaluated the game, saying: “Georgia has a great team. We respect them a lot. Our preparations before this match were quite strict and serious. And if you ques-

tion whether we consider Georgia a 7-Nation, I’d say the answer to that is pretty clear," said the Captain of Scotland Rugby Team, Stuart McInally. Nariashvili promised Georgian Rugby fandom that the team will put their maximum effort into delivering more at the next game in Scotland. The rematch, this time taking place on Scottish land, is scheduled for Friday, September 6.

TRANSLATED BY KETEVAN KVARATSKHELIYA

T

disguised under textiles and round glasses. This recognizable pattern is partly inspired by Alexandre’s travels to the Middle East, but also by his work as a graffiti artist. Preferring vandal artworks to commissioned street art, Alexandre goes by his pseudonym “Mosa” in the street, hiding his true identity.

His work has been shown around the world but hosting an exhibition in Georgia is for him an honor, and the opportunity to rediscover his origins through art. The French Pavillon hosts French artists each year for the Festival, thanks to the continuous support of the French Institute.

SPORTS

Scotland Defeats Georgia at Dinamo Arena BY NINI DAKHUNDARIDZE

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n August 31, the Georgian and Scottish rugby teams faced each other at Dinamo Arena. The almost full stadium, mostly Georgians, saw Scotland win a powerful victory of 10:44. This game was Georgia’s final

warm-up at home before the World Cup. “Georgia were expected to give Scotland a stern test, especially upfront, but this served as a reminder that the gulf between tiers One and Two in international rugby remains significant,“ the BBC wrote. Milton Haig, head coach of the Georgian team commented on the defeat after the game, saying that: “The reason for our team’s failure during the first few

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minutes of the game is that we truly lack matches of this quality. Up to 20 minutes from the start, it was a Tier One team versus a Tier Two team. Going against such quality teams more often will allow us to even the field and not give our opponents such a great advantage.” While evaluating the game, Haig offered his sympathy to the fans, saying that he was "just as disappointed as them" and admitting that even the first 30 minutes

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Profile for Georgia Today

Issue #1182 Business  

September 3 - 5, 2019

Issue #1182 Business  

September 3 - 5, 2019

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