Issue no: 986/98
• OCTOBER 3 - 5, 2017
• PUBLISHED TWICE WEEKLY
PRICE: GEL 2.50
In this week’s issue... Hualing Opens Largest Trading Center in the South Caucasus in Georgia
ON SUCCESS IN GEORGIAN LITERATURE
A look at the 2017 Saba Literary Awards
European Commission Offers EUR 45m Financial Assistance to Georgia
The Long, Hot Summer: Why the Spike in Forest Fires & What Can Be Done About It – Part I ISET PAGE 4
Electricity Market Watch GALT & TAGGART PAGE 8
OUT ON FRIDAY: Focus on the Fall of Sokhumi
BY THEA MORRISON
he European Commission has proposed a new Macro-Financial Assistance (MFA) to Georgia, worth up to €45 million. The offer was made on September 29 and, if adopted by the European Parliament and the Council, the assistance would help Georgia cover part of its external financing needs. “While Georgia has made significant progress with economic reforms, its macroeconomic outlook remains vulnerable,” the statement of the European Commission reads. “Georgia's economy is exposed to an uncertain regional and global economic outlook, and its international reserves are not yet adequate, not least
NEWS PAGE 2
due to the country's external debt level. This context has formed the base for the proposal for further Macro-Financial Assistance”. The statement added the proposed Macro-
Financial Assistance would accompany the country's program with the International Monetary Fund (IMF), approved on 12 April. Continued on page 2
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OCTOBER 3 - 5, 2017
Hualing Opens Largest Trading Center in the South Caucasus in Georgia BY THEA MORRISON
ualing Tbilisi Sea Plaza, the largest trading center in the South Caucasus, was officially opened in Tbilisi on Saturday. Around GEL 370 million ($150 million) was invested in the project, which will include around 400 shops. Georgia’s Prime Minister, Giorgi Kvirikashvili, attended the opening ceremony and highlighted that China is one of the largest investors in the country, having also signed a Free Trade Agreement with Georgia. “Georgia is the first country in our region to sign a Free Trade Agreement with China and I believe it is a historic agreement,” he stated. Kvirikashvili thanked the Hualing Group for implementing the project. He also
thanked the founder of the group and noted that Hualing Group is one of the largest investors in Georgia. “In addition to this investment, we welcome that this group is investing in the Free Industrial Zone in Kutaisi, as well as in the financial sector and many other directions. We welcome that relations between Georgia and China are developing dynamically,” he stated. The PM complimented the largest shopping center in the South Caucasus for being both comfortable and modern. “I am confident this trading center will attract customers from the entire region. There are 400 shops and the most comfortable environment. Customers will be able to buy all they need in one place," he added. Kvirikashvili also spoke about the Tbilisi Silk Road Forum to be held in Tbilisi in November. "This forum will allow us to further
strengthen relations between China and Georgia and enable business persons to discuss new projects, which, we believe, will be a guarantee of peace and stability in the region," he stated. He noted Georgia’s important geographical location in the region, pointing to its attractive economic environment for foreign investments. “China can always expect that Georgia will be a very trustworthy partner," the Prime Minister said. The event was attended by the Minister of Economy and Sustainable Development, the Tbilisi Mayor, the Ambassador of the People's Republic of China and other officials. Georgia and China finalized free trade negotiations by signing an agreement on May 13 in Beijing, China, which means that the world's largest market, which unites approximately 1.4 billion customers, will be opened to the goods and services of Georgia.
European Commission Offers EUR 45m Financial Assistance to Georgia Continued from page 1 “Of the total €45 million, €10 million would be provided in the form of grants and up to €35 million in medium-term loans at favorable financing conditions, helping to reduce uncertainties surrounding the economy's short-term balance of payments and fiscal issues,” the Commission said. Pierre Moscovici, Commissioner for
Economic and Financial Affairs, Taxation and Customs, said the proposal for additional assistance is another sign of the EU's strong support for the Georgian people. “As Georgia continues its economic transition, we are helping the country to preserve macroeconomic stability and continue the reform process needed to achieve stronger and more inclusive growth,” he commented.
The European Commission added that disbursements under the proposed MFA program would be strictly conditional on the implementation of specific policy conditionality, to be agreed between Georgia and the EU and set out in a Memorandum of Understanding, and on good progress with the IMF program. “These policy conditions would aim to address some of the weaknesses of
the Georgian economy. They would also complement the reforms agreed in the context of the EU's budgetary and other support operations, and the EU-Georgia Association Agreement which envisages the creation of a Deep and Comprehensive Free Trade Area (DCFTA),” the statement says. The website of the European Commission says that the new MFA operation is the third since Georgia's military
conflict with Russia in August 2008. At an International Donors' Conference in Brussels in October 2008, the EU pledged two MFA operations of €46 million each. The first of those operations (€46 million, fully in the form of grants) was implemented in 2009-2010 and the second (€46 million - half in grants, half in loans) in 20152017. The last tranche of the second operation was disbursed in May 2017.
OCTOBER 3 - 5, 2017
THE ISET ECONOMIST A BLOG ABOUT ECONOMICS AND THE SOUTH CAUCAUS
The ISET Policy Institute (ISET-PI, www.iset-pi.ge) is an independent think-tank associated with the International School of Economics at TSU (ISET). Our blog carries economic analysis of current events and policies in Georgia and the South Caucasus region ranging from agriculture, to economic growth, energy, labor markets and the nexus of economics, culture and religion. Thought-provoking and fun to read, our blog posts are written by international faculty teaching at ISET and recent graduates representing the new generation of Georgian, Azerbaijani and Armenian economists.
The Long, Hot Summer: Why the Spike in Forest Fires & What Can Be Done About It – Part I BY MARIAM CHACHAVA AND NORBERTO PIGNATTI
Graph #1. The Number of EU Forest Fires (2017 VS 2008-2016).
n the summer of 2017, Georgia experienced an unusually high number of forest fires across the entire country. 35 forest fires were recorded in August alone (official data reporting the size of area burned by these fires is not yet available). In almost all regions of the country, several fires were reported. Among them, the conflagration in the Borjomi gorge had the most dramatic consequences: it lasted for seven days (20-27 August), and more than 100 hectares of forest were destroyed. Many people claim that these cannot all be accidental events. Is this necessarily so, or are there other, more plausible explanations? What is certain is that, whatever the causes, forest fires can lead to extremely high economic, social and environmental costs. While it may be impossible to completely prevent forest fires from occurring, proper forest management, and the adoption of legislation providing proper incentives for stakeholders to take better care of forests and to avoid behaviors increasing the risk of forest fires, can do a lot to improve the situation. In this article, and in the follow-up that we’ll publish in the coming weeks, we’ll explore the factors that increase the risk of natural and Man-made fires, and discuss possible mitigating strategies, based on economic theory and international best practices. In today’s article, we will focus on natural forest fires. Looking at data from 2017, one can see that throughout the year, the occurrence of forest fires has been alarmingly high all over the world. According a report by NASA (2017), dozens of forest fires happening in the USA can be seen in a Terra satellite image. According to the report, the number of fires occurring is much higher than it was during previous years. The authors claim that the fires were mostly due to hotter and drier natural conditions. European countries have also been suffering from an unusually high number of forest fires during 2017. According to Euronews, the number of forest fires in European countries in 2017 has been, so far, three times higher in comparison to the 2008-2016 average (see Graph #1). Euronews attributes the
Source: European Forest Fire Information System (EFFIS)
main reason for increased forest fires to climate change, especially the higher temperatures. Scientific literature also supports the idea that the evolution of natural conditions during the last few years can justify an increase in the number of forest fires. Existing weather conditions and the likelihood of forest fires are both affected by climate changes, which can potentially increase the risk of fires for several reasons: As a result of global warming, there are longer hot seasons. Warm weather arrives earlier, meaning that snowmelt starts earlier, and the ground stays dry for a longer period of time. This results in hotter summer months, and warm weather conditions extend further in autumn. Consequently, there is a longer fire season during the year. Higher temperatures lead to drier conditions in nature; this promotes evaporation and soil becomes less watersaturated. These circumstances increase not only the probability of fire occurrence, but also makes it harder to fight fire, because it spreads faster. Longer, drier and warmer seasons may favor the proliferation of destructive insects, helping them to survive winter and rapidly reproduce. These pests can cause tree death, making them drier and easier to ignite. In this way, more fuel for forest fires is created.
Along with climate change, there have been more severe thunderstorms happening around the world, which increases the probability of lightening, and consequently increases the risk of forest fires. Given the increased risk of wildfires associated with existing climate trends, developing and implementing more effective policies against such phenomena becomes an even greater priority. So, what can be done to more effectively prevent and fight wildfires? Here are some possible directions to pursue: Clear forests of easily flammable materials, including dry trees and grasses, because these materials are easily ignited in high temperatures. Invest in the recruitment and training of an adequate number of individuals in charge of fighting and preventing wildfires, as well as in providing them with the necessary equipment, and in building proper infrastructure, including forest roads. Improve the country’s readiness to fight natural disasters. This means funding more sophisticated monitoring, prevention and communication systems. For example, the government can develop and use probabilistic models, allowing them to make predictions about the risk of wildfires weeks and sometimes even months ahead. In this way, available resources may be more effectively
10 Galaktion Street
deployed and concentrated where fire risks are higher. This, in turn, would require building more sophisticated realtime information collection systems monitoring the evolution of landscape, local climate and weather conditions. Take steps to reduce CO2 emissions (recognized as one of the main reasons for global warming). In fact, many world governments, including the Georgian one, have subscribed to the Paris Agreement, which has as its main focus global warming, and have pledged to adopt initiatives aimed at containing greenhouse gases. Among other things, governments can encourage people to increase their share of renewable energy sources in their total energy consumption; set limits, beyond which producers are not allowed to pollute; raise carbontaxes based on carbon emission (with fuels leading to more emissions being taxed more heavily); and, fight deforestation (because cutting and burning trees not only reduces the absorption capacity of the environment, but also releases more carbon dioxide into the atmosphere). The last is a particularly relevant issue in Georgia: the illegal cutting (and burning) of trees is not rare. Limiting global warming could also help stop a vicious cycle in which more fires cause more carbon emission (and less carbon absorption), which in turn leads to more global warming and so on.
THE ESTONIAN EXAMPLE Estonia is a good example of how it is possible to implement successful policies in order to prevent wildfires. In 2002 and 2006, Estonia experienced a dramatic
spike in forest fires (the majority of them were naturally caused). In 2009, the government decided to implement policies to fight forest fires. These policies focused mostly on the training of local communities and individuals who were in charge of fighting wildfires. Training was important in order to increase communities’ awareness of the risks of natural fires, and to increase the number of volunteers fighting wildfires. Firefighters were also trained to expand their ability to prevent wildfires. The trainings included topics such as: what is the nature of forest fires, how to detect hot spots, and how to avoid their emergence. After the implementation of this policy, the number of forest fires declined (see Graph #2), as did the total extension of the area burned during fires.
THE WAY AHEAD In the short term, it is possible to fight and prevent natural forest fires by setting up a proper forest management system and having well-trained and wellequipped staff. Increasing social involvement in the process of preventing forest fires can also reduce the risk of wildfires and increase the number of volunteers during emergency situations. In the long-run, and from a broader perspective, Georgia can also join the global efforts to reduce the level of greenhouse gas emissions, to which it has committed by signing the Paris Agreement. Joining this effort will contribute to the fight against climate change and thereby help reduce the occurrence of favorable natural conditions for forest fires, not only in Georgia but all over the world.
Graph #2. Number of Forest Fires in Estonia (2000-2011).
Source: Life + Information and Communication project (2012).
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GEORGIA TODAY OCTOBER 3 - 5, 2017
Green Consumer International Day Marked at Georgian Innovation & Technology Agency
Saba Annual Literature Competition Winners Announced BY NINO GUGUNISHVILI
he winners of the 15th annual literature competition Saba were announced during an award ceremony held at the Tbilisi History Museum Karvasla this Saturday. The Saba Literary Competition was founded in 2003 by TBC Bank and the Georgian Pen-Center, with the aim of assessing and identifying the literary processes carried out throughout the past year and naming the best literary works and their authors. Any original literary work published in the form of novel, prose, poetry, or a play, Georgian translation of foreign literary work, documental prose, and literary criticism are considered for the award, alongside the best literary debut, best foreign translation into Georgian, best foreign translation of Georgian literature into a foreign language, best electronic book, and an award for outstanding contribution to literature. Together with special prizes, winners are awarded with a monetary prize. The overall annual award fund is GEL 52,000. The competition jury usually consists of five members, changed each year. The jury has no chair person and its members are writers whose works are not being considered for the competition in that award year. The voting is done through a closed voting system. In the 15 years of the existence of the Saba literary competition, 2,700 books have been submitted and 127 awards given to 102 writers, poets and translators, while 60 writers have already sat in the jury. This year, 300 works were submitted, and 47 selected as finalists. “If something united the Georgian identity through all these centuries, it was primarily the language, and the literature. Saba always attempts to concentrate on both,” Rati Amaglobeli, Georgian poet and the host of the 2017 Saba awards said in his opening speech. Diana Anpimiadi, member of the jury, gave the award for Best Literature Criticism to Nana Trapaidze for her work ‘Literature and Literature’. “It’s a hugely important contest and an important category nomination, and I would like to thank the editor of this book, and especially the cover designer, Natalia Avaliani. I often say that the eleventh text of this book for me is its cover,” Trapaidze said as she accepted the award. The next category announced was the Best Essay and Documentary Prose for 2016, with the award going to Levan Berdzenishvili’s ‘Evolution of Literacy,’ which, according to its author, tells the “unknown stories of various authors, their relations to each other, the topic of ‘banned books’” and much more. In the introduction, he writes of his hope that, after reading this particular book, readers will get interested in reading other books, too. “I think that if anything interesting has been created in Georgia in Post-Soviet times and even before, something deep, and original, it is literature,” Lasha Bughadze, Georgian writer, member of the jury, said as he announced the winner of the award for Documental Prose. “I decided I had to write a book which would then interest younger generations to read more; apparently it was read by
BY NINO GUGUNISHVILI
the kind of people who read day and night anyway!” Berdzenishvili joked while receiving his award. The Best Literary Debut of the year went to authors: Beka Akhalaia ‘For those leaves that did their duty’ (collection of poems) chosen by the jury, and Zurab Abashidze for ‘How to Kill Billy Eliot’, (Books in Batumi Publishing) which was the people’s choice through internet voting. The next nomination was for Best Electronic Book of 2016, with the award going to two authors: Andro Buachidze, for his poetic collection ‘Spring comes at night’ and Luka Bakanidze’s collection of stories ‘Where are you, Lazare…?’ Khatuna Tskhadadze was then announced as the winner for the Best Foreign Literature Translation into Georgian for Umberto Eco’s ‘Foucault’s Pendulum’. “Translation is an enormous, totally different responsibility, especially when, as a translator you’re working with authors who are so much better than you yourself are,” she said. The award for the Best Georgian Language Book into a Foreign Language went to Sybilla Heinze for Anna KordzaiaSamadashvili’s ‘Who Killed Chaika’ translated into German. Lasha Tabukashvili received a Saba award for the Best Play in 2016, for ‘Somewhere over the rainbow’. “There are no losers today, nor are there at any Saba literature competition,” Tabukashvili said. “It’s the first time I’ve received this award. The Saba Literature Competition is not just a contest; it has transformed into a major literature event. We writers are often alone while working, and we need to connect with one another and meet each other more often to analyse and understand just how deep the Georgian literature process is”. The Best Prose Collection award went to Rusudan Rukhadze for her collection of prose ‘One of you will betray me’. Famous Georgian writer and poet Vakhtang Javakhadze was then awarded the Best Poetry Collection of 2016 for his ‘Elegy and other…’ and the evening came to a culmination when the winner of the Best Novel of the Year was revealed, the award going to Aleko Shugladze’s ‘Hiding’. “I would like to thank the characters of my book as it’s they who created it, not me. I would like to thank my readers; I would like to thank my publishing house Diogene, my friends living here in Georgia and abroad, and TBC Bank and Saba,” Shugladze said after accepting the award. Well-known poet Lia Sturua was awarded for Outstanding Contribution to Literature by Mamuka Khazaradze, Founder of TBC Bank. “I would like to thank all of you who through all these years are creating literary works and actively collaborating with Saba,” Khazaradze said. “When we founded Saba, it was to have the function of being supportive to the literary process and for 15 years Saba has continued to do so,” he noted. “We need, you; we need your talent and intellectual thought, especially today when our country is facing so many challenges”. “As Paul Verlaine said, music, nuances, shades and colors are most important in poetry,” Sturua said. “Literature should be considered as important as the economy, politics and social issues”.
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n the initiative of the Environmental Education and Information Center of the Ministry of Environment and Natural Resources Protection of Georgia, Green Customer International Day was marked at the Innovation and Technology Agency of Georgia (Techno Park) on September 29. Solomon Pavliashvili, First Deputy Minister of Environment and Natural Resources Protection of Georgia, discussed the importance of the green consumer together with public sector representatives. It was noted that Georgia, a country oriented towards ecological status, needs urgently to create “green demand” and to support “green consumption” if it is to ensure a sustainable healthy environment within the country. Business sphere representatives attending the event presented their future activities planned in the framework of the Green Consumption Campaign, which is aimed at changing consumer behavior, promoting green products, and obtaining and utilizing transportation which will have a less negative impact on the environment, whilst assisting and promoting “green forms” of production. The meeting at Techno Park was attended by those supporting the green
consumption initiative: Kakhaber Kuchava, Chairman of the Parliamentary Committee for Environment and Natural Resources Protection; Teimuraz Murgulia, Deputy Minister of Education and Science of Georgia; Irma Kavtaradze, Deputy Minister of Economy and Sustainable Development of Georgia; Ia Papiashvili, Director of the Environmental Education and Information Center; Sulkhan Gvalia, E-space Executive Director; and Maiko Tsereteli, Executive Director, OK! Magazine Georgia. “I remember the Earth Hour initiative launched by the Sheraton Metekhi Palace years ago, its popularity tightly linked with our Georgia Today Group holding,” Tsereteli said. “This is a classic good example of how media should work with the private business sphere, state institutions and with the public. Today, green
themes are as relevant in our society as ever, and our group has done a lot towards promoting it, as we will continue to do so in future. The problem has already been identified by those who needed to see it and work in this direction has begun. It’s important that society thinks about such issues. Georgia Today Group will always be there, where green themes are being worked on. More concretely, I would like to introduce a new initiative, which we’re launching in partnership with the Ministry of Environment and Natural Resources Protection of Georgia- a new feature in OK! Georgia Magazine entitled ‘Green Choice’, with which our readers will be regularly introduced to ‘Green Start-ups’. We hope it will serve as a motivation to them, and also interest many others in producing ecologically clean products”.
OCTOBER 3 - 5, 2017
Georgian Farmer Ranked First Place at Cheese Festival in Italy
young Georgian farmer from Tusheti has won the bi-annual International Cheese Festival in Italy. 22-year-old Kakha Abuladze won with his Tushetian Guda cheese, coming in at first
FIRST BRAND HOTEL IN KUTAISI UNDER BEST WESTERN INTERNATIONAL Within the framework of the Georgian Hotelsâ€™ Regional Network Development Project â€œ12 hotels in 12 regionsâ€? by GHYHORSPHQWFRPSDQ\Âł6LPHWULDÂ´WKHÂżUVWEUDQGKRWHOKDV been opened in Kutaisi under the Best Western International brand. The hotel accommodates 45 guest rooms, including 40 standard rooms and 5 suites. The hotel was designed taking into consideration special conditions and safety for guests with disabilities.
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Three mobile conference halls are available with a total capacity of about 100 persons. (XURSHDQFXLVLQHFDQEHHQMR\HGLQWKHJURXQGĂ€RRUFDIp and a grill-bar menu in the roof top restaurant with panoramic views over the city. The International Hotels Management Company â€œT3 Hospitality Management,â€? providing the hotel management, has 20 yearsâ€™ experience in hotel management in different countries globally.
place. Abuladze presented a Guda which had been produced by co-operative â€˜Alaznistaviâ€™. The co-operative was founded in 2015 with the support of the EU Agriculture and Rural Development Program (ENPARD). The festival was organized by the â€˜Slow Foodâ€™ organization. Shepherds and chefs producing cheese and other organic products by traditional methods
were also awarded at the four-day festival and included farmers from the United States, Italy and Cape Verde Republic. The International Cheese Festival in Italy is held once every two years and gathers hundreds of farmers from around the globe. The Alaznistavi co-operative farm is located in the Tushetian mountains 2100 meters above sea level, while the cooperative summer pastures are located at 2000 â€“ 3200 meters in alpine and subalpine zones. The produce of the cooperative is unique not only due to the technology used in preparation but also because of the rich and fertile soil the region is notable for.
BIA Creates Innovative Media Platform for Business BY THEA MORRISON
n September 29, the presentation of the new brand of BIA (Business Information Agency): â€˜Business Followerâ€™ was held at Hotel Holiday Inn in Tbilisi. The invited guests received information on the new, innovative platform that allows users to easily monitor information about companies in various media outlets, filter the information and create their own media space where they receive relevant information. The company's representatives will be able to control the news spread on media about their own company, evaluate media outlets, and place them on the platform to disseminate news in the partner media. At the presentation, project authors talked about a new media monitoring tool that allows the user to simultaneously control information and simplify content analysis.
Follower's new online platform is designed for marketers, PR specialists, journalists and people who want to get familiar with business trends in Georgia. follower.ge enables customers to get acquainted with information about more than 100 online information agencies and over 35,000 active companies located in the online database. The webpage contains information sorted into 40 categories. Each company has a personalized page on follower.ge, where all the information about it in the media is provided. News about the company will be simultaneously posted on the bia.ge website, on the business profile of the same company. The Follower website uses modern technologies that are designed to save time, simplify analysis and efficiently use business resources. The Business Information Agency is the first Georgian company serving to create and develop business information. 15 years ago, BIA established itself as the innovative company of business information. BIA holds the largest and most continuously updated online database of active companies operating in Georgia.
OCTOBER 3 - 5, 2017
The Galt & Taggart Research team comprises Georgian and Azerbaijani finance and economic experts who have broad experience of covering the macro and corporate sectors of the two countries. Our current product offering includes Georgian and Azerbaijan macroeconomic research, Georgian sector research, and fixed income corporate research. For free access to Galt & Taggart Research, please visit gtresearch.ge or contact us at firstname.lastname@example.org.
Electricity Market Watch FOR GEORGIA TODAY BY MARIAM CHAKHVASHVILI
bled to 962.3GWh. Based on the updated annual forecast, electricity import in 2017 is expected to reach a historical high of 1,692.0GWh (+253.3% y/y), with net import of 1,007.4GWh.
EXPORT SUMMARY FOR 2017
ector research is one of the key directions of Galt & Taggart Research. We currently provide coverage of Energy, Healthcare, Tourism, Agriculture, Wine, and Real Estate sectors in Georgia. As part of our energy sector coverage, we produce a monthly Electricity Market Watch, adapted here for Georgia Today’s readers. Previous reports on the sector can be found on Galt & Taggart’s website - gtresearch.ge.
GEORGIA’S NET IMPORT OF ELECTRICITY IN 2017 EXPECTED TO COME IN AT A HISTORIC MAXIMUM By comparison, Georgia was a net exporter of electricity in 2016, albeit with only 80.1GWh of net export. Electricity export was up 22.6% y/y to 684.7GWh in 8M17, while imports more than dou-
analyzed the security level for each primary energy source (natural gas, oil products, hydropower, coal, biomass, etc.). The highest risk category (E) was assigned to natural gas, due to the highest import dependency (99.7% in 2016) and lack of reservoir capacity. The lowest risk category (A) was assigned to hydropower, taking into consideration variability, risks, and resilience associated with hydro supply.
Turkey remains the main export market, with a 41.4% share in total exports in 8M17. Exports to Turkey were down 3.6% y/y from an already low base in 8M16, largely due to lower average prices on the Turkish market. The top exporters to Turkey were Georgian Urban Energy (42.5% of total), owner of the 86.5MW Paravani HPP; Energy Solutions (25.6%), exporting electricity purchased from Enguri in July 2017; and Adjar Energy 2007 (14.9%), owner of the 47.5MW Khelvachauri HPP. ESCO also exported 26.1 GWh (9.2% of total) to Turkey, in exchange for electricity imports from Azerbaijan in 2012. Electricity exports to Armenia and Russia posted significant growth. Export to Armenia was up 23.3% y/y in 8M17, from an already high base in 8M16, and accounted for 20.1% of total electricity exports.
ELECTRICITY CONSUMPTION AND GENERATION – AUGUST 2017 Domestic consumption increased 14.4% y/y in August 2017. Consumption by eligible consumers, up 66.0% y/y, was a key driver, with Georgian Manganese more than doubling its consumption to 114.9GWh, a historic maximum for the company. Consumption of distribution companies, up 10.5%, also played a significant role in overall growth. Consumption was up 8.6% y/y by Telasi, 11.7% y/y by Energo-Pro, and 8.7% y/y by Kakheti Energy Distribution. The Abkhazian region’s electricity usage was up 1.7% y/y and accounted for 11.2% of domestic consumption. Domestic generation increased 8.1% y/y, with HPP generation up 5.5% y/y (85.2% of total). Thermal generation increased 31.3% y/y (7.5% of total) from the low base in 2016, while the new wind power plant accounted for 0.8% of total electricity supply. 2.3% of total electricity supply was exported. Deregulated HPPs posted a significant increase in generation (+37.6% y/y), due to the addition of Dariali HPP (108.0MW) and Khelvachauri HPP (47.5MW). The commissioning of Shuakhevi HPP (178.7MW) in late August 2017 will result in higher growth in this category in the coming months. Generation by Enguri/Vardnili was up 7.1% y/y and accounted for more than half (53.1%) of total supply in August 2017. However, generation was down 7.1% y/y by other regulated HPPs.
ELECTRICITY IMPORTS AND EXPORTS The two exporters to Armenia were GIEC (44.0%) and ESCO (56.0%), which exported electricity in exchange for the electricity imported from Armenia during Feb-Apr 2017. Electricity export to Russia was up 77.5% y/y in 8M17 and accounted for 38.3% of total exports, with ESCO being the sole exporter. The reason behind the increase in export to Russia was an unexpected surplus of generation in June and July and inflexibility of other markets to import additional electricity on short notice. Overall, ESCO accounted for over half (53.6%) of the electricity exports in 8M17.
TPP TARIFFS REVISED TPP tariffs were revised downward for the rest of 2017. The reductions varied from 6.9% for Mtkvari Energy (down to 11.358 tetri/kWh) to 25.4% for GPower (down to 10.537 tetri/kWh). The reason behind the reductions, as stated by GNERC, is the difference between planned and actual data, including exchange rates. While changes in US$ terms were insignificant for Mtkvari Energy and Gardabani CCGT, the tariff for Blocks 3 and 4, owned by Georgian International Energy Corporation Ltd (GIEC), was lowered 13.6% in US$ terms and 23.0% in GEL terms. The guaranteed capacity fees, received by TPPs for the number of days they are under operation or on standby, remain unchanged.
GEORGIA’S OVERALL ENERGY SECURITY RATED 3.7 OUT OF 5 This, according to a study conducted by World Experience for Georgia, a non-profit organization specializing in energy security, economic sustainability, and environmental issues. The study, which was conducted using the MOSES methodology,
Electricity exports increased 15.9% y/y to 31.6GWh in August 2017 and 22.6% y/y to 684.7GWh in 8M17. 63.9% of exported electricity in August 2017 went to Armenia. ESCO was the sole exporter, exporting electricity in exchange for the electricity imported from Armenia during Feb-Apr 2017. The remaining 35.8% of exported electricity went to Turkey (-58.4% y/y). ESCO was responsible for the lion’s share (96.4%) of exports to Turkey as well, exporting electricity in exchange for electricity imports from Azerbaijan in 2012. Bakhvi Hydro Power accounted for the remainder. Electricity transit through Georgia decreased 33.1% y/y to 92.8GWh in August 2017. Electricity imports spiked to 72.9GWh in August 2017, with 68.9% coming from Azerbaijan and the rest from Russia. The GC fee was down 31.3% y/y to USc 0.6/kWh, as Mtkvari Energy and Block 4 were under maintenance for almost the entire month. Most of electricity transit (68.5%) went from Azerbaijan to Turkey, with the remainder directed from Russia to Armenia. Simultaneous transit in these directions first took place in February 2016 and continued in September 2017.
ELECTRICITY PRICES IN GEORGIA AND TURKEY The wholesale market price in Georgia increased 9.0% y/y to USc 4.7/kWh in August 2017, while the Turkish market clearing price decreased 11.1% y/y to USc 5.1/kWh. 16.3% of total electricity supplied to the grid in Georgia was traded through the market operator, with the remainder traded through bilateral contracts. The average export price was down 5.5% y/y in August 2017, but up 36.2% m/m from USc 3.3/kWh in July 2017. The monthly increase can be explained by the near-elimination of lowpriced exports to Russia, which accounted for 34.4% of total exports in July 2017.
GEORGIA TODAY OCTOBER 3 - 5, 2017
Bosch Group Debriefing on the Company’s Global Goals BY NINO GUGUNISHVILI
n September 27, Bosch Group representatives held a press briefing at Radisson BLU Iveria hotel in Tbilisi. Bosch Group, which is one of the leading suppliers of technology and services worldwide, was presented by Hansjuergen Overstolz, President of Bosch Group in Russia, Belarus, Ukraine, Central Asia and the Caucasus; David Oker, Commercial Director of Robert Bosch Ltd in Georgia; and Julia Golubtsova, Head of Corporate Communications at OOO Robert Bosch, who met with Georgian media representatives to give an overview of the company’s trends and development strategy and its operations both globally and regionally, with a focus on Georgia. During the first part of the presentation made by Overstolz, Bosch Group was said in 2016 to have had a sales growth of 3.6% - EUR 73.1 billion, with 390,000 associates and 280 manufacturers worldwide. “The company raised its research and development spending under the 10% of sales reaching up to EUR 7 billion,” Overstolz noted. “Our CFO decided that Bosch is to make considerable upfront investments as a transformation process and at the same time save in high profitability over the long term,” he said of the company’s plans. This year, Bosch achieved a rise in sales of 3 to 5 %. “Taking our existing business forward,
opening up new areas of business and occupying the leading position in technology is our strategy,” Overstolz stated, pointing to the fact that mobility, IoT (Internet of Things) and connectivity, are considered the focal points of this transformation. “In the industrial environment, and in our company in particular, connectivity is changing business models, products, and not least the world of work itself,” he said. “For us, this means opportunities we must seize… we must actively contribute to shaping change”. Bosch Group plans to make new mobility possible, mobility which is “without emission, without stress and without accidents”. “It’s no longer just a case of making better cars: we have to re-invent mobility. Cars will be electrified, automated and connected with other transport, improving air quality in cities in which 70% of the world’s population will live by 2050,” he said. He noted that Bosch is also looking into driving the transition to electromobility, with the company’s efforts directed at making electro cars that are suitable for the mass market, while also working on ways to double the density of car batteries by 2020. With regards to the IoT, Bosch sold 27 million web-enabled products in 2016 and it is now the company’s strategy to make every new electronic product they produce reliable and connected. As for Artificial Intelligence (AI), the Bosch company representative said that in ten years’ time, they expect every new Bosch product made will be developed and
manufactured by itself, or will itself have AI. In the coming years, over EUR 300 million will be invested in driving forward such technology. The regional President of Bosch Group then went on to introduce the various sectors and operations of the company, highlighting that mobility solutions made 5.5% in sales growth to EUR 43.3 billion last year, representing 60% of the company’s turnover, while the industrial technology sector is represented by EUR 6.3 billion. The consumer goods sector, nearly a quarter of the company business- Bosch is regarded as the leading supplier of power tools, accessories and home appliances, made EUR 17.6 billion for the company last year. The energy and building sector is represented by EUR 5.2 billion - Bosch is said to be one of the leading manufacturers of security, communication, and energy efficient
and heating solutions. In Georgia, Bosch is mainly represented through power tools and home appliances, heating systems and mobility. “Our turnover in 2016 increased by approximately 13%, and the growth is pretty much the same in 2017,” Oker stated. “Before 2011, we were represented in Georgia on the basis of the export model, bringing products from Germany, but as we became more interested in Georgia, we decided to open our own office here. We clearly see Georgia as a regional hub from which we conduct our business in Armenia and Azerbaijan,” he said, noting that every third instrument sold on the Georgian market is produced by Bosch. The presentations were then followed and ended with a session of questions from media representatives, covering a broad range of topics from Bosch merg-
ing with other companies (with a clear ‘no’ as an answer), the possibilities of opening factories in Georgia and introducing electric cars in the country, to the problem of non-existing technical inspection, comparing the markets of Georgia and Azerbaijan, to smart city projects and future investment plans in the region. “We still see potential in the product areas where we’re active in the region. As far as housing infrastructure is concerned, we could increase the share of heating appliances, but all of this is evolutionary, not revolutionary,” Overstolz said. “We’re supporting smart cities like San Francisco and Singapore… the details have to be analysed to see what kind of technology is needed, but of course we’re open,” he said when asked, if they are considering Anaklia?? City among their potential projects in the future.
OCTOBER 3 - 5, 2017
What We Need to Know about Cyber Security INTERVIEW BY MATE FOLDI
omás de Lara Aguilar started his career holding sales and management positions at Oracle and Iecisa. He then moved to Silicon Valley where he co-founded Secuware Inc. He worked as part of the senior team to develop and execute the global strategy for the company, co-started international operations partnering with the EVP and other executives on leading the company, and increased revenues to position the company in Gartner’s Magic Quadrant 2007 & 2008. During his time in Silicon Valley, Aguilar became an expert on Corporate Strategy and how to make Cybersecurity companies grow fast. Back in Spain, he joined Trend Micro where he was rapidly promoted to General Manager for Spain and Portugal, transforming Trend Micro's business in both markets. He is currently Associate Professor at IE, professional coach, and public speaker. The information age has presented the world with an unprecedented level of threats. Attacks which are so extremely complex, sophisticated, and ever-changing that they render our senses redundant. No longer are threats confined to physical forms such as hungry predators, enemy tribesmen, guns, or bombs : today a simple piece of code has the potential to wreak an irrational amount of havoc. Following his presentation on cybersecurity at Rooms Hotel, Tbilisi, last Tuesday, GEORGIA TODAY sat down with
the professor to pick his brain on the subject.
WHAT ARE THE MAIN THREATS FACING THE WORLD IN THE REALM OF CYBERSECURITY? It’s very important to differentiate between that for the average person and for a large corporation. I’d say that the biggest threats are faced by the latter as the attackers are after either money or information, which of course makes large corporations a very profitable target for hackers as they provide plenty of both.
SO, YOU ONLY BECOME A TARGET ONCE YOU ACQUIRE SOME SORT OF VALUE? Exactly. It follows the principle of risk vs reward. Attackers gain a bigger reward targeting a large corporation. Having said that, obviously consumers, people in general, have to implement some security policies. Basic measures include: antivirus programs, personal firewalls, VPNs, and so on : all that should definitely be implemented by everyone.
HOW HAS SOCIAL MEDIA CHANGED ‘THE GAME’ OF CYBERSECURITY; ESPECIALLY CONSIDERING ITS UBIQUITOUS PRESENCE IN THE LIVES OF YOUNGER GENERATIONS? The exposure you get and give as a person and/or a company is exponentially higher thanks to social networks and media. Thus, our attackers can access and make use of a lot more information. I would be careful and educate the young generations that everything they put in
Environment 3, the Digital World, is going to stay there forever. You have to be careful about the information you share about yourself, your kids, your family, etc. Caution is key.
OF THE THREE TYPES OF ATTACKERS YOU MENTIONED IN YOUR PRESENTATION : PROFESSIONAL MERCENARIES, HACKTIVISTS, AND CYBER TERRORISM, WHICH ONE DO YOU BELIEVE REPRESENTS THE BIGGEST THREAT? It depends, you know. Despite the reality that most attacks are done for money, any kind of attack has the potential to be greatly harmful. The theft of money and information is a serious risk presented by all three: you have to be vigilante against the threat(s) provided by all of them.
ON A MORE GLOBAL SCALE, HOW DO YOU SEE THE TRAJECTORY OF FUTURE INTERNATIONAL CONFLICTS, ESPECIALLY BETWEEN STATES : WILL THERE BE AN INCREASED MIGRATION, IF YOU WILL, TOWARDS ENVIRONMENT 3 IN THIS REGARD? That’s a good question but unfortunately I don’t have enough data to give you a confident answer on this topic. However, for anyone online, for anyone who is connected, a system is a system, and an organization is an organization everywhere. The digital infrastructures are very similar : so, everyone in the digital world is at the very least at risk of attacks,
if not already the subject thereof. So, for sure they have to protect themselves, and provide a risk analysis: as much countries as large organizations and individuals.
WHAT CAN THE AVERAGE PERSON DO TO BETTER PREPARE THEMSELVES AND TRY TO ENSURE A MORE SECURE EXISTENCE IN THE INFORMATION AGE? I urge everyone to better educate themselves on the possible threats out there, and to be vigilant. It’s often the small things that get to us: some hacks are accomplished throughout the creation of URLs that differ only by one letter or character from the original/official one. For example, imagine you want to do some online banking but you have a typo in your URL that takes you to a hostile version of your bank’s website. It’s basic things like this that the home user has to be aware of. Making yourself aware
of your surroundings and the preventable threats facing you is imperative.
TAKING IT ONE STEP FURTHER, IF SOMEONE WANTS TO GET INTO CYBERSECURITY, WHAT IS THAT THEY NEED TO DO AND/OR KEEP IN MIND? That depends on which side of the coin they’re interested in: business or technical. For the business side, you don’t even have to know cybersecurity that much. There’s such a professional shortage that there are people coming into the field from a host of other sectors: they keep up and they learn. Now, from a technical standpoint, you can start as a junior and make your way up gradually by continuously learning on the job. Or, you can get yourself a certification that is very well respected in the market such as the Certified Information Systems Security Professional (CISSP).
GEORGIA TODAY OCTOBER 3 - 5, 2017
The Eurasian Economic Union Will Remain Fundamentally Weak OP-ED BY EMIL AVDALIANI
eorgia is located in a complex region. Its neighbors share different foreign policy vectors and are at different stages of economic development. Over the past several months I have written on Georgia’s neighbors and how they impact the country’s development. This time I will focus on the Eurasian Economic Union (EEU) and what the strengths and weaknesses are of the grouping. The EEU has existed for more than two years and it is the time to ponder on what it means for Georgia to border it. Russia has been trying since the 16th century to attract and dominate its smaller neighbors; to position itself as a Eurasian power. Throughout centuries, the unchanged imperative remained the creation of buffer states all along its borders. The creation of the EEU reflects this Russian geopolitical imperative: the imperative through which any western economic or military encroachment on the former Soviet space would be, if not forestalled, then considerably constrained. Indeed, the creation of the Union (although economics does play a big part in it) is also about further enabling Russia to solidify its influence over Belarus, Kazakhstan, Armenia and Kyrgyzstan. Beyond trade, the countries also discuss security, military affairs and other vital spheres of cooperation. The overall idea, however, if not openly stated, has been to place the Eurasian Union on the one hand as a balancer to the European Union and its enlargement in east Europe and on the other as an equal partner to the Chinese and its project dubbed Belt and Road Initiative (BO) introduced in 2013. The EEU has some of strategic advantages. Altogether, the grouping has a population of almost 179 million people. The gross domestic product nears $1.9 trillion. This is much lower than what the EU or BO has. Another advantage is the size and borders of the Union which almost correspond to
former Soviet Union’s borders. This enables Russia to project its influence over large swathes of lands and, like NATO in the west, potentially use its Collective Security Treaty Organization as a shield against various security challenges emanating from the Central Asian region or in the South Caucasus. Another advantage is the Union’s geographic scope. A glimpse at the Eurasian map shows that the EEU is well positioned between two economic powerhouses: Europe and East Asia, especially considering the large strides China is making in expanding and implementing its initiative. Indeed, several major economic corridors through which China wants to connect to the European market go via Kazakhstan and south of Russia. Challenges Despite initial success in managing to draw Armenia and Kyrgyzstan in 2015 into the EEU, the expansion of the grouping has stalled. There are several reasons for that. When Russia launched the Union in 2015, the country had been hit by a recession because of low oil prices and sanctions imposed against the Kremlin’s involvement in the Ukraine crisis and the annexation of Crimea. The Russian economy contracted by 3.7% in 2015. Ukraine was lost and with it its rich business market and large population pool. What is more problematic is that the economic crisis in Russia had a significant spillover effect on other members of the Union, thus further endangering the viability of the grouping. The reason is clear, as Russia accounts for the vast majority of the economic and population clout of the Union: 143 million citizens and a $1.6 trillion GDP. Another big hit to the prestige of the Union happened in 2015 when several former Soviet states such as Ukraine, Moldova and Georgia, instead of even considering joining the Union, instead signed Association Agreements with the EU. Beyond these pro-European countries, even those former Soviet states which sought a neutral position in the standoff between Russia and the West hesitate to join the Eurasian Union. The reason is
Photo source: patentlawyermagazine.com
simple, as Russia's clout within the Union causes concerns among potential members. In the South Caucasus, Azerbaijan aims at pursuing the policy it has been following since the end of the Soviet Union without committing itself to any of the major alliances. Azerbaijan in the EEU will be too much of direct Russian influence to bear for Baku. The same goes for Uzbekistan and Tajikistan. Occasionally media reports claim that Dushanbe and Tashkent talk about their potential involvement in the Union, but so far, expectations have fallen far short of real action. The reason is the
same: Russia’s economic and military dominance within the Union is overbearing. Moreover, both Central Asian states are looking at Kyrgyzstan, whose economy did not fare well following entrance in the EEU. Thus, the EEU will continue to face economic as well as political challenges as the grouping and will struggle to sign up new members, while the existing member states will reel from Russian economic and military dominance. Moreover, beyond the five members, other former Soviet Union states are unlikely to seek to join anytime soon.
OUT ON FRIDAY: Focus on the Fall of Sokhumi
Passengers at Ochamchire railway station on one of the last trains to leave the town on the day after the fall of Sokhumi to Abkhazian separatist forces. Photo by Mike Goldwater
wenty-four years have passed since the fall of Sokhumi. On September 27, 1993, the city was taken by North Caucasian militants and Abkhazian fighters. Three days later, the separatist military units had reached the River Enguri and the war that began on August 14th ended...
Don’t miss out! Grab your copy of GEORGIA TODAY this Friday where we’ll be looking in-depth at Sokhumi then and now. Read an exclusive interview with American photographer Mike Goldwater, who was there throughout a 5-day IDP exodus, along with full accounts from numerous historians and eyewitnesses.
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October 3 - 5, 2017