Issue #952 Business

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Issue no: 952/81

• JUNE 6 - 8, 2017

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue...

Georgia to Host Silk Road Forum in November

FOCUS ON PROMOTING DCFTA POTENTIAL Civil Society Organizations & LAGS are being entrusted with informing and training Georgia's farmers

PAGE 2,8

London Terrorist Attacks

BY NINO GUGUNISHVILI

T

wo weeks after 22 people were killed by a suicide bomber at an Ariana Grande concert in Manchester, yet another attack hit the UK on Saturday June 3, reports the BBC. A white van hit pedestrians at London Bridge and Borough Market, after which three terrorists armed with knives jumped out of the van and stabbed people on the street and in nearby restaurants. Seven people were killed and the Ambulance Service says 48 patients were taken to five hospitals; 21 are still in a critical condition. Four police officers were also injured, two seriously, the BBC reports.

Continued on page 8

NEWS PAGE 2

Commercializing Science: Story of the Phage ISET PAGE 4

Georgian Wine Export in January-May Increases by 64% PAGE 5

RETAIL FPI | Is Georgia’s Tomato Business Rotten?!

PAGE 9

No Time to Sleep: Meet the Mind behind the New Creative Media PAGE 10

Border to Border Health Education Project Returns to Armenia SOCIETY PAGE 11 Prepared for Georgia Today Business by

Markets As of 02ͲJunͲ2017

STOCKS Bank of Georgia (BGEO LN) GHG (GHG LN) TBC Bank Group (TBCG LN)

COMMODITIES Crude Oil, Brent (US$/bbl) Gold Spot (US$/OZ)

INDICES

w/w

m/m

Price

w/w

m/m

GBP 36.91

Ͳ1,4%

+2,2%

GEOROG 04/21

105.59 (YTM 5.14%)

+0,1%

+0,1%

GBP 3.5

Price

+0,6%

Ͳ5,4%

GEORG 04/21

BONDS

111.70 (YTM 3.59%)

+0,3%

+0,5%

GBP 17.55

+3,5%

+7,0%

GRAIL 07/22

110.86 (YTM 5.29%)

+0,3%

+0,3%

BGEOLN 07/23

101.42 (YTM 5.72%)

+0,1%

+0,6%

Price

w/w

m/m

49,95

Ͳ4,2%

Ͳ1,0%

CURRENCIES

Price

w/w

1 279,17

+1,0%

+1,8%

GEL / USD

2,4263

+0,5%

Ͳ0,6%

GEL / EUR

2,7338

+1,3%

+2,5%

Price

m/m

w/w

m/m

GEL / GBP

3,1249

+1,1%

Ͳ1,0%

FTSE 100

7 547,63

Ͳ

+4,1%

GEL / CHF

2,5207

+1,6%

+2,5%

FTSE 250

20 002,75

Ͳ0,1%

+1,0%

GEL / RUB

0,0428

+0,2%

Ͳ

DAX

12 822,94

+1,8%

+2,5%

GEL / TRY

0,6910

+2,4%

Ͳ0,1%

DOW JONES

21 206,29

+0,6%

+1,2%

GEL / AZN

1,4213

Ͳ0,6%

Ͳ2,4%

6 305,80

+1,5%

0,0050

Ͳ

Ͳ

145,30

Ͳ1,6%

Ͳ3,8%

GEL / UAH

0,0923

+0,5%

+0,4%

1 015,08

Ͳ0,2%

+2,7%

EUR / USD

0,8863

Ͳ0,9%

Ͳ3,1%

SP 500

2 439,07

+1,0%

+2,0%

GBP / USD

Ͳ0,7%

+0,4%

MICEX

1 881,87

Ͳ2,7%

Ͳ7,2%

CHF / USD

0,9631

Ͳ1,1%

Ͳ2,9%

MSCI FM

2 738,36

+0,9%

+4,3%

RUB / USD

56,6353

+0,2%

GT Index (GEL)

1 133,66

Ͳ

Ͳ

TRY / USD

3,5088

Ͳ1,9%

Ͳ0,5%

GT Index (USD)

922,38

Ͳ0,4%

+0,6%

AZN / USD

1,6967

+0,4%

+1,1%

NASDAQ MSCI EM EE MSCI EM

+3,5%

GEL / AMD

0,7758

Ͳ0,7%

2

NEWS

GEORGIA TODAY

JUNE 6 - 8, 2017

Rosneft & BP Agree on Strategic Georgia to Host Silk Road Forum in Cooperation in Gas Sector November

BY DIMITRI DOLABERIDZE

R

osneft and BP signed an agreement on strategic cooperation in the gas sector on Friday, June 2 while at the St. Petersburg International Economic Forum (SPIEF).

The head of BP Russia, David Campbell, at the signing ceremony, noted that the British oil and gas company and Rosneft will study the possibility of cooperation in Europe, including the implementation of joint projects in the field of LNG. “Rosneft and a subsidiary of BP, ‘BP Gas Marketing Limited’, plan to sign a contract of purchase and sale of gas produced by Rosneft to ensure additional supplies of Russian raw materials to the markets of Europe, from 2019," said the press release.

In November last year, Rosneft and BP announced the closing of a transaction on the creation of joint venture — lim-

Ambassador of People's Republic of China to Georgia and Minister of Economy and Sustainable Development of Georgia

BY NINO GUGUNISHVILI

G

iorgi Gakharia, Minister of Economy and Sustainable Development of Georgia discussed the upcoming Silk Road Forum, to be held in Georgia on November 28-29, with the Ambassador of the People’s Republic of China to Georgia, Ji Yanchi, during their meeting in Tbilisi.

Giorgi Gakharia summed up his visit to China, where he participated in the Belt and Road Forum for International Cooperation, during which a free trade agreement between Georgia and the People’s Republic of China was signed.

The Silk Road Forum in Georgia is seen as a logical continuation of the Belt and Road Forum held in Beijing in May. The Silk Road Forum 2015 saw over 1000 participants from 30 countries in attendance.

ited liability company ‘Ermak Naftogaz’.

Legally binding documents on the establishment of the joint venture were signed in June 2016 in the framework of the 20th St Petersburg International Economic Forum.

The joint venture will engage in exploration in two Zones of Mutual Interest (ZMI)- in Western Siberia and the basin of the Yenisei-Khatanga, of a total area

of about 260 square kilometers. The share of Rosneft in Ermak Naftogaz accounts for 51% and BP — 49%.

At the end of March, Campbell, speaking at the Arctic Forum in Arkhangelsk, confirmed that BP will continue to invest in Russian projects, including in gas, and considers that the oil industry in Russia is developing successfully in terms of sanctions.

Georgian CSOs to Promote Free Trade with EU in Rural Areas

BY NINO GUGUNISHVILI

C

zech non-governmental organization in Georgia, People in Need (PIN) launched the new ‘Regional Civil Society Organizations (CSOs) as Vectors of Rural Economic Development’ project, to be implemented with the support of European Union, on June 2.

Together with PIN, its partners, the

Rural Communities Development Agency, PMCG Research Center, Association Atinati and the Georgian Alliance on Agriculture and Rural Development, introduced the project objectives, activities planned and its potential outcomes.

“PIN decided to work side by side with local producers to help them understand what the Deep and Comprehensive Free Trade Area (DCFTA) means and what opportunities it has to offer,” said Lauriane Gauny, PIN country Director. The project will run in collaboration with local NGOs in seven regions of Georgia:

Imereti, Mtskheta-Mtianeti, Kakheti, Samtskhe-Javakheti, Samegrelo-Zemo Svaneti, Adjara and Kvemo-Kartli, with the main objective and focus being to strengthen region-based CSOs while implementing the DCFTA and within the implementation of the SME policy in Georgia. “Small agricultural producers need support to adapt to the new requirements, and civil society organizations based in rural areas are the best placed to help producers through this adaptation process,” Gauny said.

Continued on page 8

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BUSINESS

GEORGIA TODAY

JUNE 6 - 8, 2017

THE ISET ECONOMIST A BLOG ABOUT ECONOMICS AND THE SOUTH CAUCAUS

www.iset-pi.ge/blog

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.

Commercializing Science: Story of the Phage

BY LEVAN PAVLENISHVILI AND NORBERTO PIGNATTI

A

ll over the world, the quest for technological innovation is proceeding with great intensity. Georgia is no an exception. While local universities are trying to build fablabs (fabrication laboratories - smallscale workshops offering personal digital fabrication), the government has established the Georgian Innovation and Technology Agency (GITA) to support the creation of start-ups and tech companies. In addition, there are still a large number (more than 60) of still-operating former Soviet scientific institutions, either working independently, or under different public and private universities.

Despite such a large number of scientific Institutes, however, Georgia usually ranks quite low when looking at the number of scientific publications, and at the number of citations per article (as measured by the h-index), typically around the middle of the ranking and behind most eastern European countries. Furthermore, so far, investments in the innovation sector have failed to translate into success stories that contribute substantially to the development of the country and attract the majority of the younger generation. Only 27% of the bachelor and 20% of the master’s degree graduates have backgrounds in natural sciences or engineering.

Amidst this apparently dismal landscape, however, there are a few stories that seem to be moving in the right direction. One such story is that of the George Eliava Institute of Bacteriophages, Microbiology and Virology (the Institute). The Institute managed to survive the traumatic transition period following the fall of the Soviet Union and to sustain its scientific profile around the world. With more than two dozen publications in international journals

10 Galaktion Street

over the last five years, it is still a brand name around the world in its own sphere of research. The case of the Eliava Institute is becoming even more fascinating as it is slowly managing to commercialize its scientific research and contribute to the sustainable development of its business model.

For over 90 years now, the key research area of the Institute has been the selection and development of bacteriophages.

The Institute is the only institution in the world with such a track record.

Bacteriophages are viruses that attack specific bacteria while ignoring (and being therefore harmless to) the human (or animal, or plant) host. Unlike with antibiotics, bacteria have a much harder time developing resistance against bacteriophages. Moreover, even if they manage to develop some resistance, because of the extremely large number of phages around us, researchers must just look for another phage against which bacteria have no immunity. As antibiotic resistance is increasingly becoming a problem in the modern world, the Institute, it seems, has found a very good niche for its operations.

HOW DID IT ALL START? A bit of history about the Institute can help better explain the essence of their success. The Institute was founded by two pioneers of bacteriophage research: Georgian George Eliava and FrenchCanadian Felix D’Herelle. The two scientists created a World Centre of Phage Research and Phage Therapy in Georgia.

Unfortunately, after building the Institute, its Georgian founder became a victim of Soviet repressions, and was executed in 1937. After his death, Prof.

Felix D’Herelle never returned to Georgia. Despite this unfortunate series of events, however, bacteriophage research continued, becoming a viable alternative to the initially scarce supply of antibiotics behind the Iron Curtain. The Institute was very well endowed, funded and managed by the central government

of the Soviet Union. When Georgia became independent in 1991, during the transition period, the lack of funding became dramatic, endangering the physical survival of the Institute. Despite the great difficulties, however, the scientists from the Eliava Institute managed to protect most of the Institute’s heritage and slowly started to search for alternative sources of funding, applying for different grants and building international scientific collaborations and partnerships. In addition to scientific collaborations, the researchers broadened the Institute’s portfolio and revenue sources by providing diagnostic services and by producing bacteriophages for sale and for treating patients, creating one of the first successful examples of science commercialization in the history of independent Georgia.

From the beginning of the 2000s people from around the world started coming to Tbilisi to be treated for antibiotic resistant bacterial infections. All this helped the scientists at the Institute to better understand which core services connected to their research had the greatest development potential.

THE DEVELOPMENT OF THE “ELIAVA INSTITUTE MODEL”

Tel: (995 32) 2 45 08 08 E-mail: info@peoplescafe.ge

To ensure the sustainability of its activity and the provision of these services, the Institute started implementing a model for the commercialization of science based on one used by the University of Wisconsin (The Wisconsin Technology Innovation Initiative). This model entails building up a consortium of for-profit organizations working under the umbrella of a non-profit foundation (in this case, the Eliava Foundation), that itself is founded by the Institute and its scientists. Today the Eliava consortium consists of: (i) Eliava BioPreparations – manufacturing bacteriophages, (ii) Eliava Media Production – manufacturing of biological media, (iii) Eliava Analytical-Diagnostic Center – providing diagnostic services to patients, (iv) Eliava Phage Therapy Center – providing treatment services with specific bacteriophages, and (v) Eliava Institute Authorized Pharmacy – selling medications elaborated by the Institute and produced by BioPreparations.

Although the Institute has been successful in surviving the hardships of the transition period and came out of it with a working model of operations, the challenges it faces are not over yet.

While the Institute is currently benefiting from revenues associated with the treatment of local and international patients, and from the local commercialization of its preparations, the potential revenues from this type of operations are relatively limited and do not allow for a substantial increase in scale, which is necessary for long-term sustainability. The next step for the Eliava Institute is, therefore, to capitalize on its international brand name and to bring its products and services to international markets. Putting bacteriophages on the global market is not an easy task, however, especially considering the strength of the – competing – antibiotics industry in developed countries.

The Eliava Institute has been trying for more than a decade now to get through the bureaucratic procedures of the United States and of the European Union regarding the approval of bacteriophage therapy.

One of the things that could help would be obtaining support from the Georgian government to remove the existing

obstacles to the commercialization of bacteriophages on global markets.

Another initiative that could be of assistance is the promotion of bacteriophage applications in different areas (human health, agriculture, veterinary and other) inside Georgia.

LESSONS TO BE LEARNED A clear lesson that can be learned from the case of the Eliava Institute is that it is important to identify promising niches for the commercialization of products and services related to innovative scientific research, to help achieve sustainability of scientific research initiatives.

The sale of products and services in profitable niches can both support scientific research and ensure the survival of the institution in the longer term, even in the absence of substantial public support, and constitutes a much more viable strategy in situations characterized by the scarcity of public and private funding. This solution is also preferable to the expansion of public spending over areas in which there are no substantial comparative advantages.

Another interesting lesson that can be learned from the experience of the Eliava Institute is that when an umbrella non-for-profit organization is founded to control for-profit activities conducted by the same scientists that work in the scientific institution (allowing them to retain control of the know-how and portions of the profits generated by their own research), they have a greater incentive to work for the success of the whole enterprise. A final lesson worth emphasizing is that, whenever an organization such as the one put in place by the Eliava Institute proves successful, the government should consider supporting its efforts to commercialize its products and services. This is not so much about “picking the winners” among the numerous “innovative ideas” in the country (which the government is not always in the best position to do), but about helping the “emerging winners” grow beyond their national dimension and reach international markets, potentially contributing simultaneously to the improvement of the scientific standing of the country, and to its economic development.

BUSINESS

GEORGIA TODAY JUNE 6 - 8, 2017

5

IFC Invests in Bank of Georgia Georgian Wine Landmark Local Currency Eurobond Export in January-May to Drive Private Sector Growth Increases by 64%

I

FC, a member of the World Bank Group, has supported the Bank of Georgia in its inaugural local currency Eurobond issuance by investing GEL 108.34 million (approximately $45 million), to attract much-needed international financing in local currency for Georgia’s private sector, and to boost job creation and economic growth.

As the anchor investor, IFC announced its commitment to purchase up to 30 percent in the bank’s planned issuance early on, supporting the offering during the investor roadshow and helping to strengthen confidence in the upcoming transaction. Bank of Georgia’s bond issuance has attracted GEL 500 million (approximately $207 million) from aroound 20 international investors.

The three-year bond is the first offshore local currency bond issued by a corporate from Georgia, and also the first in the past decade from a former member of the Soviet Union, other than Russia. The issuance will allow the country’s leading bank to boost long-term local currency financing, which enables businesses to grow and avoid risks related to borrowing in foreign currency. The issuance will also support the country’s de-dollarization efforts, aimed at reducing its reliance on foreign currency.

“The success of this landmark transaction demonstrates the confidence of international investors in Georgia’s currency and economy, and will help connect them to Georgia’s private sector financing needs,” said Jan van Bilsen,

IFC Regional Manager for the South Caucasus. “It will also allow the bank to provide much-needed local currency finance to more retail borrowers and small and medium businesses, to help them expand, create more jobs, and boost economic development.”

“IFC has been a long-time partner for us and I am grateful for the tremendous support it has provided in this landmark transaction. IFC's bid gave us great support in building investor

confidence and creating early momentum in book build,” said Kaha Kiknavelidze, Bank of Georgia, CEO. “This landmark bond has as much a developmental as a funding purpose.

Successful completion of the issuance has greatly expanded the investor base in Lari and, I hope, will deepen local fixed income and currency markets.”

Georgia became an IFC member in 1995. Since then, IFC has committed around $1.64 billion in long-term financing, of which $774 million was mobilized from partners, in 59 projects in financial services, agribusiness, manufacturing, and infrastructure. In addition, IFC has supported more than $331 million in trade through its trade finance program,

and implemented a number of advisory projects focused on developing the private sector in Georgia. In fiscal year 2016, IFC invested almost $19 billion in developing countries worldwide.

ABOUT IFC IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with more than 2,000 businesses worldwide, we use our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world. In FY16, we delivered a record $19 billion in long-term financing for developing countries, leveraging the power of the private sector to help end poverty and boost shared prosperity.

ABOUT BANK OF GEORGIA JSC Bank of Georgia is the leading Georgian bank with a market share of 33.0% (based on total assets), 32.0% (based on total gross loans) and 32.8% (based on amounts due to customers) as at 31 March 2017. The Bank offers a broad range of retail banking, corporate banking and investment management services. As of 31 March 2017, Bank of Georgia served approximately 2.2 million client accounts through one of the largest distribution networks in Georgia, with 274 branches, the country’s largest ATM network, comprising 813 ATMs, 2,723 Express pay (self-service) terminals and a full-service remote banking platform and a modern call center.

BY THEA MORRISON

G

eorgia’s National Wine Agency (NWA) reports that in January-May 2017, around 24.75 million bottles of wine were exported from Georgia to 41 countries worldwide that is 64 percent higher than the same period of 2016.

January-May wine exports this year amounted to $55.52 million, which is 58 percent higher than 2016.

“In January-May exports increased to the European Union, China, USA and other traditional markets. We hope that the rate of export increase will be main-

tained in all directions,” Head of the NWA, Giorgi Samanishvili, said.

The top countries where Georgian wine was imported this January-May are: Russia (14.820.976 bottles), China (3.234.144), Ukraine (2.364.112), Kazakhstan (2.364112) and Poland (978.360) In addition, in five months around 5.521 594 bottles of brandy were exported to 17 countries, 66 percent more than in 2016.

January-May brandy exports this year amounted to $13.3 million, which is 73 percent higher than data for 2016.

On the whole, export income for alcoholic drinks this January-May amounted to $100.8 million, meaning a growth of 64 percent compared to the same period of 2016.

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BUSINESS

GEORGIA TODAY

JUNE 6 - 8, 2017

Electricity Market Watch FOR GEORGIA TODAY BY MARIAM CHAKHVASHVILI

S

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.

ELECTRICITY DEFICIT IN 2017 BRIDGED BY IMPORTS RATHER THAN TPPS Electricity imports in 4M17 have already exceeded 2016 total imports by 85.1% and 2017 planned imports by 7.6%. 886.7 GWh of electricity (+138.2% y/y) was imported in 4M17, with Azerbaijan being the main source of imports (62.7% of total) and the rest coming from Russia (24.2%) and Armenia (13.1%). Electricity imports accounted for 21.1% of total electricity supply in 4M17. Imported electricity was directed at satisfying higher consumption

UPDATED ANNUAL FORECAST FOR 2017

IMPORTS AT AN ALL-TIME HIGH FOR THE MONTH OF APRIL

Electricity consumption is expected to increase 7.7% y/y, according to the updated annual forecast for 2017 issued on April 7.

The annual forecast, prepared by GSE and approved by Ministry of Energy, outlines the generation and consumption plans for each market participant. Main modifications include the addition of the WPP and HPPs, which were commissioned after the preparation of the last annual forecast on November 28, 2016; changes in import and export amounts and directions; and an update of the first three months’ forecast with actual figures. According to the modified annual forecast, imports will account for 12.9% of planned supply of electricity in 2017, with an additional 763.1 GWh of imports expected from Azerbaijan (83.1%) and Armenia (16.9%) over the remainder of the year.

The share of electricity imports in total electricity supply was 15.2%, a historical high for the month of April. More than half of the imported electricity came from Azerbaijan (60.2%), with the rest imported from Russia (12.2%) and Armenia (27.6%).

10.4% of the Abkhazian region’s consumption was satisfied by imports from Russia via the Salkhino line, while the rest was met through Enguri/Vardnili generation.

EXPORT MARKETS Price volatility on the Turkish market led to a reduction in the number of companies willing to export from Georgia to Turkey, leaving unallocated capacity of 4MW out of the 250MW allowed export capacity (ATC) in May 2017. Private companies with priority access to the Meskheti transmission line connecting Georgia and Turkey will be the main

ELECTRICITY PRICES IN GEORGIA AND TURKEY

IMF RESTRICTS POWER PURCHASE AGREEMENTS IMF has declared PPAs for power plants as a fiscal risk for Georgia in its country report issued in April 2017. IMF recommends refraining from initiating any PPAs until the institutional framework is in place. Taking into consideration the existing fall-winter period power deficit, partial PPAs currently under negotiation, with cumulative installed capacity of up to 500MW, are permitted to proceed, as long as the guaranteed purchase period is limited to eight months and the purchase price to USc 6.0/kWh. Exceptions might be made for two specific projects, Namakhvani HPP cascade and Koromkheti HPP, subject to a detailed fiscal risk assessment and evaluation.

ELECTRICITY CONSUMPTION AND GENERATION – APRIL 2017

(+9.1% y/y) and filling the gap created by a drop in hydro generation (-15.6% y/y).

Relative prices of TPP-generated electricity and imports were the main reason behind choosing imports over TPPs to satisfy high demand (5.3% higher than planned) and make up for low HPP generation (11.0% lower than planned). The price of TPP-generated electricity in 2017 has ranged from USc 3.7/kWh to USc 5.9/ kWh, while the average import price in 4M17 was USc 4.1/kWh. The decrease in the average import price was a one-off event, caused by subsidized imports from Russia (via the Salkhino line), negotiated mainly to meet the increased demand of the Abkhazian region during and after Enguri HPP’s temporary closure. Imports from Armenia were also on negotiated terms.

exporters to Turkey in 2017. For the second consecutive year, Georgian Urban Energy (owner of Paravani HPP), which has priority access to the Meskheti line, has chosen to export to Turkey only May through July, in order secure its income at an average of USc 4.5/kWh and contribute to filling the country’s deficit in winter months. Armenia has also become an attractive market for Georgian companies. Among the exporters to Armenia, besides the privately owned GIEC, is ESCO. In exchange for the imported electricity during 4M17 (116.3GWh), ESCO is exporting electricity to Armenia in May and June. The practice of repaying the import bill with exports is also used for repaying 2012 imports from Azerbaijan with exports to Turkey in 2016 and 2017.

Domestic consumption increased 7.9% y/y in April 2017 and 9.1% y/y in 4M17.

Consumption of distribution companies increased 7.1% y/y in April, while the Abkhazian region’s electricity usage was up 13.7% y/y and consumption by eligible consumers was up 5.0% y/y. Electricity exports were negligible. Electricity transit from Azerbaijan to Turkey amounted to 4.7 GWh in April 2017, down 90.1% y/y and 34.7 GWh in 4M17, down 66.8% y/y. The large reduction in transit was largely the result of lower transit capacity due to the high level of electricity imports.

Growth in domestic consumption was met mostly through imported electricity.

Total electricity supply from domestic sources was down 6.6% y/y, while imports increased almost six-fold. Three quarters (74.9%) of domestic consumption needs were met by hydro generation; the rest was satisfied by thermal (8.9%) and

imported (15.2%) electricity, while the newly built wind power plant accounted for 1.0% of total electricity supply.

NEW HPPS HELP MAINTAIN HYDRO GENERATION LEVELS The main reasons for the change in the electricity supply mix were bad hydrological conditions affecting most HPPs. Total hydro generation was down only 1.3% y/y. Generation was down 13.8% y/y

by Enguri/Vardnili and 4.0% y/y by other regulated HPPs, while deregulated HPP generation posted an increase of 24.5% y/y, mainly due to the addition of Dariali HPP (108.0MW), Khelvachauri HPP (47.5 MW), and other new HPPs (9.4MW) to this group at the end of 2016.

The decrease in domestic supply was mainly the result of lower TPP generation (-40.1% y/y). Only one TPP, the Gardabani CCGT, operated at full power for half of the month, while other TPPs mainly provided reserve for the system.

The guaranteed capacity fee was down 13.4% y/y to USc 0.8/kWh, with guaranteed capacity provided by each of the five sources for the entire month.

Wholesale market prices in Georgia were 16.0% above the Turkish market clearing price in April 2017. Turkish electricity prices increased 22.2% y/y in local currency, but due to Lira depreciation (-22.4% y/y), prices in US$ terms decreased 5.2% y/y to USc 4.1/kWh. The average price of imported electricity in Georgia was USc 4.6/kWh, down 11.6% y/y from the already low base in April 2016. The high share of subsidized imports from Russia via the Salkhino line has been the main reason for the lower average import prices in 2017.

CHANGE IN PURCHASE PRICE METHODOLOGY FOR DEREGULATED HPPS The wholesale electricity price in Georgia in April 2017 was flat at USc 4.7/kWh (+0.7% y/y), mainly due to the low import price and a change in the balancing electricity purchase price methodology. Starting April 1, the price paid by the market operator (ESCO) to deregulated HPPs for balancing energy supply was lowered from the highest regulated TPP price (14.234 tetri/kWh) to the highest regulated HPP price (9.4 tetri/kWh). In April 2017 the share of such electricity in total balancing energy market was 9.1%, while imports were the leading component (52.3%). Overall, electricity traded through the market operator in April 2017 reached 280.0 GWh, 29.1% of total electricity supplied to the grid, with the rest traded through bilateral contracts.

Call For Land Transport Management Service Provider Companies

B

P Exploration (Caspian Sea) LTD Georgia invites eligible companies to express their interest in providing Land Transport Management services for BP Georgia operations: • Provision of professional drivers, trainings and competency assurance

• Provision rent services of vehicles for in city, long distance, off road transportation • Provision of planning, scheduling, coordination and execution of maintenance and repair of vehicles in accordance with manufacturers’ recommendations with up-to-date records held.

• Provision and Management of professional Transport Call Centre/ Journey Management for fleet coordination and on time vehicles dispatch • Provide and administer vehicle assets: e g. comprehensive insurance coverage; registration, state technical inspection, fuel provision and card management,

inventory, car wash, parking, traffic fines etc • All vehicles which are owned, leased or contracted by BP shall be installed with an In Vehicle Monitoring System (IVMS) Interested companies should provide their Contact Details; company name, address, telephone, e-mail and contact name to the following e-mail address: arveladm@bp.com or to the company office in Tbilisi at 24 Sulkhan Tsintsadze street for the attention of Maka Arveladze, PSCM Country Lead Georgia.

Submission deadline 5th of June 2017.

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BUSINESS

GEORGIA TODAY

JUNE 6 - 8, 2017

Georgian CSOs to Promote Free Trade with EU in Rural Areas Continued from page 2 The target groups of the project will consist of 16 region-based civil society organizations experienced in working with rural micro and small entrepreneurs, and eight local action groups (LAGs) in the Lagodekhi, Kazbegi, Borjomi, Dedoplistskaro, Tetritskaro, Akhalkalaki, Khulo and Keda municipalities. Medium, small and micro-businesses, individual entrepreneurs, farmers and agro-producers, local CSOs and local agrarian associations are to be the beneficiaries of the project.

Through various trainings planned in the framework of the project, PIN will be assisting CSOs and LAGs to acquire information and knowledge about DCFTA-related issues, advocacy techniques and value chain research, which will then help regional producers to identify local products having a potential to enter European markets. This is expected to be done by establishing information and resource desks in the selected seven regions of Georgia.

Main project activities include coaching local CSOs in each specified region on the aspects of the DCFTA, Georgian regulations in rural development sectors, customs regulations, environmental protection, climate-smart agriculture, food safety and quality standards, energy efficiency and clean energy, and value chain research aimed at the agriculture sector.

The project is also to enhance the population reach through Radio Atinati and other partner radio stations and media outlets for the promotion of the information resource desks and the impact of DCFTA regulations. The project is to be focused on connecting targeted CSOs and LAGs with the Georgian Alliance on Agriculture and Rural Development (GAARD) and others to “empower rural communities to represent their interests in policy development and implementation”.

It is planned to develop four policy briefs on DCFTA effects, as well as to conduct four bi-annual regional workshops and two national-level discus-

sions on policy briefs through the GAARD platform, with the participation of CSOs, LAGs, stakeholders and policymakers.

“The agriculture industry is a priority sphere and there are number of institutional changes going on. With significant efforts from the government and active involvement of the private sector, there are positive changes in terms of attracting investments to the sector and in expanding international markets,” Iuri Nozadze, Deputy Minister of Agriculture of Georgia said at the program launch.

“The DCFTA has enormous benefits and opens many opportunities, at the same time bringing challenges, which means that legislative bases have to be improved, and institutional bases have to be formed. At the same time, the private sector has to comply with the higher norms and standards, as the private sector also needs investments, recommendations and support. The engagement of the NGO sector is crucial in the Euro integration process,” Archil Karaulashvili, First Deputy State Minister on European and Euro-Atlantic integration stressed ashe talked about the importance of the project at the launch ceremony.

“This project comes as an initiative to empower, agriculture, business and civil society and to help civil society actors to better inform business organizations and other producers to better understand the challenges and opportunities of the DCFTA,” said Vincent Ray, Head of Cooperation Section, Delegation of the European Union to Georgia.

The project is part of EU assistance to the Georgian government to implement the DCFTA, facilitating Georgia’s integration into the EU market.

“On the base of 24 civil society organizations across the seven regions of Georgia, we will be opening information resource desks that will enable local entrepreneurs to receive information on the DCFTA. Globally speaking, the aim of our project is to strengthen the integration of Georgia to the European markets,” said Zaal Anjaparidze, People in Need project manager.

London Terrorist Attacks Continued from page 1 Police officers shot and killed three suspects wearing fake explosive vests minutes after they were called, all of whom have since been identified. The BBC reports that the so-called Islamic State has claimed responsibility for the attack.

“There is some satisfaction here at Scotland Yard that when this attack happened on Saturday night, it was dealt with quickly, swiftly and aggressively,” said Daniel Sandford, the BBC's home affairs correspondent.

“The Metropolitan Police has acknowledged there is a need to reassess how it deals with

counter-terrorism following the growth in people using less sophisticated weapons to kill - such as driving vehicles and using knives,” Sandford added.

Georgian leaders offered their condolences to the British.

“I am deeply outraged over the brutal terrorist incidents in London. Georgia stands with the British people and government in solidarity,” said Giorgi Margvelashvili, President of Georgia.

“Georgia stands by the UK and its people following the London Bridge attack,” said Giorgi Kvirikashvili, Prime Minister of Georgia. [My] deepest condolences to the friends and families of the victims”.

BUSINESS

GEORGIA TODAY JUNE 6 - 8, 2017

9

RETAIL FPI | Is Georgia’s Tomato Business Rotten?!

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y the end of May, ISET’s Retail Food Price Index increased by 5.5% y/y (compared to May 2016) on a monthly basis (compared to April 2017), retail food prices slightly decreased, by 0.4%. The largest bi-weekly price changes were recorded for seasonal food products such as fresh fruit and vegetables.

Prices dropped the most for tomatoes (-28%), garlic (-21%), and cucumber (-8.3%). Prices increased the most for cabbage (23.3%), potatoes (17.7%), and greens (14.3%).

Figure 1: Turkish tomato imports in Georgia (in tons)

Figure 2: year-on-year comparison of tomato prices

Source: https://comtrade.un.org/

Source: ISET’s Retail Food Price Index data

IN THE SPOTLIGHT: TOMATOES Compared to the previous month, tomatoes became cheaper: the average price of 1 kg of tomatoes went down, from 3.65 GEL to 3.34 GEL. While price declines in the fresh produce category are always expected at this time of the year, tomatoes are also trading below last year’s prices. The first factor worth noting is that Russia placed limits on Turkish imports in December 2015. Before

the sanctions, Turkish tomatoes accounted for around 50% of the tomatoes consumed in Russia. Suffering from Russia’s wrath over Turkish products, tomato (one of the main Turkish agricultural export products) producers in Turkey shifted their supply to other markets, including Georgia. As a result, Turkish tomato imports almost doubled in April-May 2016 (compared to April-May 2015).

But the story does not stop there. Recently, Russia agreed to lift some trade sanctions against Turkey, but the tomato ban remained in place. Russian Prime Minister D m i t r y Me dve d ev explained that Russia has made major investments in local tomato production, and therefore the country wants to “preserve investments made in the sector that should not come to nothing."

Returning to Georgia’s retail markets, this year tomatoes are even cheaper than they were last year (figure2). While

Georgian consumers can take advantage of cheaper tomatoes, this is not good news for Georgian tomato producers.

They might not be ready to compete with cheaper Turkish tomatoes unless they differentiate their product quality.

The Kremlin on the Future of Russia after 2018

BY DIMITRI DOLABERIDZE

F

undamental changes will not happen in Russia after the Presidential Elections in 2018.

Everything will continue to work as before, and, most likely, all will be well- said Dmitry Peskov, President Putin’s Press Secretary, during the St. Petersburg International Economic Forum. He went on to express confidence that the Russians can safely look to the future. Turmoil in the country should not be expected, "everything will continue to work as it worked, and, most likely, everything will be fine," Peskov said.

The participants of the Forum directly

Source: Canada.com

connect changes in Russia with the future results of the 2018 Presidential Election and say that, if a new figure comes to power, it is natural that this will affect the ruling team. And we should expect new faces in the leadership of the state.

However, according to Peskov, the personnel issue should be left to the discretion of the new head of state and to “discuss such now is far too premature,” Peskov claimed.

As of May 29, 63% of Russians are ready to give their votes Putin. Among them, the level of unconditional support for Putin is maintained at 82%, according to a survey conducted by the Levada Center. Besides which, the Russian leader is the person most mentioned in news related to the ongoing St. Petersburg Economic Forum.

10

BUSINESS

GEORGIA TODAY

JUNE 6 - 8, 2017

No Time to Sleep: Meet the Mind behind the New Creative Media It doesn’t matter if it’s for entertainment or education, it is something needed for their development and needed for the country, especially considering the 25 years of our independence.

Today, 85 percent of the audience gets information from television, and I think that viewers must be protected. This is reality. Their moral, intellectual, psychological and physical existence should not be threatened. This, of course, is a matter for time and is a process that is regulated together with development.

INTERVIEW BY NINO GUGUNISHVILI

O

lga Babluani - Film Director, screenwriter, OK Magazine Georgia editor, author and host of popular TV show ‘No Time to Sleep’ is also the founder of BiO International, which creates and launches media projects and provides media consultancy. GEORGIA TODAY met with Olga to talk about her recent and upcoming projects.

WHAT IS THE MESSAGE YOU WANT TO DELIVER THROUGH THE NO TIME TO SLEEP TV SHOW?

TELL US ABOUT BIO INTERNATIONAL In BiO International, we’re creating media projects and offering media consultancy.

We aim to deliver focused, precise and targeted informational strategies which are well-organized and adapted to demandsomething which is a crucial social component in today’s realm. My background is in cinema, and the essence of it lays in reflecting fictionalized reality on screen; authors can tell a story depending on their own tastes and choices, whereas what I’m doing differs from cinema, as the information provided to society needs to be true and trustworthy. Cinema helps me to be more creative. In fact, the creative part of the process means much more to me. I’m the creator, producer, author and presenter of the No Time to Sleep TV show and for me that’s like working on a movie- I’m happy when I’m creating.

As the saying goes, “as long as the tree has apples every year, life goes on,” and I’m like that, too.

Media has a drastic influence on society’s way of thinking, but does not form it, as these are two different things.

The show is of a cultural and educational format and I believe it’s much needed today. There’s an enormous demand for novelty in our society. Our aim was to create a media platform where new themes would be discussed freely through inviting new people, new faces.

The show is entirely produced by my company BiO International and we have some excellent partners, who are themselves taking part in our country’s development. UNDP, Georgian Post, Silknet, as well as TBC. From September, the program will broadcast on Imedi TV, but it will stay on Maestro till the end of this TV season, aired as usual at 20:30 every Saturday and 13:00 on Sundays.

SINCE YOU’RE VERY ACTIVELY INVOLVED IN MEDIA, WHAT DO YOU THINK IS MOST NEEDED TODAY IN THE SPHERE?

Challenges are an integral part of our lives, “the longest road is the road to ourselves, and while we walk on it, we have to pave the way on our own”. Nothing is easy, even sleeping can be difficult sometimes… It’s important to have an axis of moral values that you can relate and stick to, and it will help you not to feel weak and powerless.

Family, children, your work- it’s all interrelated, and your personal life is what you dedicate your soul to.

WITH SUCH A BUSY SCHEDULE, HOW DO YOU OVERCOME CHALLENGES?

I think that Georgian media, like other spheres, needs educated, healthy individuals working in the field who, with the high standards of professional ethics, take the responsibility to offer a product to the audience of four million viewers.

SOCIETY

Business Café Meets Up for General Assembly Adopts Resolution Recognizing Right of Return for Refugees the 10th Time

T

he United Nations General Assembly on June 1 recognized the right of return of all internally displaced persons and refugees in Georgia and their descendants, regardless of ethnicity, to their homes throughout that country, including Abkhazia and the Tskhinvali region/South Ossetia.

By a recorded vote of 80 in favor to 14 against, with 61 abstentions, the Assembly adopted a resolution on the status of internally displaced persons and refugees from those areas, stressing the need to respect their property rights and underlining the urgent need for unimpeded humanitarian access to all those residing in conflict-affected areas of Georgia.

The Assembly called on all participants in the Geneva International Discussions

O

n May 31, the 10th meeting of Business Café was held at Tbilisi Marriott Hotel and saw entrepreneur, George Kananashvili, speaking about Financial Technology and challenges within.

Business Café is a project initiated by the consulting company “Insource” and has been supported by PASHA Bank since 2015. Business Café meetings are attended by top managers of large and medium-sized companies.

Each meeting offers a convenient platform for sharing knowledge and experience, as well as discussing recent trends in the economy. Interesting and interactive discussion topics attract participants and contribute to the rising popularity of the project.

As of 2017, two new sponsors joined the initiative - ACT and Orient Logic. “This meeting of Business Café was especially interesting considering that the speaker had diverse experience in real estate as well as financial services,” said Anano Korkia, Head of PR and Marketing Department of PASHA Bank. “I would like to take this opportunity to thank Insource for their responsible and professional attitude towards selecting the speakers.

Each meeting has its own unique features

and subjects for discussion.”

Among the speakers and presented topics of previous Business Café meetings were: Lado Gurgenidze, former Prime Minister of Georgia and Executive Chairman of the Supervisory Board of Liberty Bank - “Thoughts about management and leadership”; Giorgi Kadagidze, former president of the National Bank of Georgia - “Innovation management”; Alexander Jejelava, Minister of Education of Georgia – “Organizational corporate culture”; David Gogichaishvili, General Manager of the Night Show Studio – “Management

of human resources”; Andro Dgebuadze, Business Advisor – ”Management 3.0 MBA books in the mirror”; Papuna Toliashvili, founder and Managing Partner of Synergy Group – “Circular Organizational Structures”; Tinatin Rukhadze, Co-founder and General Director of research and consulting company ACT- “Who is the leader of the future?”; Guga Tsanava, businessman and entrepreneur - “Stanford Model of Management”; and Sascha Ternes, Managing Partner of TERNES Real Estate Fund LLC and former CEO of ProCredit Bank.

Illustration by Megan Eloise/The Gazelle

mandated by the 2008 ceasefire agreement, to intensify efforts to establish peace, commit to enhanced confidencebuilding measures, take immediate steps to ensure respect for human rights, and create secure security conditions for the voluntary, safe, dignified and unhindered return of all internally displaced persons and refugees to their homes.

Kaha Imnadze (Georgia) introduced the resolution, underlining its aim to galvanize international support for the rights of displaced people in Georgia, the overwhelming majority of whom had indicated their wish to voluntarily return.

The resolution stood for three principles: securing the rights of the displaced, the unacceptability of forced demographic changes, and the need for unimpeded humanitarian access.

SOCIETY

GEORGIA TODAY JUNE 6 - 8, 2017

11

Border to Border Health Education Project Returns to Armenia

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rom the 3rd to the 24th of June 2017, a new round of the Border to Border Health Education project is scheduled in Armenia. For these three weeks, teams of 18 American Peace Corps Volunteers and 13 Armenian educators will cross the country on foot, providing health education access and information about educational opportunities for rural youth across Armenia. This year, their departure will be attended by the Acting Director of the Peace Corps, Sheila Crowley. This marks the first time leadership of Peace Corps global will see the Border to Border project in action.

Returning for the sixth year with new partners, the Scholae Mundi Armenia Charity Foundation, UWC Dilijan and the Dilijan Community Center, B2B expands its capacity by delivering not only a holistic health education curriculum, but also information about the importance of education and its accessibility to around forty communities across Armenia.

Following a successful crowdfunding campaign, this year’s program will reach more communities and beneficiaries than ever before, while simultaneously transferring responsibilities to a young Armenian management team to take charge in the years ahead. Seeking to surpass last year’s record of over 1,300 students reached by the project, this year projects over 1,500 beneficiaries will participate in the program.

"We all think Armenia is such a homogeneous place that no big differences in communities would be part of the national narrative, whereas when going and actually talking to these people in different villages and cities, it turned out that we live in such a beautifully diverse country full of different traditions and community-specific customs! It was also interesting to learn what the next generation is interested in, and perhaps work on promoting healthy lifestyle, gender equality, leadership and such topics that have not been brought up before," said Nune

Harutyunyan, 2016 Armenian walker.

B2B is a partnership project between American Peace Corps Volunteers and young Armenian leaders, all passionate about providing health education and sharing opportunities for international education with rural youth. The unique curriculum is reviewed on an annual basis in response to pre- and post-test results from the previous year, and addresses the expressed needs of community participants. For some students in rural, underserved communities, B2B serves as a first introduction to general nutrition, leadership skills, gender equality, and environmental conservation.

You will be able to follow the B2B team June walk on social media exploring the magnificent Armenian hiking opportunities, promoting healthy lifestyles and travelling to the outlying regions.

Six years ago, a group of Peace Corps Armenia Volunteers saw a need. Members of their communities had no access to educational materials about healthy living and personal development. These subjects weren’t taught in most schools.

Online resources weren’t in Armenian, and were therefore inaccessible. Communities, especially villages, lacked the expertise to start programs themselves, and so this dedicated team of Volunteers created Border to Border.

PUBLISHER & GM

George Sharashidze COMMERCIAL DEPARTMENT

Commercial Director: Iva Merabishvili Marketing Manager: Mariam Giorgadze

GEORGIA TODAY

EDITORIAL DEPARTMENT:

Editor-In-Chief: Katie Ruth Davies

The Dilijan Community Center, which was founded with the support of the Scholae Mundi Armenia Foundation, sees its mission as helping to shape a caring community (both indigenous people and newcomers), ready to unite their efforts to change the prevailing reality.

Scholae Mundi Armenia Foundation is one of the three Charity Foundations (Scholae Mundi Armenia, Scholae Mundi Russia and Scholae Mundi UK) that compound the Scholae Mundi Platform established by entrepreneurs and philanthropists Ruben Vardanyan and Veronika Zonabend.

The mission of Scholae Mundi Armenia Foundation is to diversify the educational scene in Armenia by supporting the socially-oriented innovative projects and initiatives in the areas of education, arts and culture, to promote Armenia internationally and to strengthen the positive impact on the communities locally in Armenia and globally.

Scholae Mundi Platform promotes, on a non-for profit basis, the most advanced educational practices for the public benefit, while catalyzing wider social change, it supports education of students at UWC Dilijan College and other educational establishments by providing funds for capital development and scholarships.

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