Page 1 georgiatoday

Issue no: 792/1

• NOVEMBER 10 - 12, 2015



In this week’s issue... Georgian Saperavi 2011 Wins Top Two Awards in Hong Kong PAGE 3

OK! Awards Wissol Group Founder as Business Celebrity 2015



Galt & Taggart’s Archil Gachechiladze expects a strong pick up and a positive outlook for Georgia’s economy in 2016 following on from an, at times, shocking 2015. Read his EXCLUSIVE interview only in GT/Business

Georgian Tea: Finding New Strength In Unity?



State Budget May Increase by 120 Million GEL


he Georgian Government plans to adjust the 2015 budget with an increase of 120 million Lari. The Minister of Finance, Nodar Khaduri, presented the state budget report and a corrected budget draft of the ongoing year at a Government meeting. According to the Minister, from January to October the consolidated budget tax revenue was 6 billion and 526 million, 641 million more than it was in the same period last year. According to data released on November 6th, the consolidated budget tax revenue is already at 6 billion and 641 million which is 85% of the annual plan. The state budget revenues amounted to 7 billion and 962 million, which is 84% of the annual plan. The state budget mobilized 605 million Lari more than in the same period last year. In total 7 billion and 710 million Lari was spent from January to October and the capital financing

The Minister of Finance, Nodar Khaduri, presented the state budget report

expenses amounted to 1 billion and 226 million Lari in the past ten months. “Based on these trends, we are presenting a state budget draft amendment of 2015. Given the trend of economic growth and tax mobiliza-

tion, I would like to ask to increase the tax plan in the budget by 120 million Lari,” said Minister Khaduri. “At the same time, we want to reduce borrowing in the domestic market by 283 million Lari. There will be no need to issue treasury bills.” Foreign lending will decrease by approximately 100 million Lari and 96 million Lari, which will be redirected to the Ministry of Labor, Health and Social Affairs. Financing of leasing will increase by 4 million in the Ministry of Agriculture. Simultaneously, funds for irrigation and drainage will decrease and the project will be delayed for one more year. Funding for the Ministry of Regional Development and Infrastructure will drop by 77 million Lari. The Minister of Finance has asked the Cabinet of Ministers to send the presented amendments to the Parliament this week. Prime Minister Irakli Garibashvili said the Government will approve the presented project.

Dechert OnPoint: New Regulations for Agricultural Cooperatives PAGE 11




NOVEMBER 10 - 12, 2015

Rustavi2 Shareholders Will Not Cooperate with Court-Appointed Managers BY KATIE RUTH DAVIES


ajority shareholders of the Rustavi 2 TV broadcaster have refused to negotiate with the court-appointed temporary managers of the TV company, claiming they “have nothing to talk about” with “government-appointed political censors.” On November 5, temporary managers of Rustavi 2 TV, appointed by the City Court, asked the current owners of the broadcaster to name ‘any’ trustful person and they will grant to this person full authority to implement all executive functions required for the smooth dayto-day operation of the TV station. Owners of 91% of the Rustavi 2 shares, brothers Levan and Gia Karamanashvili, then released a statement regarding the developments surrounding the Rustavi 2 TV Company in which they pointed to the illegality and violence that has been on-going for three years in order to seize Rustavi 2 and restrict freedom of speech. “In the light of the unprecedented reaction from the Georgian public and international community, Ivanishvili’s government, which is completely beyond the constitutional framework, retreated and offered us, through a third party naming, a candidate acceptable for us who would be granted by the ‘temporary managers’ ‘full authority’ to manage the TV company,” the statement read. The Karamanashvili brothers then go on to remind all that Rustavi 2 itself determines the editorial policy within the framework of the joint Euro-Atlantic values the TV Company has never deviated from. “Yes, Rustavi 2 is a television which criticizes. Who knows if the issues of Sakdrisi, Panorama Tbilisi, the economic crisis and other actual issues would be covered if there was no Rustavi 2. This is the reason the government wants to seize

the TV Company,” reads the statement. Levan and Giorgi Karamanishvili, previously unknown to the Georgian public who are believed to be close associates of former President Mikheil Saakashvili, claimed that they will continue to “struggle along” with the Georgian public and the international community within all the available legal frames. “Like in all other aspects of the ongoing attack aimed at seizing Rustavi 2, this proposal [of temporary managers] contains an obvious cynicism common to Russian political mentality, wherein the party, which itself is the only source of the problem, hypocritically expresses a desire to help solve the very same problem. Our people have become victims of such cynicism multiple times in the past, including in our homeland, Abkhazia,” the statement reads. “Of course we are not going to legitimize political censors by cooperating with those who have been appointed by the government by circumventing the Constitution,” reads the statement. Tbilisi City Court last Thursday evening terminated Rustavi 2’s General Director Nika Gvaramia’s right to manage Georgia’s largest TV Company, appointing two outsiders, Davit Dvali, a former co-owner of the Company, and Revaz Sakevarishvili, the Deputy Director of rival TV Company Imedi, as provisional heads until the Constitutional Court makes the final decision on ownership. Judge Tamaz Urtmelidze ruled that, for former owner of Rustavi 2, Kibar Khalvashi, to takeover, it has to be reflected in civil registry documentation before it becomes binding. Rustavi 2’s current management consider the ruling unlawful based on the Constitutional Court’s ruling three days ago to temporarily suspend the government’s right to immediately enforce decisions in first instance courts if they have been appealed to a higher court. The current situation surrounding the Rustavi 2 has been called dire by experts who say there is no way to guess how the situation will develop.

US Ambassador, EU Delegation Head React to Rustavi 2 Development


heUnitedStates(US)Ambassador to Georgia, Ian Kelly, has expressed deep concern over Rustavi 2’s recent developments which has seen its top management replaced through a court order in an ongoing litigation over the broadcaster’s ownership dispute. “The Embassy is deeply concerned about developments late Thursday night related to Rustavi 2’s management and ownership,” Ambassador Kelly commented in a written statement on Friday. “Attempts to change the management of the station, in advance of the appeal process, have profound political implications. In a democratic society, critical opinions should be encouraged, not silenced. “We are committed to supporting Georgia’s Euro-Atlantic aspirations. We call on the government to uphold the principals of media freedom and political pluralism that are an integral part of those aspirations. At the same time we urge all sides

to refrain from violence and dedicate themselves to a peaceful resolution of the situation through dialogue,” The US Ambassador continued. The Head of the EU Delegation to Georgia, Janos Herman, has made a statement highlighting the EU is closely watching developments related to Rustavi 2. “It is important that the execution of the decision, including the change of Rustavi 2’s management, will not start immediately. Rustavi 2 has the opportunity to file a complaint and let’s wait for this process,” Herman stated. According to Herman, adherence to the rule of law, democracy and principals of media freedom are important for the EU and, in this direction, the European Union has repeatedly helped Georgia. “It is important not only to preserve the achievements that Georgia has in terms of the democratic, the rule of law and freedom of the media, but to take the next steps forward.”

Georgia Today Offers New GT Business Edition Every Tuesday!


ou may have noticed that this edition of Georgia Today is not only purple, but is now out on a Tuesday! Fear not! You’ll still be getting an exciting bundle of politics, society and cultural news every Friday, but the Georgia Today team will now also be offering you the double bonus of a second paper every Tuesday packed with Business, Economics and Law, including EXCLUSIVE INTERVIEWS with Georgia’s TOP BUSINESSMEN and WOMEN, economic analyses from ISET and Galt&Taggart, and bi-monthly updates on legal changes from Dechert. All in FULL COLOUR, every Tuesday!

Georgia Today, in its 15th year of operation, is proud to present to you its newly designed newspaper- fit to compete with the best in Europe- and to announce that Georgia Today will now be brought to you TWICE weekly. We sat down for a quick chat with George Sharashidze, Publisher & General Manager of Georgia Today newspaper, to discuss the fabulous changes.

TELL US ABOUT THE BEGINNINGS OF THE GEORGIA TODAY NEWSPAPER In early 2000 I realized the importance of having a professional newspaper in the English language as Georgia was

slowly becoming more and more recognizable on the world geopolitical map, attracting an increased number of foreign visitors from year to year. With my friends I established an English language newspaper with the ambition to become the leading news source about contemporary Georgia. At the time, Georgia Today was only 10 pages long and, as it was until this month, was published every Friday. I remember our first exclusive interview with US Ambassador Kenneth Spencer Yalowitz on the back page which was a message to our audience that Georgia Today was striving to contribute to Georgia’s integration into western structures.

WHY DID YOU DECIDE TO DIVIDE GT? For 15 years Georgia Today has played an important role in the development of quality media in Georgia. I, as a publisher, have had a growing need to make a big change which I knew Georgia Today could handle and finally we decided to put our resources into a total rebranding. Thus, as 15 years ago, we can be sure that Georgia Today is not only keeping its position on the Georgian market but leading the industry by providing Georgia with an example of a company working with European standards in the media sector. The idea about dividing GT from GT/Business comes from attracting an even wider audience, now from the business sector, too. However, being published twice weekly has another important advantage in addition to business coverage. And this is timing; the way we are planning to deliver information to our readers in a more operative and faster way. This means our readers will be able to read the latest hot news, even if non-business in nature, on a Tuesday.

WHAT WILL GT/BUSINESS HAVE THAT IT COMPETITORS DON’T? In short, quality of reporting, an unbiased, objective analysis, and checked facts and data which leads to us becoming the most reliable source of information in the English language, now in business news, too. The content our readers will find in GT/Business will be diverse and distinguished and often exclusive. In addition to news articles and interviews, we will have exclusive analysis by prominent economic and business think-tanks such as ISET and Galt & Taggart and legal updates from Dechert. I wish our readers much enjoyment reading our rebranded Georgia Today – designed with our readers in mind!




Georgian Saperavi 2011 Wins Top Two Awards in Hong Kong BY ANA AKHALAIA

The OK! Business Celebrity award went to the founder and head of the supervisory board of Wissol Group – Soso Phkhakadze

OK! Awards Wissol Group Founder as Business Celebrity 2015 BY KATIE RUTH DAVIES


n 30th October, OK! Magazine Georgia and Radio OKFM hosted an Autumn Ball in Tbilisi’s historic “Karvasla” event hall, the location of the Tbilisi Museum. OK! is a famous brand in Georgia not only for its magazine title but also for its loud events aimed not only to entertain business partners but also to create a special atmosphere for direct communication and socialization between the magazine management team and business partners of OK!. As Maiko Tsereteli, executive director of OK! Georgia told GT: “Through such events we try to communicate with our partners and readers not only from the pages of the magazine but also face to face, expressing gratitude to our hundreds of strong business partners who play such a significant role in the development of quality European standard media in Georgia.” At the glamorous ceremony accompa-

nied by popular Georgian live band Band E Roll, decorated by Kare Design and hosted with delicious food and wine by Schuchmann Wine Bar & Restaurant, OK! awarded prominent celebrities for important roles played in the development of their respected fields and for their popularity amongst readers of OK! Magazine Georgia and As the publisher and GM of OK! Georgia said, according to the decision of the editorial department and the management, taking into account the contribution made to the development of society, changing people’s lives for the better through business novelties and an active CSR policy, the OK! Business Celebrity award went to the founder and head of the supervisory board of Wissol Group – Soso Phkhakadze. According to Phkhakadze: “Despite not yet having been on the market for long, OK! magazine Georgia is a distinguished brand which we love, respect and wish further development to. For me, it’s a big honor to be nominated as a Business Celebrity by OK! Magazine, the world famous celebrity magazine strongly represented in Georgia.”


he Khakhetian Wine Cellar exhibited its products at Hong Kong International Wine and Spirits Fair (HKTDC) 2015 which was held at the Convention and Exhibition Centre on November 5-7. Wine Saperavi 2011 won the two highest awards; Grand Prix in the nomination of Best Regional Wine in Eastern Europe, and the Gold Medal. The Bronze Medal was given to wine Mukuzani 2011 by the same company. According to Deputy Minister of Agriculture of Georgia, Levan Davitashvili, to promote Georgian wine on the international market it is essential to take

part and win in such high-class international exhibitions. “We are actively working to diversify into new markets for which it is essential to promote and increase awareness of the Georgian brand. Georgian products and Georgian wine has outstanding potential to take its honourable place in the world market. I want to emphasize that wine quality is actively controlled, minimizing the chances of falsification and occurrence of poor quality products on local and international markets,” Davitashvili stated. The annual exhibition HKTDC is one of the most important of its kind in Asia, attended by tens of thousands of people from around the globe. More than 1500 applications from all over the world are submitted to the competition every year. Supported by the National Wine Agency

of Georgia, there are 6 Georgian companies presented at the exhibition: Tbilvino, Winery Khareba, Kakhetian Traditional Winemaking, Badagoni, Georgian Wine House and company Georgian Wine. The competition is held within the exhibition and the results are published on the opening day which attracts more interested traders and importers to the stands of the winning brands.

Chinese Government Offers Continued Support for Georgian Revenue Service BY ANA AKHALAIA


he Chinese Government has gifted special customs inspection equipment to the Revenue Service of the Ministry of Finance. The Ministry of Finance continues to improve customs clearance zones and customs checkpoints infrastructure to simplify taxpayer service and customs procedures. The Chinese Government granted the Georgian side a container inspection system and other technical equipment necessary for the safety of passengers and freight.

The equipment was given to the Georgian side based on the Economic and Technical Agreement between the Georgian and Chinese governments, signed by the Minister of Finance, Nodar Khaduri, and Ambassador Extraordinary and Plenipotentiary of the People’s Republic of China, Bin Iue. The Minister says that the Chinese government has given important technical support to the Ministry in recent years and now significant branches of Georgian agriculture are also being equipped through the financial support of the People’s Republic of China. “After the restoration of independence to Georgia, the Republic of China has been one of the most important trading

partners. Georgia, as a World Trade Organization member, together with partner countries, plays an active role in terms of strengthening regional economic integration. The constant support of the People’s Republic of China is quite important in this regard,” stated Minister Khaduri. The 30 million Yuan grant was spent on automated inspection systems for containers, their installation and the training of Georgian customs officers. The equipment is used to detect potential dangers at the border. It will help public safety and reduce the duration of customs procedures which is a step forward in the development of legal and effective trade cooperation.




NOVEMBER 10 - 12, 2015


The ISET Policy Institute (ISET-PI, 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.

Georgian Tea: Finding New Strength In Unity? for hundreds of hectares?! According to Giorgi Trapaidze, “with a bit of fertilizer, farmers would be able to harvest tea 6 instead of 3 times per year and thus double their yields.” Yet, operating outside any cooperatives, lacking in skills and financial resources (access to credit is a major constraint given that the collateral value of a tea plantation is a miserable 500 GEL per ha), smallholders’ attitude to innovation has been described to us as nihilistic. Instead of maximizing profits, they minimize inputs. Not spending and not investing, they fail to do well for themselves and supply the downstream industry. Incidentally, this is not a problem that is unique to the tea industry or Georgia. As has been found in recent experimental studies, myopia or present-bias is a common smallholder malaise (see a seminal paper by Duflo, Kremer & Robinson, “Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya.” American Economic Review, 2011).



fter many years of chaos and utter collapse, Georgia’s once glorious tea industry is again showing signs of life. More and more individual farmers and businesses – mostly very small, but some quite ambitious, such as Geoplant (known for its “Gurieli” brand) – grow, process and pack tea. Despite competition from major producing countries and international brands, Georgian tea has great export potential because of the value attached to it all over the former Soviet Union. While the potential is clearly there, it is not at all clear what strategy should Georgia pursue in developing the sector. The old Soviet model of large scale sovkhozbased production is dead. What we have instead is a multitude of extremely fragmented plantations in need of recultivation and technological upgrading. The million dollar question is how one can integrate these plantations into a modern and internationally competitive value chain.

IN SEARCH OF THE RIGHT ORGANIZATIONAL MODEL One alternative would be to have smallholders gradually replaced by large industrial farms. Yet, while perhaps ‘efficient’ in the narrow technical sense (particularly for low-quality teas that don’t require many manual processes), this scenario carries very large social, economic and political costs associated with a massive dislocation of Georgia’s rural population. Another possibility is provided by the likes of Avtandil (Avto) Lomtatidze and Giorgi Trapaidze who are performing the critical aggregation function by collecting and processing tea leaves produced by Guruli smallholders. Avto and Giorgi live and operate in Kvenobani and Khidistavi, two neighboring villages in the Chokhatauri municipality. Among their suppliers are more than a hundred small farmers each owning between 1000 sqm to one hectare. In this way, they provide the link between these small guys and the market – local, national, and even international. Against all odds, in part out of love of his profession and in part thanks to his Guruli character, Avto was among the first Georgian farmers to start a private tea processing business soon after the Soviet Union’s collapse. He was fortunate to find a great friend and colleague in the person of Merab Dolidze – an experienced engineer who passed away in 2015. Merab was instrumental in assembling the tea processing line. Avto was a chemist by education and a tea technologist by training. His main responsibility was to operate the line and make sure that the final product met the desired quality standards. The small factory Avto and Merab set up in Kvenobani processed and sold tea in the local market. Very far from breaking into the global markets, but good enough to help themselves and many of their fellow neighbors. Their success inspired others. In 2005, a very similar processing operation was set up in the nearby Khidistavi village by Giorgi Trapaidze. Being new to the tea business (his prior experience was in wood processing), Giorgi relied on his friendship with Avto and Merab to acquire the necessary knowhow. The trio coop-

Strength is in Unity. Photo by Irakli Kochlamazashvili

erated on many dimensions, sharing transportation and distribution costs and engaging in joint marketing abilities. As Giorgi knows to tell, “If I had more tea leaves than I could process during the harvest, I could rely on Avto and Merab to process them to avoid waste. We were mixing each our teas and selling them together so as to cut distribution costs and exploit economies of scale.” In 2007, Merab and Avto’s business was lifted by the wave of new entrepreneurial activity which swept Georgia in the early years following the Rose Revolution of 2003. A partnership with Mikho Svimonishvili’s newly established Marneuli Food Factory (MFF) helped them to the national scene. “This was like infusing new blood into the company”, recalls Avto Lomtatidze. Mikho agreed to purchase their tea and sell it under the MFF brand. By 2010, Lomtatidze and Dolidze felt the time was right to launch a private company. Lodo Ltd (combining the first two letters of the founders’ names) was born that year. In 2012, while continuing their cooperation with MFF, Lodo and Giorgi Trapaidze agreed to package and sell their tea through Shota Bitadze – a tea broker selling tea locally as well as internationally, particularly in Ukraine.

For lack of raw materials, the processing capacity of Guria Company 14 – 2 tons of fresh tea in 24 hours – is very far from being fully utilized. During harvest time, they employ up to 15 workers, who operate in two shifts, day and night. Yet, all they were able to process in 2015 was about 10 tons of fresh tea leaf (they bought an additional 2.5 tons of dry tea to fulfill obligations to their marketing partners). To make use of excess capacity, the cooperative would occasionally process tea leaves for other producers, charging for the service. That, however, is far from their ideal. Just like its business parent, Lodo Ltd, the new cooperative is focused on processing. With all the new EU-financed equipment (an aroma oven, a tea drying and sorting machines, green tea fixation equipment, and a truck), Guria Company 14 is now well-positioned to produce large quantities of higher quality teas. Yet, as far as raw material supply is concerned, Lomtatidze and Trapaidze remain totally dependent on neighboring farmers, whose productivity is a major drag on their business. The cooperative’s own tea plantations total a meager 5ha (fenced and recultivated with ENPARD’s support) but what are these 5ha compared to the processing capacity of Guria Company 14, which is large enough to cater

MAKING COOPERATION WORK FOR THE POOREST The manner in which farmer cooperation is currently being developed in Georgia is leaving the poorest Georgian farmers outside the fledgling cooperative movement. It is only natural that the most capable and entrepreneurial – such as Merab, Avto and Giorgi from our story – would be the first to get organized in small groups and prevail in the competition for ENPARD or government funding. It is only natural that they would have better business ideas, and the resources to hire grant proposal writers. The fact that the more entrepreneurial and capable farmers get additional support is perfectly fine from the ethical point of view. After all, selection and survival of the fittest is what evolution is all about. The problem with this approach is that its leaves behind the large mass of Georgian smallholders who are badly needed as suppliers of raw materials for the food industry. This is a problem of economic policy, not of ethics or morality. The latest proposed amendment in the Law on Agricultural Cooperatives is apparently aimed at addressing this gap. The lawmakers’ idea is to NOT allow processing cooperatives to source more than 30% of raw materials from nonmembers. The choice to be faced by such cooperatives will be to either shift to the

Ltd (business) mode of operation or expand membership. Membership in a processing cooperative would provide smallholders with the long-term incentives to invest in skills and technology, thus helping overcome the chronic present-bias from which they suffer. It may also provide them with the resources (subsidized loans or grants) and knowhow (learning from other members or ENPARD) to undertake the necessary technological adjustment. Additionally, significant gains could be associated with better coordination and division of labor, resource sharing and mutual help. But what about the founding members and initial investors in a processing coop? How are their rights to be protected in a larger cooperative? It is quite obvious that what stands in the way of enlarging existing cooperatives is the prospect of new members outvoting the founders and stripping them of their assets. Therefore, if our goal as a society is to promote inclusive farmer cooperation, cooperation that works for the poor while at the same time supplying the food industry with the raw materials that it needs, the Law on Agricultural Cooperatives would have to allow farmers like Giorgi and Avto to expand membership without losing control. This can be achieved by creating different classes of members (voting and non-voting) or making voting rights proportionate to initial investment and/or labor inputs. Despite the challenges, the future of Georgian tea looks quite bright. Local and international demand is an inexorable pull factor driving investment throughout the entire value chain. It is only a matter of time before the right organizational model emerges in a process of trial and error. However, it is in our hands to nudge the process in the direction of greater or lesser inclusivity, greater or lesser preservation of Georgia’s rural traditions and landscapes. The article was produced with the assistance of the European Union through its European Neighbourhood Programme for Agriculture and Rural Development (ENPARD), Austrian Development Cooperation, CARE Austria and CARE International in the Caucasus. The contents are the sole responsibility of the authors and can in no way be taken to reflect the views of the European Union, Austrian Development Cooperation, CARE Austria or CARE International in the Caucasus.

REDISCOVERING FARMER COOPERATION? Aggregation by tea processing and packing businesses, such as Lodo (and, on a much larger scale, by Gurieli), certainly helps small farmers to bring their product to the market. Yet, it does not solve the fundamental problem of low productivity and quality at the farm level. The lack of high quality raw material – tea leaves – is THE major constraint for Lodo and other Georgian processors as they seek to scale up and enter international markets. To undertake additional investment and improve coordination at the processing stage, in 2014 Lomtatidze, Dolidze and Trapaidze, together with four other partners, formed an agricultural cooperative, “Guria Company 14”, which was officially recognized by the Agricultural Cooperative Development Agency (ACDA) and received funding support from an NGO coalition led by CARE-International as part of EU’s ENPARD program.

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NOVEMBER 10 - 12, 2015

TBC Bank Signs Agreement for GEL 48 Million Loan from BSTDB BY KATIE RUTH DAVIES


BC Bank and the Black Sea Trade and Development Bank (BSTDB) have signed an agreement in the amount of GEL 48 million. The three-year local currency SME Loan facility will enable TBC Bank to finance small and medium-sized enterprises in Georgia. BSTDB has arranged to obtain the local currency funds through a private placement of GEL denominated bonds arranged by TBC Capital, a subsidiary of TBC Bank. This is the first such loan from BSTDB. “We are delighted to continue our partnership with BSTDB,” said Vakhtang Butskhrikidze, CEO of TBC Bank. “The transaction is of great importance not only for TBC Bank but for the entire financial sector as it enables us to provide loans in local currency that are increasingly in demand from our customers and will enable TBC Bank to further strengthen its position in the SME segment. This transaction reflects both institutions’ commitment to continuing cooperation and we look forward to more years of productive partnership. In addition, the issuance of the bonds will support local capital market development.” “We are pleased to continue our successful relationship with our long-standing partner, TBC Bank and to offer a product that eliminates currency risks,” said Ihsan Ugur Delikanli, BSTDB President. “This first GEL denominated loan, provided by

BSTDB, will support TBC Bank in stimulating economic growth and job creation through development of Georgia’s SME sector. The new Georgian Lari denominated facility will complement BSTDB’s existing USD 10 million SME Loan Facility and USD 10 million Trade Finance Facility with TBC Bank.” BSTDB is an international financial institution established by Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Turkey, and Ukraine. The BSTDB headquarters are located in Thessaloniki, Greece.

This first GEL denominated loan, provided by BSTDB, will support TBC Bank in stimulating economic growth and job creation

Ihsan Ugur Delikanli, BSTDB President

National Bank of Georgia Increases Refinancing Rate BY ANA AKHALAIA


he Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) decided to increase the refinancing rate by 50 basis points to 7.5 percent. The monetary policy decision is based on the macroeconomic forecast. In response to increased inflation expectations, the National Bank of Georgia continues tightening the monetary policy. National Bank of Georgia: “According to the current forecast, at the beginning of 2016 the inflation will remain above its target value, will start decreasing afterwards and will return to its target value of 5% in the second half of 2016. The annual growth in consumer prices equaled 5.8% this October. The main factors causing the rise in inflation are still coming from the supply side, namely the

increase in the input costs of production due to exchange rate depreciation and higher prices on certain imported goods. An important impact on inflation came from the one-time increase in the electricity tariff. The rise in inflation has been limited by the weak aggregate demand and decrease in the world prices of oil and food products.” According to preliminary forecasts, the real GDP growth since the start of the year was 2.7%. The external sector and weak domestic demand are the factors which hold up the real growth. The change in the exchange rate (GEL/USD) has caused import to adjust; thus on some level helping the elimination process of external imbalance. Since the beginning of the year import has decreased by 14%. Accordingly, it can be assumed that the impact of the existing external shock on the exchange rate has been exhausted. Further changes in the monetary policy will depend on the inflation forecast, factors affecting it, and on general state of the economy.

Galt & Taggart Signs with Saxo Bank for a Better Global Trade Experience BY STEVEN JONES


alt & Taggart (Galt & Taggart) and Saxo Bank announced today the signing of an agreement that will allow clients of Galt & Taggart to access global capital markets and invest on a multi asset basis. The product will be available from November 2015 and will provide a highly adaptive trading experience with professional tools, insights and world-class execution to its users. Galt & Taggart, a wholly owned subsidiary of JSC Bank of Georgia, is the leading investment banking and investment management service firm in the country with a unique insight into the regional market. The company is at the forefront of capital markets development in Georgia and in the neighboring markets. Saxo Markets is the institutional division of Saxo Bank Group. Founded in 1992, the Bank is head-

quartered in Copenhagen and has offices in 26 countries. Saxo Markets provides institutional clients and their end customers with multi-asset trade execution, prime brokerage and industry-leading trading technology. Saxo Markets’ speed of innovation and use of disruptive technologies empowers institutional clients to deliver seamless experiences for their end users to access the capital markets. Saxo Markets serves institutional clients through key hubs in the UK, Denmark and Singapore. “We are very pleased to join forces with Saxo Bank to further enhance our clients’ trading experience. With this we are looking forward to extending Galt & Taggart’s track record of offering the best trading capabilities in the country. Our partnership with Saxo Bank will allow us to bring the latest technology to the market and provide our clients with full control over their investments,” said Archil Gachechiladze, Chairman of Galt & Taggart. “We are looking forward to unveiling full details of the partnership in November 2015.”




Galt & Taggart - Making Investing in Georgia Easier BY ANA AKHALAIA


n September 2014, the Investment Management arm of Bank of Georgia was rebranded as Galt & Taggart, a name that goes all the way back to 2000. The firm has invested a great deal of resources since then in becoming the major player in the Georgian investment banking sphere. G&T built the first research house in the country from the ground up, providing macroeconomic, sector, and fixed income (Georgian Railway and Georgian Oil & Gas Corporation) coverage. Furthermore, Galt & Taggart, already the leading brokerage in Georgia, recently announced a landmark partnership with Saxo Bank, which will enable it to offer clients a highly adaptive trading experience, with professional tools, insights, and worldclass execution. Georgia Today met exclusively with Archil Gachechiladze, Deputy CEO, Investment Management of Bank of Georgia, and Chairman of its subsidiary, JSC Galt & Taggart, a leading firm in investment banking and investment management services in Georgia.

INTERNATIONAL FINANCE MAGAZINE RECENTLY NAMED GALT & TAGGART THE BEST INVESTMENT BANK IN GEORGIA. WHAT WERE ITS IMPORTANT ACHIEVEMENTS OVER THE PAST YEAR? We are at a stage when the capital markets should be reactivated in Georgia. The first steps were taken in this direction last year, with three different bonds issued by private companies, in addition to the issuances of international finance organizations. G&T acted as the lead placement agent for these transactions and is the clear leader on the market in this regard. The market is small at present, but we have great expectations. We launched a new product for Georgia. Depositors faced with lower interest rates today need to get used to bonds, which are higher-risk, higher-returns instruments. To ease this transition for the Georgian investor, we started with the bonds of our subsidiaries, which were very well received. Notably, not only our relatively wealthy clients, but foreign funds showed significant interest. We started with GLC, our leasing subsidiary, which launched a three-year bond, placed a 20 million bond for m2 Real Estate, a significant amount for the local market, and another 15 million GEL threeyear issuance by Evex. 10, 15, 20 million GEL bonds are now a reality as a new form of funding for Georgian companies.

WHAT WAS THE BIGGEST CHALLENGE THIS YEAR? The Lari depreciation was a big shock

Archil Gachechiladze, Deputy CEO, Investment Management of Bank of Georgia, and Chairman of its subsidiary, JSC Galt & Taggart

The business supportive environment attracts foreign investors, which allows the country to realize its potential in transport, logistics, energy, and hospitality sectors, among others for the Georgian economy. Many families have had difficulties, especially those with bank loans in US dollars. But the economy endured the hardships without losing a lot of reserves, unlike other

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countries. Azerbaijan has spent 55% of its foreign reserves, whereas we only spent 9%. I think we fared considerably better than the rest of the region. Bank of Georgia (BOG) had announced a new initiative of GEL-denominated bonds, but had to suspend it due to the Lari depreciation. It’ll be a significant step forward for the economy once local currency bonds are accepted by NBG for liquidity measures.

ARE THERE ANY OBSTACLES FOR INVESTORS IN GEORGIA? Georgian legislation is quite good, with no big barriers. Bonds carry a 5% income tax that should be removed, in our opinion. The Minister of Finance announced readiness to work on this issue, so bonds can compete with bank loans.

WHAT ARE G&T’S FUTURE PLANS AND PROJECTS? It is good news for our company as well as the Georgian economy that many companies have approached us. We will soon announce another bond issuance by a private company. For now, I can say that it is a Georgian company in the food industry. In addition, there are several other companies we are working with. There is significant demand for GEL-denominated bonds. We are awaiting next steps for NBG to recognize Lari bonds for bank liquidity requirements.

WHAT ARE THE ADVANTAGES OF BONDS? We believe that now is a good time for investment banking in Georgia. On the one hand, there are the depositors faced with lower interest rates on foreign currency deposits. Rates on one-year USD deposits of leading banks have dropped to 4% from a high of 12-13% in previous years. On the other hand, corporate loan issuances are down. The National Bank applies a high risk weighting to dollardenominated loans. Therefore, issuing 9-10% bonds would be beneficial for companies and would allow them to diversify their funding sources, attracting investors in addition to traditional bank financing. Depositors will be able to earn 9% on bond issuances of companies they know well instead of 4% on bank deposits. We believe in the potential of this market and will continue to play an important role in its development.

WHAT IS YOUR OUTLOOK ON THE GEORGIAN ECONOMY? Growth in Georgia in 2015 mainly reflected a deterioration in the external environment, as the region has been hit hard by falling oil prices, related regional currency depreciations, and negative repercussions from the recession in Russia. However, with the floating exchange rate regime and prudent fiscal framework, Georgia managed to remain competitive and keep macro fundamentals healthy. Despite economic troubles in the region,

Georgia remains an attractive tourism destination. At the same time, the business supportive environment attracts foreign investors, which allows the country to realize its potential in transport, logistics, energy, and hospitality sectors, among others. As growth is expected to pick up modestly in the region in 2016, Georgia’s healthy macro fundamentals, economic diversification, low oil prices and EU DCFTA provide a solid base for a strong pick up and a positive outlook for Georgia’s economy in 2016.




NOVEMBER 10 - 12, 2015

USAID’s REAP Offers Mariam Kutelia Internship Program BY ZVIAD ADZINBAIA

REAP’s program’s official poster and logo portraying Mariam Kutelia. Source: REAP Georgia


SAID’s Restoring Efficiency to Agriculture Production (REAP) is offering an innovation for Georgian youngsters interested in the sphere of agriculture. The US-funded organization has recently launched a substantive internship program, named the Mariam Kutelia Intern Program. The organization invites applications for intern positions every six months, where students from different universities are given the opportunity to work in various fields that support REAP’s implementation, including administration and finance, monitoring and evaluation, environment, and access to finance and technical assistance. In addition to the internship, for each incoming group, REAP offers one competitive research grant to address constraints faced in Georgia’s agriculture sector. REAP says all selected interns are eligible for the grant and application is voluntary, with one applicant selected for funding. The application selected will be the best research idea and proposal submitted as judged by REAP management. Goals of the grant include providing the recipient with management and decision-making experience and with financial responsibility. Thus, the grant will be managed in all aspects by the recipient with the availability of advice and counselling from REAP management and the university advisor. “Agriculture is changing, and with it,

a revised set of skills is needed to address new challenges and stimulate its development,” says the REAP team, considering young qualified specialists as key drivers in these processes. This month REAP has awarded diplomas for the successful completion of the program to the previous team of motivated Georgian interns. The 6-month internship united 34 students from 11 universities in REAP’s Tbilisi, Telavi, and Kutaisi offices. The interns had been involved in a variety of REAP program areas. They had the chance to directly interact with businesses and act as consultants under the close mentorship of REAP specialists. “I had the pleasure of working at USAID project REAP for the past six months. The program for me meant being active,

having interesting tasks, and interacting with professionals” says Mariam Mtsituridze, a former REAP intern. Alexander Charkviani, who has contributed to the REAP program as a young professional, believes his internship at CNFA was a life changing experience. “This is an ideal opportunity to start a career because of professional co-workers, who are always ready to give you an advice and instruct you as they are interested in developing young professionals.” The USAID-supported REAP program is an integrated enterprise development designed to increase incomes and the rural employment by launching successful agribusinesses and promoting increased investment in Georgia’s agriculture sector.

Carrefour Georgia Employees Double as Second Carrefour Hypermarket Opens in East Point Mall


l Futtaim Retail - the retail arm of Majid Al Futtaim, the leading shopping mall, retail and leisure pioneer in the region and owner of the regional franchise rights to Carrefour, has opened a second Carrefour hypermarket in Tbilisi, located in East Point Mall. The 10,000 sqm hypermarket offers customers the widest choice of fresh produce and household goods with over 40,000 items, including groceries, home appliance, home, and sports and leisure equipment as well as textiles. Commenting on the significance of the opening, Philippe Peguilhan- Country Manager of Carrefour Georgia -said: “Carrefour East Point has provided employment to more than 450 people and that means we’ve doubled the number of Carrefour employees in 2015 to a total of 1200 in Georgia. “As part of Majid Al Futtaim Retail’s 45 million GEL investment plan in Georgia, we will also be opening a third supermarket next week in Isani which will add another 120 jobs. Expansion will continue in Tbilisi as well as in Rustavi and in two other major cities of Georgia- Batumi and Kutaisi as we seek to extend our commitment to create great moments for everyone, every day,” he continued. Presently, Carrefour is working with more than 500 suppliers, including 20 from different regions of Georgia, such as Kakheti, Imereti, and Shida Qartli, as well as 30 local farmers, whom Carrefour collaborated with to elevate to international standards. Carrefour also brought international standards to retail in Georgia as a leader in Europe, such as hygiene standards to guarantee high quality products with best practice hygiene processes. The brand is

committed to provide the widest range of quality products at the most affordable prices to its customers. Carrefour Georgia was established in 2012 with the opening of its first Hypermarket in Tbilisi Mall Hypermarket , followed by two supermarkets; Karvasla in 2013 and GTC in 2014.

ABOUT MAJID AL FUTTAIM RETAIL Majid Al Futtaim Retail is the exclusive franchisee of the second largest supermarket chain in the world, Carrefour, and holds the rights to operate the brand in 38 countries across the Middle East, Western and Central Asia and Africa. It is the retail arm of the leading shopping mall, retail and leisure pioneer across the region, Majid Al Futtaim. Since opening its first hypermarket in the UAE in 1995, Majid Al Futtaim Retail currently operates 150 Carrefour stores in 12 countries across the region. Carrefour operates a range of retail concepts to suit every customer. These include Carrefour Hypermarkets, Carrefour Markets and Carrefour City stores, as well as the Carrefour online shopping portal. In line with the brand’s commitment to provide the widest range of quality products at the most affordable prices, Carrefour today offers an unrivalled choice of more than 40,000 food and non-food products through many promotions each year. Carrefour promotes the highest service standards in the region and shapes the development of the regional retail industry. Majid Al Futtaim Retail carefully selects the location of each Carrefour store based on convenience and ease of access for its shoppers, including in shopping malls, and residential and commercial hot spots.




Georgian Railway: Passenger Comfort Our Top Priority BY ANA AKHALAIA


eorgian Railway has introduced many innovations to improve the quality of its services. Passengers who often travel by train appreciate these changes. What’s more, Georgian Railway is able to draw a high number of passengers thanks to its lowcost tickets. Dachi Tsaguria, Head of the Georgian Railway Service Quality Development Office, talks about specific innovations and plans.

THE SITUATION IN PASSENGER TRAINS HAS DRAMATICALLY IMPROVED. TODAY, WE HAVE MANY INNOVATIONS. WHAT SPECIFIC PROJECTS HAVE YOU IMPLEMENTED TO IMPROVE THE QUALITY OF SERVICES? Georgian Railway receives revenues from cargo transportation and we also subsidize passenger transportation services. We do our best to offer full comfort to our passengers and to make their journeys more pleasant. We have introduced a new cleanup system with modern equipment and techniques. The system enables carriages to be cleaned with 180-degree high pressure steam whereas previously we cleaned the exterior of carriages by hand. We have restored the carriage wash plant that had been suspended since the collapse of Soviet Union.

At the same time, we are focusing on improving the quality of services. To that end we have signed an agreement with Ilia State University Business School on training our staff. Cashiers, operators, and conductors, who directly relate with passengers, now go through rigorous training. We are very content with the results of these trainings, and can see that the quality of services has already improved. Moreover, for many years information displays were out of order. As a result, passengers were uncertain when this or that train would arrive or leave. We have bought the necessary equipment and installed it at 18 main stations across Georgia. To further improve the quality of services, we have simplified the ticket purchasing process. In summer the flow of passengers is higher, therefore, long uncomfortable queues occur frequently at booking offices. We have installed special regulating systems to manage such queues. We have also worked to ease the ticket purchase process and now passengers can buy tickets on various websites, for example, on www., and at quick payment terminals. It should also be noted that, according to various international reports, Georgian Railway has set one of the lowest tariffs worldwide and ranks second in the world and first in Europe. Ticket prices range from 1 GEL to 55 GEL depending on the destination. We have also introduced a 10-month discount

valuably and thoroughly repaired locomotives, all of which were tested, and demonstrated very good results. We have also been working actively to repair platforms all over Georgia. At this stage we have reconstructed eight platforms and we plan to repair a further 12 in 2016.


campaign and our passengers are now able to buy 40-GEL tickets at 25 GEL, and 23 GEL tickets at 18 GEL. All these innovations inspire us. We do our best to maintain low prices and simultaneously to increase the quality of our services. Our wagons were recently improved, but there is still considerable work to be done in this regard. We have launched the intensive rehabilitation of carriages. We have unre-

paired old wagons which used to run in foreign countries but these have been almost fully amortized. We have not spared efforts on this project and have repaired 17 wagons of 20. By the end of 2015, we plan to have overhauled all 20 wagons. We have also repaired seven locomotives- each modernized to the highest level jointly with the Locomotive Repair Plant. Georgian Railway has never had so

Start time: 12:00, 15:00 Ticket price: From 8 Lari

Start time: 22:15 Ticket price: 11.50 – 12.50 Lari

November 11 BASHI-ACHUKI Akaki Tsereteli Directed by Dimitri Khvtisiashvili English Subtitles Start time: 12:00, 15:00 Ticket price: From 6 Lari

THE LAST WITCH HUNTER Directed by Breck Eisner Cast: Vin Diesel, Rose Leslie, Elijah Wood Genre: Action, Adventure, Fantasy Language: Russian Start time: 22:20 Ticket price: 11.50 – 12.50 Lari

THE LAST WITCH HUNTER (Info Above) Start time: 17:15, 20:15, 22:45 Ticket price: 9.50 – 12.50 Lari

We plan to introduce many other projects. We are working on changing the ticket sales system. The new system will be introduced in summer 2016 and will secure passengers from unexpected complications. With the new system, even if a passenger loses their tickets, they will still be able to travel using our new e-tickets with barcodes which will include passenger information. Conductors will check the e-tickets through barcode readers. Moreover, we plan to rehabilitate the Tbilisi Railway Station. As reported, we have repaired Batumi railway station through an entirely new concept. Today, the Batumi Railway Station is the best in Georgia. I would like to congratulate not only Batumi residents, but the whole country on this fact. We also want Tbilisi Railway Station to have a good appearance and are developing a new project which we have high expectations for. I would like to assure all passengers of Georgian Railway that we aim to create full comfort for each of them.


GABRIADZE THEATRE Address: 13 Shavtelis St. Telephone: 2 98 65 93 November 11 MARSHAL DE FANTIE’S DIAMOND Rezo Gabriadze Directed by Rezo Gabriadze English Subtitles Start time: 20:00 Ticket price: 10, 15, 20 Lari GRIBOEDOV THEATRE Address: 2 Rustaveli Ave. Telephone: 2 93 11 06 November 10 ELDER SON Aleksandre Vampilov Directed by Gogi Margvelashvili Language: Russian Start time: 18:00 Ticket price: 5 Lari TBILISI VASO ABASHIDZE MUSIC AND DRAMA STATE THEATRE Address: 182 D.Agmashenebeli Ave. Telephone: 2 34 80 90 November 10 INTROSPECTION – STORY ABOUT US Directed by Davit Doiashvili Musical English Subtitles Start time: 19:00 Ticket price: From 20 Lari TBILISI NODAR DUMBADZE STATE CENTRAL CHILDREN’S THEATRE Address: 99/1 Agmashenebeli Ave. Telephone: 295 39 27 November 10 SALAMURA Archil Sulakauri’s Tale Directed by Kote Mirianashvili English Subtitles

November 12 BIRTHDAY PARTY Fairy Tale Directed by Nikoloz Sabashvili English Subtitles Start time: 12:00 Ticket price: From 8 Lari TBILISI ZAKARIA PALIASHVILI OPERA AND BALLET THEATRE Address: 25 Rustaveli Ave. Telephone: 2 99 04 56 November 10 DAISI Zakaria Paliashvili Participants: Liana Kalmakhelidze, Elene Janjalia, Teimuraz Gugushvili, Eldar Getsadze, Gia Asatiani, Tamaz Saginadze Conductor: Revaz Takidze Start time: 19:00 Ticket price: From 5 Lari CINEMA

AMIRANI CINEMA Address: 36 Kostava St. Telephone: 299 99 55 November 10-12 BLACK MASS Directed by Scott Cooper Cast: Johnny Depp, Benedict Cumberbatch, Dakota Johnson Genre: Biography, Crime, Drama Language: English Start time: 19:30 Language: Russian

SPECTRE Directed by Sam Mendes Cast: Daniel Craig, Christoph Waltz, Léa Seydoux Genre: Action, Adventure, Thriller Language: Russian Start time: 12:15, 16:00, 19:15, 22:30 Ticket price: 7.50 – 12.50 Lari RUSTAVELI CINEMA Address: 5 Rustaveli Ave. Telephone: 255 50 00 November 10-12 SPECTRE (Info Above) Start time: 12:00, 14:30, 16:15, 19:30, 22:45 Ticket price: 9.50 – 12.50 Lari THE MARTIAN 3D Directed by Ridley Scott Cast: Matt Damon, Jessica Chastain, Kristen Wiig Genre: Adventure, Drama, Sci-Fi Language: Russian Start time: 22:20 Ticket price: 11.50 – 12.50 Lari AN INTERRUPTED FLIGHT Directed by Arshakyan Yelena Cast: Tatev Omakimian, Tigran Makarian Genre: Drama Language: Russian Start time: 15:15 Ticket price: 8.50 – 9.50 Lari BLACK MASS (Info Above) Start time: 18:05, 19:40, 22:45 Ticket price: 9.50 – 12.50 Lari


SHALVA AMIRANASHVILI MUSEUM OF ART Address: 1 Lado Gudiashvili St. Telephone: 2 99 99 09 November 4-11 THE JAPANESE CONTEMPORARY ARTIST SHU KUBO’S EXHIBITION November 5-23 MALKHAZ KUKHASHVILI’S PERSONAL EXHIBITION ZURAB TSERETELI MUSEUM OF MODERN ART Address: 27 Rustaveli Ave. Telephone: 2 14 84 11, 2 98 60 04 October 9 - November 15 THE SOLO EXHIBITION OF FAMOUS GEORGIAN ARTIST OLEG TIMCHENKO The exhibition combines the series of three different projects under the title “Self-Portrait, Culmination, No Comment”. GALLERY

TUMANISHVILI THEATRE Address: 164 D. Agmashenebeli Ave. Telephone: 2 34 28 99; 2 35 70 13 November 10-17 SIMON MACHABELI’S EXHIBITION THE NATIONAL GALLERY Address: 11 Rustaveli Ave.

November 7 – December 6 THE EXHIBITION OF SCENOGRAPHY by three Georgian artists – Oleg Kochakidze, Alexander Slovinsky, Yuri Chikvaidze. VERNISSAGE GALLERY Address: 49 Kote Apkhazi Str. Tel.: 2 99 88 08 November 3-13 Tamuna Melikishvili’s solo exhibition DRAUGHT. ARTISTERIUM 2015 November 10 18:00 – I REMEMBER, group exhibition project, Georgia. Container Gallery, 10 Radiani Str. MUSIC

TBILISI CONCERT HALL Address: 1 Melikishvili St. Telephone: 2 99 00 99 November 10 GIYA KANCHELI 80 Conductor: Nikoloz Rachveli Start time: 20:00 Ticket price: From 15 Lari MOVEMENT THEATRE Address: 182, Aghmashenebeli Ave., Mushthaid park Telephone: 599 555 260 November 10, 12 JAM SESSION Leaders: Reso Kiknadze (sax) Nika Gabadze (guitar) Misha Japaridze (bass) Irakli Choladze/Gio Kapanadze (drums) Start time: 21:00




NOVEMBER 10 - 12, 2015

Aversi: Voluson E10 Ultrasound Apparatus Now in Georgia BY KATIE RUTH DAVIES


presentation has been held at the Aversi Clinic in Tbilisi to show off the latest standard echoscope apparatus. The head of General Electric, the creating company of the Voluson E10, spoke about the quality of the equipment and the opportunities it will present. According to the General Director of Aversi, Dimitri Jorbenadze, the “Voluson E10” is based on innovative Radiance System Architecture that has set a new standard for Imaging Performance. The E10 has the technology to study both the inside and outside of a foetus. Equipment of this type is already in use in a number of countries around the world, Georgia currently being the only post-Soviet one. The founder of Aversi Clinic, Paata Kurtanidze, said doctors in Georgia will be trained by specialists from General Electric in the use of the new echoscope equipment. “But in Aversi Clinic, regardless of the introduction of this new technology, prices will stay the same,” Kurtanidze stated.

National Wine Agency: Wine Export Up BY ANA AKHALAIA


ccording to data conducted by the National Wine Agency (NWA) of Georgia, wine export increased into EU countries over the past 10 months with most Georgian wine going to the Polish market. According to NWA officials, over the last 10 months Georgia exported 28,101.431 bottles (0.75 L) of wine to 42 countries around the world which amounts US $77.2 millionl 1.8 million bottles of Georgian wine were exported to China, 87% higher than past year. China is fourth among the top five Georgian wine exporting countries

China is fourth among the top five Georgian wine exporting countries after Russia, Kazakhstan and Ukraine

after Russia, Kazakhstan and Ukraine. Export has increased into EU countries: Poland - 2% (1,260.870 bottles), Latvia - 3% (924,792), Estonia - 35% (389,274), Germany - 14% (211,236), Netherlands - 88% (47,232) and France - 104% (29,100). Export also increased in such strategically important markets as the US - 26% (209,339), Japan - 19% (126,686), Canada - 66% (147,636), Kyrgyzstan - 168% (172,536), Israel – 212,% (33,720), Korea - 37% (24,054) and other. The top five Georgian wine exporting countries are as follows: Russia – 14,660.981, Kazakhstan – 4,004.586, Ukraine – 2,569.249, China – 1,807.955, and Poland – 1,260.870 bottles. “Due to political and economic events in the region, a sharp decline of export

figures in two largest exporter countries, Russia (-54%) and Ukraine (-61%), reflected on the overall 10-month export figure which has reduced by 43% compared to the same period of 2014,” states the NWA. In addition, according to NWA data, during the reporting period, the country exported 5,450.321 bottles (0.5 L) of brandy into 17 countries (US $14.2 million); 7.1 million liters of brandy spirit in 7 countries (US $21.7 million); and 104,580 bottles (0.5 L) of Chacha (Georgian pomace brandy) in 20 countries (US $403 million). Overall, according to data of the NWA, income derived from exports of wine, brandy, Chacha, wine materials, pouring brandy and brandy spirits in JanuaryOctober reached US $115.6 million.




Dechert OnPoint: New Regulations for Agricultural Cooperatives


echert Georgia, through the contribution of partners Archil Giorgadze and Nicola Mariani, joined by senior associates Ruslan Akhalaia and Irakli Sokolovski, as well as Ana Kostava and Ana Kochiashvili, is partnering with Georgia Today on a regular section of the paper which will provide updated information regarding significant legal changes and developments in Georgia. In particular, we will highlight significant issues which may impact businesses operating in Georgia. Dechert Georgia is the Tbilisi branch of Dechert LLP, a global specialist law firm that focuses on core transactional and litigation practices, providing world-class services to major corporations, financial institutions and private funds worldwide. For more information, please visit or contact Nicola Mariani at

NEW REGULATIONS FOR AGRICULTURAL COOPERATIVES The legal framework for the organization of agricultural cooperatives in Georgia is a relatively new development. It was adopted in August 2013 after being introduced by the Law of Georgia on Agricultural Cooperatives (the “Law”). Related legal issues have been, generally, regulated by the Law of Georgia on Entrepreneurs, which mainly deals with the business registration process and overall management of cooperatives. In 2013, the Georgian Government prioritized the development of agricultural business and introduced tailored rules to govern the legal aspects of agricultural cooperatives. Over the past two years, the Law has been regularly updated to reflect issues arising during its practical application. The Parliament of Georgia is currently working on another set of amendments (the “Amendments”), aimed at better serving the interests of farmers and harmonizing applicable rules with the best international practices. The Amendments have now passed two readings at the Parliamentary sessions without any particular resistance from voting members, which gives the impression that they will most likely achieve final passage at the third and final parliamentary reading. The Amendments are accompanied by an explanatory note setting out the main changes and their respective purposes (the “Explanatory Note”). The Explanatory Note provides that the correct agricultural cooperative practices could lead to rapid economic development of the country, which is why the Amendments aim to introduce more legal regulations in this sector. Such regulations are expected to guarantee that agricultural cooperatives, unlike other business entities, are focused more on optimization of labor forces than receiving profit from invested material resources. The Explanatory Note also mentions that since the Law entered into force in 2013, 1,000 new agricultural cooperatives have been registered. Therefore, it is apparent that the internal business relations of agricultural cooperatives require further regulation. For these purpose the Amendments focus on several structural changes, which are set out below.

MEMBERS OF AGRICULTURAL COOPERATIVES Under the Amendments, agricultural cooperatives shall have associated members in addition to general members. The general members participate in the agricultural activities of the cooperative and hold respective stakes, while associated members hold stakes but are not involved in agricultural activities. General as well as associated members are natural and legal persons in Georgia, including foreign citizens and corporations registered abroad. Every cooperative is obligated to have an up-to-date member registry compliant with specific rules established by the Minister of Agriculture of Georgia. Individual membership in the cooperative may be terminated in cases when a member leaves the cooperative, is expelled, dies or if the cooperative itself ceases to exist. Members may be prevented from leaving the cooperative if they have not made their due contributions. Members may only be expelled by the decision of the general assembly of the cooperative if: (i) they breached their obligations; or (ii) they committed a material breach of the cooperative statute or decision of the directors, supervisory board or general assembly of the cooperative.

MEMBERSHIP CONTRIBUTIONS General members are obligated to make mandatory contributions to the cooperative fund. The cooperative fund is the sum of the accumulated contributions, and can be used only by the decision of the cooperative’s general assembly. The amount of mandatory contributions by a general member is calculated before the start of each financial period, taking into account the estimated volume of work to be performed by the member and the value of products/services to be provided to said member. Members can also make additional contributions, provided they have fully covered the mandatory contributions. The terms of contributions to be made by associated members are established by the general assembly of the cooperative, the Law and specific agreements concluded between the cooperative and the associated members. Property used to make either mandatory or additional contributions to the cooperative fund shall be subject to prior evaluation. Such property may not be placed under any restrictions and may not be disposed of without prior written consent of the member who made the contribution.

DISTRIBUTION OF DIVIDENDS According to the Explanatory Note, one of the main changes proposed in the Amendments relates to the mandatory regulation of dividend distribution by the cooperative. In particular, the dividends shall firstly be distributed to the associated members. The Amendments set forth two structures available for distribution of dividends to the associated members: on the one hand, the

associated member may agree with the cooperative to receive the dividends pro rata with its contributions. In such cases, dividends distributed to associated members shall not be more than 15% of the total value of the contributions made by the associated member for the given financial year. On the other hand, the general assembly may decide, in accordance with the individual agreement between the cooperative and the associated member, to distribute dividends based on the yearly profit of the cooperative. In such cases the Amendments provide that no more than 30% of the annual profit made by the cooperative may be distributed as dividends in total for the given financial year. Similar rules apply to distribution of dividends to general members, with the condition that the associated members have already received their share of dividends.

AGRICULTURAL COOPERATIVE DEVELOPMENT AGENCY LEPL Agricultural Cooperative Development Agency (the “Agency”) is a legal entity of public law established under the Ministry of Agriculture of Georgia

CONCLUSIONS The new regulations intend to support development of the agricultural sector in Georgia. The existing legal framework might not be able to deal with all obstacles which exist in the sphere; however, it is evident that legislators are constantly working to improve the situation by observing and assessing problems arising during the practical implementation of the law. Legal provisions are being accordingly adapted to best suit the primary interests of natural and legal persons active in this sector. In our view, the Law provides reason to be optimistic about the future of the Georgian agricultural sector. *** Note: this article does not constitute legal advice. You are responsible for consulting with your own professional legal advisors concerning specific circumstances for your business.

OTHER RIGHTS AND OBLIGATIONS OF COOPERATIVE MEMBERS Rights and obligations of cooperative members are separately regulated by the Law, with the Law prescribing different rights and obligations for general and associated members. In comparison with general members, associated members are prevented from participation in the management of the cooperative. On the other hand, they have prevailing rights during dividend distribution. Other general rights and obligations of cooperative members are the right to use the services of the cooperative, the right to information, including the right to request auditory checks of financial



Commercial Director: Iva Merabishvili Marketing Manager: Mako Burduli


documents, the right to dividends, the right to receive part of the property remaining after liquidation of the cooperative and/or after the termination of the member’s membership with the cooperative. All cooperative members are legally obliged to: (i) comply with the requirements of the Law and the statute of the cooperative; (ii) make any mandatory and voluntary contributions as set out in the internal documents and agreements between the cooperative and the member; and (iii) comply with any other obligations set out in the statute of the cooperative, the Law and any other legal acts and regulations adopted under Georgian legislation.

in order to manage and oversee the development of agricultural cooperatives on the Georgian market. The Agency is the main registration authority, carrying out the administrative process for granting relevant cooperative status to legal entities of private law. The Agency is also tasked with monitoring the activities of those private legal entities which were given the status of cooperatives. Notably, the cooperatives enjoy tax advantages, which mostly serve the sole purpose of supporting the practical cooperation among farmers. For the same purpose, the Amendments intend to broaden the authorizations of the Agency by empowering it with the authority to issue grants to agricultural cooperatives. The Amendments do not provide, however, the rules directly applicable to this authority of the Agency. Most likely the process will be subject to requirements of the Law of Georgia on Grants, adopted on 28 June 1996, as amended.


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Profile for Georgia Today

Issue #792 Business  

Nov. 10 - 12, 2015

Issue #792 Business  

Nov. 10 - 12, 2015