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Issue no: 1098/154

• NOVOMBER 6 - 8, 2018

• PUBLISHED TWICE WEEKLY

In this week’s issue...

FOCUS

ON IVANISHVILI Bidzina Ivanishvili, Chairperson of the ruling political team, Georgian Dream (GD), Addresses the Georgian People

PRICE: GEL 2.50

Weekly Entrepreneurial News @entrepreneur.ge NEWS PAGE 2

PAGE 3, 10

Construction Falters, While the External Sector Continues to Improve in September 2018 ISET PAGE 4

Passenger Trains on BakuTbilisi-Kars Railway Coming Late 2019

Congressman Poe Urges US to Sign Free Trade Agreement with Georgia BY THEA MORRISON

C

hairman of the House Georgia Caucus, United States Congressman Ted Poe (Republican, Texas) sent a letter to the US Trade Representative Ambassador Robert Lighthizer urging him to consider conclusion of a free trade agreement with Georgia. The information was released by Georgia’s Ministry of Foreign Affairs (MFA). The ministry says Poe’s letter reads that in close cooperation with the United States, Georgia plays a key role in ensuring stability in the Caucasus region and supporting American security interests around the world. “Georgia is a critical strategic partner that has made remarkable progress over the past two

Photo source: abc13.com

decades in enacting political and economic reforms…Lowering trade barriers between our two nations would go a long way towards fur-

ther strengthening our partnership,” the letter reads. In his letter, the Congressman notes the US and Georgia have already established the foundation of a growing relationship between American and Georgian companies, workers, and consumers. Moreover, the letter underlines the importance of Georgia’s strategic location, granting access to landlocked Central Asian countries, with a combined market size of 120 million people and a combined economy of $300 billion. Poe mentions that in 2014, Georgia signed an Association Agreement with the EU, which enabled a new Deep and Comprehensive Free Trade Area (DCFTA) between the two. “As a result, Georgia recently implemented several important economic reforms, including improvements to tax and regulatory regimes to improve its investment-friendly environment. Continued on page 2

BUSINESS PAGE 6

Data Festival to Take Place in Tbilisi BUSINESS PAGE 11

University of Westminster Hosts Georgian Studies Day

BUSINESS PAGE 15 Prepared for Georgia Today Business by

Markets Asof02ͲNovͲ2018

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2,7194

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3,5273

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0,0969

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155,76

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0,8781

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1,0035

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66,1750

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1582,68

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5,4289

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GTIndex(USD)

1208,13

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AZN/USD

1,6950

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MSCIEM


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NEWS

@entrepreneur.ge Gamarjoba! I’m the Editor-in-Chief of the Georgian edition of Entrepreneur magazine and I’m here to share the top weekly Entrepreneurial news with you:

Ecobox is a new startup offering customers a monthly subscription for different categories such as beauty, perfume, coffee, sweets, beard grooming, alcohol, etc. Customers can choose their category on www.ecobox.ge, give their personal preferences and then expect to receive a “box” with tailored products on a monthly basis. According to the founders, the main advantage of Eco Box is to save subscribers money and to surprise them with unexpected products upon opening the box every month. Mindori (English: meadow) is the name of a Georgian startup founded by young entrepreneurs Marita Geneashvili and Leko Shatirishvili. Their mission is to provide ultimate comfort for chefs and cooks through accessible indoor greenhouses matched to interior décor where cooks can grow their own vegetables and greens. According to the founders, healthy food and green technologies are in our best interests and that’s why they’re ready to offer a market innovative product which is now a prototype but will soon become the real thing with the help of American mentors. Grado is a producer of fruit spirit, the only Georgian brand selling this type of product on European and US markets. The company was founded two years ago and the founders managed to achieve a high standard of production which is the reason European doors are open to them. According to Giorgi Gobechia, Grado’s top manager, their product is distinct for its high quality and low price, another reason European consumers love it so much! Follow the Entrepreneur Georgia Instagram page to get the latest updates from Georgian Entrepreneurs. For doing business with Georgian Entrepreneurs, write us on business@entrepreneur.ge

GEORGIA TODAY

NOVEMBER 6 - 8, 2018

Georgia’s PM Starts Working Visit to China BY THEA MORRISON

O

n November 4 the Prime Minister of Georgia, Mamuka Bakhtadze started his working visit to China with a meeting with the Chair of the Bank of China Group, Chen Siqing. The sides discussed the trade and economic relations between Georgia and China, which have further developed thanks to the recent free trade agreement signed by the two countries. Georgia is the first country in the region to have signed an FTA with both China and the European Union, which provides Georgiancompanies,alongwithbusinesspersons interested in investing in Georgia, with access to a multimillion market. The sides also talked about the existing potential in bilateral financial cooperation and the importance of effectively tapping into it.

The Georgian PM’s Press Office reports that following the meeting between the Prime Minister of Georgia and the Chairman of the Bank of China Group, the Produce in Georgia Agency and the Bank of China signed a memorandum of cooperation. The document was signed by the Agency's Director Mikheil Khidureli and representatives of the Bank of China, seeking to promote the further enhancement of cooperation between Georgian and Chinese SMEs and to foster the

exchange of information and experience in adopting new technologies. As a part of his visit to China, Bakhtadze will participate in the first China International Import Expo in Shanghai and in the opening ceremony of the Hongqiao International Trade Forum. Bakhtadze is scheduled to deliver a speech at the international forum's discussion panel Trade and Investment. He will also visit the Georgian Pavilion bringing together 53 Georgian companies at the International Import Expo.

Congressman Poe Urges US to Sign Free Trade Agreement with Georgia Continued from page 1 US business and workers must also be able to take advantage of the improving commercial climate in Georgia through our own bilateral free trade agreement. The benefits of deeper economic integration between our nations are immensurable because they will provide dividends beyond the free flow of goods, services, and investment,” he stated. The Congressman believes that with the increased trade, both countries can enjoy stability and security. “Given the economic and geostrategic

importance of the American-Georgian relationship, I strongly encourage you to launch negotiations for a bilateral trade agreement,” the letter reads. The Georgian MFA highlights that in June, 28 US congressmen sent a strong bipartisan supportive letter to US Trade Representative Ambassador Lighthizer, urging him to start negotiations with Georgia in order to sign a US-Georgia Free Trade Agreement. The Prime Minister of Georgia, Mamuka Bakhtadze, commented on the letter of Congressman Ted Poe, saying a free trade agreement with the US would be

a very important message and a precondition for Georgia to reach one of the key goals of its economic strategy by transforming the country into a regional economic hub. "We have advanced to an active phase in discussing the FTA issue with our American colleagues, which is a very importantpreconditionforfurtherstrengthening Georgia economically. Our friends have responded to Congressman Ted Poe's initiative and expressed their views. 28 Members of Congress have urged the US Trade Representative to speed up reviewing this initiative," the PM stated.


NEWS

GEORGIA TODAY NOVEMBER 6 - 8, 2018

NGOs Evaluate Pre-Election Environment of Presidential Elections BY THEA MORRISON

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eorgia’s three major non-governmental organizations – International Society for Fair Elections and Democracy (ISFED), Georgian Young Lawyers’ Association (GYLA) and Transparency International (TI) Georgia have evaluated the pre-election environment of the October 28 Presidential Elections in Georgia. The NGOs say that the election campaign was dominated by electoral subjects exchanging accusations and engaging in campaigning against one another. “This election was marked with an obvious trend of unprecedented coordinated attacks on domestic observer organizations by officials of the government and the ruling party, coupled with a smear campaign on social media. With regard to the effects of social media on the electoral environment, attempts to discredit major presidential candidates and political parties using organized pages and sponsored content on Facebook was a challenge,” the joint statement of the organizations reads. The non-governmental sector says the election period was accompanied by the release of compromising recordings, including the much-publicized recordings related to Iberia TV and Omega Group cases, accusing acting and former high-level officials of the government of business harassment, possible corrupt deals and other crimes. “The recordings also contained conversations about the possible illegal scheme of funding of

the ruling party for elections. These accusations triggered serious doubts about elite corruption and informal governance in the country,” the NGOs said. According to the organizations, during the preelection campaign, they revealed the following major violations: •Pressure on observer organizations - There were noticeable attempts to interfere with the activities of monitoring organizations and set their agenda for them. Attacks by the authorities were coupled with a sponsored smear campaign against NGO leaders on anonymous Facebook pages; •Observer organizations detected instances of intimidation and harassment; •Abuse of administrative resources - mobilization of civil servants for campaign events of the independent candidate endorsed by the ruling party, Salome Zourabichvili; •Campaigning on social media: In the pre-election period, observers found a number of instances of civil servants campaigning on their personal Facebook pages during working hours, in violation of electoral legislation; •Alleged political influences and nepotism - Among 73 temporary DEC members, 14 were relatives of officials of the electoral administration and 8 were supporters or activists of Georgian Dream. However, the NGOs also listed positive sides of the process. According to them, the media environment was pluralistic and the majority of TV broadcasters were actively covering the presidential election. Also, the organizations underlined that the preelection period was free from any major incidents of violence and physical confrontation.

Ivanishvili Addresses the Georgian People

Image source: exclusivenews.ge

BY KATIE KVARATSKHELIYA

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idzina Ivanishvili, Chairperson of the ruling political team, Georgian Dream (GD), addressed citizens on Monday following last week’s presidential elections, which resulted in a call for a second-round between Salome Zurabishvili (the GDsupported candidate) and Grigol Vashadze (UNM), set to take place on December 2. He spoke of his recognition of citizen discontent and why that should be short-lived as the country moves forward. “I want to tell you that I understand you well!” the billionaire ex-PM told Georgia. “I hear your grief and frustration; I understand that you are dissatisfied because your life has not improved significantly; I understand that you are dissatisfied because you think that some employees care more for themselves than their people. You are dissatisfied because you think that today's government has failed to restore justice. “I am not going to focus now on the 9-year regime that trampled on your rights and dignity… Today, it is important to see that our homeland is still on its historic path, and though there is a high risk of wrong decisions being made, we should see it as a new

opportunity…It is an opportunity to achieve the ultimate goal - a better future for the people. If Georgian Dream fails to do its job, I will be the first to speak up. We cannot let the mistakes and criticisms of others take the values that are so dear to us. Our opponents are trying to overturn everything- they do not want to correct past mistakes. Their campaign is shamelessly lie-based. They openly state they will release those convicted for the torture and oppression of their people, which, in addition to insulting the public, is a threat of direct destabilization. “In 2012, we removed a violence-based regime. We went through a very difficult period and have tried to move the country towards stable development. We have achieved many important successes on this road: Business is free from state interference, the media is free; in the most difficult economic environment, we have obtained regional leadership and our American and European friends in the international arena are increasingly looking at integrating our country into NATO and the EU. “Despite the numerous risks, since independence, Georgia has never had such a stable period of development. And despite these successes, the main challenge in the country remains poverty. Consequently, we need decisive changes, first of all for socially vulnerable groups.” “Young people should be involved in the development of the country's governance and policy,” he said. “My friends, the life of the country is coming to a turning point when the people themselves are becoming the authors of the epochal changes… I know your pain, I know the reasons for your discontent. I promise you that all patriots will find their place in their homeland in our united family and nobody will remain without attention.” Mr. Ivanishvili closed by making a promise: “I am taking the responsibility to redress in one year all the errors of governance, and I will use all resources available to me, so that the development of the country becomes irreversible.” Continued on page 10

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BUSINESS

GEORGIA TODAY

NOVEMBER 6 - 8, 2018

Construction Falters, While the External Sector Continues to Improve in September 2018 BY DAVIT KESHELAVA AND YASYA BABYCH

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SET-PI has updated its forecast of Georgia’s real GDP growth rate for the fourth quarter of 2018. Here are the highlights of this month’s release:

HIGHLIGHTS o Recently, Geostat has released its preliminary estimate of real GDP growth for the third quarter of 2018. The Q3 growth rate now stands at 4.0%, which is 3.2% below the ISET-PI’s last forecasted value. As a result, the estimated real GDP growth for the first nine months of 2018 amounted to 4.9%. o ISET-PI revised its forecast of real GDP growth for the fourth quarter of 2018 to 3.7% - down from 6.4% in October. o Based on September’s data, we expect annual growth in 2018 to be 4.7%. This number is in line with the IMF’s growth forecast for 2018, but behind the NBG’s growth projections for the same period. Despite the fact that NBG’s forecast of real GDP growth for 2018 remained unchanged at 5.5%1, IMF has cut its economic growth forecast for Georgia from 5.5% to 5.0%. The revision occurred in the wake of economic difficulties in the region and the pending (or already enacted) credit restrictions2 which have put pressure on consumption and investment. According to Geostat’s recent release, the official estimate for the third quarter of 2018 (based on VAT taxpayers’ turnover data) now stands at 4.0%. The newly estimated Q3 figure was substantially lower than initially anticipated by our forecast. Consequently, the ISET-PI Q4 forecast has also been revised downward to 3.7%. Thus, the revision of the forecast has to do with the update of the Q3 growth estimate rather than any significant changes in the model’s core explanatory variables. Yet, a few variables in the model did change substantially, both in annual and in monthly terms.

GROWTH IN THE MANUFACTURING AND FINANCIAL SECTORS

According to the Geostat, the manufacturing and financial sectors were the most important contributors to Q3 real GDP growth. It is notable that an increase in manufacturing translated into an increase in exports of these goods to the partner countries. For example, the export of Ferro-alloys and Copper Ores and Concentrates went up by 23.3%3 and 21.1% respectively in the third quarter of 2018, as compared to the same quarter of the previous year. Moreover, manufacturing goods were the main contributors to total merchandise exports in Q3 of 2018 and thus, positively affected growth projections in our model. The output of the banking sector in the third quarter of 2018 grew by 18.4% compared to the same quarter of the previous year. Notably, the sound and profitable4 banking sector continues to support the domestic economy by issuing credit and financing domestic consumption and investment spending. The total volume of deposits (the main source of credit for banks) went up by 18.2% annually in September. This includes domestic and foreign currency deposits, which grew by 28.0% and 13.1% respectively5 compared to the same month of the pre-

vious year. Before the introduction of the second wave of the restrictive credit regulations, the total volume of commercial banks’ loans to the national economy increased by 22.8% relative to the same month of the previous year. Moreover, the amount of loans issued to the industrial sector went up by 31.1% annually in September, while lending to the hospitality and the transport and communication sectors were up by 45.6% and 85.3% respectively. Domestic credit expansion contributed to the growth of money supply and real GDP growth. However, further credit expansion could be limited by the planned restrictive credit measures. According to the Banks Association, the new credit regulations are expected to reduce credit portfolios by 4.5-5% and the real GDP growth by 3% (0.8% as estimated by NBG).

GROWTH IN HOTELS AND RESTAURANTS, AND TRANSPORT AND COMMUNICATION SECTORS According to the Geostat, the other sectors that contributed substantially to the real GDP growth were the hotels and restaurants, and transport and commu-

nications. The rapid development of these sectors was due to the increased number of international visitors, in particular tourists. The number of international visitors to Georgia increased by 5.7% in September compared to the same month of the previous year, while the number of tourists went up by 9.1% annually and accounted for 70.8% of all international visitors. According to the model, tourism made a significant positive contribution to the GDP growth forecast.

EXTERNAL TRADE IMPROVES, WHILE THE CONSTRUCTION SECTOR FACES PROBLEMS. Despite the deterioration of economic conditions in the wider region – especially the currency crisis and the economic downturn in Turkey along with the depreciation of the Russian ruble – Georgia’s external statistics continue to improve. Notably, exports grew by 17.1% year-overyear in September of 2018 and were driven by significantly larger exports/re-exports of motor cars to Azerbaijan, increased exports/re-exports of copper ores and concentrates to China, and recovered exports of ferroalloys to Russia. Georgian exports to Turkey, however, declined by

27.4% in Q3 of 2018 as compared to the same quarter of 2017. This was mainly due to the lari appreciation against the Turkish lira and the deterioration of economic conditions in Turkey (these factors could be considered as a major threat to Georgia’s real GDP growth going forward). During the same period, imports increased by 3.3%. The trade deficit thus improved by 4.9% compared to the same month in 2017 and reached 409.73 million USD. The improved trade statistics positively contributed to the growth projections. The sector that made a substantial negative contribution to the growth forecast was the construction sector. The number of permits given to construction companies during JanuarySeptember of 2018 was down by 4.6% yearly. The new credit regulations are expected to further constrain the construction sector and negatively contribute to the growth forecast. Our forecasting model is based on the Leading Economic Indicator (LEI) methodology developed by the New Economic School, Moscow, Russia. We constructed a dynamic model of the Georgian economy, which assumes that all economic variables, including GDP itself, are driven by a small number of factors that can be extracted from the data well before the GDP growth estimates are published. For each quarter, ISET-PI produces five consecutive monthly forecasts (or “vintages”), which increase in precision as time goes on. Our first forecast (1st vintage) is available about five months before the end of the quarter in question. The last forecast (5th vintage) is published in the first month of the next quarter. 1 According to the NBG’s monetary policy report, exports, consumption, and investment are expected to contribute to real GDP growth positively over the course of 2018. 2 The second wave of credit regulations was expected to enter into force by November 1st, 2018m but due to some technical issues the regulations were postponed by several days. 3 It is notable that the export of Ferroallays to United States around doubled in yearly terms. 4 The ROA and ROE of the banking sector increased by 0.1 and 0.7 pp. respectively in September. 5 The same growth rate for contraction and trade were 17.8% and 19.1% respectively.

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BUSINESS

GEORGIA TODAY

NOVEMBER 6 - 8, 2018

Passenger Trains on Baku-TbilisiKars Railway Coming Late 2019 BY SAMANTHA GUTHRIE

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zerbaijan Railways CJSC announced last week that passenger transport will begin on the Baku-Tbilisi-Kars Railway in the second half of 2019. In 2014, Stadler formed a joint venture with Azerbaijan-based company International Railway Distribution LLC and agreed to provide the passenger cars that will run on the long-awaited Baku-Tbilisi-Kars route. The new Stadler passenger cars are scheduled to be delivered to Azerbaijan in the first quarter of 2019. Each train will have 257 beds, divided into first, second and a blended "first/ second" class of family compartments. “The delivery of 10 new railcars has been scheduled for the first stage, the delivery of another 10 railcars has been scheduled for the second stage,” said Azerbaijan Railways. Their statement also noted that since the railway first opened for cargo transport in June of this year, more than 3,000 containers have been shipped along the route between China, Central Asia, Russia, and Azerbaijan and Turkey. The shipments have so far primarily contained building materials, electrical equipment, detergents, grain and other goods. Azerbaijan Railways first announced in June 2014 that they had signed a EUR 115 million contract

Image source: Prime Minister of Georgia, Press Office

with Stadler to supply three 10-car variable-gauge sleeper trains, the delivery schedule was originally set for between mid-2016 and mid-2017. The original contract includes the option for purchasing an additional 70 sleeping cars. By 2030, the railway will be capable of carrying an estimated 17 million tons of cargo and approximately three million passengers. Azerbaijan Railways also noted that the countries linked to the Baku-Tbilisi-Kars Railway on the other

side of the Caspian Sea – Turkmenistan, Kazakhstan, and Uzbekistan, notably, have high expectations for the route and its potential to increase their transit roles. The Baku-Tbilisi-Kars Railway is based on an agreement between the governments of Azerbaijan, Georgia, and Turkey. The Railway was officially inaugurated on October 30, 2017, with a ceremony at the Baku International Sea Trade Port, by Prime Minister of Georgia Giorgi Kvirikashvili, President

of Turkey Recep Tayyip Erdogan, President of Azerbaijan Ilham Aliyev, Prime Minister of Kazakhstan Bakytzhan Sagintayev, and Prime Minister of Uzbekistan Shabkat Mirziyoyev. At the opening ceremony, Kvirikashvili spoke to the gathered crowds, saying “The most important thing is the fact that the project demonstrates the unity of the countries present here. I’m sure that by similar projects and by standing beside each other, we will deepen our ties even more, which will bring more success to our countries and our region.” The Baku-Tbilisi-Kars Railway includes 826 kilometers of track. In Georgia, 29 kilometers of new train tracks were laid from Akhalkalaki west to the border of Turkey, and 76 kilometers of track were laid inside Turkey, from the border to the city of Kars. Residents of the southern part of the Samtskhe-Javakheti region where transportation links are limited and lengthy, particularly in the winter, are looking to the railway line to bring more tourists to the cities of Akhalkalaki and Ninotsminda and the area around Paravani Lake. In 2012, Georgian Railways transported 20 million tons of freight, while in 2016 it was just 11.9 million tons – a 40% decrease. The decrease is due in part to the construction of new, high-speed highways such as the East-West Highway between Tbilisi and Khashuri and the Kobuleti Bypass on the Black Sea Coast.

Tkibuli Miners Suspend Protests after Gov't Promises Salaries BY THEA MORRISON

Image source: Netgazeti

M

iners from Georgia’s western town of Tkibuli have decided to suspend the protests launched on November 2, after the government promised they will receive their salaries as usual, despite the fact that the mines are closed

for inspection. The decision to close the Tkibuli mines was made in July by the Prime Minister of Georgia, Mamuka Bakhtadze, after a July 16 incident in Mindeli mine left four miners dead and six severely injured. Bakhtadze said the government would no longer put its citizens’ lives at risk and declared the mine would be closed until it became completely safe to resume works there. "The mine shaft will not resume work until the criminal investigation and technical expertise is complete,” the PM stated this summer. The miners launched protests after Georgian Industrial Group (GIG), the owner of the mines, declared they could not pay the workers’ salaries if the mines do not operate. Representative of the Trade Union, Tamaz Dolaberidze, stated that after the closure of the mines, the workers received their salaries for August, September and October. However, according to him, the employer company told the workers they would not get further salaries as the mines are closed. The information was also confirmed by Jambul Jakeli, Director of Saknakhshiri, which is a subsidiary company of the GIG carrying out mining works in Tkibuli. Jakeli said that in the three months since the mines were closed, the company spent around GEL 2 million ($733,918) on the salaries of its employees, adding Saknakhshiri cannot afford to continue paying salaries if operation is not resumed. "We had hoped to resume coal extraction. We held negotiations with banks hoping they would give us some money. However, the work has not been renewed and the company can no longer pay salaries. In order not to lie to people, the director of GIG told me to warn the employees,” the Saknakhshiri Director told Netgazeti. Economy Minister of Georgia Giorgi Kobulia stated the miners will continue receiving salaries despite the fact that the mines are closed. He said the inspection of the mines will be finished by December, after which the employees can resume working in the places which are safe. "Technical assessment is currently underway in the mines. This inspection will end in December. In areas where we have a guaranteed conclusion on safety, we will renew working. Until the work starts, we agreed with the miners to pay them their salaries,” the Minister said. In total, around 1300 people are employed in Tkibuli mine.


BUSINESS

GEORGIA TODAY NOVEMBER 6 - 8, 2018

7

Lisi Development Enters Ukrainian Market

BY MARIAM MERABISHVILI

O

ne of the largest Georgian development companies, Lisi Development, has entered the Ukrainian market. A presentation of the company was held in Hilton, Kyiv,

where the company's projects and eightyear history were introduced to the attending guests. Lisi Development opened its representation in one of the most prestigious business centers in Kyiv- the IQ Center and the new sales office will serve interested people from this week. The company entered the Ukrainian market with its three largest projects:

Residential complex Lisi Green Town, Kokhta-Mitarbi Resort in Borjomi Municipality and the new project on the Black Sea coast - Buknari Resort. Lisi Development was founded in 2010 and has since constructed on 400 hectares near Lisi Lake. The company started operating on the real estate market with a difference: establishing the innovative principle “80/20,” which implies using

only 20% of the territory for construction for the company's projects and the remaining 80% for greening and recreational zones. Lisi Development has become the country's leader and is known for having established green approaches in the real estate sector. Lisi Green Town was the company's first large project. The multifunctional complex in Tbilisi unites: apartments,

duplexes, townhouses and villas, parks, a swimming pool and fitness hall, children's and entertainment zones, out- and indoor parking. The architecture of the project is distinguished for its low-rise buildings, constructed using concrete, wood and brick. The general plan of the settlement was laid out by leading Georgian and foreign architects. The Kokhta-Mitarbi Resort is a fourseasonal complex of international standard hotels and residential apartments located in Borjomi municipality. At the first stage, hotels and residential apartments were built near Kokhta Gora (Hill) when the hotels partner became hotel "Rooms". The resort will be receiving its first guests this year. The resort is distinguished by the following factors: • Ability to be a four-season vacation resort; • Unique green landscape of Kokhta Gora and Mitarbi; • The so-called "Ski in and Ski out" concept, which implies apartments integrated with ski runs; • The General Development Plan, which belongs to the world's most famous French companies- Geode and “Compagnie des Alpes, both of which worked on the development of the French Alps resorts. • Construction and quality of international standards. In 2018, a new project was begun on the Black Sea coast: Buknari Resort. The project will be a mixed-type uniting hotels, residential apartments, restaurants, cafes and various entertainment zones. The resort will be the only international standard resort on the Black Sea to have its own yacht marina. At this stage, the general plan of Buknari Resort is under developed, a project of the world's most famous architectural bureau of WATG, a company with 70 years’ experience in doing global scale projects around the world. These include: hotels 'Four Seasons' in the United States, United Arab Emirates, Mexico, Mauritius; the resort 'ATLANTIS THE PALM' in the United Arab Emirates, 'PALACE OF THE LOST CITY' in South Africa, and more.


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BUSINESS

GEORGIA TODAY

NOVEMBER 6 - 8, 2018

Georgia’s Democracy: From Guns to Dreams & Roses. What’s Next? BY DAVID APRASIDZE AND REVAZ SURGULADZE

THE GEORGIAN ‘BIRZHA’ – AN EXERCISE IN (MALE) GRASSROOTS DEMOCRACY?

T

he results of the first round of Georgia’s 2018 presidential elections are being discussed everywhere. Street corner gatherings, the ‘birzhas’, are seething with excitement. While quite emotional at times, the level of typical ‘birzha’ exchanges may surprise observers. For one thing, positions are often better grounded in facts than those presented by pundits, TV talk show participants, and parliamentarians.

CHAPTER I: “BIRZHA” POLITICS We both live in the Saburtalo district of Tbilisi – a dense agglomeration of Soviet blocks of flats dating back to 1970s. Ugly on the outside, but quite cozy on the inside («страшные снаружи, добрые внутри», as a Soviet song from the same period goes). Two days after the elections, we decided to step out of our cozy apartments into the thick of the neighborhood’s street-level democracy.

In its Russian original, ‘birzha’ refers to a stock exchange or a place where day laborers gather in order to get a job. In Georgian slang, ‘birzha’ is the equivalent of ‘street corner societies’, observed by William Foote Whyte in Boston’s Italian slums – an outdoor gathering of idle youth (‘corner boys’). However, Georgian ‘birzha’ participants are often ‘college boys’ and adult males who come together to exchange information and discuss anything ranging from women or popular music to politics. Saburtalo’s political stance has evolved quite considerably since 2012. In that year’s parliamentary elections, 70% of the Saburtalo vote went to the Georgian Dream (GD) alliance, leaving the ruling United National Movement (UNM) with only 25%. In the 2013 presidential elections, GD’s Giorgi Margvelashvili – the new ruling party’s candidate – crushed his UNM opponent: 66% to less than 18%. GD’s advantage over the UNM signifi-

Figure 1. Election results for party list representation in parliamentary elections (2008, 2012, and 2016) and local elections of 2017. A red country turning blue in less than 10 years.

cantly eroded in the 2016 parliamentary elections: 49% to 27%. Finally, the results of last week’s presidential elections show that Saburtalo is once again a toss-up district: GD-sponsored presidential nominee Salome Zurabishvili (37.5%) is neck-andneck with UNM’s Grigol Vashadze (30%), assuming he gets the support of those who voted for his former UNM colleague and Ministry of Foreign Affairs boss David Bakradze (6.8%). Our neighbors come from all walks of life, and the ‘birzhas’ we attended were quite representative of the district’s mixed demographics and political views. That said, there was one thing everybody seemed to agree on: Georgia is making progress as a democracy, enhancing ordinary people’s confidence that they are the ultimate power holders in society. Both sides also shared a concern: the opposition candidate’s victory may destabilize Georgia’s fragile political situation, unleashing pro- and antigovernment street action and, potentially, violence.

CHAPTER II: DOMINANT PARTY POLITICS

Note: I Parliamentary elections, 2008 II Parliamentary elections, 2012 III Parliamentary elections, 2016 IV Local elections, 2017 In blue and red are districts won by the Georgian Dream and United National Movement, respectively.

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While civil war, gun violence and political assassinations of the 1990s are all but forgotten, Georgia’s democracy is still a work-in-progress. The country’s political culture is far from passive and submissive, but, so far we have been living under an elected single-party dictatorship, not a vibrant democracy. Time after time, the Georgian people vote for the ruling party, allowing it to achieve a constitutional super-majority in the parliament and rule over all Georgian municipalities. Opposition forces are visible only in Tbilisi, but even here they are hopelessly divided. And then, after 8-10 years of submission to a one-party rule, come political convulsions and revolutions... That's not anyone’s ideal of democracy.

gias!” (Zurabishvili); “[The second tour] will be all minus one!” (Grigol Vashadze).

CHAPTER IV: TIME FOR EXTRAORDINARY DECISIONS! In extraordinary times, extraordinary decisions are required. In early 1990s, as South Africa was preparing to end the Apartheid, the warring parties agreed to form a Government of National Unity in order to steer the nation’s painful transition to a more inclusive future. The South Africans managed to strike a political deal despite sharp racial and class divisions, as well as a long history of mutual hatred, colonial domination, discrimination and rebellion. Georgia may be culturally and economically divided into its liberal and conservative halves, yet the main driver of Georgia’s all-or-nothing politics is not a clash of values or ideology, but the big egos of its alphamale businessmen and politicians. Members of Georgia’s political elites have to realize that they will not be able to eliminate each other and have much more to gain by concluding a pact of mutual recognition. An extraordinary precedent in Georgia’s modern history, such a pact could take the form of a broad political agreement to reform Georgia’s electoral law and hold early parliamentary elections.

CHAPTER III: MULTI-PARTY DEMOCRACY? The 2018 presidential elections add color to Georgia’s monochromatic political map. The country as a whole and each municipality (with the exception of Sachkhere, Bidzina Ivanishvili’s home turf) are now divided among two-three parties. As in the past, the ruling party (GD) does relatively better in rural and ethnic-minority municipalities, but is far from winning them all. The optimists among us may regard such a high level of political contestation as a sign of a genuine multi-party democracy finally striking root. However, this holds only if parties on all sides of the political divide recognize each other’s right to exist and the electoral system is re-engineered accordingly: to represent Georgia’s cultural and political diversity rather than allowing one faction to dominate over the other. So far, there has been little indication that the warring parties are ready for compromise. The rhetoric and actions we’ve seen in this election were of the single-party domination variety: mudslinging, abuse of administrative resources, and electoral bribery. Georgia’s ‘corner boys’ may feel somewhat empowered but our politicians are still thinking in zero-some-terms, trying to maximize their private gains – and not much else, as reflected in recent statements issued by leading presidential candidates: “These are not elections between two parties, this is about choosing between two Geor-

Indeed, by abolishing single-member districts (which are the root cause of parliamentary supermajorities) and introducing voting on nation-wide party lists, Georgia would take a major step towards a healthier political situation in which major choices are rigorously discussed and contested. If held in the new format, parliamentary elections would most probably produce the first truly coalitional government, one based on compromise rather than outright domination. * * * We did not bring up our vision of an internal peace treaty among Georgia’s political factions at any of the ‘birzhas’ we attended. Having experienced guns, rose revolutions and Georgian dreams, the Georgian people have learned to be skeptical. Still, this week’s Tbilinomics Tamada toast is a very traditional one: to peace – not only with our enemies, but within our own nation. About the authors: David Aprasidze is a political scientist working on political transformation and democratization issues. He is a professor at Ilia State University and a senior associate with Tbilinomics. A recent ISET graduate, Revaz Surguladze joined Tbilinomics as a research fellow in October 2018.


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GEORGIA TODAY NOVEMBER 6 - 8, 2018

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The 4th Official Ceremony of the Welcome to Georgia! National Tourism Awards Welcome to Georgia! National Tourism Awards to celebrate success of Georgian Tourism and Hospitality! The after-party host is Republic – a newly opened multifunctional venue which combines cool and contemporary interiors by world-renowned Georgian architects and artists. Located in the very heart of the city with panoramic windows offering a spectacular view over the center and the Caucasus Mountains, Republic, with its slick design and gorgeous views, is an elegant addition to the historical center of Tbilisi. For the fourth year already, the Georgian National Tourism Administration on behalf of the Ministry of Economy and Sustainable Development of Georgia is Co-organizer of the Awards project. Also Co-organizer of the project is Bank of Georgia. Official Supporters: Tbilisi City Hall and Partnership Found. General Sponsor - Alliance Group. For more information visit the website: awardstourism.com

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t the beginning of December, Rustaveli Theatre will host the most remarkable event of the Tourism and Hospitality industry of Georgia - the Fourth Official Ceremony of the Welcome to Georgia! National Tourism Awards. At the Awards Ceremony, winners and finalists of 20 different nominations, out of more than 350 nominees, will deservedly receive recognition for “The Best in Tourism and Hospitality.”

The Welcome to Georgia! National Tourism Awards is an annual awards ceremony held in Georgia for the field of tourism and hospitality since 2015. It has successfully established itself as a unique platform to develop the country's tourism sector, serving as a kind of "Oscars" to celebrate the achievements of the Georgian tourism and hospitality industry. The Award Ceremony is closed and will host to 800 guests: General Managers and owners of the best hotels, res-

taurants, wineries of the country, the market leading developers, the main businesses of the country, government officials, national and local authorities, representatives of the largest hotel operators, travel agencies and tour operators, mass media and industry press. The venue of event is a national and cultural monument of Georgia - Rustaveli Theater. Exquisite culture, centuries-old traditions and unique hospitality will come together in Rustaveli Theater at the Fourth Official Ceremony of the


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GEORGIA TODAY

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Georgia’s Capital Markets Poised to Blossom BY GEORGINA BAKER

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eorgia’seconomyhasgrown robustly over the past decade, despite the global financial crisis of 2008-9 and the regional headwinds of 2014. Deep economic reforms have earned the country a reputation as a star reformer, securing 6th place in the World Bank Group’s Doing Business 2019 Report, which assesses the ease of doing business in 190 countries. This is the highest ranking for an emerging-markets economy. Georgia has one of the most developed banking sectors in Eastern Europe. Leading banks operate at international standards. The country’s two largest banks are listed on the London Stock Exchange. Yet access to financing remains a major obstacle for businesses, according to the World Economic Forum’s Global Competitiveness Index 2017-2018. So, what can businesses do to expand their sources of financing? One solution is to tap into savings through capital markets by issuing bonds. This is what other emerging-market economies have begun to do. Unfortunately, this has been easier said than done and Georgia’s capital markets have been developing relatively slowly. But that situation is now changing— thanks to a series of bold, pro-market and governance reforms, and improvement of the tax regime and enhancement of transparency and accountability. As demand for funding increases, capital markets are expected to develop rapidly over the next few years, particularly with real GDP growth in Georgia projected to average around 5.2 percent in 2018 and 2023 (Source: IMF’s World Economic Outlook, October 2018). This is important for Georgian businesses. It is also important for Georgia’s economy—which is why the develop-

ment of capital markets is now high on the government’s agenda, and the National Bank of Georgia is playing an active role in the process. Good corporate governance is also gaining relevance, with increasing research suggesting that companies with robust governance structures tend to perform better financially, and investors are starting to take notice. The European Union’s Association Agreement with Georgia, which came into force in 2016, requires fundamental changes to the legislative base for Georgian capital markets. Starting in January 2018, Georgia’s tax code introduced tax benefits for bond investors to encourage participation. In 2019, the government will also start implementing pension reforms—to bolster the accumulation of savings outside the banking sector and boost demand for bonds issued by Georgian corporations. This can help create alternative savings and new sources of liquidity. The pension reform is expected to promote domestic savings and create an institutional investor base for long-term Laridenominated assets. All this is crucial for the country’s economy. World Bank Group research has revealed that emerging-market countries with robust domestic capital markets are better able to manage financial crises, avert major economic dislocations, and help firms and citizens maintain financial solvency. In other words, welldeveloped capital markets serve as additional support to enhance stability of the financial system. But what are the advantages at the company level? Debt capital markets provide an alternative source of funding for corporates, while also giving investors the flexibility to sell in the secondary market ahead of maturity. Issuers can typically achieve longer tenors and larger funding amounts through capital markets than in the conventional loan market. In addition to

financial benefits, corporates also gain much more visibility. In Georgia for example, by requiring a credit rating for a domestic issue, the regulator has encouraged issuers to seek credit ratings from international credit rating agencies. Going through the comprehensive rating process means more transparency for the investors and more visibility for the issuers. Georgian companies indeed have recently started to be rated by Fitch Ratings, which has already evaluated several large Georgian companies. Some firms

have even gained access to international trading platforms. International financial institutions can help strengthen investor confidence by participating in bond issuances, especially early on in the process. For example, in 2017, my organization—the International Finance Corporation—was the sole anchor investor for the first offshore Lari-denominated bond issued by a Georgian corporation (Bank of Georgia). This was the first international localcurrency bond issued by any corporation from the wider Commonwealth of Inde-

pendent States (CIS) region, except for Russia, since 2008. The issuance helped crowd-in 500 million Lari (approximately $207 million at that time) from international investors in long-term local-currency finance for businesses. It also helped in the development of a local-currency market, advancing the country’s “dedollarization” efforts and raising the Bank of Georgia’s profile in the capital market. Over the past few years we have seen fundamental changes in the market, more and more companies are coming to the debt capital markets to raise funding. National Bank of Georgia accepts corporate bonds as eligible collateral for rated issuances. This presents a huge opportunity, as such issuances become more attractive for banks as investors. In addition, pension reform will trigger accumulation of savings outside of the banking sector which can also create demand for corporate issuances. Georgia can further advance the growth of domestic capital markets by becoming a regional financial hub and attracting international savings and international issuers to take advantage of the transparent and investor friendly environment. This would also align with its ambition of becoming a regional logistics hub, leveraging its favorable geographical location, as a gateway to the Caucasus and Central Asia. There is a sound logic for this, given that Georgia has historically always acted as a trading center for the Caucasus region. The country still has a way to go to become a mature capital market—not just for debt but also for equity. But the country is off to an excellent start. Georgina Baker is Vice President for Latin America & the Caribbean and Europe & Central Asia at IFC, a member of the World Bank Group. IFC is the largest global development institution focused on the private sector in developing countries.

Address of the Chairman of the Georgian Dream - Democratic Georgia Political Union

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would like to address my fellow Georgians. I am addressing you because of my immense responsibility to you. First, I would like to thank those who reiterated their trust in us, those who, despite numerous problems, believe in the path chosen by us! Today, however, it is imperative to address those discouraged. I want you to know that I understand you very well. I understand your heartache and disappointment. I understand that you are dissatisfied because your lives have not improved drastically. I understand that you are dissatisfied because you believe that some officials care more for their own welfare than of the wellbeing of the people. You are dissatisfied because you believe

that the current authorities have failed to restore justice. Many of you are angry because we have made possible the threat of a violent regime’s comeback. Today, I will not speak about the 9-year regime that trampled down all rights, dignity, and many of you and your families experienced it firsthand. I will not speak about our achievements either. What is most important today is that our homeland once again faces a historical crossroads. There is a high risk of making a wrong decision, yet it is the best time for new opportunities and renovation. A few months ago, I had to return to politics. I had to because I saw problems deepen with no effective mechanisms to address them. It turned out, however, that the people saw these problems much clearer and deeper. I must agree with you. But there is something we all must remember! Our opponent is not a political party. Today, unfortunately, we stand opposite the same brutes united for revenge. We are facing an ordeal, and we allowed this ordeal to happen. When the authorities distance themselves from the people, they lose public trust, and now I want everyone to hear

that the sole purpose of our political union is to serve the people. I do not want anyone to think that the party is of any value on its own. It is only a way to reach the ultimate goal of ensuring a better future for the people. This is why I will be the first to go against Georgian Dream if it fails and against any branch if it fails to serve the people. At the same time, we cannot let these mistakes be used by the force which, in reality, wants to obliterate every value that is so dear to us. These mistakes must be considered properly and criticized. The opponents, however, use their machinery of deceit working at full throttle to strike out everything—they do not want to correct mistakes! They want to destroy everything, and do it at any cost, which is most unfortunate! The only campaign the opponents are holding is that based on lies. They shamelessly promise the people that which is beyond the purview of president in a parliamentary system. At the same time, they openly announce the release of those charged with torture and abuse, which besides being an insult hurled against society, poses a direct threat of destabilization. In 2012, we got rid of a regime sustained by violence. We have been through a most difficult period, trying to put the country on the right track of stable devel-

opment. On this path, we have numerous significant achievements: Business is now free from state racketeering, the media is free, more than one far-reaching social program has been implemented, we have claimed regional leadership in a very difficult economic environment, and many others. In the international arena, our American and European friends see it increasingly feasible and realistic for our country to integrate into NATO and the EU. Despite many risks, Georgia enjoys the best years of stable development since the restoration of independence. And yet, despite these successes, poverty remains the main challenge in the country. Consequently, above all else, we need decisive changes for the most vulnerable social groups. Unlike many populists, I will not of course cite particular statistics, but I will make a point of saying that the benefits and assistance for pensioners and IDPs must be reconsidered drastically! Caring for them is a matter of our dignity, and we must be able to do it! Human resource policies must be amended promptly to be based on experienced human resources and constantly to attract new ones, especially youth. Youth must be engaged in our country’s governance and policy-making! My friends, at certain breakthrough

moments in the country’s life the people themselves become the architects of milestone changes, and our nation has exhibited this kind of wisdom more than once. I would like to address Georgian Dream’s old guard, those who accomplished the impossible in those historic days of 2012. Georgia is once again in need of your loyalty and experience, your civil heroism. I understand your heartache, and I am aware of every reason behind your anger. I promise you that every patriot will find a due place worthy of their merit in our unified family—nobody’s merit will be neglected! Let me remind you what I said before the election. That in one year’s time I pledge to correct every mistake in governance and to use all my resources to ensure the irreversibility of the country’s development. Importantly, we should not let our displeasure with the government and individual officials feed our desire to punish the authorities while, in reality, punishing our own future and our own country, lest we waste everything we dedicated our lives to in 2012. I am convinced that we will make a choice in support of the people’s wellbeing, freedom, and dignity, and that together we will succeed in building a modern Georgia focused on human being!


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GEORGIA TODAY NOVEMBER 6 - 8, 2018

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Data Festival to Take Place in Tbilisi

BY AMY JONES

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three-day event focusing on data and communication will be held on 7-9 November in Tbilisi. It is the first festival of this scale to be held in the Caucasus, set to attract leading industry experts from around the world. Data plays a huge role in many aspects of society and business, affecting everything from consumer purchasing decisions to advertising campaigns; web design to fake news. The event will be very relevant to those working in Georgia’s technology and communication sectors. Bringing together over 500 journalists, CSO activists, marketing specialists, business professionals, government officials, data analysts, developers and designers working with data, the event will explore the potential impact and uses of data. The festival focuses on six main uses of data: in journalism and truth, politics, science and artificial intelligence, fintech, visualization, and marketing. The event is organized by Forset, a team of creatives specializing in data communications, and Data Science Tbilisi, a collective of data scientists. The first day will be held at Tbilisi State University, with the following days to take place at Mediatheka

Veterans Park. Numerous global companies have supported the event, including Prague Civil Society Center, Eastern Partnership Civil Society, Zalando, Exactpro, and Fintech. It will be attended by employees and industry experts from Google, Facebook, Amazon, Zalando, Deutsche Welle, as well as professors from universities, among others. On the first day, DataFest will offer the opportunity to hear a series of 20-minute inspirational talks from industry experts on topics such as ‘How Artificial Intelligence is changing the way we look at data’ by Daniel Rsaza, a teaching fellow at Google News Lab, ‘Amazon: Years of AI innovation on behalf of customers’ by Denis Batalov, a machine learning architect at Amazon Web Services, and ‘Exploring the structure of human smuggling networks’ by Isabella Gollini, Assistant Professor at the University College Dublin. The following day, participants will be able to choose from various workshops led by data experts to delve deeper into data topics. The full-on day of data immersion begins at 9:30 and will prepare participants for the datathons on the final day. The datathons will cover topics such as machine learning, civil society and data, and data for storytellers. Most talks will be held in English or Russian. Tickets can be purchased on the datafest.ge website until November 7 and are priced at 150 GEL (1st day), 200 GEL (1st and 2nd day), and 250 GEL (all three days).

EU4Energy to Help Georgia Improve Energy Infrastructure Planning

Disruption Made in Georgia? BY ALEXANDER KEMPF

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andro Chalagashvili is a visionary. The young man from Georgia wants to revolutionize the Hospitality and Travel Industry. Therefore, he founded a startup called Tripify. The aim of his company is to develop a personalized tour guide planner allowing tourists to create their own itinerary based on budget, interests and time. Users just have to choose different bars, sights or museums they want to visit. Via drag-and-drop, they can move them into Tripify and the software instantly offers them a way to get from one place to the next. On October 25, Sandro Chalagashvili presented his innovative idea to an international jury of the Welcome Challenge in Tbilisi, an annual Global Forum for Hospitality and Travel Industry. If Chalagashvili and his team are successful, planning and booking a trip via internet should become much easier in the future. "We will make the planning process a hundred times better," the young man promises the Jury. Tripify allows its users to book tickets and other things easily online in advance and matches a travel agent with the client. For the jury of the Welcome Challenge, the idea behind Tripify looks promising. So they awarded

Source: EU Neighbors. Photo: European Union

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he Energy Community Secretariat under the EU4Energy Governance Project organized a two-day workshop in Kyiv, Ukraine, on 30-31 October. The aim was to help the six Eastern Partner countries – Armenia, Azerbaijan, Belarus, Georgia, the Republic of Moldova and Ukraine – to improve their energy infrastructure planning. The event brought together representatives of all six countries, including from regulatory agencies, ministries and transmission system operators. The Energy Community experts presented best practices in infrastructure planning, including the identification of priority projects, the role of regulators in investment planning, risk assessment and tariff setting, as well as long-term infrastructure plans based on the EU’s experience of Ten-Year

Network Development Plans under the Third Energy Package. The participants also discussed the methodology for the identification of so-called ‘Projects of Eastern Partnership Interest’ (PEPIs). The methodology, developed under EU4Energy technical assistance, covers projects of cross-border relevance in Eastern Partner countries that are not members of the Energy Community (Armenia, Azerbaijan and Belarus), and projects connecting Energy Community Contracting Parties with Eastern Partner countries (e.g. Ukraine with Belarus and Georgia with Armenia). Derived from Regulation 347/2013 on guidelines for trans-European energy infrastructure, the PEPI methodology was adapted to fit the specific circumstances and needs of these countries.

the start up from Georgia with the third prize. The whole idea behind the Welcome Challenge meeting was to find the so called “disrupters of tomorrow,” that might change a whole industry. “Remember the three guys that had an idea to rent out their mattresses to guests? Today they have a multi-billion-dollar company called AirBnB,” said Saba Kiknadze, a co-founder of the Welcome Challenge Forum. Is Tripify a candidate to follow in these footsteps? Time will tell. The software has yet to be made ready, but Chalagashvili and his team want to launch the software by the end of the year. “It's almost done,” he tells the Jury. The first prize of the Welcome Challenge was given to a company, that is already on the market. Eco Solutions from Baku helps big hotels in the capital of Azerbaijan to improve their waste management. Their solution is not only sustainable, but thanks to them the hotels involved also save money. “We will save you a minimum of 10% on your current waste spend,” Eco Solutions tells future clients on their website. With the grant money from the Welcome Challenge, the Azeri company now wants to enter new markets, like Georgia. The winners at the Global Forum received grants of up to EUR 15,000. And beside that, the young entrepreneurs had the chance to meet with potential investors and get feedback for their businesses.


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GEORGIA TODAY

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Money in the Pot: Does Georgia’s Economy Need Cannabis? BY AMY JONES

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peaking about the legalization of marijuana in Georgia, Deputy Minister of Internal Affairs Natia Mezvrishvili last week stated, “the consideration of this issue has been postponed for an indefinite term,” thus bringing an end to discussions which have been a focal point of political rhetoric since the decriminalization of cannabis earlier this year. The topic has divided the opinion of politicians and Georgians alike and even led to the arrest of Zurab Japaridze, leader of the opposition party Girchi, during a cannabis festival in October. However, the cannabis industry is worth billions worldwide and is growing rapidly. With high levels of debt, is Georgia losing out on potential (and much-needed) economic growth by dropping the discussions to legalize cannabis? Georgia’s economy, although growing, could be destabilized by the relatively large amount of private and public debt. According to a Forbes article, the debt from private and public Georgian companies amounts to more than 110% of the GDP, much higher than the recommended maximum of 50% for a country like Georgia. Moreover, debt is rising. Between 2010 and 2017, foreign debt increased by 189%. It is expected to reach $2.3 billion by 2020. Although many countries have high levels of external debt (the US had $18.6 bil-

lion in 2017), the International Monetary Fund recommends paying off foreign debt as quickly as possible, especially since the financial crisis of 2008. Moreover, the fluctuation of the Lari in recent years makes external debt more problematic for Georgia. Some experts believe that the high levels of debt could cause instability in the runup to the 2020 elections. The Georgian economy currently relies heavily on tourism and industry. However, Georgia could potentially benefit from the exploding cannabis market by allowing the plant to be grown for export. Although the exact value of cannabis sales remains unknown as it is still illegal in many countries, it is expected to be a $35 billion industry by 2020 in the US alone. The industry could not only bring additional income but also create thousands of jobs. The American state of Colorado created more than 10,000 jobs after legalizing cannabis in 2014. Moreover, crime fell in Denver by 14.6% in the first three months following its legalization, making further savings for the district. However, Andrew Freedman, a consultant who advises governments on cannabis production, says, “at the end of the day, the debate shouldn’t be about tax revenue. ‘Is this going to create more burden on public safety?’- that’s where the debate should be.” The political rhetoric surrounding the cannabis debate often focuses on shallow political attacks rather than a truly analysis of the potential effect on society and the economy. Politicians voiced con-

cerns of creating a “drug-dealing” economy and “a nation of cartels” without often discussing the potential negative and positive impacts in detail. In fact, many countries are now producing cannabis without experiencing a boom in drug-related problems. The UK currently leads production with 44.9%, followed

Bulgarian National Holiday Celebrated in Tbilisi BY KATIE RUTH DAVIES

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n November 4, the Embassy of the Republic of Bulgaria in Tbilisi held a celebration of the Day of National Leaders of Bulgaria - 1 November. The festive event was another occasion for the gathering of members of the Bulgarian community in Georgia. Ambassador Desislava Ivanova welcomed the Bulgarian citizens, their families and their Georgian friends. In her speech, she recalled the history of the unique holiday and its special role in preserving the Bulgarian spirit and, above all, the Bulgarian diaspora. “The Day of the People's Enlighteners is an allBulgarian celebration of the historical memory and of our national self-confidence, preserved for centuries,” the Ambassador said. “Thousands and thousands of well-known and unknown scholars, mentors and enlighteners, fighters for national liberation, have inspired faith in the people's own power.” She went on to encourage the Bulgarian youth diaspora of the benefit of a mother tongue education. “The Embassy of the Republic of Bulgaria and I

are happy that in friendly Georgia, the community of the Bulgarians, who came here at different times and under different circumstances, is alive and active: living with the spirit of our Bulgarian ancestors and their aspirations for the rise and prosperity of the Bulgarian nation. Happy holidays!” the Ambassador said. November 1 is a Bulgarian holiday dedicated to educators and scholars who have built and preserved the spiritual values and cultural identity of Bulgaria. Among the most revered Bulgarian national leaders are St. Ivan Rilski, Konstantin Kostenechki, Gregory Tsamblak, Yoasaf Bdinski, Vladislav 'Gramatik', Dimitar Kantakuzin, Petar Parchevich, Peter Bogdan, Paisiy Hilendarski, Priest (Popa) Peyo, Neofit Rilski, Ivan Seliminski, the brothers Dimitar and Konstantin Miladinovi, Georgi Sava Rakovski, Vasil Aprilov, Vasil Levski, Hristo Botev, Stefan Karadja, Hadji Dimitar, Lyuben Karavelov, Petko Slaveikov, Nicolas Batsarova, Ivan Vazov, and many others. Most have streets named after them throughout Bulgaria. The day of National Leaders was first celebrated in Plovdiv in 1909. In 1923, King Boris III declared November 1 a national holiday in memory of all deserving Bulgarians. In 1945 the celebration was prohibited and re-instated in October 1992, when it was officially declared the 'Day of National Leaders'.

by Canada (38.4%), Portugal (10%), and Israel (4.4%). However, a recent article in the British newspaper The Guardian accuses the marijuana industry of above all benefiting the pockets of the producers. Should Georgia legalize cannabis in Georgia, it would need to regulate the industry to

ensure the country would benefit as a whole. Nonetheless, the decision of politicians to halt discussions to legalize cannabis could mean that Georgia will lose out on the opportunity to boost its economy and lessen its debt. Other countries are already exploiting the potential of the lucrative market.


BUSINESS

GEORGIA TODAY NOVEMBER 6 - 8, 2018

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Cyber-Attacks & IT Outages Are the Main Threat to Supply Chains

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on-physical threats top this year’s causes of disruption, while the uptake of business continuity arrangements continues to grow. Cyber-attacks and data breaches (49%) are the most concerning challenge for professionals both over the next 12 months and the next five years. That is according to the 2018 BCI Supply Chain Resilience Report, published today by the Business Continuity Institute (BCI) in collaboration with Zurich Insurance Group. Other concerns over the next five years also include IT outages (41%) and adverse weather (39%), which are often connected to one another, as IT outages can be a consequence of both adverse weather and cyber-attacks. Over the next 12 months, concerns include health issues, as human illness (25%) and health and safety (24%) feature among the top 10 future challenges. Following the trend of 2017, the uptake of business continuity arrangements continues to grow. An increasing number of organizations embed business continuity to protect their supply chains. On the other hand, top management commitment, a key factor to ensuring resilience, declined from 2017, from 41% to 33%. Technology employment to analyse disruptions is still low (38%) and those organizations that use it rely on traditional software rather than advanced solutions. However, the minority of organizations that use technology solutions are more successful at analysing incidents among their suppliers. There is also an upward trend regarding organizations that have insurance coverage. However, the report highlights that respondents who stated to not have any sort of insurance are not aware of the reason. This reveals a possible awareness gap that could be costly for organizations. Other findings in the report include:

not aware about disruptions has grown – from 10% in 2017 to 16% in 2018. - 52% (8% more than 2017) organizations reported supply chain disruptions among their Tier 1 suppliers, while an increased number of responders (+8% since 2017) admitted to not analysing the full extent if their supply chain in case of disruption. - The threat landscape for supply chains has changed since 2017. While unplanned IT and communications outages (53%) remain the top cause of disruption, adverse weather (41%) follows up (rising from sixth place in 2017) with cyber-attacks and data breaches (33%), loss of talent/skills (30%), and transport network disruption (27%). “Supply chains are exposed to risks and threats of various nature,” says David Thorp, Executive Director of the BCI, comments. “As organizations become increasingly interconnected through global networks, their growing complexity makes them more vulnerable to disruptions. Through the years we have seen higher levels of awareness and adoption of best practices, and we are moving towards more resilient supply chains. However, opportunities of refinement are still there and collaboration among network is an essential element in keeping the supply chain intact.”

ABOUT THE BUSINESS CONTINUITY INSTITUTE (BCI)

- Reporting of supply chain disruptions has increased since 2017, going from 70% to 73%, and overall the majority of organizations have consistently shown a growing level of reporting over pre-

Vocational Education & Training to Receive Increased Support from Switzerland, UNDP

A Swiss farmer. Source: ch.coca-colahellenic.com

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n 6 November the Swiss Agency for Development and Cooperation (SDC), United Nations Development Program (UNDP), Ministry of Education, Science, Culture and Sport of Georgia and Ministry of Environmental Protection and Agriculture of Georgia signed a project document about a new initiative to support Vocational Education & Training in agriculture. With a budget of over $6 million, the four-year (2018-2022) initiative offers Georgian farmers new educational opportunities and extension services. The initiative will be implemented in close part-

nership with the Government of Georgia, Georgian Farmers’ Association, vocational colleges, public and private agriculture extension centres, universities and local communities. The project document was signed by Irina Abuladze, Deputy Minister of Education, Science, Culture and Sport of Georgia; Giorgi Khanishvili, Deputy Minister of Environmental Protection and Agriculture of Georgia; Olivier Burki, Regional Director of the Swiss Cooperation Office in the South Caucasus; and Louisa Vinton, the newly appointed UN Resident Coordinator and Head of UNDP in Georgia.

vious years (68% on average). - The number of organizations suffering a disruption in the past 12 months has decreased – from 65% to 56%. However, the number of organizations

Founded in 1994 with the aim of promoting a more resilient world, the Business Continuity Institute (BCI) has established itself as the world’s leading Institute for business continuity and resilience. The BCI has become the membership and certifying organization of choice for business continuity and resilience professionals globally with over 8,000 members in more than 100 countries, working in an estimated 3,000 organizations in the private, public and third sectors.


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BUSINESS

GEORGIA TODAY

NOVEMBER 6 - 8, 2018

Village Support Program to be Reinstated BY SAMANTHA GUTHRIE

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he Government of Georgia has announced plans to reinstate its Village Support Program in 2019. Georgia’s Minister of Regional Development and Infrastructure, Maia Tskitishvili, explained over the weekend that the new iteration of the program will focus primarily on financing infrastructure projects. “The Regional Development Fund finances projects worth over 50,000 GEL [approximately $18,400), but villages frequently need small projects such as arranging parks, road repairs, cleaning sewage channels and so on. The program has now been restored, but on a smaller scale. Furthermore, we have directed this program to infrastructure projects to increase its efficiency. The budget is 20 million GEL [$7.4 million],” said Tskitishvili. Municipal governments will oversee the implementation of program-funded projects. Last month, when talks of reinstating the program began, Deputy Minister Mzia Giorgobiani said that the program would be a sub-component of projects

to be implemented throughout the regions. “At the present stage, we are working with self-governmental entities in order to, through the direct involvement of the population, ensure that projects are properly selected,” said Giorgobiani. The concept was first developed in 2009, under then-President Mikheil Saakashvili. In 2014, it was repackaged through a budget resolution on the Village Support Program, under Article 19 of the Law "On the 2014 State Budget." 50 million GEL [$18.4 million] was allocated from the state budget to implement various projects in rural areas, including infrastructure, water supply, and road repairs. The new budget allotted approximately 2,000 GEL ($735) per village. To enhance the effectiveness of the program in 2014, the program introduced the new stipulation that the allocated funds must only be spent on the construction and rehabilitation of local infrastructure and amenities, for equipment of buildings for general use and procurement of long-term use equipment. There are other special state programs to fund projects related to historical monuments, social/cultural and religious facilities, and to purchase agricultural goods and services. The program

Image source: Ministry of Regional Development and Infrastructure

also expressed the goal of reducing ruralurban migration by increasing funding to high mountain villages to improve infrastructure and promote job creation. Then-Minister of Regional Development and Infrastructure Davit Narmania announced the program, saying “We call on the residents of the villages to participate in the process actively in order

to resolve the problems they are facing in their own villages.” The program was shuttered in 2016 during a round of government reforms. “We have explored the program defects. All details will be specified in the discussion process,” Tskitishvili said in a statement on Friday. The original program financed an aver-

age of 100 projects a year, which were chosen by the village residents themselves at community meetings. There has been significant demand from local authorities and politicians to resume the program, with claims that the Ministry of Regional Development and Infrastructure has been neglecting rural infrastructure needs in favor of large-scale projects.

The World Commemorates the End of World War One BY EMIL AVDALIANI

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ne hundred years ago, World War One ended. This November, world leaders will gather in France to commemorate the end of the conflict which ushered in a century of wars and large ethnic cleansings, unraveling of empires, World War Two and the subsequent Cold War between the US and the Soviet Union. Even though the commemoration in France will serve as a unifying motive between the various leaders, the world has in fact been divided as never before in the period which followed the end of the “Great War.” It all began on June 28, 1914 in Sarajevo, then the center of Bos-

nia, a province annexed by AustriaHungary in 1908. On that day, Gavrilo Princip, a member of the ultranationalist group “Black Hand” stood on the corner of Appel Quay and Franz-Josef Strasse eating a sandwich. The 19-year-old Bosnian Serb was part of a group of assassin students called the Young Bosnians who were trying to capitalize on Archduke Franz Ferdinand’s trip to Sarajevo. Heir to the AustriaHungary throne, Ferdinand was visiting Bosnia to attend military exercises, and when the Young Bosnians heard of his visit, they smuggled semi-automatic pistols and handheld bombs over the Serbian border. Their first attempt to assassinate Ferdinand ended with a bomb rolling off the side of the Archduke’s car killing a few bystanders. A motorcade carrying Ferdinand and

his pregnant wife, Duchess Sophie Chotek, took a wrong turn on Appel Quay, and Princip was given a second chance to carry out what the conspirators had agreed on. Two shots killed the couple, and the assassination catapulted Europe into World War I. The conflict killed millions and swept several of the major monarchies off the European continent. The Russian Empire, stretching from Vladivostok to Warsaw, broke up, losing the South Caucasus, almost the entire Ukraine and the Baltic States, while the hinterland of the country was at full-scale civil war between Reds and Whites. The mighty Germanspeaking world of two German and Austrian empires was shaken to its core: while the German Empire with its monarchy simply ceased to exist and its territory was truncated from east and west,

the Austrian empire was dismembered. The same happened to the Turkish Empire. Victorious France and Great Britain occupied the entire Middle East, and during the Versailles Conference (1919) they did not even invite the German and Russian sides (so important for securing a long-term European peace) to negotiate their rights. As a result, Germany was floored by having to pay huge military reparations and was unable to sustain its economy.

EXTREMISM World War I spawned perhaps two of the most violent ideologies in world history: Nazism and Communism. This was a reaction, primarily, to the difficult economic situation those countries found themselves in following the war. All of Hitler’s electoral messages had one theme: to reverse the Versailles Treaty. Communists had the same agenda. The essential point here is that both countries were excluded from the European peace settlement. The failure of the League of Nations (precursor to the modern United Nations) should be explained primarily by this fact. Revisionist Berlin and Moscow wanted another world conflict and the Molotov-Ribbentrop pact should be seen through this lens. Ideology-driven regimes form an essential part of European history: a number of Asian countries (China, Cambodia, Vietnam) too saw extremists rise to power. The destruction of Hitler’s Third Reich ought to have brought about a more peaceful world. Instead, we saw a second round of ideological conflict between the democratic and communist powers led by the USA and USSR. Both of them were doing the same things: invading foreign countries and financing local democratic/communist parties to topple governments in power. In the end, the

Communist bloc broke up and the world was again enthralled with the prospect of long-term peace.

BACK TO MODERN DAYS When the world leaders gather in Paris this month, the question they will face is whether the world has become a more stable place than it was 100 years ago. There are disturbing indications that all runs contrary to this assumption. Over the past 27 years, we have seen dozens of large-scale wars around the world. The world nowadays sees many similarities to what was happening in the pre-1914 political order. Beyond actual conflicts, today we see how a number of regional powers aspire to achieve a larger geopolitical stance in the region, which is always bound to cause tensions with future repercussions. Russia has increasingly stepped up its influence on her immediate neighborhood. Her relations with the West are in shatters and her economy is weak, making the country more willing to ease the pressure through foreign policy maneuvers. More importantly for killing the post-Cold War order is China’s aspiration for a much bigger role on the Eurasian landmass – an initiative which goes against the US’ geopolitical imperatives. The Arab Spring, supposed to bring about the freedom of the Middle East, culminated in the bloody Libyan and Syrian wars with tens of thousands of casualties. The United Nations cannot ensure every right of a state, big countries often bully their small neighbors, and as a result, large-scale warfare persists whether in Central Africa, the Middle East, or even in Europe itself (Ukraine). 100 years on from the end of the World War One, this November the world leaders in Paris can easily grasp how less safe the world has become in the past decade.


BUSINESS

GEORGIA TODAY NOVEMBER 6 - 8, 2018

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University of Westminster Hosts Georgian Studies Day

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n November 1, the University of Westminster hosted ’Georgian Studies Day' (GSD) co-organized by the Embassy of Georgia to the UK. In light of the centenary of the First Georgian Democratic Republic, the all-day event was dedicated to the topic - "Georgia’s Independence 1918-1921: Then and Now". The conference was opened by its founder and convener Dr. Tamara Dragadze, who invited Prof Peter Bonfield, Vice-Chancellor and President of the University of Westminster, Professor Andrew Linn, Head of the Liberal Arts and Sciences college (UoW) and Dr John Murphy, Head of the School of Life Sciences (UoW) for their welcome remarks. Keynote speaker HE Tamar Beruchashvili, the Ambassador of Georgia to the UK, gave a general

overview of the main topic – the role of the First Democratic Republic as a unique experiment of democracy and the first European social democratic state, which formed a foundation for the modern Georgian state and society. Jonathan Djanogly MP, Chair of the All Party Parliamentary Group on Georgia, talked about the role and importance of the UK-Georgia bilateral high level format called ‘Wardrop Strategic Dialogue’. Eric Lee, author and journalist presented several topics from his recent book: ’The Experiment: Georgia’s Forgotten Revolution, 1918-1921’. In his talk ‘Declaration of Georgia’s Independence: Why the 26th of May?,’ Giorgi Kobakhidze, Counsellor of the Embassy of Georgia, elaborated on the main factors and geopolitical developments sur-

rounded the declaration of Georgia’s independence. Dr. Gillian Evison, Head of the Bodleian Libraries’ Oriental Section and Chair of the Marjory Wardrop Fund, talked about the rich collection of Sir Oliver and Marjory Wardrop preserved at the University of Oxford and what this legacy means from today’s perspective. Professor Peter Lydyard and Dr Nina Porakishvili, GSD co-conveners from the University of Westminster gave a lecture: “Education and Science: a Century of Change”. Representative of the Georgian Orthodox Church Father Giorgi Trapaidze spoke on the topic “The Georgian Apostolic Autocephalous Orthodox Church”. Jason Osborn, founder and director of the Georgian Film Festival in London, gave a presentation on ‘Independent Georgian Filmmaking from the End of the Czarist Empire to the Post-Soviet World Today’, followed by Peter Nasmyth with a slide-

show “Independence and Mountain Communities”. Keti Kalandaze from the British Georgian Society talked about recently launched Georgian language classes at the University College London and overviewed some major projects of the BGS. The audience traditionally heard reports on annual activities within existing twinning schemes: Bristol-Tbilisi, Newport-Kutaisi and Newcastle-Akhaltsikhe. An update on the Mkurnali Charity was also presented. A documentary ‘Chronicles of Independence’ was screened during break between the sessions. An exhibition dedicated to the First Democratic Republic, featuring its achievements, initiatives and personalities, was also presented during the conference by the Embassy of Georgia. Georgian Studies Day is a traditional format which explores various Georgia-related topics. The University of Westminster annually hosts the GSD conference with a specific theme. This year the conference was held for the 31st time.

Tbilisi Fashion Week Spring/Summer 2019 Featured in Vogue Italia

BY SHIRIN MAHDAVI

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bilisi Fashion Week Spring/Summer 2019 wrapped up last week and has already been covered internationally. The fashion event was recently featured in Vogue Italia in a piece by Vogue Italia contributor Lorenzo Sabatini. Designers from this season’s Tbilisi Fashion Week were selected for Vogue’s Talent selection. In his piece, Sabatini began by praising the relatively new institution of Tbilisi Fashion Week. He noted the Tbilisi and Georgian fashion industry’s aim to reach and make a name for itself in new and global markets and not solely with neighboring countries. And this season’s fashion week in par-

ticular made for some promising emerging talents for Vogue’s Talent selection as well as the Tbilisi fashion industry’s goals of broader recognition. The first talent selected was Korsava. The 25 year old designer’s collection for Tbilisi Fashion Week Spring/Summer 2019 was titled “Post-Apocalypse.” As the theme of Fashion Week was “We Must Take Care of Nature,” Korsava’s pieces reflected environmental concerns with looks “characterized by a minimalist approach in acid and cherry red tones, mesh tank tops and trench coats.” Another designer featured in this season’s fashion week and highlighted by Vogue was English designer Rosella May. Her work was geared more toward social issues, specifically mental health. The clothing in her collection housed a “sporty appeal, her prints inspired by the Rorschach test ,usually employed by therapists and psychiatrists, are quite interesting, as well as the tops and mini-skirts crafted from denim leftovers.” Lasha Devdariani was also chosen by Vogue’s Talent selection. Devdariani sources his fabrics from West Asia and Georgia in an attempt to promote more humble and environmentally-friendly fashion production practices. His bohemian-style caftans are among his most popular pieces and part of what helped him be chosen by Vogue. Finally, TSITE was also among the designers selected by Vogue’s Talent selection. “Bringing attention to national tradition, in this case translated into contemporary apparel featuring comfy and loose-fitted proportions, is the main aim of the Tamara Tsiteladze, a brand that caught the eye courtesy of the skilled draping, inserts and asymmetrical dresses of the SS 19 collection, ‘Midnight Floating’.” Tbilisi Fashion Week only just began in 2009 but is already gaining the international attention it desired and deserves. Not only is Tbilisi Fashion Week and the Georgian Fashion industry becoming a household name in the fashion world, but with environmentally and socially-conscious designers put on the spotlight at Tbilisi Fashion Week Spring/Summer 2019, the institution is also shining a light on significant problems in our society. h t t p s : / / w w w. v o g u e . i t / e n / v o g u e - t a l e n t s / news/2018/10/26/fashion-georgia-tbilisi-fashion-weektsite-laura-devdariani-rosella-may-korsava/

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Issue #1098 Business  

November 6 - 8, 2018

Issue #1098 Business  

November 6 - 8, 2018

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