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facebook.com/ georgiatoday

Issue no: 996/103

• NOVEMBER 7 - 9, 2017

• PUBLISHED TWICE WEEKLY

FOCUS ON THE IBF

Find out top motivational speaker Haseeb T Hasan's take on Georgian business

PAGE 6

PRICE: GEL 2.50

In this week’s issue... First B2B Exhibition of Social Enterprises Held in Tbilisi NEWS PAGE 3

ISET-PI GDP Growth Forecast Predicts 4.7% Real Growth in 2017 ISET PAGE 4

Impact Hub: The Year That Was

Increased Prices Affect Inflation Rate BY THEA MORRISON

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n October, the monthly inflation rate amounted to 0.8%. Compared to the same period of the previous year, the Consumer Price Index change ( CPI - annual inflation rate) posted a 6.4% increase. The data was presented by the National Statistics Office of Georgia (Geostat), which says that the monthly inflation rate was mainly influenced by price changes for food and non-alcoholic beverages. In October, prices for said items increased 1.6 % and contributed 0.46 percentage points to the overall CPI change. Geostat says that prices were comparably higher for the following subgroups: vegetables (11.5 %), milk, cheese and eggs (3.2 %), oils and fats (1.1 %). Meanwhile, prices for fruit and grapes went down (-3.0 %).

The prices also went up for clothing and footwear. In this group, a 6.5% increase in prices was observed, which had an upward effect of 0.19 percentage points on monthly inflation. Prices increased both for footwear (12.0 %) and clothing (3.6 %). Annual inflation was mainly influenced by price changes for the following groups: Food and non-alcoholic beverages - prices increased 7.4%, contributing 2.21 percentage points to the annual inflation. Transport - prices in the group increased 14.7%, contributing 1.83 percentage points to the annual inflation. Alcoholic beverages and tobacco - prices increased 17.6%, with a relevant contribution of 1.13 percentage points to the overall index growth Health - prices were up 5.8%, which resulted in a 0.5 percentage point contribution to the overall annual inflation.

BUSINESS PAGE 8

China to Rapidly Reform its Electric Vehicles Market BUSINESS PAGE 9

Assessing the Russian Power across the Post-Soviet Space, Part II: Uzbekistan

POLITICS PAGE 11 Prepared for Georgia Today Business by

Markets Asof03ͲNovͲ2017

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111.86(YTM4.88%)

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103.23(YTM5.34%)

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62,07

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1269,91

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3,0239

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3,4073

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7560,35

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0,0054

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157,26

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0,0966

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1126,18

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0,8615

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2587,84

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0,7647

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MSCIEMEE

MICEX

2081,15

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1,0007

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2861,70

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59,0564

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1133,66

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3,8875

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GTIndex(USD)

922,38

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NEWS

GEORGIA TODAY

NOVEMBER 7 - 9, 2017

Georgia, Guest Country at Warsaw Security Forum BY MALGOSIA KRAKOWSKA, POLAND

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he two-day Warsaw Security Forum kicks off on Wednesday 8 November in Warsaw, Poland and is to feature a high profile visit from Georgia’s president Georgi Margvelashvili. Over 30 delegates from Georgia will participate in the event. "We are proud to have Georgia as an official guest country at the Warsaw Security Forum with President Georgi Margvelashvili as special guest who will deliver remarks on the second day of the Forum,” Program Director of the WSF, Dr Katarzyna Pisarska told GEORGIA TODAY. The Warsaw Security Forum serves as a platform for dialogue on the security policy between EU, NATO, and Russia, and is committed to the strengthening of understanding of transatlantic security and cooperation. This year’s meeting brings together 120 speakers and over 500 guests from all around the world. Dr Pisarska emphasized that today, Poland is growing into the role of Georgia’s representative in Europe.

"Poland strongly endorses Georgia’s aspirations to become a member of both NATO and the EU. Our bilateral relations have been traditionally strong, but have further intensified in the last few months, with Poland becoming an outspoken advocate of Georgia's pro-Western course," Dr Pisarska reiterated. Georgia's presence is not only demonstrates the country's strong commitment to NATO and EU, but also showcases Georgia as a model to follow for other countries in the region. President Margvelashvili is among numerous dignitaries set to attend. Other notable guests include OSCE Secretary General Thomas Greminger, Lithuania’s Foreign Minister Linas Linkevicus, Poland’s Finance Minister Mateusz Morawiecki, Head of Poland’s National Security Bureau Paweł Soloch, Czech Defence Deputy Minister Daniel Kostoval, former PM of Tunisia Mehdi Joma, and former Bulgaria’s Foreign Minister Daniel Mitov. The first edition of the Warsaw Security Forum took place in 2014. The event is organized by the Casimir Pulaski Foundation, an non-partisan think-tank specializing in foreign policy and international security. WSF 2016. Photo source: Warsaw Security Forum Facebook

6.4 Million Int’l Travelers Visit Georgia January-October

Photo source: bpn.ge

BY THEA MORRISON

A

round 6.4 million international travelers visited Georgia in January-October 2017, according to data published by the Ministry of Internal Affairs of Georgia (MIA). The Information Analytical Department of the MIA claims that in October, 607.989 travelers visited Georgia, which is a 15.2% increase compared to the same period in 2016.

In particular, in the January-October period, the number of visitors amounted to 6.430.824, which is 1.016.180 tourists more year-on-year (y/y), a growth of 18.8%). The number of tourists in ten months amounted to 3.042.907 visits, which is 28% more y/y. The majority of visitors in October came from Armenia (+12.7%), Azerbaijan (+9.1%), Russia (+30.3%), Turkey (+2,4%), Ukraine (+2.3%) and Iran (+76.8%). In East European countries, Belarus leads with visitors to Georgia at a 28% increase. The number of visitors from the United

States increased by 25% in said 10 months. The head of the National Tourism Administration, Giorgi Chogovadze, stated at the press conference that the positive trend of growth has also been maintained from European Union countries, with the UK at 40% growth, Austria +36.8%, The Netherlands +34.6%, France +30.4% and Germany +29.1%. “According to the data of the second quarter of 2017, income from foreign tourists amounted to $658.7 million (growth +27.8%), which is $143 million compared to the data of the previous year," Chogovadze said.


NEWS

GEORGIA TODAY NOVEMBER 7 - 9, 2017

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First B2B Exhibition of Social Enterprises Held in Tbilisi BY NINO GUGUNISHVILI

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he first ever Business to Business (B2B) exhibition of social enterprises opened on November 3, at Garden Hall, Ilia Garden Tbilisi, aiming to establish business partnerships between local social enterprises and the leading companies in Georgia. The event was also designed to raise awareness of the social entrepreneurship concept, and help the overall development and promotion of social enterprises in the country. The B4B exhibition was organized by the Center for Strategic Research and Development of Georgia (CSRDG), with Social Enterprise Alliance-Georgia as co-organizer of the event. It was held within the EU- and Bread for the Worldfunded ‘Social Entrepreneurship - Innovative Approach for Economic and Social Changes’ project which is ongoing until 31 January, 2019. “The goal of the event is to introduce social enterprises and their potential to the business sector in the country. You’ll see a lot of social enterprises which have extremely interesting concepts and products, and who are competitive,” Eka Datuashvili, Head of the Social Entrepreneurship Program at the CSRDG told GEORGIA TODAY. We are surrounded by the testament

to that potential; stands showcasing everything from handcrafts, beautiful wooden toys, natural products ranging from wine and honey to natural juices, and gift cards and paper-recycling services. “These products made by social enterprises can very easily be accquired and used by the business sector, and there will be a dual benefit to doing so,” she tells us. “On the one hand, they will get the products they need and on the other other hand through their acquisitions policy, the businesses can achieve greater social impact and help solve many of the problematic issues in our society. That’s why we chose a B2B format for this exhibition, enabling potential partnerships to be launched between social enterprises and the business sphere. I believe that this can be the start of very productive collaborations,” she added. “Social enterprises are often regarded as a kind of a charity in Georgia, when in reality it is a business with a social mission and goals,” Natia Metreveli, Public Relations Manager at the CSRDG, told us. “The incomes they receive are then used for social needs again. We would like the business sphere to become more active and involved. We have so many social enterprises represented here, and it’s great to know that many of the public and private sphere companies already expressed their interest to cooperate with social enterprises”. “We recycle paper waste and make

Green Gift Stand at B2B Exhibition

numerous products from it; stationery that can be used in offices; calendars, wrapping paper and more,” said Dato Janelidze, General Director of Green Gift social enterprise. “At today’s event we expect to expand our reach and raise awareness of waste paper recycling”. Anna Goguadze, founder of Mziuri Café social enterprise, shared her personal views on social enterprises in Georgia. “Large business are still not supporting

social enterprises to the extent they can, being a social enterpreneur is as yet quite new as a concept in Georgia and many don’t even know what it means,” she said, adding that the B2B exhibition gave her a chance to communicate with other social enrepreneurs and that she hopes to get more business representatives interested in potential partnership. Kote Svanadze, the founder of social enterprise Kodala, producing ecologically clean wooden toys, said their enter-

prise was created four years ago, and actively employs people with disabilities and people from socially vulnerable groups. He told us their products are available in many supermarkets throughout Tbilisi and they have their own shop on Leselidze (Apkhazi) Street. “We’ve already planned four meetings today and we hope they will be successful. Social enterpreneurship clearly needs more promotion and awareness-raising in Georgia,” Svanadze said.


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BUSINESS

GEORGIA TODAY

NOVEMBER 7 - 9, 2017

ISET-PI GDP Growth Forecast Predicts 4.7% Real Growth in 2017 BY DAVIT KESHELAVA & YASYA BABYCH

I

SET-PI has updated its forecast of Georgia’s real GDP growth rate for the fourth quarter of 2017. Here are the highlights of this month’s release: • Recently, Geostat released the preliminary estimate of the real GDP growth for the third quarter of 2017. The Q3 growth rate now stands at 4.4%, which is 1.5% below the ISET-PI’s last

TRADE, REMITTANCES AND TOURISM The external sector had a large and positive effect on the GDP forecast. A surging demand from the neighboring countries dramatically boosted Georgia’s exports: 27.3% relative to the same month of the previous year. Imports of goods and services increased only moderately by 5.5% in yearly terms. As a result, the trade balance (net-export) improved by 4.3% (trade deficit was reduced by 427.3 million US Dollar, see the graph below). In addition, remittances inflows and tourism maintained double-digit growth in September.

Money inflow increased by 23.8% compared to the same month of the previous year, while the number of tourists (visitors staying in Georgia for more than 24 hours) increased by 24.8% yearly.

NATIONAL CURRENCY DEPOSITS OF VARIOUS MATURITIES IN COMMERCIAL BANKS Nearly all types of national currency deposits increased significantly both in yearly and monthly terms between August to September. Demand Deposits, Time Deposits, and Time Deposits with maturity less than 3 months increased dramatically by 65%, 63% and 181% respectively compared to the same month of the previous year. The increase was palpable, but much more moderate for the large and very liquid National Currency Current Account, which went up “only” by 10% yearly and 5% monthly. The only variable that experienced a decline in this group was Time Deposits with maturity more than 12 month (decreased by 23% in yearly terms). Thus, the aggregate measurement of the national currency deposits – National Currency Total Deposits - increased by more than 38% yearly.

DEPOSIT DOLLARIZATION A variable which is related to national currency deposit accumulation and also influences the ability of NBG to conduct monetary policy is Dollarization Ratio of the total non-bank deposits. This variable was reduced by 0.1 percentage

Source: National Bank of Georgia (NBG)

forecasted value. As a result, the estimated real GDP growth for the first nine months of 2017 amounted to 4.7%. • ISET-PI revised its forecast of real GDP growth for the fourth quarter of 2017 to 4.6%. • Based on September’s data, we expect annual growth in 2017 to be 4.7%. This number is in line with the National Bank of Georgia’s growth forecast for 2017 (the forecast was recently revised by NBG upward from 4% to 4.5%). According to the latest Monetary Policy Report, the upward growth revision is based on the improved trade balance, increased consumption and investment, supported by rising money inflows and improved business confidence. Since our last forecast, a few changes in the economic data landscape stand out as significant:

Source: National Bank of Georgia (NBG)

points to 65.4% in September. (In the meanwhile, Dollarization Ratio of the total credit portfolio was reduced by 0.6 percentage point and amounted to 56.7%.) From the standpoint of our forecast, even a slight reduction in deposit dollarization ratio is welcome news, as the accumulation of national currency deposits increases national savings, investments and fosters economic growth in the long run. Indeed, we can see from the forecast that an increase in the National Currency Deposits related variables had a positive contribution to the GDP growth projection.

CURRENCY IN CIRCULATION The other set of variables that had a significant positive effect on our forecast is related to currency in circulation. The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on September 6th and decided to leave the policy rate unchanged at 7%. NBG also did not intervene in the foreign exchange market in September. However, all monetary aggregates, including the largest Broad Money (M3), increased significantly

(by 4% monthly and 19% yearly) in September. The largest yearly increase was observed for Monetary Aggregate (M2) which went up by 22% relative to the same month of the previous year. Moreover, Currency in Circulation itself increased by 14% in yearly terms.

EXCHANGE RATE MEASURES The depreciation of the Real Effective Exchange Rate (REER) had a small but negative contribution to the Q4 real GDP growth projections. REER depreciated by 4% monthly and 5% yearly in September (see the graph below). The Lari Real Exchange Rate (RER) depreciated monthly with respect to the national currencies of the United States (3%), Russia (5%), The EU (4%), and Turkey (4%). Theoretically, the negative impact of REER depreciation should not be surprising, given that the overall impact of REER on real GDP growth is ambiguous. Nevertheless, the negative impact of lari depreciation in September was likely quite small and counterbalanced by significant growth in the external sector variables.

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 the 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.

Source: National Bank of Georgia (NBG)

10 Galaktion Street

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


6

BUSINESS

GEORGIA TODAY

NOVEMBER 7 - 9, 2017

Finding the Strength to Take Risks: IBF Speaker Hasan on Inspiring Georgian Businesses EXCLUSIVE INTERVIEW BY MATE FOLDI

City Center is 4-star hotel in the center of Tbilisi City. With our wonderful staff and service, the hotel is packed to the brim with that world renowned Georgian culture, cuisine and hospitality- everything you need to make your stay perfect! Want a top location and calm environment? Hotel City Center is the place for you! Feel the comfort of stylish and tastefully decorated rooms: City Center provides the ideal place to unwind or catch up on work. Explore the different types of rooms and choose a space that's right for you. Whether it’s time for a board meeting and trainings or you need a fitness club to work out in, be sure that you’ve found the perfect place. And that’s not all! We know that dining is not only about food; it’s also about atmosphere and good service, and that is something we at City Center hotel pride ourselves on, so come along and try out our restaurant and café.

H

aseeb T Hasan, has lived in Dubai for the past 18 years with his wife and business partner, Zaufyshan, and over the past 21 years, through their organization Intek Solutions UAE, they have designed and provided one-on-one coaching to hundreds of CEOs, leaders, executives, singers, actors, politicians and celebrities. Many people have ranked their “Motivational Skills” amongst the highest of all techniques of training that they employ and more than 50,000 people have benefitted from their facilitation. He and his wife were Masters of Ceremonies at the recent Tbilisi IBF Sales Conference which was attended by more than 300 corporate executives. GEORGIA TODAY spoke to Haseeb to find out more.

TELL US ABOUT YOUR BACKGROUND AND WHAT YOU DO

Address: Queen Tamar Avenue #24 Website: www.citycenter.ge Email: info@citycenter.ge

I am 59. I grew up in Lahore Pakistan, which was once a very different place from what it is now, very much like Georgia today. I went to the best schools, college and the USA. My background was in finance: I got my education in Texas before going back to Pakistan, and later Singapore, to work at various multinational companies, including British American Tobacco, Merril Lynch, LU Biscuits and others. In 1996 I decided I wanted to do something on my own, rather than spend the rest of my life working for somebody else. My wife joined me and it’s been 21 years that we have been helping people and organizations around the world. I like to motivate and inspire people, so I decided to move to the field of training and development and developed my own material and content. Today, our company, Intek Solutions, runs trainings on leadership, managements, sales, personality development, communication skills, negotiation skills, presentation skills, a whole range of different “soft skills” with the goal of improving the lives and motivation of our clients in 29 countries. Georgia is our 30th destination. We prepared for the IBF event by doing our homework. Now we understand several aspects of Georgian culture that even many Georgian might not be aware of. Study of cultures is an integral part of our profession and passion in life – to impact lives positively.

IS THERE A UNIVERSAL FORMULA THAT CAN BE APPLIED IN YOUR FIELD TO BRING THE BEST OUT OF INDIVIDUALS? When I was first invited to Georgia to develop and design in-house training programs last year, I spent considerable time exploring the country and taking note of gaps and challenges for the Georgian culture. There is no one fixed formula: we change and improvise according to our audiences’ needs. Customization is our biggest USP (Unique Selling Point). Our strategy is to motivate our audiences and rekindle that fire in their bellies which has been put out over years of working in the corporate sector: the strict procedural, mundane, routines of corporate life often kills or greatly diminishes this crucial fire inside people once they’ve been a part of the system for too long. We work at bringing that innovation and creativity out, making them dream again, acquire new, healthier productive habits, and unlearn their old, unhealthy, unproductive ones – barriers to further success in life. Everyone has issues, but it’s all about getting to ‘know yourself’. Indeed, our training workshops are all about self-awareness, developing actual tools on how you can motivate yourself and others, and have a better life both at home and in the office.

ON YOUR 4TH VISIT TO GEORGIA, WHAT KIND OF INSIGHTS AND CONCLUSIONS HAVE YOU BEEN ABLE TO DRAW ABOUT THE GEORGIAN BUSINESS SECTOR? Georgian culture is one of the most unique and authentic cultures remaining on this Earth. For a long time now, the country has been invaded by the foreigners around them. So the Georgian culture, especially of the older generation who have lived through the Communist era, where Georgian culture was suffocated, became extremely ‘safety oriented,’ with the intention of protecting their families and children. They had no choice but to try and survive. Unfortunately, no outsider can help them if Georgians don’t help themselves. I say, ‘Wake up Georgians: you are a free country now! You just need to believe in your pure self. You are one of the best places left on this Earth to live- clean water, clean air, non-GMO tasty fruit and vegetables, amazing wines, breath-taking nature, and hospitality I’ve never seen anywhere else before!’ When we talk about sales, business development, entrepreneurship, real value-adding activities in

an economy, people are shy because of that safetyoriented culture, and this kind of mindset is not going to get the country anywhere. We need to overcome this insecurity in our minds if we are to move forward. “Risk-taking” and “motivation” need to replace “safety”, as the go-words, because this a serious hinderance to the potential of this country. I seriously believe Georgians have a very unique responsibility of preserving their traditional values of respect and unconditional helping spirit rather than doubting each other within. Doubt and fear came from outsiders : it’s not a true Georgian characteristic. The threats Georgia is now facing is that the Americans, Chinese, and Europeans are coming in, the country is opening up and to fit the international standards, certain gaps need to be filled. However, this can only be done with the successful leadership of those controlling the money and power; organizations need a purpose that is greater than simply making money; people need a cause higher than themselves; people need to visualize a future that preserves their culture, because a ‘cultural rape’ is taking place as we speak. As things stand, Georgia, like large parts of the developing world, is at risk of losing its own culture, threatened by the prospect of being sucked into the international capitalist, money-making machine where people are conditioned to go to work for the sake of it, and where profit for the sake of profit is the ultimate goal, with a total disregard for traditional human values. This is one of the biggest challenges in Georgia today.

HOW TO MOVE FORWARD TO CHANGE THIS CULTURE? IS RELIGION TO BLAME? One shouldn’t touch people’s belief systems. I’ve seen a lot of cultures around the world where innocent people have been manipulated in the name of religion towards money making and power play to control innocent minds. This makes people very judgmental and less tolerant of others. The concept of God, unfortunately has been misused to inculcate fear in people, hence distancing religious rituals from actual spirituality. What you have to do is open their minds and make them realise that they have a certain type of ‘conditioned mindset,’ a need to unlearn a certain set of habits. Without going into specifics, our job is to facilitate a platform, to be a good channel for them, to visualise what the barriers standing in their way to success are. It is then their job to overcome them and find their own answers. So the answer to this question will vary from person to person. When we say that "we want to preserve the culture,” I’m not talking about religious culture, I am talking about people’s culture: the warmth, the hospitality, the trust. These cultural elements are much more alive outside Tbilisi, in the mountains and villages where the people are much more authentic and kinder : we need to preserve those cultures. I’m not worried about Tbilisi, because as a major city it is destined to follow the rut of commercialism and survival. Yes, they want to be Westernized, they want to be Europeans, and on the outside they might be, but their thinking patterns show great values ; values that we cannot forget to understand and appreciate, rather than always look to the West as an example. What we need to do is develop the country: foreign exposure is necessary but not to the extent that it changes them completely; rather, they should pick up only the elements that they need, and not the ones they don’t.

IS GEORGIA ON THE RIGHT TRACK? Yes. Georgia is opening its doors to foreign investment. Georgia’s annual growth is 4.3%, double that of any other country in the region. Prime Minister Kvirikashvili’s four-point agenda is a testimony of this, where modified income tax, governance, infrastructural projects, and investment in education are being focused on. Georgia is currently ranked one of the most reliable and business friendly environments in the region. The fact that Moody’s has already upgraded Georgia’s rating to one notch below investment grade shows that there is progress in the right direction. Now once that investment grade is reached, and if the skillset of the people of Georgia is not up to the mark, the multinational and commercially-driven organizations are going to start bringing in expats. The Anaklia port project worth $2.5 bn, will establish Georgia as a major port city in this world, especially linked to the Silk Road. The Silk Road was the past and will be the future. Right now, we are welcoming people, but there will come a point when, if the country isn’t geared up to the global standards of professionalism, the Georgian people will start to look at foreigners as a threat to their livelihoods. Georgians need extensive Training and Development to catch up to international benchmarks of being a ‘global player in an international market.


8

BUSINESS

GEORGIA TODAY

NOVEMBER 7 - 9, 2017

Impact Hub: The Year That Was EXCLUSIVE INTERVIEW BY MÁTÉ FÖLDI

I

mpact Hub is a global network that offers a wide variety of interesting projects for people of different professions and organizations, and brings a common workplace and space to its members. From Amsterdam to Singapore or from Johannesburg to Tbilisi, Impact Hubs can be found in over 100 cities around the world, with more than 20,000 members. It’s a place for enthusiastic, motivated individuals who are ready to share their experience to create a better tomorrow, who want to influence and have an impact on society development in any sphere, be it their city or their country. Impact Hub members benefit from a global community that brings guidance and access to resources, inspiration and collaboration opportunities which are shared through all the Impact Hubs worldwide for a growing positive effect on the world. It’s fair to say that, since it opened, Impact Hub Tbilisi has made quite an impact. GEORGIA TODAY sat down with Ketevan Ebanoidze, one of the founders, to pick her brain on the year that was. Not long after opening, she told GEORGIA TODAY that their goal was for Impact Hub Tbilisi to be “a place where new ideas are born, not just a venue or a space where you can simply work. We’re trying to connect all our members with each other and maximize the contribution of every member to the hub through the generation of new ideas and projects. We want to contribute to the process of civil society development, and we think that Impact Hub Tbilisi is an open and transparent place for that.” One year later, we asked her if she felt they’d achieved this goal. “Soon after opening, we realized that we had to work not only on promoting Impact Hub Tbilisi, but also on the concept of co-working itself, as working in an open space together with a diverse group of people is quite new for Georgians. If we compare the statistics of our members a year ago with the status quo, we can see a huge difference. For the most part, during the first several months of operation we had 70% international members; today, though, it’s the opposite: you will see even more Georgians than foreigners working at Impact Hub. So, one thing, though not the only one, that we are proud of is our successful promotion of the benefits of co-working in the local community. We are setting an example of how working together can lead to successful collaboration opportunities”.

HOW DOES IMPACT HUB WORK TOWARDS HELPING THE LOCAL COMMUNITY AND FOSTERING INCLUSIVE DEVELOPMENT? We decided that we wanted to contribute to the development of social entrepreneurship in our country. To that end, we started to explore different kinds of programs and projects that Impact Hubs all around the world were implementing: we found the Social Impact Award (SIA), an international program initiated by Impact Hub Vienna, to be the most interesting. The program aims to promote social entrepreneurship among youth, and is the best tool for the development and implementation of social business ideas. The Social Impact Award is run by 18 countries and is a 10-month educational program with different stages. First, we held an allinclusive and open series of workshops that were attended by over 200 students, after which the participants and non-attendees alike could submit their project proposals. Seven teams were then selected, consequently undergoing a very intensive incubation period between June and July under the tutelage of very experienced and qualified mentors, allowing them to develop prototypes of their projects. Finally, the jury narrowed down their finalists to three winners, who received not only a monetary prize but also the opportunity to attend the SIA summit, which brings together all the winners from each of the 18 countries. We are very proud of our winners, whose amazing ideas are dealing with pressing social issues and presenting very innovative solutions to solving these problems.

IS YOUR MEMBERSHIP CHARACTERIZED BY A DISTINCT DEMOGRAPHIC OR HAVE YOU BEEN ABLE TO INVOLVE AND ATTRACT OLD AND YOUNG GENERATIONS ALIKE? Our community actually consists of a wide-ranging age group: from students all the way to people in their sixties, so it’s definitely not just the youth getting involved with Impact Hub. We try to engage with different channels to reach a broader audience: we’re very active on social media, as well as on

mainstream media and have built up an extensive contact database who are informed in a monthly newsletter about the latest happening at Impact Hub. We have a diverse events calendar that might be interesting for any age group. For instance, last month we started a new series of events called “Meet the Ambassador”. These events involve the heads of diplomatic missions to Georgia being invited to Impact Hub and being given the floor for an informal interactive session with youth and all other interested people. As our first guest speaker, we had the honor to host Justin McKenzie Smith, the Ambassador of the United Kingdom. We had a full house. Our second speaker was the Ambassador of Turkey to Georgia, Zeki Levent Gümrükçü, with his inspiring and impressive talk.

WHAT STEPS ARE YOU TAKING TO ENSURE THAT THE IMPACT OF IMPACT HUB IS AS INCLUSIVE AS POSSIBLE? FABRIKA AND IMPACT HUB ARE HERE TODAY AS A RESULT OF THE GENTRIFICATION OF TBILISI. WHAT KIND OF EFFECT HAS THIS HAD ON THE NEIGHBOURHOOD? Gentrification is a very difficult and perhaps controversial issue to talk about, given that it can bring a lot of positives and negatives to the areas affected. With respect to Fabrika and Impact Hub, I believe that it has gone a long way towards actually helping the neighborhood and benefiting the local community. You know, before Fabrika was built, this part of Tbilisi was lifeless: nothing was happening here. Now it has become a lot more popular with a greater flow of tourists and business, which has resulted not only in greater economic capital but also an increase in the creative capital of locals as they look to come up with new business ideas to tap into the attention that Fabrika has brought to the area.

LOOKING TO THE FUTURE, WHAT PLANS DO YOU HAVE TO CONSOLIDATE AND BUILD UPON THE SUCCESS OF THE LAST YEAR? First, we are going to take advantage of the widespread success and interest that was shown towards the Social Impact Award by having another edition in 2018. This year only Tbilisi and Telavi were involved in the program; our aim for 2018 is to expand the program into more cities and regions of Georgia. Besides, increasing our involvement with youth, women empowerment is another issue that we will be working on; we are currently formulating ideas for a project that focuses on helping empower young women living in the more conservative areas of the country. Furthermore, we’re continuously working on member engagement. Once a month, we host community meetings where all members are welcome to share their experiences with each other, in an informal setting with a glass of wine in hand; it’s something that we’ll be continuing, as it is very important to keep the community united. Finally, we’re collaborating with different organizations on a local as well as international level. For instance, we just organized a Students’ Startup Boot Camp in Kutaisi together with Garage 48, an Estonian organization that runs hackathons all over the world. The next Boot Camp will be held in Batumi in November. This is just a small taste of things to come at Impact Hub. It goes without saying that the year ahead will be fantastic and full of amazing projects and events as we look to build upon the success of the last twelve months. Stay tuned!


BUSINESS

GEORGIA TODAY NOVEMBER 7 - 9, 2017

9

High Numbers of Foreigners Establishing Businesses in Georgia BY TOM DAY

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eorgia has seen an increasingly large number of foreign citizens choosing to build businesses here in recent years. In 2017, The World Bank ranked Georgia as the 4th best country for ‘starting a business’, out of 190 other nations. What is it about the ex-Soviet country that is so appealing to them? I met this weekend with Thejus Thomas, the owner of a recently opened hostel, to find out. He began by telling me how he and other foreign citizens see Georgia as a country that is developing very quickly and has a lot of opportunity because of this. “Georgia is growing, we think it will soon be part of the EU, so more travelers will be coming here. Now is the time to build a business, while it is cheap and there is a lot of opportunity, because the future should see a big return.” After the collapse of the Soviet Union, in a clever move to bring capital into the country, it was the idea of former president Mikheil Saakashvili to get rid of bureaucracy for people wanting to set up a new business. Mr. Thomas went on to talk about his own experience of this. “In Georgia, it is very easy to setup a business. It is very fast.” In fact, you can register a new business in just one day in Tbilisi. He added that “no big investment is

needed to set anything up. In other countries, you need a substantial investment.” So, how did he discover Georgia, being all the way over in India? Word-of-mouth, of course! “A friend told my father about it, so we looked it up online and decided to go for it. When we got here, we met other Indians who said the same thing and helped us to get started”. He seemed happy to be here, running a business, and his face bore a luminous smile as he provided his answers. I wondered if he could tell me anything negative. He pondered, but the only problem he could think of was the occasional language barrier. “If I go to a place like the markets, I have a real problem with communication. Sometimes English isn’t enough”.

We quickly moved to his favorite thing about Georgia, which he declared was “the food. I love the national dishes, Khinkali and Khachapuri, and how the fruit and vegetables are always fresh. In India, they inject chemicals to keep them fresh, but here it’s all natural. The same goes for the wine!” So, it seems the work of the former president has succeeded. With minimal start-up costs and negligible bureaucracy, Georgia is growing very quickly. Foreigners are recognizing this, and are coming here in high numbers, that are sure to increase in the coming years. The country has changed miraculously in the last two and a half decades, setting a strong example for its neighbors.

China to Rapidly Reform its Electric Vehicles Market BY DIMITRI DOLABERIDZE

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f the People’s Republic of China (PRC) continues to increase its sales of electric vehicles at the same rate as it does today, then in the short term it is set to become the absolute leader in the spread of this type of transport. The benefits of electric vehicle ownership operating in the PRC in recent years have "spurred" the demand for an environmentally friendly mode of transport so that even after these privileges are "curtailed" it does not fall, but, on the contrary, continues to grow. In September, approximately 2.7 million cars were sold worldwide, 78 thousand of which are those that use alternative energy technologies: hybrid engines and electric batteries. Compared with September 2016, this was a 79% increase in sales. From January to September this year, Chinese citizens purchased 398 thousand electric vehicles, which implies an increase in sales of almost 40% y/y. Local manufacturers produced 424 thousand electric

vehicles, and it turns out that if this amount is subtracted from exports, then virtually all electric vehicles are bought by the Chinese themselves. Moreover, the September demand for electric vehicles outperformed production. In September, 77 thousand electric vehicles came off the assembly line, up from 55 thousand in August (+68% y/y). Thus, China again broke the record. The leader in sales is the BAIC EC-Series, followed by the city electric car Zhidou D2 EV, and in third is off-road car the BYD Song PHEV. In order to combat the serious environmental threat of pollution, China has set a special quota for the share of electric vehicles: by 2019 they should make up at least 10% of total vehicles being driven in the country, and by 2020 at least 12%. According to the plans of the Chinese authorities, which were voiced earlier, local automakers will be able to supply about three million electric cars per year to the market annually by 2020, and by 2025, 7 million. And this is the fifth of the total production of cars in China. It was also reported that in 2018 China will be able to produce up to 1 million electric vehicles.


10

BUSINESS

GEORGIA TODAY

NOVEMBER 7 - 9, 2017

Consultation & Innovation with Future Lab EXCLUSIVE INTERVIEW BY NINO GUGUNISHVILI

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uture Laboratory, is a newly founded consultancy company with an ambition to transform Georgian business innovatively and support it by creating new innovative business models to enable companies to meet challenges as they arise. GEORGIA TODAY talked to Irakli Kashibadze, Future Laboratory’s founder and CEO, to find out more about his new venture and what the innovative consultancy his company proposes is all about.

TELL US ABOUT THE FUTURE LABORATORY. HOW DID YOU COME UP WITH THE IDEA? The idea for Future Laboratory came after the process of analysing one of the apparent problems which exists both on the Georgian market and in the region. The world is developing at an ever-increasing speed. There are companies and startups emerging that, with their innovations and novelties, are pushing the powerful companies off the market in a very short period of time. This tendency has reached Georgia already. Although it may not be seen by many, Facebook and Youtube are the most visible examples of how the advertising revenues have been taken away from Georgian TV or Radio stations, and how print publications are vanishing. Think about AirBnB, a global site competing with hotels, or about Taxify or Yandex Taxi, that operate on the UBER principle. The world is changing, but in Georgia and in the region, business representatives often think that their business models will last forever, which is not the case. Alternatively, many companies have technical challenges that can be solved through innovation and that’s exactly how the idea of creating Future Laboratory, a con-

sultancy company, was born. We are here to help Georgian and Regional businesses, universities and governments make an innovative transformation, change their business models and potentially answer the challenges they face. Our company also assists businesses in optimization and development through innovations, enabling them to save on resources with the help of scientific inventions and expertise. I think the most important thing we have is very competitive knowledge and experience. I personally have 19 years’ experience working in the technologies and innovation field. Future Laboratory is the first company of innovation consulting which ensures support in the process of digital transformation for compa n i e s , u n ive rs i t i e s a n d eve n governments.

It’s about the human expertise and practical experience we’ve gained. We created the Georgian Inovation and Technology Agency (GITA) from zero; we’ve built two techno parks and nearly 10 innovation laboratories; we’ve launched the programs Startup Georgia and Startup Friendly; and, of course, we have important international contacts. Secondly, it’s in the methodologies we apply for the innovative transformation of the companies. It’s also in our aspiration to be a successful global company able to compete with famous international brands. We’re constantly developing and our structure is developing, as are the processes enabling us to meet world challenges.

WHAT IS THE CONCEPT AND HOW DOES IT WORK?

Of course, from the very beginning, our company was a startup with no analogue on the Georgian or regional market and it was difficult to develop through traditional approaches. We were functioning as a startup but we corrected at each and every step on the way: today we can see an increasing demand on our services. The speed with which we work gives us an advantage on both local and regional markets.

Firstly, we conduct innovation audits. An innovation audit brings the existing “blind spots” to life and also shows the development potential the companies have. On the basis of the first audit, we then move to either optimization and development through innovations in the company, or to assisting them establish new directions.

WHAT DO YOU OFFER CUSTOMERS AND WHAT ARE THE AREAS THAT FUTURE LABORATORY COVERS? Right now, we’re actively working in the banking, agriculture spheres and production. Our company also works in the area of innovation ecosystem development: these are international projects. We’ve been successfully collaborating with the Government of Moldova, assisting in the construction of three technologocal parks and their innovation ecosystem development.

WHAT MAKES FUTURE LABORATORY STAND OUT?

WAS IT DIFFICULT TO START? WHAT MAKES FUTURE LABORATORY COMPETITIVE ON THE MARKET?

WHICH OF THE PAST OR CURRENT PROJECTS WOULD YOU HIGHLIGHT AS A SUCCESS? Alongside consulting, we’ve added new directions: innovative infrastructure management and an education (Future Specialities) dimension. In terms of innovation infrastructure management, we’ve already launched the innovation center ‘Startup Factory’ at the University of Georgia, and are managing it now. Also, we founded the Technology Transfer Center. Each of these projects have very interesting projects within them. In the education sphere, we’re collaborating with Buckswood School in Tbilisi,

making future lab’s where children can learn professions of the future. In terms of consulting, we’ve been successfully collaborating with the biotechnology sector, assisting a Georgian company to create a business model for a new product and others. In Moldova, a Techno Park is being built based on the Georgian concept and it’s great to know that Georgian knowledge and experience has spread to another country.

WHAT ARE YOUR FUTURE PLANS FOR THE DEVELOPMENT OF FUTURE LAB? We’re still a startup, so our goal is to create many successful cases seeing us helping companies to the fore by implementing innovations. Establishing new and improved products, services and business models is the only way forward for companies, for universities and even for governments to develop.

EFTA & Georgia: Prospects & Opportunities BY NINO GUGUNISHVILI

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eptember 1, 2017 marked the entry into force of the Free Trade Agreement between Georgia and the European Free Trade Association (EFTA) member states Iceland and Norway, with the ratification procedures for Switzerland and Lichtenstein to follow. GEORGIA TODAY talked with Alvaro Borghi, Deputy Head of Mission, Swiss Embassy in Georgia, about this landmark agreement and prospects and opportunities arising from it. “The entry into force of the Free Trade Agreement is regulated bilaterally and it entered into force on September 1st, 2017, for Georgia, Iceland and Norway. Switzerland and Liechtenstein still have to complete their internal ratification procedures,” he told us. “That said, our internal procedures are almost complete since the Swiss Parliament approved the Agreement in September 2017 without opposition. We assume that we’ll be ready to notify completion of our internal requirements early next year, which means the Agreement can enter into force in spring 2018”. On the opportunities available for Georgia after signing the EFTA agreement, Borghi stated that “a free trade agreement can be considered one of the three ‘pillars’ of the framework conditions which states offer to (private) economic actors. Switzerland and Georgia have already concluded, in the past, agreements covering the two other ‘pillars’, with a convention to avoid double taxation (2010) and an agreement on

investment promotion and protection (2014)”. He tells us that the purpose of signing a free trade agreement in 2016 was to avoid discrimination against economic actors which are active in the Georgian and Swiss markets, notably in comparison with the beneficiaries of the EUGeorgia Deep and Comprehensive Framework Agreement, which was signed two years prior. “For Georgia, this agreement with EFTA countries is part of a series of numerous free trade agreements signed in the past years, which includes, for instance, the EU and China. It helps to open the Georgian market to the world and to avoid its dependence on a limited set of countries. In practice, it will allow Georgian producers to export their goods under better conditions. And it will probably allow Georgian consumers to benefit from Swiss products at a better price,” Borghi said, add-

ing that, from a broader perspective, the agreement will also serve the development of Georgia, since it is expected to lead to an improvement of the standards according to which Georgian goods are produced. Asked about the differences between the Georgia-EFTA and the Georgia-EU free trade agreements, Borghi emphasized that the agreement with the EU is a deep and comprehensive framework agreement of which the free trade agreement is one part. The agreement with the EFTA states focuses on free trade issues and does not touch upon Georgian trade-related laws, as the agreement with the EU does. “One of the main reasons Switzerland was so interested to conclude a free trade agreement with Georgia was to avoid discrimination. We are happy that our economic operators will more or less have the same conditions on the Georgian market as the EU operators,

once the agreement enters into force,” he emphasized. While the EFTA agreement covers diverse sectors from trade in goods and trade in services to protection of intellectual property rights and government procurement, we also wanted to know from which sectors, in his opinion, Georgia could potentially benefit most. “A lot of Georgian exports will receive preferential treatment when the agreement enters into force. Interesting potential exists, for example, in the area of mineral water and nuts. Generally, the FTA provides for predictability and legal certainty which will benefit Georgian economic operators,” he answered, going on to say that Georgia has undertaken commitments which it can actually fulfil, and that’s why there should be no provisions of the agreement which Georgia will struggle to meet. “Our goal is that, over the next few years, it will lead to an increase in trade volume in terms of goods and services, as well as to an improvement of the quality of exchanged products. We also hope that trading between our two countries will become easier,” he told us. “Though, it will probably take some years before a real trend in this direction can be observed. This is true for all free trade agreements”. “I would like to stress one key element: the agreement itself merely creates opportunities: it is up to the private sector to take advantage of them! In the meantime, the authorities will continue working to improve the economic framework conditions,” Borghi told us. “For example, negotiations on a Swiss-Georgian agreement on the protection of geographical indications started in August this year”.

We also spoke to a Georgian producer about the advantages and benefits of the EFTA agreement and, more specifically, what entering the European market means from an exporter’s point of view. Iago Bitarishvili, founder and owner of Iago’s Wine, a small, boutique winery in the village of Chardakhi, Kartli, makes organic Qvevri wines and Chacha. He started exporting his wine to the European market in 2006. “The European market is one of the most comfortable, as it’s extremely stable and so are the partners we have,” Bitarishvili told us. “Free trade agreements bring enormous possibilities to us. Even though we may not yet be able to fully realize these opportunities, we’re slowly establishing ourselves and our places on the European market,” he says. Iago’s Wines are available in Switzerland, France, Italy, Denmark, Spain, Germany, the UK, Australia, Japan and the US. “Our wines are niche wines: we export 5,000 bottles a year, primarily distributed in top hotels and wine bars and restaurants in Europe,” he says. “10 years ago, the major problem was awareness, the Russian market was closed and the local market was not functioning. Georgian wine was barely known beyond the region and we were unable to reach the European market. But slowly everything changed. I think that this sphere is surely developing and moving in the right direction, it just needs more time to reach its full potential,” he concludes. As Alvaro Borghi said, it is now up to the private sector to fully benefit from the opportunities the EFTA agreement has to offer.


POLITICS

GEORGIA TODAY NOVEMBER 7 - 9, 2017

11

Assessing the Russian Power across the Post-Soviet Space, Part II: Uzbekistan BY EMIL AVDALIANI

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t has been in Russia’s core interests to have Uzbekistan as a close partner, as the country arguably has the most strategic location in the region. Uzbekistan shares borders with all Central Asian states (Kazakhstan, Kyrgyzstan, Tajikistan and Turkmenistan) and Afghanistan, and also sits on a big part of the agriculturally rich Fergana Valley, with a sizable population as well as oil and natural gas deposits. This has resulted in, at times, difficult relations between Tashkent and Moscow since the break-up of the Soviet Union. Yet, its strategic location as well as large resources have enabled Uzbekistan to always successfully resist Russian pressure to enlist Tashkent into CSTO or the EEU. Despite foreign policy issues with Moscow, Uzbekistan’s long time president Karimov, in his 26-year reign, managed to leave the CSTO in 2012 after four years as a member. Although Karimov has notoriously bad relations with almost all his neighbors, it was under his rule that the foundation of Uzbekistan’s non-alignment policy was laid. This largely conditioned Russia’s behavior towards Uzbekistan, and Moscow has big economic interests in the country. As a reflection of this, in early April 2017, Uzbek and Russian companies signed 16 $3.5 billion-worth agreements and when the Uzbek president visited Russia, another $12 billion-worth of projects was signed. Further, a new five-year natural gas contract was signed between the countries. Russian and Uzbek delegations also reached an interesting agreement on facilitating Uzbek labor migrants’ stay in Russia. Perhaps somewhat related to this, later in May, the Russian ministry of internal affairs announced it would open an office in Uzbekistan to better control the flow of migrants into Russia. Russia is also interested in taming radical Islamism and its followers, which are often recruited from

Central Asian workers visiting Russia. Among the Central Asian states, Uzbekistan has been notorious as there were several examples of Uzbeks involved in terror attacks across Europe, including the one in the St. Petersburg subway this year. Beyond grassroots terrorism, on a wider geopolitical level, Russia is worried that the Central Asian region could be engulfed by instability. This prompts Moscow to seek better relations with Uzbekistan, including closer military and security contacts, as the country borders on volatile Afghanistan. Perhaps a good reflection of this geopolitical imperative is the first military exercises (which started from October 3rd in Forish training facility, about 250 km southeast of Tashkent) since 2005 between the two countries.

CHINESE MOVES

ities in the region and Putin himself endorsed the BRI in his statements. However, there are reasons for the Kremlin to be worried in the longer term as China has already surpassed Russia in becoming Uzbekistan’s primary economic partner and investment source. For instance, this May, Uzbekistan signed $20 billion-worth of agreements with China, dwarfing the Russian moves mentioned above. China, like Russia, is also worried about the potential instability in Central Asia and the spill-over into Xinjiang (a restive Chinese province populated with Muslim Uighurs). Here again, military and security cooperation with Uzbekistan would serve Beijing’s interests, but Uzbekistan so far has been careful not to entangle itself in any Chinese security initiatives as this would negate the notion of Tashkent’s nonalignment policy. Overall, even though China frames its BRI and the

ensuing economic projects in Uzbekistan not as a competition with Russia or other regional powers, but simply as a possibility to better reconnect the Central Asian region, still some geopolitical questions remain. How long will Moscow react as its economic clout recedes? Bearing in mind the economic potential of BRI, the fundamental weaknesses of the Eurasian Economic Union, what will Tashkent choose in the pursuit of economic growth? It is likely that Russia and China will pursue closer economic and security ties with Uzbekistan, as both powers remain concerned with transnational terrorism, potential US encroachment, and Islamist recruitment. Nevertheless, Uzbekistan is unlikely to make radical moves towards rejoining CSTO or the EEU, or siding with Beijing. Tashkent will continue unbound by alliances, giving it more leverage and a freer hand in its foreign policy.

Although Uzbekistan has its own economic and military potential to remain non-aligned and to withstand Russian pressure, there is another player, China, which not only balances Russia, but also wants to increase its own influence over Uzbekistan. To Beijing, Uzbekistan represents a centerpiece of its Central Asian policy. Here again, as in the case of Russia, Uzbekistan’s geographic position and the country’s rich gas and agricultural resources play a big role. Moreover, when China unveiled its ambitious BRI in 2013, Uzbekistan was noted as an important element in one of the corridors which would connect China with the neighboring sub-regions. Chinese politicians are clever enough not to position themselves as opposing Russian influence in Uzbekistan. Indeed, an overview of Chinese analytical reports on the BRI and statements by Chinese officials show that Beijing is more concerned with other powers such as Japan, India or the US which could challenge the project in Central Asia. In comparison, the Chinese are less inclined to think of Russian opposition to the BRI in Central Asia, and Uzbekistan in particular. Indeed, Moscow has not expressed any worries over growing Chinese activ-

Ambassador to Greece: Crimes Committed by Georgians in Greece Harm Mutual Relations

Georgia’s Special and Plenipotentiary Ambassador to Greek and Serbian Republics, Ioseb Nanobashvili. Photo source: Imedinews.ge

BY THEA MORRISON

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eorgia’s Special and Plenipotentiary Ambassador to Greek and Serbian Republics, Ioseb Nanobashvili, stated that the main problem in the relationship between Georgia and Greece is the crimes committed by Georgian citizens there. The ambassador made the statement while commenting on the increasing number of crimes committed by Georgians in the country. “It goes without saying that this issue is seriously harmful to our country and its image, as well as to the embassy’s activities,� Nanobashvili said, adding that such crimes hinder the process of negotiations between the two states. “Such cases also create a very negative background and mood among the Greek people towards Georgians,� the ambassador’s address reads. Nanobashvili stated that despite the reality, the embassy has been conducting an ongoing dialogue over the issues.

“We demand the rights of Georgian citizens be protected despite the serious crimes they are accused of. We also demand no false or vague information to be reported on our compatriots that are charged for crimes,� the Ambassador added. Crimes committed by Georgians have increased in Greece of late. Around a week ago, Greek media reported that three Georgians robbed and tortured an 85-year old pensioner in the outskirts of Athens. Soon after the incident, the local police detained seven Georgians, including the three who had allegedly tortured the woman. Georgian broadcaster Rustavi 2 TV reports that, according to the Greek police, those arrested for torture and robbery had been convicted for a similar case in the past, but their sentence at the time was shortened and they were released. “It is believed that the same group of Georgians has links with around 30 robbery cases in Athens. The police believe the robbers have accomplices and are working to identify them,� Rustavi 2 reported.

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Three mobile conference halls are available with a total capacity of about 100 persons. (XURSHDQFXLVLQHFDQEHHQMR\HGLQWKHJURXQGĂ€RRUFDIp and a grill-bar menu in the roof top restaurant with panoramic views over the city. The International Hotels Management Company “T3 Hospitality Management,â€? providing the hotel management, has 20 years’ experience in hotel management in different countries globally.

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Issue #996 Business  

November 7 - 9, 2017

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