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Issue no: 1166/188

• JULY 9 - 11, 2019

• PUBLISHED TWICE WEEKLY

FOCUS

ON RUSTAVI 2

A journalist's insult of Putin causes uproar and protests

PAGE 2

PRICE: GEL 2.50

In this week’s issue... Weekly Entrepreneurial News @entrepreneur.ge NEWS PAGE 2

Georgia’s Economy in May: So Far So Good, “Gavrilov Effect” Yet to Be Seen ISET PAGE 4

Plan for Kutaisi Airport Rail Station Scrapped BUSINESS PAGE 5

Kremlin Tells US to Mind Own Sanctions before Criticizing Russia's Travel Ban on Georgia

Tourism Admin Head: Georgia May Lose 1 mln Tourists after Russian Ban on Flights

BUSINESS PAGE 5

Annual Inflation Rate Equals 4.3% in Georgia BUSINESS PAGE 10

“Gastronaut” Puts Georgia on World Gastronomy Map

BY THEA MORRISON

G

eorgia’s National Tourism Administration (GNTA) Head Mariam Kvrivishvili says that the Russian travel embargo on Georgia will likely lose the country around 1 million tourists this year. Kvrivishvili said Georgia had expected around 1,700,000 Russian tourists to come to Georgia. “The 2019 six-month data shows the country has already hosted 700,000 Russian tourists, which means that as a result of [Putin’s] travel ban with Georgia, which took effect on July 8, the country will lose around 1 million tourists and GEL 2 billion (around $ 713,979,722) income.”

BUSINESS PAGE 9

What Singapore Can Teach Georgia POLITICS PAGE 11 Prepared for Georgia Today Business by

Markets Asof05ͲJulͲ2019

Image source: Travel in Georgia

The GNTA head also said that talks that the embargo will not hit the Georgian economy are “unserious.” She says other factors also contribute to the reduction of Russian tourist inflow, including direct propaganda from the Kremlin, which claims that Georgia is not safe for Russians, and constant traffic jams at the Lars checkpoint on the Georgian-Russian border. “Tourism agencies operating in Russia are a direct source of business for our tourism sector. They were cooperating with our tourist companies and booking hotels, transport and guides. These people, according to our information, have been contacted by specific structures in Russia and told to cut tours to Georgia,” she said. Continued on page 3

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NEWS

GEORGIA TODAY JULY 9 - 11, 2019

Rustavi 2 TV Host Gabunia Offends Vladimir Putin during His Show @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: Kazbegi View is the dream-come-true of three friends, Ani Alibegashvili, Vasil Manjavidze and Iako Papukashvili. Ana had prior experience in the hotel business: Step in Kazbegi, a hotel launched a year ago, quickly became one of the go-to destinations for tourists. The high demand was followed by Kazbegi View- three premium-class cottages located in Kazbegi. Boasting outstanding architecture and stunning panoramic views and individualism, Kazbegi Views should be on your must-visit list, with the landscapes framed by floor-to-ceiling windows sure to be a sensation to treasure. Elselema, a clothing and uniform-producing company with two factories in Tbilisi and Lanchkhuti, is expanding. Elselema started producing/exporting products for international brands such as “Koton”, “Moncler”, “Damat” and “Chameleon” years ago. Now, it has samples ordered by Prada. Elguja Mamasakhlisi, founder, notes that the focus on the quality of products is their main success. The portfolio of the company includes military uniforms, uniforms for police and guards, waterproof clothes, feather jackets, everyday clothing and knitted products for men, women and children. The company is to add two new lines and recently launched special belts for the Swiss police. The innovative liquid Elixir was launched through cooperation with an Austrian scientist. Giorgi Zviadadze, co-founder of the company, offers a multi-use product good for personal hygiene, and the health of animals, birds, and plants. The ecologically clean, high-tech solution has already been exported to eight countries, including India and Finland. Production takes place in Georgia, in a factory boasting nearly 100 employees, and holds safety and quality certification. Zvidadze announced plans to produce an energy drink “having a positive impact on the human health.” 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

BY GT TEAM

O

n Sunday night, the host of Rustavi 2’s program ‘Post Scriptum,’ Giorgi Gabunia, commenced his show with a statement addressed to Vladimir Putin, the President of the Russian Federation. The monologue, very offensive to Putin in both form and context, was read in Russian by Gabunia. The short statement included but was not limited to swearing at Putin’s dead parents. Citizens and politicians were quick to respond. “What Georgian society has witnessed today on Rustavi 2 is categorically unacceptable! I profoundly categorize this television message as a provocation containing the greatest threat against the peace and security of Georgia. Every sensible person will view this fact as a manifestation of a politically, utterly dangerous provocation,” said the country’s Prime Minister Mamuka Bakhtadze. “It is a war of provocateurs against their homeland, a dirty and outrageous game putting the security of the state and citizens at stake.” President Salome Zurabishvili also released a statement condemning the comments. “Our way is the peaceful way, our perspective is Europe and our strength is stability. This move either serves as provocation for a new war or as a revenge for unfinished revolution! Either way, it is an act against one’s country!” A group of civilians gathered around the Rustavi 2 TV building at 11 PM on Sunday night and remained until 4 AM on Monday morning, threatening Rustavi 2 journalists, demanding an investigation into Gabunia’s swearing and for he and Rustavi 2 General Executive Nika

Gvaramia to be fired. Amid the protests, Rustavi 2 was taken off the air from 2 AM to mid-morning Monday. Gvaramia made a public announcement prior to the protest: “After Gabunia’s show, I think Rustavi 2 owes an explanation to the public. While I share the pathos and am not going to apologize for the swearing at Putin…, I want to stress that expressing one’s self in this manner is unacceptable. That is not the channel’s attitude, nor does it follow our editorial policy nor professionalism. The show’s copyrights go to Gabunia [meaning no content is controlled before the broadcast], yet the channel is disappointed and unsatisfied, as such statements do not complement our media code.” On the protests, Gvaramia’s comments became political: “This is not a spontaneous gathering of protestors – this is a government organized protest. Here, we see familiar faces who are constantly

played by pro-Putin Government,” reads the statement. “Whatever mistake it was that Gabunia made [while admitting that it was quite big], we will not sacrifice one of our most pro-Western and honorable journalists to please this proPutinist mob. No one will resign. This mob represents Russia in our country, as does the government.” Timur Shafir, Executive Secretary and International Director of the Russian Union of Journalists, commented on Gabunia’s speech, calling it an eccentric ploy of an inferior individual, which “has no connection with journalism.” Shafir told Ria Novosti that the behavior of the Georgian journalist was unprofessional and disgusting. Dmitry Peskov, the Spokesperson of the Russian President stated “the insults addressed to Putin and the Russian Federation are absolutely intolerable and we condemn them.” Protests were set to resume outside the Rustavi 2 studio on Monday evening.


BUSINESS

GEORGIA TODAY JULY 9 - 11, 2019

Finding Solutions to Protracted Internal Displacement in Georgia Tops Agenda of Conference

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epresentatives of the ministries and state agencies, donor community, UN agencies, civil society and IDP communities gathered in Tbilisi on July 5 to discuss the national legislation, policies and strategies on internal displacement and challenges faced in Georgia, including in the breakaway regions of Abkhazia and South Ossetia. Guided by the 20th Anniversary of the Guiding Principles on Internal Displacement, the conference on Internal Displacement discussed the ways forward to addressing the protracted displacement and supporting solutions. The Conference was opened by the Deputy Minister of Internally Displaced Persons from the Occupied Territories, Labor, Health and Social Affairs of Georgia, Grigol Giorgadze. "We look forward to continuing working together with all key ministries to support efforts that help internally displaced persons find livelihoods, education opportunities, and self-reliance so they can find their own durable solution," Sabine Machl, UN Resident Coordinator in Georgia, said in her welcome remarks. Yoko Akasaka, UNHCR Regional Representative a.i. in the South Caucasus, joined her by stating, “Georgia should be praised for having made significant progress and achievement in support of IDPs. However, a number of challenges still remain when it comes to durable solutions. We all, including government, NGOs and IDPs themselves, need to work together in search of new and alternative approaches to support their self-reliance and achieve solutions.” The Conference created an effective platform for harnessing international experience and practice in securing durable solutions for IDPs in Georgia.

The United Nations Special Rapporteur on the Human Rights of Internally Displaced Persons, Cecilia Jimenez-Damary, focused on a Plan of Action for Advancing Prevention, Protection and Solutions for Internally Displaced People 2018-2020. The Plan outlines four priority areas for the next three years: participation of IDPs; national laws and policies on internal displacement; data and analysis on internal displacement; and addressing protracted displacement and supporting durable solutions. The conference was organized by the United Nations and the Ministry of Internally Displaced Persons from the Occupied Territories, Labor, Health and Social Affairs of Georgia with the assistance of the UN Refugee Agency (UNHCR).

Alexandre Zazarashvili Wins The Voice Kids of Ukraine BY KETEVAN KVARATSKHELIYA

O

n July 7, Alexandre Zazarashvili, 12-year old singer from Georgia, won the large-scale contest The Voice Kids of Ukraine. Zazarashvili was coached by the Ukrainian pop duet Vremya i Steklo (Aleksey Zavgorodniy and Nadya Dorofeeva) during the show. At the final concert, the young singer took to the stage with three songs, “Once in the Street” of famous Nino Katamadze, the Ukrainian song “Люди, як кораблі”, as well as world-renowned “All by Myself” of Eric Carmen. The latter was also chosen by Zazarashvili for the Blind Auditions, through which he caught the eye of all the judges, as well

Image source: Facebook

as thousands of spectators of the The Voice Kids show. He was considered a contest leader from the start. Alexandre Zazarashvili was also the semi-finalist of Ranina in 2018, Georgia’s method of selection for Junior Eurovision.

Tourism Admin Head: Georgia May Lose 1 mln Tourists after Russian Ban on Flights Continued from page 1 Kvrivishvili says Georgia cannot afford experiments to see how the country will manage with no Russian tourists at all. “This is why we are doing our best to reduce the risks and effects of the Russian sanctions to the minimum,” she told Week of Forbes. She also said she had held meetings with the representatives of the tourism sector throughout the country to better estimate the consequences of the sanctions. "We were in Ajara, Batumi, Kakheti, and Kutaisi, as well as in the capital. Our problem and challenge is the private sector. Ajara and the seaside towns face the biggest challenge because a large number of reservations have been cancelled. Regrettably, in Kakheti, we have no better situation as the majority of bookings have been cancelled,” she noted. Kvrivishvili says the private tourism sector is asking for measures to be taken to hold on to the Russian market as it is the largest consumer of Georgian tourism services. She said that a detailed action plan will be presented soon. The recent data published by the Georgian National Tourism Administration reads that Russian tour-

ists amounted to the largest part of visitors that Georgia hosted in June 2019. In total, Georgia received 471,979 tourists last month, which is 71,990 visits more compared to the same time last year. In addition to this, in January-June 2019, Georgia hosted 3,862,444 international travelers, which is 8.4% more compared to the same period of 2018. The GNTA reports that in June, the number of visits from Russia increased by 30.8%. The list of top origin countries with the most visitors to Georgia last month is: • Russia (+30.8%) • Turkey (+45.8%) • Azerbaijan (+8.8%) • Armenia (+9.7%) The National Tourism Administration also said that tourism plays one of the main roles in the country’s economy, adding that in January-May 2019, international tourism revenue reached $1.1 billion, which is $101 million more compared to the same period of 2018. Russian President Vladimir Putin signed a decree banning Russian airlines from flying to Georgia and vice versa on June 21 in response to large-scale anti-Russian occupation rallies in Tbilisi.

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BUSINESS

GEORGIA TODAY JULY 9 - 11, 2019

Georgia’s Economy in May: So Far So Good, “Gavrilov Effect” Yet to Be Seen BY DAVIT KESHELAVA AND YASYA BABYCH

I

SET-PI has updated its forecast of Georgia’s real GDP growth rate for the second and third quarters of 2019. Here are the highlights of this month’s release: • ISET-PI’s growth projections for the second and third quarters of 2019 were revised upward by less than 0.1 percentage points. They now stand at 4.8% and 7.5% respectively. • Geostat has increased the estimate of the average real GDP growth for the first quarter of 2019 to 4.9% (by around 0.2 percentage points). • Recently, Geostat published its preliminary estimate of real GDP growth for May 2019, which now stands at 4.7%. Consequently, the estimated real GDP growth for the first five months of 2019 is 4.9%. • Based on May’s data, we expect annual growth in 2019 to be 5.5% in the worstcase or “no growth” scenario, and 5.9% in the best-case or “average long-term growth” scenario. Our “middle-of-the road” scenario (based on average growth over the last four quarters) predicts 5.6% real GDP growth in 2019. Based on the available data, the growth forecast for the second and third quarters of 2019 reached 4.8% and 7.5% respectively. These high forecast figures can be explained by the fact that quarterly growth rates typically follow a certain pattern, captured by ISET-PI’s empirical forecast model. Thus, the higher-than usual growth in the first quarter may result in an overly optimistic forecast about the next quarter’s performance. Indeed, ISET PI’s forecasts for Q2 and Q3 are largely influenced by the high Q1 actual growth. Yet, looking at the economic landscape from the standpoint of the May data, several variables changed significantly and affected growth predictions in different ways. In particular, favorable economic conditions in the neighboring countries, improved trade balance, remittances, and international tourism contributed to the overall growth projections, while higher-then-targeted inflation and restricted consumer lending dampened the growth forecast.

The beginning of 2019 showed strong growth in the wider region. According to the rapid estimates of real GDP growth, most of the countries in the region experienced significant acceleration of economic activities in the first four months of 2019. The Armenian economy advanced by 7.3% annually, while the Russian and Azerbaijani economies grew on average by 1.2% and 2.8%, respectively. Thus, improved economic conditions in the wider neighborhood stimulated the Georgian economy though trade, remittances and tourism channels. In May 2019, Georgia’s total exports grew by 3.5% year over year (slightly decelerated growth rate compared to the earlier months of 2019), driven by the export/re-export of copper ores and concentrates (6.0 percentage points contribution to the overall export growth), higher re-exports of motor cars and packaged medicine (both accounts for 8.8 percentage points of the total export growth). Export of ferro alleys and wine to Russia, however, contributed negatively to the export statistics. The main destination markets for Georgian export products were Russia (14%), Azerbaijan (13%), Bulgaria (13%), Armenia (8%), Ukraine (7%) and Turkey (7%) accounting for 62% of total exports.

During the same period, imports of merchandise goods declined by 7.3%, driven by the import of petroleum and petroleum gases (negative contribution to the total import growth figure by around 1.1 percentage points), motor cars and telephone devices. The main trading partners of Georgia for imports were Turkey (19%), Russia (11%), China (10%), USA (6%) and Germany (5%), accounting for the 51% of total imports. As a result, the trade deficit narrowed by 14.4%, yearly to 417.7 million USD. Both remittances and tourism showed significant yearly increases in May 2019. Money transfers surged by 11.8% in the fifth month of 2019, driven by remittances from the United States of America (1.5 percentage points), Ukraine (51.2% annual growth), European Union (28.2%) including Italy (28.4%), Greece (24.6%), and Spain (24.1%). Notably, remittances from the Russian Federation (-1.7 percentage points) and Turkey (-1.5 percentage points) experienced a slight yearly decline. Nevertheless, Russia remains the top country of origin for money inflow, accounting for 24% of total remittances. The number of all type of visitors in May of 2018 increased by 14.2% year over year. Out of these, 69% were classified as tourists, and the growth rate of

these visits reached 18.0% annually. According to our model, both tourism and remittances had a significant positive contribution to the GDP growth forecast. However, From July 8th, Russia banned all passenger flights to and from Georgia, under the orders of Russian President Vladimir Putin. The „tourism embargo“ is not reflected in the data yet, but is expected to have a negative impact on real GDP growth in 2019. On the negative side, the increase in Consumer Price Index (CPI) dampened our growth predictions. In May, the annual inflation rate reached 4.7%, which is 1.7 percentage points higher than the targeted 3%. The main contributors to the annual price increase were: excise tax on tobacco (making the excise tax equal on filtered and unfiltered cigarettes ) and increased food prices, which contributed to annual inflation 1.3 and 2.3 percentage points respectively. However, one should note that this type of tax hike (excise on tobacco) can increase only the level of prices, not the inflation rate going forward (it is a one-time factor) and it is expected to be exhausted next year. It is worth mentioning that core inflation (inflation excluding the most volatile petroleum and food prices) remains at a low level of 1.1%. Our fore-

casting model still identifies the inflation rate increase as a negative contributor to future GDP growth. It is notable that we usually include Metals Price Index (PMETA) and the Agricultural Raw Materials Index (PRAWM) as explanatory variables in our forecast. The reason for adding these series is that metals form a significant share of Georgia’s exports, while food is one of the main import items. Therefore, a global increase in the price of metals should help the Georgian economy, while an increase in the price of agricultural produce is more likely to hurt it. In May 2019, metal and agriculture prices decreased by 9.4% and 3.3% respectively in annual terms. As was the case with other variables this month, the changes in these series turned out to have a very small (but overall negative) effect on our forecasted GDP growth in the second and third quarters. As mentioned in our previous report, new lending regulations could potentially have a negative impact on shortterm growth prospects. In May 2019, the total volume of commercial banks’ consumer credit increased by only 2.8% and 1.1% in yearly and monthly terms respectively. However, the volume of commercial banks' short-term consumer credits decreased by 63.7% in yearly terms (the main driver behind this negative trend being consumer loans in national currency). Whereas, the volume of commercial banks' long-term consumer credits increased by 16.9% yearly. Overall, the variables related to consumer credit have had a slightly negative impact on the current 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 (the 1st vintage) is available about five months before the end of the quarter in question. The last forecast (the 5th vintage) is published in the first month of the next quarter.

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BUSINESS

GEORGIA TODAY JULY 9 - 11, 2019

5

Plan for Kutaisi Airport Rail Station Scrapped BY SAMANTHA GUTHRIE

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he idea to build a railway station at the Kutaisi Airport was first floated in 2016, as the number of flights at that airport exploded, led by low-cost carrier Wizz Air. The initial idea was to connect the Tbilisi and Kutaisi airports via train. The existing train station at Tbilisi airport has a short link to Station Square, from which travelers can catch minibuses or buses to other destinations in the capital or go further by train, even to Armenia or Azerbaijan, while there is an existing railway station near Kutaisi airport, at Kopitnari, about one kilometer away. In October 2016, Georgian Railways spokesperson Dachi Tsaguria told Kutaisi Post that “Georgian Railways is currently researching whether the new airport-to-airport link will be effective and profitable. At the Tbilisi end, a rail line was completed a few years ago, but is hardly noticed by travelers due to its rare, twice-daily departures,” reported Railway Pro. In April 2017, then-Prime Minister Giorgi Kvirikashvili announced a oneyear countdown to the completion of the new railway line and station. In a dramatic ceremony, Kvirikashvili announced that “The countdown has started - in 364 days it will be possible to get in the Kutaisi International Airport on the new railway.” He inaugurated

a large digital countdown clock displaying the time until completion. By that time, the first three kilometers of foundation for the railway had already been laid. The estimated cost for the project was 10 million GEL ($3.6 mln). “Together with this station, Kutaisi International Airport will become the most important center, allowing all our citizens to enjoy affordable visa-free travel to Europe,” said Kvirikashvili. All trains traveling between Tbilisi and Batumi would have stopped at the Kutaisi airport station. The new railway was a part of the

government’s Four-Point Reform Agenda and the country’s new Spatial Arrangement Plan, developed in 2016 to modernize Georgia’s infrastructure and improve the flow of goods and people. In mid-2017, it was announced that the Kutaisi airport would be expanded to triple the passenger capacity. The expansion, which is budgeted to cost 26.4 million GEL ($9.5 mln), was initially scheduled for completion earlier this year, but the timeline has repeatedly been pushed back. Late last week, the plans were all knocked on their head when Deputy

Minister of Economy and Sustainable Development Akaki Saghirashvili came on Channel 1 news to announce that the new railway station will not be built at the Kutaisi airport. Instead, said Saghirashvili, the existing Kopitnari station will be renovated. “We will submit our plans to the government in the near future. German company ARGM has already finished exploration works and we will arrange railway communication with the airport. A shuttle will be provided for passengers by the airport [to connect the airport to the train station]. We have obtained promises from the

Roads Department that the road will be repaired and all trains moving between east and west will stop at the existing railway station,” he explained. The current infrastructure means that travelers generally travel by minibus or bus between the Kutaisi airport and Tbilisi or Batumi – the country’s main tourist destinations. If the transport schedules do not align, travelers may have to pay extra for a hotel room in Kutaisi, or take a taxi from the city center to the airport, which can cost as much as the trip between Tbilisi and Kutaisi.

Kremlin Tells US to Mind Own Sanctions before Criticizing Russia's Travel Ban on Georgia BY THEA MORISON

T

he Kremlin reminded the United States of their sanctions against Russia, when the latter criticized Moscow for imposing an embargo on flights with Tbilisi. The Russian Foreign Ministry released a statement in response to the United States Chargé d'Affaires in Georgia, Elizabeth Rood, who called the steps taken by the Russian leadership in connection with Georgia “unjust, unnecessary and disproportionate.” "The measures that Russia has taken recently when cancelling flights to Georgia, as well as calling on their citizens not to visit Georgia, were unfair, unnecessary and disproportionate,” she said. Moreover, the US Chargé d'Affaires also called on Russia to fulfill the obligations taken under the 2008 ceasefire agreement and allow humanitarian aid into the occupied territories of Georgia. Elizabeth Rood also responded to the statement of Deputy Chairman of the Russian State Duma, Pyotr Tolstoy, who said that the breakaway regions of Georgia, Abkhazia and South Ossetia [Tskhinvali], will never become part of Georgia again. Tolstoy made the statement in an interview with the Georgian TV company Rustavi 2. According to him, Russia has not occupied the mentioned regions,

Image source: Russian Foreign Ministry. Source: en.news-front.info

and is instead “supporting their independence.” In response, Rood said breakaway Abkhazia and South Ossetia are an integral part of Georgia. “Maybe the members of the Russian Duma say so, but we believe that Abkhazia and South Ossetia are an integral part of Georgia and the US firmly supports Georgia's territorial integrity,” she stated. The Russian MFA wrote on Facebook

that they “would like to remind Ms. Rood of what such ‘unfair, unnecessary and disproportionate’ measures are like. “A wide range of countries carrying out their independent foreign policies have fallen victim to this policy of the United States (a state which has been brandishing ‘a restrictions baton’ for decades),” they said. The Ministry highlighted that US sanctions have been in effect against Russia

uninterruptedly "since at least 1974" when the Jackson-Vanik amendment became law. The amendment linked the trade benefits between the two countries to free emigration from the Soviet Union. "It is evident that over the past 50 years, Russia has been viewed by the US establishment as an unfriendly state," the statement reads. Moscow also noted that, to date, the number of US "sanctions wars" against

Russia total 65. "Instead of mentor rhetoric about the Russian measures, which protect the lives and health of Russian citizens abroad, we would like to hear from Ms. Rood about ‘the fair, necessary and proportionate’ US restrictive measures that have been imposed over decades to exert pressure on our country’s foreign policy," they stressed. On June 21, 2019, Russian President Vladimir Putin signed a decree banning Russian airlines from flying to Georgia from July 8 in response to anti-Moscow rallies in Tbilisi. The Kremlin claimed the ban was to "ensure Russia's national security and protect Russian nationals from criminal and other unlawful activities” after largescale rallies were launched in Georgia following the arrival of Duma MPs in the Tbilisi Parliament on June 20. As Russian tourists amount to 25% of the Georgian tourism market, it is believed the country will suffer around a $700 million loss. In support of Georgia, like many other members of the diplomatic corps in Georgia and abroad, the US Chargé d'Affaires called on people to visit Georgia and spend their summer there. "I love most the natural beauty of Georgia. Georgia’s breathtaking landscapes are matched only by the richness of its history and culture and the hospitality of the Georgian people. Come spend your summer in Georgia and see for yourself!" reads her statement.


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BUSINESS

GEORGIA TODAY JULY 9 - 11, 2019

Strategic Philanthropy: Social Impact & Company Benefits BY KATIE RUTH DAVIES

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n recent years, Georgian companies seeking to develop their CSR (Corporate Social Responsibility) approaches are looking to become more strategic in their philanthropic initiatives. Lack of knowledge and experience in the field for creating such strategies and being able to correctly measure the impact that their donations have on the causes they choose to support hold many companies back from success. With this in mind, the Center for Strategic Research and Development in Georgia (CSRDG), with the support of the European Union and Konrad Adenauer Stiftung (KAS), on July 4 held a training for companies about ‘Strategic Philanthropy’ at Rooms Hotel in Tbilisi. The training was designed to assist Georgian companies to sophisticate their philanthropic programs and develop strategic approaches in order to achieve more significant benefits for society and for themselves. To deliver this essential training, the organizers chose Professor and Dr. Michael Hopkins, one of the “top 100 thought leaders in the world,” [Trust of America, 2013], CSR adviser for UEFA and Managing Director of MHC International, which offers CSR/Sustainability research and advisory services worldwide. He has worked in over 100 countries as consultant inter alia on CSR, training, and linking education systems to the labor market, and has written over 100 publications and 15 books in the field of Corporate Social Responsibility. Mr. Hopkins reads lectures in Geneva, Brussels, Great Britain, India, and America, and was more than happy to come and share some of his vast know-how with a small group of eager participants in Tbilisi- representatives of the banking, beverage, fashion brand, trade, startup, transport, and pharmaceutical sectors. “CSR is a complex notion, reflected in responsible business behavior in everyday operations. There is a misconception in many companies that philanthropy is CSR- yet it is but an element of what makes a good CSR strategy,” Hopkins begins. He then goes on to present the key questions a company should ask itself when considering or evaluating a new project as part of its CSR strategy. With each question, he gives illuminating examples from his many years of experience in the field, aiming to help the company representatives in attendance to prepare how to define focus areas for philanthropy programs, how to plan philanthropy programs with the view of the bigger picture to achieve more significant social impact, and how to align philanthropy programs with business goals in order to produce simultaneous social and economic gains.

IS THE PROJECT SUSTAINABLE? I.E. AFTER INITIAL INVESTMENT, WILL THE PROJECT CONTINUE AND EVEN GROW IN THE FUTURE? Here, Hopkins briefly touches on UEFA’s ‘Respect’ campaign, which aims to promote respect for those of different color, ethnicity and physical ability. But, he says, UEFA never adopted a full stakeholder model. “In the planning, they thought about players but not the management or media. The players, off-pitch, rarely speak about the values of RESPECT, nor do they embody those values in their social behavior, and this is picked up by the media. In short, UEFA in this has thus far failed to have a long-term view,” he says, going on to emphasize his own formula for a successful CSR strategy:

Evaluate continuously; Create guidelines to demonstrate your company has a business case for what you are investing in; Compare with a control group, evaluating through the example of others doing the same or through those who are not being affected by your project; Have a strategic approach to giving; and Consider sustainability and the long-term impact. I’ll use a final inspiring quote to close this piece, one which I feel encompasses much of Mr Hopkin’s advice of the day. This quote was given to the Harvard Business Review by Michael Porter and Mark Kramer: “Corporations are not responsible for all the world’s problems, nor do they have the resources to solve them all. But a well-run company can have a greater impact on social good than any other institution or philanthropic organization.” And this goes for a wellrun CSR strategy too!

Treating Key Stakeholders Responsibly.

WHAT CONTRIBUTION TO DEVELOPMENT DOES THE PROJECT MAKE? ARE STEPS BEING TAKEN TO REPLICATE THE PROJECT’S SUCCESSFUL OUTCOMES? Hopkins speaks about a good friend of his, Bob Monroe, who in the process of his work came across a group of youth playing football at the edge of a Nairobe slum housing 1 million people. They were playing with an old plastic ball and were surrounded by mountains of trash. “Bob, intrigued, asked them why they didn’t clear their play area of trash,” Hopkins tells us. Their answer, perhaps familiar to many in Georgia, was “it’s not our responsibility to clear it up”. Bob then employed the “I do something for you, you do something for me” technique and gave the boys two days to clear up in exchange for a brand-new ball. “With that motivation, they took on the challenge and cleared the football pitch. Bob came back with the promised ball and, now inspired, began to work with the local community. With annual funding from NGOMBE, Bob’s NGO MysaKenya is helping Nairobe to use sports to develop its slums: there are 2000 leagues with 25,000 teen players, a library, and a huge sports training center. To win the league, both talent and good social impacts count as much as winning the games- clearing rubbish, working in HIV clinics…, of the 750,000 graduates of the training center so far, some have become government officials, architects… With his vision, Bob managed to convert a generation with a project that has been copied 300 times in various countries worldwide,” Hopkins tells us. [For more info visit http://www.mysakenya.org/]. But, Hopkins points out, the system is far from perfect. “The mechanism is reliant on annual funding, which is sad because such good causes should not be at risk of closing due to lack of finances.” Hopkins tells us he suggested the idea of contracting all those who benefit from the scheme to, in exchange for the education given by MysaKenya, contribute 10% of their future earnings- paying back into the system that helped them and in so doing prolonging the life of the project and enabling it to help future generations in the same way. The July 4 training participants immediately saw that the same sustainable approach could to some extent be used in Georgia when training youth and the socially vulnerable.

IS THE PROJECT CONSISTENT WITH COMPANY FEEDBACK FROM STAKEHOLDER CONSULTATIONS? WHAT IMPACTS DOES THE PROJECT HAVE ON THE COMPANY’S BOTTOM LINE? Hopkins gives us the example of the island of Mauritius, whose Minister of Finance decided to tax the companies of the island’s 1 million population a 2% Philanthropy Tax, meaning 2% of the company profits had to go towards NGO support and charities. Hopkins, called in to consult on the issue, said he was displeased with the decision, seeing it as potentially damaging to the country’s economy in that it might drive away business. But, he tells us, on seeing India follow suit, he realized that there might be something to it after all. “I got Mauritius and India to reduce that tax to 1%. The NGOs weren’t happy, but there was no doubt it made CSR a hot topic, forcing companies to think about the bigger issues and to take CSR much more seriously.”

DOES THE PROJECT CREATE CAPACITY AT THE MACRO,

MESO OR MICRO LEVELS?

“CSR is not the same as philanthropy,” Hopkins emphasizes. “Most philanthropy projects tend to work at the micro level, when a 3M approach should be employed to intensify the impact: Micro (the project level); Meso (capacity developmenttranslating the project into things that work); and Macro (at the policy level with government involvement).” Costs for stakeholders within these levels, Hopkins says, would by “rule of thumb” be 50% spending at the Micro level, 40% at the Meso and 10% at Macro. The point here is that for CSR to be truly sustainable, it needs to involve high-level stakeholders but be built on a grassroots foundation, with everyone involved encouraged and eager to work for the common good. “CSR needs a mixed economy and democracy- a leadership who listens to the grassroots. People in the world today are becoming unsympathetic to those who are different. Considering the old adage that ‘Sustainable development meets the needs of the present without compromising the ability of the future generation to meet their own needs,’ this needs to change!” he says, adding that it is also the government’s responsibility to introduce measures to ensure that short-term gains are sustainable and not damaging or at risk of failure. Hopkins at this point presents a slide with an inspiring quote: “[Companies have an] economic, financial and environmental responsibility to create higher standards of living while preserving the profitability of the corporation and integrity of the institution for people within and without- achieving sustainable development in societies, addressing multistakeholders and their materiality. Being a responsible company/institution means working in partnership with society and being part of its long-term development.” [A Planetary Bargain: Corp Social Responsibility Comes of Age (Macmillan 1998, updated)]

IS THE PROJECT TYPE 1,2 OR 3? Hopkins, on evaluating CSR projects for their effectiveness, uses the questions in the box on this page and also his own criteria. A “Type 1” project is a “Charitable, philanthropic action, such as a donation to a good cause.” He gives us here an example of an NGO-led “free meals for socially vulnerable school pupils” campaign that was begun in India with far-reaching aims but which, if funding is lost, would be closed. A “Type 2” project is one which sees the development of a by-product of the company actions. Hopkins gives us a negative example whereby an international company in Jamaica decided to

boost employee satisfaction and productivity by raising their salaries. To their surprise, the move had an adverse effect on the local economy in that it led to pay dissatisfaction in other companies and strikes. In Hopkins’ view, it would have been better in this case to “pay lower wages to the employees but willingly pay higher taxes to the government for the benefit of wider society.” A “Type 3” project is one that promotes sustainable development and positive initiatives, often in addition to Type 2.

ARE PROJECT OPERATIONS TRANSPARENT? WHAT KEY INDICATORS ARE USED TO MEASURE PROJECT IMPACT, IF ANY? Hopkins here emphasizes the role of the media in CSR promotion and of renowned international reporting mechanisms for presenting the results and impacts of a CSR initiative, a fact which any Georgian company who has budgeted for a philanthropy initiative and any local NGO who has received foreign funding, knows is essential. Some companies here, especially in the banking sector, are already employing international standard reports in their annual practice, a “laudable, necessary, but complex and sometimes confusing step for those unaccustomed,” Hopkins said. Many Georgian companies are linking the UN’s Sustainable Development Goals (SDGs) to their CSR strategies, selecting goals from among the 17 and working to implement them within their CSR strategies, the most popular being poverty, education, responsible consumption, climate action and gender equality.

HOW DOES THE PROJECT CONTRIBUTE TO THE COMPANY’S REPUTATION? Starting out with the poignant “Reputation takes 20 years to create and 5 minutes to destroy,” Hopkins presents the example of oil giant Shell, whose reputation was all but destroyed in the early 2000s. A good CSR strategy, if done right, can do more for a company than an advertising campaign- in fact, it becomes an advertising campaign in itself, and the more people involved at the grassroots level, the more effective the impact can be. “We all know to treat customers well, but a company should not forget its employees and managers,” Hopkins says, highlighting that this will have a wider social impact. The key points of the July 4 training can be summarized as such, useful for any company setting out on the CSR path: Accountability- record your project’s impact (social and otherwise); Consider ROI (return of investment);

Questions to answer when creating/evaluating a CSR project: 1. Is the project sustainable? I.e. after initial investment, will the project continue and even grow in the future? 2. What contribution to development does the project make (create employment, reduce disease, create growth, empower people, enrich civic life, improve human rights)? 3. Is the project consistent with company feedback from stakeholder consultations? 4. What positive/negative impacts does the project have on the company’s bottom line? 5. Does the project create capacity at the macro, meso or micro levels? Madonna- Africa- school- affect policy!!! 6. Does the project have any leverage- are steps being taken to replicate the projects successful outcomes? Work with govt, replicate country-wide. 7. Is the project Type 1,2,3? 8. Are project operations transparent? 9. Do the projects pay a living wage? 10. What key indicators are used to measure project impact, if any? 11. How does it contribute to the company’s reputation? “Reputation takes 20 years to create and 5 min to destroy.”

CSRDG, which was established in 1995, has a successful multi-year experience in the field of civil sector development in Tbilisi as well as in the regions of Georgia. CSRDG has been focused on results that can improve the lives of individuals and societies in general. It was the first Georgian organisation to prepare and publish a Sustainability Report in accordance with GRI (Global Reporting Initiative) sustainability reporting guidelines; the first Georgian-language textbook on CSR for higher educational institutions; and comprehensive analytical research on “Corporate Social Responsibility and Public Sector’s Role” (analysis and recommendations for the Government of Georgia). Since January 2017, a consortium led by Konrad Adenauer Stiftung in partnership with Georgian civil society organizations: Center for Strategic Research and Development (CSRDG), Civil Society Institute (CSI), Center for Training and Consultancy (CTC) and Education Development and Employment Center (EDEC), has been implementing the Georgian Civil Society Sustainability Initiative (CSSIGE) in order to address key challenges of Georgian civil society sector.


BUSINESS

GEORGIA TODAY JULY 9 - 11, 2019

Tbilisi Airbnb Market Analysis

Image source: Airbnb Community

BY SAMANTHA GUTHRIE

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ushman and Wakefield, a US-based commercial real estate services company, has released their latest monthly report in their Hospitality Series, focused this month on the Airbnb market in Tbilisi. Data for their report came from AirDNA, which provides aggregate data on demand and performance indicators on Airbnb. The report looks only at properties located in Tbilisi for the period from June 2016 – May 2019. The daily rental, home-sharing website Airbnb, which is operated in more than 81,000 cities in 91 countries, has taken Tbilisi by storm in recent years. As of May 2019, there were 14,438 active listing in Tbilisi, a 7,213% increase on three years ago. Many families own multiple apartments, which they hold as gifts for their children or as investments rather than selling. Now, some families are turning extra apartments into income-generating rentals. Investors are also snatching up small apartments in tourist-friendly neighborhoods and converting them to daily rentals. As the Cushman and Wakefield report explains, however, “A surge in supply has not...been accompanied by the same speedy increase in demand. In the first quarter of 2019, for every booked property in Tbilisi, two other available ones remain unbooked.” While the demand rate has been slowly increasing over the years, still as many as 67% of properties on Airbnb were left un-booked in the first quarter of 2019. The spike in properties on the market really began in July 2016, when listings jumped 1,102%, from 229 in June to 2,753 in July. On the positive side, the “average monthly growth rate of the number of booked properties has outpaced the growth rate of active listings in both 2017 and 2018, and again in the last five months of 2019.” “Airbnb is not legally regulated in Georgia, and there does not seem to be a threat to Tbilisi communities. The general social climate is positive, underscored by the financial benefits of operating an Airbnb,” the report reads. However, there are many reports anecdotally of people struggling to find long-term rentals or even properties for sale due to the volume of properties being used for daily rentals. Additionally, as the report cautions, the majority of Airbnb listings, at least in the low season, go un-rented. Currently, the most guests by far come from Russia (Moscow and Saint Petersburg), which is likely to be affected by the new Russian flight ban imposed by President Vladimir Putin. In May 2019, 77% of listing are Entire Homes, 21% are Private Rooms and just 2% are Shared Rooms. Unsurprisingly, the Cushman and Wakefield report finds that demand and occupancy rates for Airbnb properties are “characterized by seasonality...peaking in the third quarter and dropping to the lowest in the first.” While demand for Entire Homes is the highest among the rental types, and growing, demand for shared rooms, although small, is the only category that does not experience strong sea-

The general social climate is positive, underscored by the financial benefits of operating an Airbnb sonal shifts. Within the Entire House category, the most popular option is studio apartments, followed closely by one-bedroom apartments. Homes with five or more rooms are the least popular. Talking money: the monthly average median rates for Entire Homes peaked at $43 a night in the third quarter of 2016, and fell to $32 a night in the first quarter of 2019. In the same period, median rates for Private and Shared rooms have largely held steady around $25 and $11 a night, respectively. The median revenue for an Airbnb listing for an Entire House property was $457 in May 2019. The highest earning quartile of properties made more than $778, and the top 10% took home at least $1,209. The third quarter of 2017 was the most profitable for landlords, on average, with a median monthly income of $573. For the entire 35-period recorded in the Cushman and Wakefield report, the total revenue of the market reached $95.5 million. “In terms of location, the Old Town is the most popular and highly ranked. This area is populated with old-style, expansive houses, which provide exactly the kind of local, authentic, immersive environment that a typical Airbnb guest is looking for. Geographic proximity to the tourist center is a strong advantage as well,” the report explains. The wider Avlabari and Mtatsminda neighborhoods are also popular, followed by Vera. Looking ahead, Cushman and Wakefield predict that Airbnb will introduce their Plus and Experience services to the market, that the number of luxury listings will increase “as Airbnb is starting to be seen as a legitimate, profitable business,” and that Airbnb will become more attractive to business tourists. They also warn that while regulation may threaten the growth of the industry, continuing the status quo without regulation may pose a threat to local communities, injecting a “revolving door of strangers” into previously established, family-oriented neighborhoods. One major benefit of the rise of Airbnb in Tbilisi? The “rising recognition of Georgian cities on the world stage,” increasingly important as Russian sanctions take aim at the Georgian tourism industry this summer. To download the full report: http://cushwake.kz/wpcontent/uploads/2019/07/FINAL_MKTB_JUNE_ AIRBNB-1.pdf

Image source - Spend your summer in Georgia

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BUSINESS

GEORGIA TODAY JULY 9 - 11, 2019

Your Guest Is My Guest, or Why Tourism Is Not a Zero-Sum Game

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he share of “transit tourists” (those who continue from Georgia to a neigbor country) in the total is not very high -- about 16.9% in 2016, and 16.7% in the first 9 months of 2017. However, it is increasing over time: both in absolute terms (more than tripling since 2010!) and as a share of total tourism. The most attractive tourism packages (by a large margin) are Georgia & Armenia, and Georgia & Turkey. These developments demonstrate that tourism is not a zero-sum game, building the case for closer cooperation and coordination between countries in the region.

* * * The South Caucasus is divided by high mountain ranges, often impassable political borders, and ethnic conflict zones. In addition to three independent states, the region also includes three unrecognized territories. Nakhichevan is separated from Azerbaijan’s mainland by Armenia’s Syunik region. Armenia’s border with Turkey and Azerbaijan, on the other hand, is sealed for political reasons. Though trampled by politics, the economic arguments for greater regional integration in the South Caucasus are truly powerful. For one thing, thanks to its strategic location on the major NorthSouth and East-West transport routes, the region could serve much larger flows of transit cargo and energy resources. And just like railways, roads and pipelines, intra-regional and international tourism could also provide strong stimuli for greater integration, soothing economic pain inflicted by years of conflict and isolation, helping build trust and overcome excessive fragmentation. Each of the three South Caucasus nations carries significant touristic potential thanks to pristine and versatile landscapes and unique, centuries-old cultures. Not surprisingly, both Armenia, Azerbaijan and Georgia designated tourism as a key national priority, investing in infrastructure and international marketing, easing visa regulations, and improving border crossing procedures. Yet, while going it alone may be a fine strategy in the short run, one should also consider the synergetic effect from doing it together, and potentially engaging other neighbors as well – Russia, Turkey and Iran. Indeed, by fully harmonizing border management procedures, improving communication and transport linkages, and making a joint effort to promote the region as a world-class touristic destination, the South Caucasus as a whole could unlock new, lucrative markets for high-end tourism in the Gulf, Eurasia, Western Europe and North America. Geographical proximity between Georgia, Armenia, and Azerbaijan and the low cost of intra-regional transportation could attract tourists who would never come to this region for the sake of visiting only one (small) country. As an African proverb goes, if you want

to go fast, go alone. If you want to go far, go together.

THE MANY FACES OF TOURISM Is every foreigner arriving in Georgia automatically a “tourist?” Not really. According to the formal definition used by GNTA, a tourist is an individual that spends at least 24 hours in a country different than his or her country of residence. In this sense, a truck driver carrying goods from Turkey to Azerbaijan via Georgia is not a tourist. There is also the concept of transit tourism, which defines the activities of a genuine, international tourist passing by or crossing a country, which is neither the country of origin nor the country of destination (for example, an American tourist heading to Armenia, but spending a couple of days in Georgia). Just like the traditional definition, transit tourism does not include visitors who stayed in a country for less than 24 hours. Despite the fact that transit tourism has been long known to be an important phenomenon in many developed and developing countries, international economic literature hardly addresses this issue. This type of tourism was first discussed by Markovik for Yugoslavia, and later Croatia (Angelkova, Petkova & Cvetanka, 2015). Nowadays, however, there is not even a consensus among scholars about the definition of this term.

TRANSIT TOURISM ROUTES INVOLVING GEORGIA YourGuestIsMyGuest figureGeorgia is emerging as one of the fastest-growing travel market worldwide. According to the Georgian National Tourism Administration (GNTA),1 in 2016, the total value added in the tourism sector increased by 11.8%, compared to the previous year, and reached 2.06 billion lari. The growth

rate of the tourism sector was significantly higher than the growth rate of the whole economy. As a result, the share of tourism in GDP continued to increase and reached 7.05% (see Figure 1). Moreover, approximately 64.3% of Georgia’s service export revenue comes from tourism, and this sector generates 2.17 billion USD in foreign exchange income for Georgia, which is two times more than income from remittances. The share of “transit tourists” in Georgia’s total is not very high (about 16.9% in 2016, and 16.7 in the first 9 months of

Table 1: Types of tourism

Origin within the Origin outside the country country Destination within the 1. Domestic tourism 2. Inbound tourism country Destination outside the 3. Outbound tourism 4. Transit tourism country Source: The Economics of Tourism Destinations, Guido Candela and Paolo Figini, 2012

Table 2: Transit tourism involving Georgia, 2010 vs. 2017

Package

Entry

Georgia Georgia, Turkey Turkey Georgia Georgia, Azerbaijan Azerbaijan Georgia Georgia, Armenia Armenia Armenia, Georgia, Armenia Turkey Turkey Armenia, Georgia, Armenia Azerbaijan Azerbaijan Turkey, Georgia, Turkey Azerbaijan Azerbaijan

transit tourists

Exit Turkey Georgia Azerbaijan Georgia Armenia Georgia Turkey Armenia Azerbaijan Armenia Azerbaijan Turkey

2017). However, it is increasing over time: both in absolute terms (more than tripling since 2010!) and as a share of total tourism. In the first nine months of 2017, according to Georgia’s Ministry of Internal Affairs, the country hosted about 2.7 million tourists. Out of these, at least2 450 thousand people (16.5%) visited more than one country – Georgia and an immediate neighbor – and, thus, could be considered “transit tourists.” Several conclusions emerge from the data presented in Table 2. • “Georgia & Armenia” package is the most popular when it comes to regional tourism. In January-September 2017, at least 123 thousand tourists (accounting for 27.3% of total transit tourism) arrived to Georgia from Armenia or the other way around. Another 25 thousand came to Georgia from Armenia and continued to Turkey or vice versa. Finally, almost 11 thousand used Georgia as a springboard for visiting all three South Caucasus nations. In total, almost 160 thousand visited both Georgia and Armenia. • “Georgia & Turkey” package is second in popularity, attracting almost 114 thousand tourists in the first 9 months of 2017 (25.3% of total transit tourism). In combination with Azerbaijan or Armenia, the Georgia & Turkey package accounts for almost 242 thousand visitors, leaving other packages far behind. • “Georgia & Azerbaijan” package is third in popularity, attracting 48 thousand tourists in January-September 2017 (10.7% of total transit tourism during this period). When combined with Turkey or Armenia, Georgia and Azerbaijan served an additional 113 thousand visitors, bringing the total for this package to more than 161 thousand. How many of the “transit tourists” are

2010 2017 8,994 60,512 9,971 53,410 6,160 23,581 10,508 24,557 10,013 57,942 14,242 64,917 10,903 14,102 9,437 11,287 1,164 3,346 1,977 7,545 31,993 52,025 25,236 50,548

% of total transit tourists 2010 2017 6.3 13.4 7.0 11.9 4.3 5.2 7.4 5.5 7.0 12.9 10.0 14.4 7.6 3.1 6.6 2.5 0.8 0.7 1.4 1.7 22.4 11.5 17.7 11.2

real tourists as opposed to truck drivers, who face delays at the border or have other reasons to extend their stay in Georgia beyond 24 hours? While precise information is not available, we can “guesstimate” their share by excluding Azeri, Armenian and Turkish nationals from transit tourism “packages” involving their own countries (e.g. Turkish or Azeri drivers on the Turkey-GeorgiaAzerbaijan route, or Armenian and Turkish drivers on the Turkey-Georgia-Armenia route). Excluding professional drivers, the two winning packages (by a large margin) are Georgia & Armenia, and Georgia & Turkey. Not surprisingly, these two packages also represent the fastest growing segments in transit tourism involving Georgia. For example, the number of tourists on Georgia-Turkey and Georgia-Armenia routes in just the first nine months of 2017 was 6-8 times higher than corresponding figures for the entire 2010.

WHAT IS THE NATIONAL MIX OF TRANSIT TOURISTS? Looking at the two dominant packages, two things stand out. A very large share of transit tourists are Russian nationals: about 42 thousand out of 106 thousand (39.8%), and 43 thousand out of 105 thousand (40.7%) on the Georgia & Armenia and Georgia & Turkey routes, respectively. Second, regional packages also attract tourists from further away destinations: • Iran, Ukraine, Saudi Arabia, Belarus, and Kazakhstan account for 44.8% of all transit tourists on the Georgia & Turkey route. • Poland, Iran, Germany, Ukraine, Japan and Italy account for 27.4% of transit

% of total tourists “real” transit tourists 2010 0.9 1.0 0.6 1.0 1.0 1.4 1.1 0.9 0.1 0.2 3.2 2.5

2017 2.2 2.0 0.9 0.9 2.1 2.4 0.5 0.4 0.1 0.3 1.9 1.8

2010 6,769 7,886 5,031 9,159 8,346 10,999 6,443 4,819 1,164 1,977 2,038 3,209

2017 55,922 49,294 18,232 18,479 50,472 55,146 11,541 7,588 3,346 7,545 5,667 6,464

tourists on the Georgia & Armenia route. Very importantly, the Georgia & Armenia route appears to be particularly promising when it comes to attracting high-end tourist from Asia and Western Europe, who tend to spend more on higher quality hospitality services and shopping. Finally, something must be said about tourists who come to the South Caucasus in order to explore all three countries of the region. Their number is still quite low, a bit less than 11,000 in the first nine months of 2017. Yet, they represent a fast growing segment, increasing almost 5 times compared to 2010. Of particular note is the fact that a relatively large share of such tourists are long distance travelers, coming from places like Germany, US, and UK, Hungary and Russia, China and South Korea. Truly regional tourism in the South Caucasus is still hampered by many bureaucratic barriers and borders. Yet, its development demonstrates that tourism is not a zerosum game, building the case for closer cooperation and coordination between countries in the region. 1 Georgian Tourism in Figures 2016, Structure & Industry Data, GNTA See the full report: https://gnta.ge/wp-content/ uploads/2016/08/ENG-2016.pdf 2 Given data limitations, we can identify as “transit tourists” only those visitors who used a land border crossing on their way in or out of Georgia, and are thus underestimating the actual volume of transit tourism through Georgia. For example, we do not observe visitors travelling to/from Tbilisi to Baku by air. On the other hand, we cannot identify truck drivers who take more than 24 hours when transiting through Georgia.


BUSINESS

GEORGIA TODAY JULY 9 - 11, 2019

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“Gastronaut” Puts Georgia on World Gastronomy Map at forums and trainings. In Barbarestan, we see the concept, brand identity, interior and exterior design, the theme on the plate, and set up and service as being in one spirit, and the fact the menu is completely different from what is happening on the local market is one of the most important factors for the restaurant’s success. I’d say that this was a restaurant that inspired a specific change in Tbilisi and has set a kind of precedent. The Barbarestan owners are already experienced residents who stay up-to-date with the latest novelties and are constantly seeking to evolve.”

“The specifics of gastronomic knowledge are very important in our field,” Levan says. “Today, the world is developing very rapidly. You need to have knowledge in this area to find your place and to be able to develop your business and implement the worldwide restaurant and gastronomy trends gently on the local market, taking into consideration lots of different factors, like the Georgian psychology, way of thinking, and spending capacity.”

IS GEORGIA BECOMING AN INNOVATOR IN THE FIELD OF GASTRONOMY?

“We are never satisfied with the projects we’ve done,” Lali says with a laugh. “We are constantly developing, and we believe that there will always be even more interesting projects ahead.”

“Europe is more of an innovator, while America is a researcher,” Levan says. “I would say Spain [is most innovative]. We travel to a lot of different countries and discover all kinds of restaurants. We have been in top restaurants and met the top masterchefs, because in our field it is important to have such experience. You have to know the world’s trends. The history of Georgia is different from that of the Soviet Union - the chefs were only cooks [then] and knew nothing about restaurant management. But a new generation is coming with a new view. We lost 120 years, though, hence the importance of our consultancy agency.”

TELL US ABOUT THE GASTRONAUT TEAM. “The Gastronaut Agency already has 27 people on its team and has implemented about 15 projects. Lali is the creative director of our agency. I'm a restaurateur,” he tells us. “The most recent project we did is Puri Guliani, a bakery and kitchen.”

WHAT IS THE MOST IMPORTANT THING TO KNOW IN THE GASTRONOMY BUSINESS?

EXCLUSIVE INTERVIEW BY MARIAM GABEDAVA

L

evan Qoqiashvili (Restaurateur/founder of Gastronaut) and Lali Papashvily (Creative Director/founder of Gastronaut) met each other and set off on a mission to introduce Georgia to the world as a county of gastronomy, creating restaurants of various concepts countrywide. We sat them down for an exclusive interview to find out more. “I have 15 years’ experience as a manager in the hospitality field,” Levan tells us. “Yet, in that time I never saw a specialized consulting agency [here]. The idea to do it ourselves came up when I met Lali. She had been part of this sphere since childhood, as her father had a restaurant in Moscow.

We seek high quality in the Georgian gastronomy & hospitality market and to improve and innovate existing projects

Our interests crossed and ‘Gastronaut’ has born. We started out by helping our friends and relatives, giving advice, and grew into a business consulting agency five years ago.” “I’m an architect by education, but I was extremely interested in the gastronomy and restaurant business,” Lali says. “And my interests and education eventually united! In Tbilisi, I came to the gastronomic field seeing great contrasts between Russia and Georgia in this industry on the local market. When we started forming our business, as the first hospitality consulting agency we had to work hard and energetically. And the result of that is the success and opportunities for growth we have today!”

TELL US WHAT GASTRONAUT IS. “We are a HoReCa business development agency, consulting in different directions for F&B outlet needs, based in Tbilisi, Georgia,” Levan says. “Our aim is to establish high quality in the Georgian gastronomy and hospitality market and to improve and innovate existing projects.” “Our company offers 11 different services, so if you have an idea and you want to open a restaurant, you can come to us and we will plan everything from the very beginning,” Lali adds.

TELL US ABOUT YOUR INVOLVEMENT WITH THE RENOWNED ‘BARBARESTAN’ RESTAURANT. “Back in the days, 5-7 years ago, everything in Tbilisi was approximately the same: the restaurants and hotels concept, interior design, brand identity, f&b menu, style of service,” Lali notes. “Restaurant ‘Barbarestan’ was one of the first innovator restaurants and an important attempt to change the concept of HoReCa, suggesting something special, a unique dining and conceptual experience with a powerful storyline. In Gastronaut, we believe in the ‘power of complexity,’ a term I use when I speak

TELL US ABOUT ONE OF YOUR MOST SATISFYING PROJECTS.

WHAT IS GASTRONAUT’S MAIN GOAL? “One of our main goals, which we have done globally, is to develop Georgian gastronomy to an international level and to pin our food and wine culture on the world gastronomy map,” Levan says. “For this purpose we entered a project with the Ministry of Agriculture, which financed us with 147,000 Euros so we could go to the Bocuse d'Or Young Chefs Championship and SIRHA exhibition in Lyon, France- the biggest of its kind in the world. There were 30 of us in the Georgian delegation. Neither Georgia nor the Caucasus region had a [renowned] place in our field and therefore it was a very important challenge for the company and an incredible opportunity to see and be seen, just in the right place and among the right people. Now, we are running the national championship of Bocuse d’Or in Georgia. This will be the first Georgian gastronomic festival to be held in the framework of the ‘Bocuse d'Or’ championship.”


10

BUSINESS

GEORGIA TODAY JULY 9 - 11, 2019

2019 Semi-Finalists of the European Social Innovation Competition gather in Turin, Italy This year’s Academy will also feature a public event on 17 July called the ‘Future of European Social Innovation’ hosted in collaboration with Nesta Italia. At this evening event, industry leaders will gather to discuss the state of regional social innovation and the successes of the European Social Innovation Competition. The 2019 Semi-Finalists of European Social Innovation Competition Meet in Turin social innovation ecosystem. Later this year, Competition Judges will have the responsibility of selecting 10 Finalists among whom will be the three winners. Each winner will be awarded 50,000 Euros. An Impact Prize of 50,000 Euros will also be awarded to the 2018 Semi-Finalist that has achieved the most significant social impact over the past 12 months. All of the 2019 Finalists and Semi-Finalists will be invited to attend the Competition’s 2019 Awards Ceremony in Brussels in October.

Launched in memory of social innovation pioneer Diogo Vasconcelos, the European Social Innovation Competition is a challenge prize run by the European Commission across all EU Member States and Horizon 2020 associated countries. Now in its 7th year, the Competition acts as a beacon for social innovators in Europe, employing a proven methodology for supporting early-stage ideas and facilitating a network of radical innovators shaping society for the better. Each year the Competition addresses a different issue facing Europe. This year the focus is: Challenging Plastic Waste. The Competition is organized by the European Commission with support from Nesta, Kennisland, Ashoka Spain, the European Network of Living Labs, and Scholz & Friends. For information on earlier editions and winning projects, visit: www.eusic.challenges. org

Image source: eusic.challenges.org

T

he 2019 Academy of the European Social Innovation Competition is due to kick off in the Italian city of Turin next week. The threeday educational and networking event, starting on 16 July, has become a highlight of the social innovation calendar in Europe - each year bringing industry experts into contact with some of Europe’s most promising social entrepreneurs. Last month, the European Commission announced the 30 participants, from 19

countries, who were chosen to attend the Academy of the European Social Innovation Competition. These ‘SemiFinalists’ were selected from 543 applicants from across Europe to contribute to solve one of the big issues of our time: Challenging Plastic Waste. The European Social Innovation Competition’s 2019 Academy will focus on the key ingredients needed to build a sustainable social venture. Training will primarily take the form of workshops delivered by experienced social innova-

tors and articulated around four key topics: innovation, impact, sustainability and scale. The Semi-Finalists will also receive personalized support from a coach, based in their own country. This prepares them for the next stage of the Competition, where they will be asked to submit extensive Development Plans to the Judging Panel. The aim of the Academy and subsequent support is to empower the SemiFinalists to develop their projects into viable business propositions.

Annual Inflation Rate Equals 4.3% in Georgia

Photo: National Statistics Office of Georgia

BY ANA DUMBADZE

I

n June 2019 the Consumer Price Index decreased by 1.0 percent compared to the previous month, while the annual inflation rate amounted to 4.3 percent, the National Statistics Office of Georgia reports. The price of food and non-alcoholic beverages decreased by 3.9% in June 2019, show the latest inflation data by the National Statistics Office of Georgia (Geostat). The monthly inflation rate was mainly influenced by price changes for the following groups: Food and non-alcoholic beverages: the prices in the group decreased by 3.9 per-

cent, contributing -1.23 percentage points to the overall monthly inflation rate. Within the group, the prices were lower for the following subgroups: vegetables (-27.9 percent), fruit and grapes (-5.8 percent). Meanwhile, the prices increased for sugar, jam, honey, chocolate and confectionery (1.3 percent), also for milk, cheese, and eggs (0.7 percent); Transport: the prices went up by 0.9 percent, contributing 0.1 percentage points to the overall monthly inflation rate. The prices in the group increased for purchase of vehicles (1.1 percent) and for the operation of personal transport equipment (1.0 percent); Health: the prices went up by 0.8 percent, contributing 0.06 percentage points to the overall monthly inflation rate. The

prices increased for medical products, appliances, and equipment (1.9 percent). The annual inflation rate was mainly influenced by price changes for the following groups: Food and non-alcoholic beverages: the prices within the group increased by 6.5 percent, contributing 1.94 percentage points to the overall annual inflation rate. Within the group the prices were higher for the following subgroups: fish (13.3 percent), vegetables (11.9 percent), bread and cereals (11.7 percent), meat (6.4 percent), milk, cheese and eggs (6.1 percent), mineral waters, soft drinks, fruit and vegetable juices (4.3 percent), also sugar, jam, honey, chocolate and confectionery (4.2 percent). Meanwhile, the prices decreased for fruit and grapes (-11.6 percent); Alcoholic beverages and tobacco: the prices increased by 20.1 percent, with a relevant contribution of 1.33 percentage points to the overall annual CPI growth. The prices increased for tobacco (42.7 percent); Transport: the prices increased by 3.2 percent, which resulted in a 0.4 percentage point contribution to the overall annual inflation rate. The prices were higher mainly for the operation of personal transport equipment (3.9 percent) and transport services (2.1 percent); Recreation and culture: the prices went up by 5.0 percent, contributing 0.29 percentage points to the overall annual inflation rate. The prices in the group

increased for recreational and cultural services (6.5 percent); Health: the prices went up by 2.9 percent, contributing 0.24 percentage points to the overall annual inflation rate. The prices increased for the following subgroups: medical products, appliances,

and equipment (4.0 percent), out-patient services (2.9 percent) and hospital services (1.7 percent). Overall, Georgia’s monthly inflation posted a one percent decrease in June 2018, while the annual inflation rate amounted to 4.3%.


POLITICS

GEORGIA TODAY JULY 9 - 11, 2019

11

What Singapore Can Teach Georgia OP-ED BY EMIL AVDALIANI

D

ue to Singapore's size, location and neighborhood, good parallels can be made with modern Georgia. Today, Singapore, which in Malayan means "the city of the lion," is one of the richest countries in the world. In Georgia, it has been fashionable for more than a decade to speak about Singapore’s economic success and how this can be emulated by Georgia, but little has been said that the real Singaporean achievement lies in its ability to build good, constructive relations with its neighboring states, which, like Russia to Georgia, are large, geopolitically hostile and economically more powerful. Such success for Singapore came not just through the right economic policies, as its politicians managed to build the right foreign policy in all directions. Indeed, Singapore had even larger geopolitical odds against it when its leaders set out to build a state at the southern tip of the Malaysian Peninsula; even larger threats than today’s Georgia. Take several examples. By the time of its establishment in 1819, 70% of Singapore’s two-million inhabitants were ethnic Chinese, while in the surrounding territories there were around 100 million people of Malayan, Indonesian and Vietnamese nationality. When, after World War Two, Singapore became independent, it faced a direct challenge to its nascent state from various large ethnic

groups. Georgia had similarities in that regard, but after the dissolution of the Soviet Union, when the country was left facing its larger neighbors with ethnic minorities on its soil, Tbilisi failed to offer a constructive approach to the preservation of the state sovereignty. Back to Singapore: its politicians recognize that China, Malaysia, Indonesia and Vietnam are potential adversaries not only in military and economic terms but also in ethnic politics. The problem is complicated by the fact that these countries are Singapore’s geographically close neighbors. Singaporeans have learned to live with large and rival neighbors and that is where it could serve as a good lesson for Georgia in its relations with Russia. But for its success, Singapore realized that it was necessary to create a strong economy and military power to limit Chinese, Indonesian and Malaysian challenges. Today, small Singapore, with roughly 3.3 million inhabitants, has almost the same number of airplanes as the 23-million-population of Australia. Moreover, Singapore has a large naval fleet with powerful attacking capabilities. It sees that the only real possibility to maintain its independence among its big Asian neighbors its to show them what it is ready to do (through military operations) to protect its assets. There are many similarities with Georgia: Russia’s size, military and economic capabilities and geographic proximity, present the need for Georgia to build constructive relations with Moscow. Singaporeans understand that a war with China and other neighbors would

Image source: reddit.com

be disastrous for the country, thus its leaders had to create a state-of the art foreign policy where military power and diplomacy intersect to such a level so as not to create troubles with China and Malaysia. At the same time, this policy also precludes those same countries from taking direct military action against Singapore. The main achievement of Singapore's diplomacy is that by its economic

and military potential, large neighbors are forced to think and act less in terms of hard power. Thus, small Singapore has learned well what Georgia has yet to in its foreign policy: live with hostile neighbors but reap the benefits at the same time. A new, much higher level of foreign policy should thus be implemented, where the entire political establishment is thinking

in the same way. Such homogeneity in Georgia's foreign and domestic politics would bring longer-term results. Russia is Georgia’s neighbor and this is something, as in the case of Singapore and China, that cannot be avoided. That is why the study of Singapore-China, Singapore-Malaysia and Singapore-Indonesia relations will be a good lesson for Georgia’s future.

EU-Funded 2019 Opinion Polls Show Continued Support for EU in Georgia

T

he EU financed 2019 opinion polls in Georgia through its ‘EU Neighbors East’ project. The survey took place between February and April 2019 and was based upon faceto-face interviews among a representative sample of 1,000 people throughout the country. The annual survey is now into its fourth year, with the first wave having been carried out in 2016. Similar surveys were also carried out in five other Eastern Partnership countries: Armenia, Azerbaijan, Belarus, the Republic of Moldova and Ukraine. Results from the six countries are presented in national reports and a consolidated regional overview report. Here below are the key findings in Georgia – more details may be found in the fact sheets and report at the links indicated below.

Photo source - Sky

MAIN FINDINGS: • 80% of Georgians feel relations with the European Union are good. • 71% of people in Georgia trust the EU (unchanged since 2018). • 50% of Georgians have a positive image of the European Union (EU). Only 4% of Georgians have a negative view of the EU. • 74% of Georgians (up 16% since 2017) are aware of the EU’s financial support to the country, and 62% consider the support to be effective. Georgia report & fact sheets 2019: https:// www.euneighbours.eu/en/east/stayinformed/publications/opinion-survey2019-georgia Regional overview 2019 (all EaP countries): https://www.euneighbours.eu/en/east/ stay-informed/publications/opinion-survey2019-regional-overview

Donald Tusk to Visit Georgia BY AMY JONES

P

resident of the Council of Europe Donald Tusk will visit Georgia on July 11 to 12. He will attend the international conference “Georgia’s Euro-

pean Way” in Batumi. Georgian Prime Minister Mamuka Bakhtadze, President of Georgia Salome Zurabishvili, and other government officials will speak at the conference held to celebrate the Eastern Partnership’s 10th anniversary. Many EU commissioners and politicians will attend the event, among them Juri Ratas, the Estonian

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Prime Minister; Swedish Foreign Minister Margot Wallstrom; and Polish Foreign Minister Jacek Czaputowicz. The Eastern Partnership is a joint initiative of the EU, Armenia, Belarus, Georgia, Moldova, Ukraine and Azerbaijan. It aims to promote trade, travel and economic strategy between the EU and the EaP members.

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Profile for Georgia Today

Issue #1166 Business  

July 9 - 11, 2019

Issue #1166 Business  

July 9 - 11, 2019

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