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Issue no: 910/60

• JANUARY 10 - 12, 2017


In this week’s issue...


Ex-Mayor of Tbilisi Released from Prison

ON WINTER RESORTS New Heli-Ski opportunities and Betania for sale


PAGE 2, 3


Taxi Fares to Increase from January NEWS PAGE 2

Bloomberg: Trump Pulls Out of $250 Mln Tower Plan in Black Sea Resort PAGE 5

Electricity Market Watch GALT & TAGGART PAGE 6

Nabeghlavi: How a Swiss-Georgian Friendship Brought a Mineral Water to Success

President of Israel Visits Georgia BY THEA MORRISON


he President of Israel, Reuven Rivlin, is paying a two-day visit to Georgia. He was welcomed by Georgia’s President, Giorgi Margvelashvili at the Presidential Palace on Monday morning. After the welcoming ceremony, the presidents held a face to face meeting and underlined that Georgia and Israel have enjoyed a multi-century friendly relationship. The sides discussed the future prospects of deepening economic, defense and security cooperation. President Margvelashvili condemned terrorism and underlined Georgia’s role in fighting this global challenge. He said that despite the fact that 20 percent of Georgia’s territories are occupied by Russia,

Georgia is still one of the largest contributors to world peace and security. Georgia’s president thanked his Israeli counterpart for supporting Georgia’s sovereignty and territorial integrity, as well as for the firm partnership. Both sides noted that Georgia and Israel are celebrating 25 years of diplomatic relations this year, however, the friendship of the peoples have lasted for over 2,600 years. Moreover, it was noted that there was a need to enhance the trade relationship between the two countries. Margvelashvili underlined that the corruptionfree business environment and strategic geographical location of Georgia makes it an attractive country for investment. He then invited Israeli companies to invest in Georgia in various growing sectors, such as renewable energy, agriculture, tourism and industry. The meeting was attended by the head of


IDP Families Receive New Flats for the New Year presidential administration Giorgi Abashishvili, the Secretary of the National Security Council Secretary, David Rakviashvili, advisors of the President, the legislative and executive branches of the government, and Israeli officials. Within the frames of his visit, President Rivlin is to meet Georgia’s Prime Minister, Giorgi Kvirikashvili and the Parliament speaker, Irakli Kobakhidze.

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JANUARY 10 - 12, 2017

German & Austrian Companies to Operate Heli-Skiing in Georgian Winter Resorts Former Mayor of Tbilisi, Gigi Ugulava. Source: newposts.ge

Ex-Mayor of Tbilisi Released from Prison BY THEA MORRISON


igi Ugulava, former Tbilisi Mayor and one of the leaders of Georgia’s key opposition party United Na t i o n a l M ove m e n t (UNM), who was charged for misspending in 2014, was released from prison on January 6 on the basis of a verdict of the Tbilisi Appellate Court. The Court, taking into account the amnesty law, sentenced the former Mayor to one year, nine months and 22 days jail time for abuse of power in the “Tbilservice Group Case”. As Ugulava had already served the term, he was immediately freed from prison. In 2010 - 2011, Ugulava allegedly embezzled more than four million GEL of public funds. The money he embezzled was used to create 800 fictitious job positions within municipal service Tbilservice Group, through which funds were allegedly used to pay the salaries of thenruling party UNM activists. Ugulava was initially arrested in July 2014 for the misappropriation of funds and embezzlement. He was sentenced to seven month pre-trial detention. After this, in September 2015, he was found guilty and sentenced to nine years in prison. This prison term was commuted to four years and six months. On January 4, the Appellate Court requalified the article and Ugulava’s sentence was shortened by three years and three months. “I was the leader and thus everything was my responsibility, good or bad. Of course, I had no intention to turn it in a political direction, but that’s how it turned out. It would be wrong to blame me for embezzlement and appropriation of funds,” Ugulava stated of Tbilservice Group in his concluding speech at the Court. Following release, the ex-Mayor held a meeting with UNM members and stated he was going to meet founder and for-

mer leader of the UNM, Georgia’s expresident, Mikheil Saakashvili, who is wanted in Georgia on numerous charges. As Saakashvili is now a Ukrainian citizen, Ugulava said he was ready to meet the ex-president in Ukraine and discuss with him confrontation within the party present due to diverse opinions about the change of the leadership of the UNM. Saakashvili, who now is in the opposition in Ukraine, welcomed Ugulava’s release on his Facebook page. “Gigi has not committed a crime, nor has he done anything wrong…This imprisonment was nothing but the oligarch’s personal revenge and part of an intimidation campaign,” Saakashvili wrote in his Facebook post, referring to the exPrime Minister and founder of the ruling party-Georgian Dream, Bidzina Ivanishvili, who is considered by the opposition as the informal ruler of the country. Vice Prime Minister of Georgia, Kakha Kaladze, says that former Tbilisi mayor Gigi Ugulava will still have to answer questions pertaining to his use of government funds despite his recent release from prison. “The Court is absolutely independent and it makes independent decisions. However, regarding Ugulava, I have information that there are some questions over specific cases which he will have to account for,” Kaladze said. The Prosecutor’s Office disapproved of the court verdict and stated that it would appeal the decision. The United States Embassy to Georgia has released a statement over the Ugulava case, which says that the right to appeal against a decision was an important part of any democratic judicial system. “The Court of Appeal assessed the evidence and enabled the parties to present their legal arguments. These steps are a clear example of the fact that the judicial system has the opportunity to be independent, which is an integral part of any healthy democratic system,” the US embassy said, adding that the judiciary must be free from political pressure.



he Georgian Civil Aviation Agency has granted permission to Wucher Helikopter Gmbh and HTM Helicopter Travel Munich GMBH to fly the winter resorts in Georgia.

From January 10, Wucher Helikopter Gmbh will operate flights in the Stepantsminda - Gudauri area with AS 350 B3 Ecureuil and AS 350 B Lama helicopters serving groups of tourists, snowborders or skiers interested in heli-skiing tours. Another company, HTM Helicopter Travel Munich GmbH, will be launching flights in Gudauri resort for heli-skiing fans with AS 350 BS helicopters from

January 16 to March 31. The Georgian Civil Aviation Agency announced the flights will only operate in clear weather conditions and according to visual flight rules (VFR). The Heli-Ski flights are expected to promote the touristic potential of the winter ski resorts in Georgia, making them more attractive and comfortable for potential tourists.

Taxi Fares to Increase from January BY NATIA LIPARTELIANI


rom January 1, 2017, changes implemented to the Georgian Tax Code have meant that Georgia has seen an increase in the excise tax on fuel and motor oils for vehicles, as well as an increase in prices for taxi services. Company Taxify informed its customers via e-mail that from January 6, the taxi tariff would increase by 10 Tetri. Where before the journey tariff was 50 Tetri per kilometer, it is now 60 Tetri per kilometer. The price for waiting mode has also increased from 10 to 12 Tetri per minute. “The changes also affect taxi fares,” the head of City Taxi, Nikoloz Tkeshelashvili, told Businesspressnews. “The cost of travel has increased by 8 Tetri per kilometer and it is possible there will be a further increase by 2-4 Tetri.

As for the fixed tariffs, since January 1, there has been an increase in fares from 50 Tetri to 1 GEL. Where a journey cost 3 GEL, today it costs 3.50; where the price for a long-distance journey was 7 GEL, now it is 8 GEL.

According to Tkeshelashvili, the growth in rates will have a negative effect on every taxi company and will negatively impact customer satisfaction. In addition, he says it is hard to forecast further changes in the taxi fares.




Want to Buy New Betania Resort?

Eco Tourism Complex to Be Built in Mtskheta Cover Photo Sevsamora Villa




etania winter ski resort is up for sale. As the head of the resort’s managing company Randevu Betania, Tamaz Basilia, told news outlet Commersant, the reason is a lack of dedication and interest from the local authorities. He says operation of the ski resort was suspended the second consecutive year this season. “There are problems with Telasi incorrectly charging taxes. There is no access road to the resort. Basically, there are problems in every direction,” Basilaia said. “I have worked solely on

enthusiasm for 1-2 years but it can’t go on. Nobody cares about this ski resort.” Who the next owner will be is still unclear. Basilaia says the Betania ski resort is dependent on snow as artificial snow is too expensive. He also notes that there is a hotel located at the resort, however, contsruction is unfinished and there is a lack of ski infrastructure. The ski resort has a price tag of $2.5 million. “This is the amount that was invested in the development of the resort,” Basilaia said. Randevu Betania is located 18 kilometers from Tbilisi and is spread over 30 thousand square meters. The resort was launched in 2012 and was initially planned as a year-round holiday destination.

hotel with 41 rooms, restaurants, cottages, outdoor and indoor swimming pools, a spa center, a wine museum, sports areas and children’s playgrounds is to be built in the town of Mtskheta as a part of a new touristic complex. It is set for completion in 2018-2019. The project, to be implemented by Sevsamora Villa Ltd with an investment of GEL 5 million, will have an eco tourism concept introducing locally produced ecological Georgian products. The company has already bought vineyards and also owns land in the villages of Saguramo and Jighaura issued by the National Agency of State Property for GEL 104,261.




JANUARY 10 - 12, 2017

ProCredit Holding Listed on Regulated Market of Frankfurt Stock Exchange


roCredit Holding AG & Co. KGaA (ProCredit Holding), the holding company of the international ProCredit group of banks, is now listed on the regulated market (Prime Standard) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) in Germany. This marks another milestone in the successful development of ProCredit since its establishment as a banking group in 2003. With this listing on the Frankfurt Stock Exchange, ProCredit Holding is opening up to investors that can identify with the group’s unique approach to banking and with the ethical corporate mission implemented and lived by the well-trained client advisers in each ProCredit bank. As a young, modern and highly integrated banking group that is very well established in the banking sectors of the emerging economies in which it operates, the ProCredit group believes in economic

development that is in line with its ecological and social criteria. Its focus is on South Eastern and Eastern Europe where it serves as a “Hausbank” for the region’s small and medium-sized enterprises (SMEs). The group places great value on fostering entrepreneurship by collaborating with formalized, forward-looking SMEs that have sustainable business models. The listing of ProCredit Holding on the Prime Standard sub-segment of the Frankfurt Stock Exchange further emphasizes ProCredit’s commitment to transparency, a critical pillar which has supported the group along its consistently profitable development path. The acceptance of ProCredit Holding as a member of the Frankfurt Stock Exchange should above all be good news for the group’s SME clients, whose excellent growth potential shall be better served by ProCredit Holding’s greater access to the capital market.

Number of Tourists in 2016 up 7.6 Percent BY THEA MORRISON


he head of Georgia’s National Tourism Administration (GNTA), Giorgi Chogovadze, announced Wednesday that the number of tourists visiting the country in 2016 had increased by 7.6 percent from 2015. According to Chogovadze, 6,350,825 international visitors arrived in Georgia last year, which is 449,731 more than the previous year. The greatest number of tourists hailed from Azerbaijan (1,523,075, an increase of 9.3%), followed by Armenia (1,496,246, an increase of 1.9%) and Turkey (1,254,089 – a decrease of 9.9% from last year). 1,037,564 Russian tourists visited Georgia in 2016, which is a full 12% more than in 2015, while visits from Ukraine increased by 21.8%, amounting to 172,631 people. The year-on-year statistics for visitors from Europe also show positive signs. The total number of travelers from Lithuania, Latvia, Czech Republic, Bulgaria and Germany has significantly increased. “An exceptional increase in tourism was observed from the following countries: Iran (+485%), India (+ 199%), Saudi Arabia (+ 116%), the Philippines (+

Tetnuldi Alpine Ski Resort

89%), Oman (+ 75%), and China (+46%),” Chogovadze said. He added that the income from international tourism has also increased, amounting to $1.7 billion in three quarters of 2016. That represents $177 million more than figures from the previous year.

The greatest number of tourists hailed from Azerbaijan ( an increase of 9.3%), followed by Armenia (an increase of 1.9%) and Turkey (a decrease of 9.9% from last year)




Georgian Wine Exports Increase in 2016 Georgia's President Mikheil Saakashvili, left, and Donald Trump shake hands during a press conference, on March 10, 2011. Source: Bloomberg.com

Bloomberg: Trump Pulls Out of $250 Mln Tower Plan in Black Sea Resort BY THEA MORRISON


nited States PresidentElect Donald Trump’s company has pulled out of a proposed $250-million tower project in Batumi, Bloomberg reports. “The Trump Organization and its local partner in Georgia, the Silk Road Group, said in a joint e-mailed statement that they have decided to formally end the development of Trump Tower, Batumi,” the article reads.

The project, a 47-story residential condominium, was announced in Batumi in 2012 by Trump and then-Georgian President Mikheil Saakashvili. Silk Road said it will go ahead on its own with a luxury tower in the city, once dubbed the Monte Carlo of the Caucasus by Trump. Bloomberg reports that Trump’s organization announced last month it was ending real estate projects in Brazil and Azerbaijan, in what Executive Vice President Alan Garten described as “housecleaning” ahead of Trump’s January 20 inauguration. “Political opponents have said his business interests could prejudice US foreign

policy - especially in the former Soviet Union, given Trump’s professed admiration for Russian President Vladimir Putin,” Bloomberg says. The Trump Tower in Batumi was widely assumed to have been shelved when Saakashvili lost power in 2013 and was later stripped of his Georgian citizenship. But Giorgi Ramishvili, Silk Road’s founder, said a month ago that it was still on track. “Ramishvili, contacted by phone, didn’t elaborate on why it’s been abandoned now, and also declined to comment on whether he’ll be attending Trump’s inauguration,” the article reads.



eorgian wine exports showed a 38% growth in 2016, with USD 114 million in sales – almost 50 million bottles – to 53 countries worldwide. Apart from traditional markets, the demand for Georgian wine grew in the European Union, the United States, and China.

Russia remains the single biggest buyer, importing 49% more than it did in 2015. It is followed by Ukraine, with 6 million bottles (a 70 % increase), and China, which has reported a full doubling of Georgian wine imports, totaling 5 million bottles. Kazakhstan, with 3 million bottles, and Poland, with 2 million bottles, follow. The most popular Georgian wine varieties on international markets are Kindzmarauli, Mukuzani, Tsinandali, Akhasheni, and Khvanchkara.




JANUARY 10 - 12, 2017

The Galt & Taggart Research team comprises Georgian and Azerbaijani finance and economic experts who have broad experience of covering the macro and corporate sectors of the two countries. Our current product offering includes Georgian and Azerbaijan macroeconomic research, Georgian sector research, and fixed income corporate research. For free access to Galt & Taggart Research, please visit gtresearch.ge or contact us at gt@gt.ge.



ector research is one of the key directions of Galt & Taggart Research. We currently provide coverage of Energy, Healthcare, Tourism, Agriculture, Wine, and Real Estate sectors in Georgia. As part of our energy sector coverage, we produce a monthly Electricity Market Watch, adapted here for Georgia Today’s readers. Previous reports on the sector can be found on Galt & Taggart’s website - gtresearch.ge.

NEW YEAR - NEW TARIFFS GNERC has announced new tariffs for certain HPPs and TPPs, as well as for commercial users of Telasi and EnergoPro; residential tariffs remain unchanged in 2017. The new tariffs become effective on January 1, 2017. Tariffs were revised for ten HPPs (all owned by Energo-Pro), which together accounted for 18.1% of total generation in 11M16. Only one of them got a tariff increase, while tariffs were lowered by 12.5%, on average, for the remainder. Enguri and Vardnili, the largest state owned HPPs, also saw their tariffs increase to 1.496 tetri/kWh (from 1.187 tetri) for Enguri and to 2.88 tetri/kWh (from 1.17 tetri) for Vardnili. Tariffs were revised upward for all TPPs for the year 2017. Revisions varied from a 13.5% increase for the Gardabani CCGT to a 66.9% increase for GPower. The guaranteed capacity fee, received by TPPs for the number of days they are on standby, was decreased for Block 3 (-23.8%), Block 4 (-30.6%), and the Gardabani CCGT (-6.1%), while it was increased for Block 9 (+10.5%) and GPower (+1.4%). Changes were applied to GSE and Energo-Trans tariffs as well. GSE is a transmission and dispatch licensee, while Energo-Trans (subsidiary of GSE) is only a transmission licensee. GSE was granted a 15.6% increase for transmission services, while its tariff for dispatch services was lowered by 16.3%. Energo-Trans saw its tariff lowered by 7.9% for the 500kv lines and increased by 71.0% for its 400kv lines. The latter is paid mainly by exporters, while the former three tariffs are payable by both consumers and exporters. Despite all the changes on the regulated wholesale electricity market, household tariffs remain unchanged. The Telasi and Energo-Pro tariffs were increased insignificantly and only for commercial users connecting to high voltage lines (6kv and above).

10 YEAR NETWORK DEVELOPMENT PLAN 2017-2027 APPROVED BY MINISTRY OF ENERGY, DECEMBER 15, 2016 The Ten Year Network Development Plan (TYNDP) is to be updated on an annual basis. This (third) edition of TYNDP features revised forecasts of electricity consumption growth and updated pipelines of power plant and transmission network projects. The annual consumption growth rate in the

total electricity supplied to the grid in November 2016. The newly commissioned wind power plant generated 1.8gWh, accounting for 0.2% of total electricity supplied to the grid. Total generation increased 17.9% y/y, with HPP generation up 17.0% y/y and TPP generation up 18.9% y/y. The main drivers of the increase in hydro generation were Enguri and Vardnili (+43.3% y/y). Electricity imports in November 2016 were down 84.8% y/y to 12.7gWh, with 76.4% coming from Azerbaijan and the rest from Russia. Guaranteed capacity was provided by each of the five guaranteed capacity sources for most of the month. Mtkvari Energy and Gardabani CCGT operated at full power

optimistic scenario is revised downward from 5.0% to 3.5%, which would result in 16.4tWh of electricity consumption in 2027. Expected commissioning dates for several large HPPs (Khudoni, Nenskra, Oni) have been pushed back, resulting in certain infrastructural projects also being postponed. Total investment over 2017-2027 is estimated at EUR 735.4mn, with 40% of that amount to be spent over the first three years.

EBRD APPROVES US$ 5.5MN LOAN FOR 17.2MW LUKHUNI 2 HPP Rustavi Group LLC is a special purpose vehicle (SPV) established for the sole purpose of constructing the HPP. Rustavi Group LLC is owned by Rusmetali Ltd (51%), a company registered in Georgia, and JSC Partnership Fund (49%). EBRD is providing a senior loan of up to US$ 5.5mn, partnering with TBC Bank on the project. Total investment cost of the project is estimated at US$ 26.4mn.


GROWTH IN NOVEMBER 2016 Domestic consumption increased 11.5% y/y in November 2016, with DNO consumption (+14.0% y/y) driving the growth. The greater Tbilisi area (Telasi subscribers) posted an outsized 21.5% y/y growth rate. Usage of Energo-Pro subscribers was up 10.3% y/y, while Kakheti Energy Distribution usage was up 5.9% y/y. Consumption of the Abkhazian region was up 10.4% y/y, following a 20.8% y/y increase in October 2016. Eligible consumer usage was down 4.3% y/y from an already very low base in November 2015 (-32.7% y/y). Consumption by Georgian Manganese, the largest direct consumer, was up 1.7% y/y from the November 2015 low base, while consumption by GWP, the second-largest direct consumer, declined 6.3% y/y. Electricity exports were negligible in November 2016. A significant amount of electricity transit (131.5gWh) took place from Azerbaijan to Turkey.


for the whole month, while Blocks 3 and 4 and GPower were mainly providing reserve for the system.

WHOLESALE ELECTRICITY PRICES DOWN IN NOVEMBER 2016 Wholesale market prices in Georgia decreased 21.2% y/y to USc 4.3/kWh, 9.0% below the Turkish market clearing price in November 2016. Turkish electricity prices decreased 0.2% y/y to USc 4.7/kWh from a significantly low base in November). 16.2% of total electricity supplied to the grid in November 2016 was traded through the market operator, with the rest traded through bilateral contracts.

DCFTA Web Portal to Launch in Georgia BY NINO GUGUNISHVILI


he Ministry of Economy and Sustainable Development of Georgia and The German Corporation for International Cooperation (GIZ) are to launch a DCFTA web portal in Georgia, an informative resource on the Deep and Comprehensive Free Trade Area (DCFTA) which is a preferential trade regime introduced within the Association Agreement (AA) between the European Union and Georgia. The aim of the online platform is to inform the small and medium businesses in the country about the possibilities and benefits of free trade with the EU. The web portal aims to be a communication platform in which state institu-

tions involved in the DCFTA implementation process will participate and will also provide information on new legislative initiatives to be implemented in accordance with the AA. Applications to participate in the tender for creation of the website will be accepted until January 20, after which the winner will have 18 months to complete the project for launch. GIZ has been supporting Georgia’s transition to a social market economy, democracy and the rule of law since 1992.




Nabeghlavi: How a SwissGeorgian Friendship Brought a Mineral Water to Success BY LUKAS MÄDER


homas Diem is not an investor. The 74-year-old Swiss from Zurich is a psychiatrist. His vocation was people, not investing money for profit. Yet today, Diem is an associate of one of the largest Georgian mineral water companies, the Margebeli Holding, which has the well-known Nabeghlavi in its portfolio. This extraordinary story began back in the early 1990s when Thomas Diem visited Georgia for the first time and fell in love with the country and its selfconscious people. During a later visit in 1997, on the search for old and forgotten musical works, he met Avtandil Svimonishvili and they visited the abandoned mineral water bottling factory in Nabeghlavi in Western Georgia. “I found a soulmate,” Diem tells GEORGIA TODAY of his meeting Svimonishvili. “We are both patriots of small countries, and we both believe that financial profit is only justified if the employees and the country profits, too.” With this philosophy, together they founded a company for bottling Nabeghlavi water. In the beginning, it was a struggle to keep going and the first five or six years were spent trying to find investing partners, dealing with the hassle of bureaucracy and fighting against dubious competitors, “and doing so in a fair and respectable way,” Diem recalls.

We are patriots of small countries, and we believe that financial profit is only justified if the employees and the country profit, too

He started with a venture capital contribution of 40,000 Swiss Francs but had to increase his investment step by step – until after six years, a bigger investor showed up. “It was never an option for me to let my partners down. The natural loyalty among us was an essential part of our success.” At the initial stages of set-up, Diem traveled to Georgia several times a year to bring potential investors to see the project. This changed as the next generation took over. Mikheil Svimonishvili, the son of co-founder Avtandil and former Minister of Agriculture in the Saakashvili period, is now the operational chief, while Thomas Diem's own son has also taken on an active role in the Margebeli Holding. And water is not their only business anymore. The Margebeli Holding is active in agro production, food processing and food distribution, too. They grow fruits and farm cattle, they produce tomato sauce, pickled cucumbers and apple jam, and distribute products – the whole chain from the field to the supermarket. And soon they will begin a trial bottling fruit juices. “I'm a huge fan of Switzerland,” says Mikheil Svimonishvili, who spent a number of years studying there. He wants to bring as much Switzerland to Georgia as possible – not the best idea when taken from a strictly economical point of view: “We have higher costs, but at the same time also higher quality,” he says. Such high standards have also been applied to the latest project of the Margebeli Holding, a cooperation with the Austrian juice producer Rauch. “Our bottling plant is state-of-the-

art, which is why it costs as much as it would in Switz e rl a n d ,” s ays Mikheil Svimonishvili. He doesn't believe in the philosophy that for East-

ern Europe second-hand technology is sufficient. Thomas Diem will turn 75 this year, 20 years after the beginning of his engagement in Georgia. Financially, his investment has paid off, although this was never his priority. “I have gained experience I wouldn't want to have missed thanks to



10 Galaktion Street

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

my investment,” Diem tells us. “The experience of handling financial problems and strategic mistakes, but also the experience that even aged 55, one can start a totally new project in life.” He finishes by saying he is happy to see the company’s spirit being carried forward with the next generation.


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JANUARY 10 - 12, 2017

Swiss Business in Georgia

Mikheil Svimonishvili, Margebeli Holding and former Minister of Agriculture



he possibility of free trade with Europe has raised high hopes in Georgia. Since the signing of the free trade agreement with the EFTA in June 2016 in Berne, these hopes have focused on Switzerland in particular, one of the four EFTA member countries. “The agreement opens a lot of opportunities, especially in the field of agribusiness,” says Mikheil Mikeladze, President of the GeorgianSwiss Business Association, an organization which aims to promote economic relations between the two countries. In fact, there's a lot to promote when it comes to business between the two countries. In 2015, the volume traded was only 39 million Swiss Francs ($39 mln), even less than 2014, according to Swiss statistics. Most of this was made up of Swiss products being exported to Georgia, the majority phar-

maceutical and watch-making parts. Only 15% of the total bilateral volume consisted of Georgian exports, mostly textiles and agricultural products. But the EFTA agreement alone won't help Georgia to change this trade imbalance when it enters into force, probably in late 2017. “To export products to European countries, Georgia needs farreaching reforms to meet the high Western standards,” says the Swiss Ambassador to Georgia, Lukas Beglinger. “Moreover the trade of agricultural products is not fully liberalized in the agreement.” “Normally, a free trade agreement works for the profit of the country with higher developed products, in this case Switzerland,” says Mikheil Svimonishvili, Margebeli Holding and former Minister of Agriculture. “Today, Swiss chocolate is 12% more expensive than the same product from Germany because of taxation. This will change with the agreement.” And it could increase imports from Switzerland to Georgia. With $175 million in 2015, Swiss investments made up only 1.3% of all foreign investments in Georgia.

However, this is set to change and there are already a number of large-scale investments in the field of agricultural production and food processing. The Margebeli Holding, with the prestigious Nabeghlavi mineral water, is a Swiss-Georgian cooperation existing since 1997 [see page 7]; the meat producer and processor Blauenstein was founded by Swiss businessman Max Blauenstein from Geneva; and the hazelnut trade firm Anka Fair Trade is run by a Turkish-Swiss citizen. These investments are not only made with huge returns

in mind, but at least partly also for reasons of emotional attachment to the small Caucasian country. And Georgia is indeed a small market. That's why the country as such is no priority market either for Swiss companies nor for the Swiss organization promoting exports. Additionally, Ambassador Beglinger sees problems in terms of legal security. “The justice system doesn't always work professionally here,” he says. But in his opinion the main challenge is education and skills. Svimonishvili agrees, “Too many young people are graduating university in Georgia,” he says. “This lowers the academic standard, while, on the other hand, there is a severe lack of skilled workers.” That the government has announced reforms in this sector is welcome news. Yet, the regulatory framework in Georgia is quite investor friendly, and bureaucracy and corruption are relatively low. Added to this that the tax framework has become even more attractive from this month, with the so called “Estonian Model” making re-invested earnings tax-free. Tourism and manufacturing could be interesting sectors for Swiss companies to invest in. “These are the sectors the government wants to boost,” says the Georgian-Swiss Business Association’s Mikeladze. “For example, the State offers loans for industrial production on good conditions.” Ambassador Beglinger sees logistics and infrastructure as potential fields for Swiss investment, helped by the Georgian government’s desire to establish the country as an economic hub in the region thanks to free trade agreements with European countries as well as with most CIS countries and China. “But an attractive framework and economic potential is not enough,” says Mikheil Svimonishvili. “Swiss companies don't come to Georgia just because: they need to be attracted and convinced. Foreign investors should be helped to understand the mentality in Georgia,” he says. “That's the only way to get a big company from abroad to invest in this small country.”

IDP Families Receive New Flats for the New Year

Mayor David Narmania and Sozar Subari, Minister of Internally Displaced Persons (IDPs) from the Occupied Territories, Accommodation, and Refugees, officially hand over ownership of new homes to 200 families in Tbilisi



undreds of internally displaced families in Georgia will be receiving new apartments for the New Year. At the end of December 400 IDP families were granted flats in newly constructed buildings across Tbilisi. In addition, it was announced that applications for new flats in the central Georgian city of Gori were to open for a further 480 families from January 3rd. At a ceremony on Dadiani Street on December 26, Mayor Davit Narmania and Sozar Subari, Minister of Internally Displaced Persons (IDPs) from the Occupied Territories, Accommodation, and Refugees, 200 of the 400 families in Tbilisi were officially handed ownership of their new homes. “Of the 400 apartments granted, 200 are located by Tbilisi Sea and 200 are in the center of Tbilisi, on Dadiani Street,” Subari said in a statement concerning the newer, 480-family grant. “The apartments will be allocated according to the wishes of the IDPs, by means of a ballot system, although ground floors will be granted to people with dis-

abilities. The building will have an entrance adapted for PWDs. 200 families will be able to meet the New Year in their new homes. As for the remaining 200 families, those receiving apartments by Tbilisi Sea will be able to greet the Old New Year there (January 14th).” Of the 200 apartments on Dadiani Street, 148 are single-room, 27 are double-room and 25 are threeroom apartments. Since 2012, 1,800 families have been provided with living spaces by the government to compensate for homes lost behind occupation lines. There are 263,598 IDPs in all, according to the latest available statistics (2015). The Prime Minister, in his End of Year speech on December 29th, claimed that around 13,700 IDP and 300 so-called “eco-migrant” families have received apartments in total since 2012, and that some 1,700 more families will be able to move into new apartments in 2017. As for the 1,360 families which have announced their preference to stay in rural areas across Georgia and pursue an agriculture-centered life, the government intends to purchase houses worth 17,000-31,000 GEL and offer them in lieu of urban apartments.



Georgia-China Free Trade Deal among Top 10 China Events

The signing of the Georgia-China Free Trade Agreement (pictured above) holds 8th position on the list of China’s major economic milestones for 2016



he Georgia-China Free Trade Agreement has been placed on the list of China’s major economic milestones for 2016. The Agreement with Georgia holds 8th position on the list, which was determined by the Ministry of Commerce of the People's Republic of China in December. The China-United States Commerce and Trade United Commission was ranked 1st on the list, which followed the results of a popular survey. That survey is carried out on an annual basis by China's Ministry of Commerce.

Georgia's Ministry of Foreign Affairs says that Georgia will be the first country in the region to have a free trade agreement with China. Talks were launched in 2015. On October 5, 2016, China's Minister of Commerce, Gao Hucheng, and Georgia’s then-Minister of Economy, Dimitry Kumsishvili, signed a memorandum to finalize the deal. Georgian wine, mineral waters and agricultural products are among the goods that will be exported to China and its market of 1.4 billion consumers, with zero tariffs, with no additional customs fees and with no transition period. Before the deal goes into effect it must be ratified. This is expected to happen in the middle of 2017. After that, the world’s largest market will be open for Georgian products.

UNDP: Georgia Adopts First National Strategy for Rural Development

The strategy focuses on promoting entrepreneurship and civil engagement, and on improving the quality of people’s life while paying special attention to the values of natural and cultural heritage. Source: ENPARD



he United Nations Development Program (UNDP) reports that Georgia’s government has adopted its first-ever national strategy for rural development. The plan outlines the country’s vision for the three years 2017 to 2020, in key areas of rural development – growth and diversification of local economies, improvement of social and public services, sustainable use of natural resources, and local engagement in the development process. The Rural Development Strategy 2017–2020 was initiated by the Government of Georgia and supported by the European Union (EU) and two United Nations agencies – the UNDP, and the Food and Agriculture Organization. It falls under the scope of the EU-funded European Neighborhood Program for Agriculture and Rural Development (ENPARD). UNDP reports that the strategy focuses on promoting entrepreneurship and civil engagement, and on improving the quality of people’s life while

paying special attention to the values of natural and cultural heritage. “The preparation of the Strategy engaged a range of national and international stakeholders, including for civil society and community organizations, national and international experts, relevant ministries and state agencies,” the agency said. After its adoption by the government, an ‘Interagency Coordination Council on Rural Development’ will be established and led by the Ministry of Agriculture. The council will coordinate the implementation of the strategy and will look into specific initiatives for individual regions of Georgia. According to UNDP: “the EU is supporting rural development in Georgia through its ENPARD Program. Implemented since 2013 with a total budget of EUR 102 million, the main goal of ENPARD is to reduce rural poverty in Georgia. The first phase of ENPARD in Georgia focused on developing the potential of agriculture. The second phase focuses on creating economic opportunities for rural population that go beyond agricultural activities.” The national strategy for rural development 20172020 was adopted by the government during its year-end session December 30th.





JANUARY 10 - 12, 2017



Companion fares, kids fly free and other fantastic deals to be discovered across the airline’s global network between 9 and 16 January 2017 More than 500 amazing prize Additional great offers available from main partners Visa, Expedia and AccorHotels


he popular travel festival of Qatar Airways is back and has been significantly enhanced for 2017, inviting world travellers to take advantage of a number of exceptional deals across the airline’s global network. Extraordinary deals can be found on the World’s Best Business Class* and Economy Class, along with special companion fares, discounts on group bookings** and a kids special offer on sale between 9 and 16 January 2017. The Qatar Airways Travel Festival online Treasure Hunt will also once again offer Qatar Airways’ millions of social media followers the opportunity of searching for a zero fare Golden Ticket to one of the airline’s exciting global destinations, with clues being released via the airline’s Facebook, Instagram and Twitter pages throughout the sale period. Qatar Airways passengers can choose from even more exciting places to explore, starting in 2017 with the launch of new services to Auckland, New Zealand; Canberra, Australia; Dublin, Ireland; Las Vegas in the United States, Rio de Janeiro, Brazil; Santiago, Chile; to name a few. Offers available throughout the Travel Festival are applicable on Economy and Business Class return airfares, with a travel period between 11 January and 15 December 2017 to more than 150 destinations worldwide, including the Middle East, Europe, East Asia, East Asia, Asia Pacific, and Africa. For the first time since starting the travel festival, Qatar Airways’ has partnered with leading company, Visa, providing Visa card holders with additional discounts of up to 15 percent on flight bookings. Travelers can also take advantage of the airline’s partnership

with AccorHotels, receiving a 10 percent discount when booking accommodation via the airline’s website, as well additional benefits on great flight and hotel packages when booking with partner Expedia. Qatar Airways Chief Commercial Officer, Dr. Hugh Dunleavy, said: “The Qatar Airways Travel Festival has fast become an exciting global event that offers great value and encourages our travellers to keep exploring; and I’m thrilled to be able to bring it back for its third installment. The New Year is the perfect time to start thinking about

travel plans for the year ahead and the travel festival allows travellers to take advantage of a number of fantastic deals and promotions across our entire network at exceptional prices. “Our guests also have the opportunity to enjoy free upgrades to our Business Class or can benefit from further discounts on group bookings – our travel festival is designed to encourage our valued guests to go places together and create memories with those who they cherish the most.” The airline’s Privilege Club members also have the opportunity to earn dou-

ble Qmiles on bookings made throughout the promotion period, while travellers can also win a number of exciting prizes including upgrades to the World’s Best Business Class, Silver and Gold Privilege Club memberships, up to 100,000 Qmiles, access to Al Maha Lounges, Qatar Duty Free vouchers as well as vouchers to The Airport Hotel’s wellness spa inside Hamad International Airport. Guests can also take advantage of fantastic deals on hotels and accommodation packages in partnership with Qatar Airways Holidays. The Qatar Airways Travel Festival

provides the perfect opportunity for travellers to treat their nearest and dearest to award-winning service when they go places together, with the airline receiving a number of accolades in 2016. Qatar Airways was named Skytrax’s Best Staff Service in the Middle East, World’s Best Business Class 2016 and Best Business Class Airline Lounge as well as Best Business Class from Business Traveller Awards. The airline recently announced a number of new enhancements to its cabin to elevate the passenger experience, including new BRICS and Castello Monte Vibiano Vecchio amenity kits for Business Class passengers, and refreshed Hasbro children’s entertainment kits for the airline’s youngest travellers. Passengers taking advantage of the Qatar Airways Travel Festival are encouraged to turn two holidays into one by planning a stopover in Doha, with a new transit visa scheme offering visitors a free transit visa for up to 96 hours on your way to or from your final destination. Combine a quick visit to Doha, with its historic sites and fivestar shopping and resorts, with a dream holiday – only available to Qatar Airways passengers. Visit Qatar Airways at http://www.qatarairways.com/us/ en/qatar-transit-visa.page for more information. *World’s Best Business Class as voted by Skytrax Airline Awards 2016. **Discounts increase with each additional passenger on group bookings from 3-7 people. Terms and conditions apply. Seats and subject to availability and blackout dates apply. Please review at time of booking at qatarairways.com/travelfestival


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Opposition Claims Political Bias in Selection of New Public Broadcasting Director

Vasil Maghlaperidze, new Director General of Georgia’s Public Broadcaster (GPB)



edia watchers and opposition members are expressing disapproval at the selection of Vasil Maghlaperidze as the new Director General of Georgia’s Public Broadcaster (GPB). Maghlaperidze was elected on Friday in the second round of secret balloting by GPB’s eight-member board of directors, receiving six votes. Before the final voting, some members of the media and the opposition repeated concerns that Maghlaperidze was favored by the current government. Maghlaperidze is himself a former employee of GDS TV, which is owned by Bidzina Ivanishvili, founder of ruling the Georgian Dream party (GD) and ex-Prime Minister of Georgia. Maghlaperidze produced a program for GDS TV called “2030.” Lasha Tugushi, a media commentator, called the decision shameful. “Their decision has ended development of the GPB. We, society, are paying 40 million GEL to the broadcaster for such incompetent decisions. This is unfair,” Tugushi said. Another commentator, Zviad Koridze, said the board of directors had elected a politically biased person. "It is a sad reality. The board made a political biased decision. It actually made a decision to prevent development of the GPB as an independent and democratic institution. They elected a person who openly demonstrated his political bias during

Gazprom Sets Record for Russian Gas Export BY DIMITRI DOLABERIDZE


uring 2016 Gazprom supplied European countries with an extra 179 billion cubic meters of gas, 12.5% more than in 2015- a record in the history of the Russian gas industry. “Gazprom set a new record of gas export to foreign countries,” said head of the company Alexey Miller on January 9. Compared with the previous year (158.56 billion cubic meters), the export volume of Gazprom in non-CIS countries grew by approximately 12.5% or by 19.9 billion cubic meters. "The record result demonstrates the significant increase in demand for Russian gas in Europe and our ability to ensure that it is exported in the desired volume,” Miller said. "This is an amount not seen in the Soviet Union, or even in the days of modern Russia," said Miller, noting the growth of supply to Germany and other major gas consumers in Europe. The total volume of gas in 2016 increased to about 570 million cubic meters and the company, according to Miller, is able to increase production by another 150 billion cubic meters, if necessary. "We are always working on the market and extracting as much gas as is necessary for consumers," Miller said. The previous record in gas production was last achieved by Gazprom in 2006, with 556 billion cubic meters. In 2009, production fell to 461.5 billion cubic meters; in 2011, it rose to 513.2 billion

cubic meters; went down again, and by 2015 had fallen to 418.5 billion cubic meters. At the New Year's conference, Miller said there was an increase in gas production by 11 billion cubic meters compared to the plan for 2016 thanks in part to the company's development of new production centers, in particular, on the Yamal Peninsula. The Yamal Peninsula is located in the YamalNenets autonomous district of northwest Siberia, Russia. It extends roughly 700 km and is bordered principally by the Kara Sea, Baydaratskaya Bay on the west, and by the Gulf of Ob on the east. "The resource base of Gazprom is gradually shifting to the north,” Miller said. “Russian gas on the map appears as a powerful new gas transportation corridor, a gas supply chain for consumers in the Russian Federation and overseas markets. Of note is the development of the Northern Corridor, consistent creation of new capacity in the northwest of the Unified Gas Supply System - the creation of facilities for the gas supply of the Sea gas pipeline Nord Stream - 2,” Miller said.

the interview,” said Koridze. Members of Georgia’s main opposition party, the United National Movement (UNM), have expressed their own disappointment, fearing that the new director will take orders from the government. “Everything is absolutely clear. A politically biased person won the elections and now the broadcaster has become dependent on the government,” said Sergi Kapanadze, a member of UNM. Fifteen people filed initial applications for the position. Members of GPB’s board of directors chose the candidates from 14 after candidate Bachuki Bakhtadze was excluded following review by the board. The Board of Trustees of GPB announced an open competition for the vacant position on November 28, after the former Director General, Giorgi Baratashvili, left his post right ahead of the October 8 parliamentary elections. Five candidates were considered during the next round of voting: Zaal Anjaparidze, Vasil Maghlaperidze, Nino Zautashvili, Tinatin Berdzenishvili and Natia Kuprashvili. That ballot resulted in a run-off between Maghlaperidze and Berdzenishvili. The new director general denies all allegations and says that his political past is not a crime. “Everyone has a past. The main thing is that this past should not be shameful. I do not think that I have done anything that I should be ashamed of,” said Maghlaperidze, adding that some changes would take place at the broadcaster. The new director said he would do his best to transform GPB into the nation’s leading broadcaster. He will serve his term for the next six years.



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JANUARY 10 - 12, 2017

Four Questions for Georgia in 2017 OP-ED BY LINCOLN MITCHELL


ike most years, 2017 promises to be an exciting and intriguing one for Georgia. Given how spectacularly wrong much of my political forecasting was in 2016, I am not making any predictions for Georgia, or any other countries for the new year. However, there are some key questions that will confront Georgia this year and are worth exploring. How Georgia responds to these questions will be of central relevance to Georgia’s future.

CAN GEORGIA NAVIGATE THE NEW GLOBAL ENVIRONMENT? The New Year began in Georgia with a visit by three influential US senators, John McCain (R-AZ), Lindsay Graham (R-SC) and Amy Klobuchar (D-MN). One of the reasons for this visit was for these senators to demonstrate that the US-Georgia bond remains strong. That the need to do so arose at all is evidence of the rapidly changing political relationship between the leadership of Russia and the US and its potential impact on Georgia. Unfortunately, a visit by three earnest and well-meaning senators will do little to ameliorate this concern. Interestingly, the strong words of praise that the trio, notably Senator Graham, had for Georgia and its current government suggest that the coming Trump presidency has left little political space for Georgia’s American friends to continue to repeat inaccurate United National Movement (UNM) talking points about the Georgian Dream (GD) somehow being pro-Russia. Donald Trump’s election will at the very least mean tremendous uncertainty for Georgia. Trump campaigned on a vision of the US becoming less engaged with the rest of the world. He has little experience in foreign policy, and has a tendency to over-personalize everything from not winning television awards to terrorist attacks. Additionally, and of particular relevance for Georgia, the new American President appears to be enthralled with Russia’s President Vladimir Putin and very likely owes his narrow electoral college victory, at least in part, to Russia’s hacking of the Democratic Party. It is possible, but unlikely, that this will have little effect on Georgia. There are still many supporters of Georgia, and many who are wary of Russia, in congress, the US government and the broader American foreign policy community. However, it is more likely that Moscow will try to exploit its new relationship with the American president to weaken the link between Washington and Tbilisi. The Georgian government must be nimble in its efforts to maintain this relation-

ship and to prevent Georgia from being a casualty in the new good feeling between Presidents Trump and Putin. Whether or not it can do this in 2017 will have tremendous bearing on the future security, and indeed sovereignty of Georgia.

WILL GEORGIA MOVE TOWARDS A MULTI-PARTY POLITICAL SYSTEM? The 2016 election was a triumph for the governing GD, and an equally resounding defeat for the opposition UNM, who had governed the country from 2004-12. Moreover, that election was less an exercise in parties offering different ideas and visions, than one in which the UNM’s calls for regime change fell on deaf Georgian ears. As a result, the GD currently comfortably dominates Georgian politics; and the UNM appears to be in disarray. Thus, while Georgia is making progress in areas regarding freedom and democracy, it remains, in many respects, a oneparty system. If Georgia continues to be dominated by one party, as has been the case essentially since independence, its democratic development will be stunted. There are some possible paths to a multi-party system including the rational breakup of the GD block, an opposition

coalition of liberal pro-western parties and individuals emerging from the last election or a currently unseen political force emerging. There is, however, no guarantee that this will happen.

CAN GEORGIA’S ECONOMY BEGIN TO DELIVER FOR ORDINARY GEORGIANS? There have been some recent signs that Georgia’s economy is beginning to recover. Additionally, during the last several years, Georgia has begun to be a larger presence in the food, culture, travel, design and film world. It is increasingly common to see Georgian wine, mountains, fashion or film in the global media in a positive way that demonstrates what Georgia can offer the rest of the world. For example, Vogue described Georgia as the hottest travel destination for 2017. This, in addition to ongoing efforts to reduce regulations, improve the business climate and nurture the tech sector over the last several years are good harbingers for Georgia’s economic development. These positive developments have not yet begun to impact the everyday lives of Georgia’s people, who still confront widespread unemployment and poverty.

As long as that remains the case, nice mentions on foreign websites or magazines are of little concrete value for Georgia. The major economic challenge for the Government of Georgia in 2017 is to translate these abstract accomplishments into concrete economic goods for the Georgian people. This will require government policies that focus explicitly not just on bringing investment to Georgia, or raising Georgia’s profile as a destination for tourists, hikers, wine experts or foodies. Instead, policies must seek to link foreign investment to more and better paying jobs, facilitate the development of small businesses that can support these growing sectors and make sure that inflation does not become too high. If Georgia can turn a good story about economic development and reform, albeit one that primarily resonates outside of Georgia, into a reality for the Georgian people, it will be a significant turning point for Georgia, one that suggests they are moving in new and better direction

WHAT ABOUT ABKHAZIA AND SOUTH OSSETIA? Since the war in 2008, there have been few major flare-ups between Russia and

Georgia, but numerous minor and medium sized clashes between the two. Abkhazia and South Ossetia have been at the center, both symbolically and actually, of many of these. While Georgia has succeeded in stymieing Russia’s efforts to win almost any international recognition for their position that these are two independent states, Tbilisi has been unable to stop Russia from tightening its control over the regions or pushing the de facto borders, usually by erecting fences, further into the rest of Georgia. Despite these issues and the obvious relevance of Abkhazia and South Ossetia to broader Russian efforts to increase their influence in what they call their near abroad, Abkhazia and South Ossetia are not exactly front and center issues in Georgian political life. This is in part because the Georgian government lacks a clear policy approach that could solve the problem. Military solutions are not possible. Strategic patience is little more than a euphemism for doing nothing and hoping for the best. Other more innovative approaches, such as engaging in more dialog and the like would cause political problems for the ruling GD. Additionally, because both the GD and the UNM were unable to move Abkhazia and South Ossetia closer to Georgian sovereignty, neither party has much of an incentive to focus a lot of political attention on these questions. It is, however, significant that the New Year’s delegation from the US Senate visited the boundary line at Khurvaleti near South Ossetia. This was a reminder, not least to Russian President Vladimir Putin, that despite Donald Trump, some in the US leadership have not forgotten about Russia’s occupation of much of Georgia. Given the increased tension, but also increasingly strange relationship, between Russia and the West, 2017 could see Abkhazia and South Ossetia taking on a political relevance that is much greater than in previous years. The year ahead will force Georgia to confront a changing world where long held notions, like the stability of American democracy or core concepts underpinning NATO, can no longer be assumed. While Georgia must craft a strategy for a changing Washington, and changing relationships between Washington and Moscow, there are domestic issues, such as the longstanding needs to deepen multi-party democracy and create an economy that benefits ordinary Georgians that will require attention and determine what happens to Georgia this year as well. The Georgia Analysis is a twice monthly analysis of political and other major developments in Georgia. Find it on lincolnmitchell. com. Lincoln Mitchell is a political development, research and strategic consultant who has worked extensively in the post-Soviet space.

Rustavi 2 TV Director Attacked BY THEA MORRISON


ika Gvaramia, Director General of Georgia’s opposition-leaning TV channel Rustavi 2, was physically assaulted at a restaurant on Saturday, following the funeral of his father. As Gvaramia reports, the incident took place in a restaurant in central Tbilisi, just before he was going to leave. “The lights went out as we were getting ready to go, and we were unexpectedly attacked in the dark…I had no time to react or understand what was happening,” Gvaramia’s post reads. After the incident, the police arrested

one person, son of the former opposition figure Levan Gachechiladze. The arrest came after Rati Gachechiladze admitted the assault on his Facebook post. “The incident in the restaurant was my reaction to the physical and moral abuse that my family and I have suffered in the last years from Gvaramia and not only from him,” Gachechiladze’s post reads. He also underlines that only he attacked Gvaramia and there were no other attackers but him. However, the Rustavi 2 TV Director insists that Gachechiladze was not alone and it was a group assault. Gvaramia is also dissatisfied that the investigation was launched under article 126 of Georgia’s Criminal Code that refers to violence. He believes the case was not adequately qualified and it is

either group assault or a hate crime. Rati Gachechiladze’s father, Levan Gachechiladze, was a presidential candidate in the 2008 presidential elections in which he came second after ex-president Mikheil Saakashvili. As for Gvaramia, he was one of the most outspoken members of then-ruling party and now opposition United National Movement (UNM). He served as a Member of Parliament in 2004-2007 and was then appointed First Deputy Prosecutor General of Georgia. In January 2008 Gvaramia was appointed Minister of Justice. He served as the Minister of Justice until October 2008. He was then appointed as the Minister of Science and Education, a position he quit in December 2009. Gvaramia has been the Director General of Rustavi 2 since November 2012.

Nika Gvaramia, Director General of Rustavi 2 TV

Profile for Georgia Today

Issue #910 Business  

January 10 - 12, 2017

Issue #910 Business  

January 10 - 12, 2017