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Issue no: 1038/124

• APRIL 10 - 12, 2018

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue... Georgian Wine Export up by 24% in January-March NEWS PAGE 2

Can Quotas Do It?! ISET PAGE 4

m2 to Finish Suspended Constructions of Center Point Development Company

FOCUS

BUSINESS PAGE 5

Kovzanadze: Global Vision, Extraordinary Approaches & Fundamental Changes Needed

ON A CLASSIC RALLY Racer Zoe Whittaker set to promote Georgia through her classic car rally next month

PAGE 8

Russia Removes Ban on Breakaway Abkhazian Products

BUSINESS PAGE 10

International Monetary Fund Mission Positively Assesses Georgia's Economic Indicators BUSINESS PAGE 11

BY THEA MORRISON

T

heRussianFederationhasdecided to remove a temporary ban imposed last month on the import of vegetables and fruit from Georgia’s breakaway region of

Abkhazia. However, Russia’s Ministry of Agriculture stated they are tightening control on imports, and Russia’s Rosselkhoznadzor (Federal Service for Veterinary and Phytosanitary Surveillance) will be in charge of this. Continued on page 2

Turkey’s Cooperation with Russia Unlikely to Influence Ankara-Tbilisi-Baku Alliance POLITICS PAGE 15

Photo source: RFE/RL

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2

NEWS

GEORGIA TODAY

APRIL 10 - 12, 2018

Georgian Wine Export up 29 Years Since Tragedy by 24% in January-March - Georgia Remembers

April 9 Heroes BY THEA MORRISON

O

n April 9, Georgia celebrated the 29th anniversary of the April 9 tragedy, when the Soviet Union's armed forces dispersed a peaceful demonstration in the center of Tbilisi in 1989. The country also marked the 27th anniversary of its independence from the Soviet Union. Every April 9th, the citizens of Georgia gather at the memorial located in front of the Old Parliament building in Tbilisi, to pay tribute to the victims. 21 people were killed on April 9, 1989, in a peaceful demonstration demanding the country’s independence from the Soviet regime. Sixteen died at the scene while five died later from injuries, among hundreds injured, poisoned and taken to hospitals. On April 9, 1991, the legislative body of the country and the first President, Zviad Gamsakhurdia,

BY THEA MORRISON

G

eorgian wine export increased by 24% in the first quarter of the year (January-March), which, according to the Georgia’s National Wine Agency (NWA), is a very positive start. The NWA published the results of the JanuaryMarch wine export statistics, according to which 17.7 million bottles of wine were exported to 43 countries worldwide, which is 24% higher than the same data from last year. In total, the income from wine export in JanuaryMarch 2018 amounted to $40.47 million, which is 26% higher than data from the same period in 2017.

adopted the Declaration of Independence and announced Georgia’s sovereignty from the Soviet Union. On Monday, Georgian leaders, officials and ordinary citizens brought flowers to the April 9 memorial and remembered the fallen heroes. Georgia’s Prime Minister Giorgi Kvirikashvili stressed that the April 9 tragedy showed the consolidation of Georgians and demonstrated their unity. “With such consolidation and the integration of the whole country, we must strengthen our country's independence; we must build a stronger Georgia, and remain loyal to the ideals for which the April 9 heroes sacrificed themselves,” the PM stated while laying flowers at the Memorial of Heroes. Georgian President Giorgi Margvelashvili also paid tribute to April 9 heroes, saying their merit in protecting Georgia will never be forgotten. “We should thank these people that we are free now,” Margvelashvili added.

Wine export this year increased in the following countries: Belarus - 429%, Japan - 230% the United Kingdom - 98% , France - 71%, Kazakhstan - 85% , The Czech Republic - 68%, Latvia - 61%, The Netherlands - 46%, Germany - 38%, Ukraine - 36%, Poland - 32%, Estonia - 28%, Russia - 28%, Israel - 24%, USA - 3%. The top five countries that imported the most bottles of Georgian wine in January-March this year are: Russia (11,511,830 bottles), Ukraine (1,771,928), China (1,117138), Kazakhstan (877,494), and Poland (740.922 bottles of wine). The Georgian National Wine Agency says in total, 134 Georgian companies exported wine from Georgia. 3.5 million bottles of Georgian brandy and 43.8 thousand bottles of chacha were exported abroad in the first quarter of this year.

Russia Removes Ban on Breakaway Abkhazian Products Continued from page 1 Russia prohibited the import of certain products from occupied Abkhazia due to the "critical phytosanitary situation" in the form of the agricultural pest the Asian Stink Bug (Brown Marmorated Bug) which destroyed nearly the whole hazelnut harvest in Georgia and occupied Abkhazia last year. The Russian side made the decision in order to prevent the spread of the pest onto Russian territory from occupied Abkhazia. Russia’s Ministry of Agriculture stated the decision to remove the ban on breakaway Abkhazian products was made on April 5, adding it would take effect from April 10. The Director of the Department of Plant Production, Mechanization, Chemicalization and Plant Protection of Russia, Petr Chekmarev, spoke about the measures taken by the de facto Abkhaz side to improve the phytosanitary situation, and the results of monitoring during the visit of Russian specialists. “The authorities of Abkhazia mobilized troops, organized manual collection of the pest, chemical treatment and conducted a mass effort with the

population to eliminate the pest. Around 10.5 million bugs were collected by the locals, which prevented its spread to the fields, orchards and vineyards,” Chekmarev said. The Russian Ministry added that specialists of the Rosselkhoznadzor and experts held informative meetings with local specialists and the general population of Georgia’s Russian-backed occupied region, gave recommendations and introduced information about how to effectively combat the Brown Marmorated Bugs. Several days ago, the Russian side stated they would pay Abkhazians 1000 Russian Rubles (around $17.5, GEL 42.44) per kilogram of Asian Stink Bug. The offer from the Russian side is one of the methods being used to combat the invasive pest, which has already started to multiply very quickly as the weather warms. Last week, de facto Abkhazia declared they are imposing a ban on imports from Georgia due to the pest, claiming they spread to the breakaway region from Georgia. Russia’s Rosselkhoznadzor alleged that the bugs were artificially created in Georgia and deliberately spread to Abkhazia.


NEWS

GEORGIA TODAY APRIL 10 - 12, 2018

3

Tbilisi Fashion Week to Open on April 19 Head of the Instituto Marangoni, and Elizabeth Tudor, Editor-in-Chief of the international web portal NOWFASHION. With the support of the National Tourism Administration, Tbilisi Fashion Week will be covered by more than 20 international editions this season, including Vogue Italia, Vogue UK, Vogue Russia, Vogue Ukraine, Vogue Poland, Style Sight Worldwide, Buro 24/7, L'officiel Ukraine, Harper's Bazaar Kazakhstan - Ukraine and Russia, NOWFASHION, Glamour Italy and Netherlands, WWD, WhoWhatWear, Trendspace, Esquire Italy, Oyster magazine, StreeTrends, SNC magazine, Refinery 29 and Frankie & Clo. As for the commercial part of the week, a number of important buyers will be arriving in Tbilisi, giving Georgian designers a chance to pitch their wares to such greats as H Lorenzo (LA, USA), Alduca D'Aosta (Venice, Italy) , Tomorrow showroom (Milan, Paris, London, New York), Mytheresa.com (Germany), Espacemonochrome.com (Monaco), Bangkok Department Store, Saks Fifth Avenue (Kazakhstan), and Youconcept London (UK). Two brands will be working in the fashion shop of Tbilisi Fashion Week. Arthouse will be taking care of hairstyles, while the Inglot specialists will make up the models. Partners: Art House, Inglot, Gabunia and Partners, Sobranie, Maidan Group, Martini, Hotel Museum, SOLO, Weekend Max Mara, Black Lion, National Youth Palace, Garden Hall, Georgian Art Palace.

BY KATIE RUTH DAVIES

T

he 17th session of Tbilisi Fashion Week (TFW) will be held from April 19 to April 22, with Tbilisi Balneology Resort hosting the showrooms and other events of the 2018 Autumn-Winter Season collection. TFW is held within the framework of ‘Check in Georgia’ with the support of the Ministry of Culture and Sport of Georgia, Ministry of Economy and Sustainable Development, "Produce in Georgia" and the National Tourism Administration. TFW is a dedicated symbol of Georgian culture and art. This will be seen no more clearly than on the opening day (April 19), with SOLO presenting the project ‘Medea Japaridze - Style Icon’ in the Tbilisi National Youth Palace Garden. Keto's costume from the well-loved film ‘Keto and Kote’ will be on display as will other elements from the Georgian classical film. The 4-day program of the 2018 TFW boasts 20 events featuring both Georgian and international designers including Keti Chkhikvadze, Ani Datukishvili, Tsite by Tamara Tsiteladze, Lasha Jokhadze, ELENNY, MIA, SAYYA, MIRO and Mak Mari. Following the London and Milan Fashion Weeks, the international brand of men's clothing 1377 will also be on show. As per tradition, TFW continues to discover new talents and popularize them. As a result of a special selection, up to 10 newcomers will be presented on April 20 at the Designers' Competition in front of both viewers and jury. The winners of various nominations will be awarded prizes from local and international partners. Guests can enjoy a Martini and Sobranie after-party at the Museum Hotel. Atelier Martha's presentation of the

TFW f/w 2018 Official Agenda "Knight in the Panther's Skin" will be held in café Black Lion, the presentation of Flying Painters will be held at Fabrika, accessories by Ethere will be presented at the Tbilisi Balneological Resort Garden, Young Artists Authentic Art Lab exhibition 'Elementary Particles' will be yours to enjoy at Marjanishvili’s Strada

restaurant and the exhibition ‘Georgian Clothing’ is scheduled for the International Press at the Georgian Art Palace. The project Talks by Marketer.ge will be held on March 21, with SOLO's Chavchavadze Lounge offering up to 100 marketers and followers the chance to listen to words of wisdom from Gizu Laura,

Horses & Tomatoes: the Putin/ Erdogan Friendship BY DIMITRI DOLABERIDZE

R

ecently, President Vladimir Putin enjoyed a two-day visit to Turkey. Judging by the statements made on both sides, trust has been completely restored between the countries, which had been on rocky ground since November 2015, when the Turkish Air Force shot down a Russian Su-24, and the Turkish leader Recep Erdogan refused to apologize for the incident. Relations between the two countries at the time became so complicated that Putin signed a decree on the application of “special economic measures” against Turkey. In 2017, Putin and Erdogan met eight times, not to mention having more than 20 telephone conversations. The last time the presidents met was last year in Sochi. And, in spite of mutual concessions, the atmosphere at the talks then reigned nervous. This time, everything was different. In the Turkish capital, Putin was met by an honor guard, a horse guard and a military band. They hosted the hymns of the two countries and organized a cannon salute. And at the photograph-

ing ceremony, Erdogan was as relaxed as if he was with a close friend. In terms of the business relationship between the two countries, in 2017, Turkish trade turnover increased by more than 40% compared to the previous year - up to $22 billion. Turkey occupies eighth place among the foreign trade partners of Russia in terms of turnover. The export of agricultural products from Turkey grew by 1.6 times and reached $1 billion at the end of last year. However, Ankara is trying to lift the limit for the number of tomato suppliers to Russia and to increase the volume

of authorized supplies. Now they export only 12 Turkish enterprises. By the evening of the last day of Putin’s visit, it became known that Rosselkhoznadzor had allowed another Turkish producer to supply Russia. The gesture is purely symbolic, though, and there will be no noticeable impact on the growth of supplies and so this will not threaten domestic import substitutes. Despite the fact that the business part of the visit was quite successful, it seems that it was not the main one after all. The key topic was the situation in Syria, which was discussed at length by the leaders of Russia and Turkey.

19:00

Lasha Jokhadze

Tbilisi Balneological Resort

20:00

Mia

Tbilisi Balneological Resort

21:00

Sayya

Tbilisi Balneological Resort

22:00

TFW After Party hosted by Museum Hotel, Martini & Sobranie

Museum Hotel

21-Apr 11:00 Talks by Marketer - 14:00 - Fashion Marketing

SOLO Lounge Chavchavadze ave.

15:00

Exhibition Georgian National Costums

Art Palace

16:30

Ani Datukishvili

Tbilisi Balneological Resort

17:30

Miro

Tbilisi Balneological Resort

18:30

MAK MARI

Tbilisi Balneological Resort

19:30

1377 - Menswear

Tbilisi Balneological Resort

20:30

ELEMENTARY PARTICLES by Authentic Studio

Strada Marjanishvili

13:00

Atelier Marta Accesoire Presentation

Black Lion / Shavi Lomi

14:30

Flying Painters

Fabrica

16:00

Ethere accesoire

Tbilisi Balneological Resort/ Upper Garden

17:00

Elenny

Tbilisi Balneological Resort

18:00

Tsite by Tamara Tsiteladze

Tbilisi Balneological Resort

19:00

Nino - Soviet Dress Tbilisi Balneological Resort

20:30

Keti Chkhikvadze

22-Apr

19-Apr 19:00

TFW OPENING / Fashion Icon / Medea Japaridze

14:00

NEW TALET'S Competition

National Youth Palace

20-Apr Tbilisi Balneological Resort

Garden Hall

TBC Status Presents Levan Songulashvili’s Personal Exhibition ‘Styx’

S

tyx is a multimedia project that combines the artwork, video and installation of artist Levan Songhulashvili who, in recent years, has joined the grand list of artists choosing to reflect meditative consciousness. The current Tbilisi exhibition is supported by TBC Status. The name of the project is connected to the mythological river and stands as a symbol of radical change and a movement from the visible world to the invisible realm of the spirits. Consequently, the exposition is a kind of journey between the consciousness and unconscious of the artist himself.

The exhibition curator is one of the most influential British critics of the art-world, Mark Gisborne, who came to Georgia for the project presentation. Songhulashvili's personal exhibition in Georgia is also being presented in Berlin at Galierie Kornfeld. Songhulashvili's paintings have been exhibited at various exhibitions throughout Europe and America. Three of his works were successfully sold at Sotheby's and in 2017, the Georgian artist was recognized by the US as an extraordinary artist and awarded a green card. Last year saw Songhulashvili's work on display in the Metropolitan Art Museum, named among more than 1000 works.


4

BUSINESS

GEORGIA TODAY

APRIL 10 - 12, 2018

THE ISET ECONOMIST A BLOG ABOUT ECONOMICS AND THE SOUTH CAUCAUS

www.iset-pi.ge/blog

The ISET Policy Institute (ISET-PI, www.iset-pi.ge) is an independent think-tank associated with the International School of Economics at TSU (ISET). Our blog carries economic analysis of current events and policies in Georgia and the South Caucasus region ranging from agriculture, to economic growth, energy, labor markets and the nexus of economics, culture and religion. Thought-provoking and fun to read, our blog posts are written by international faculty teaching at ISET and recent graduates representing the new generation of Georgian, Azerbaijani and Armenian economists.

Can Quotas Do It?! BY LIKA GODERDZISHVILI

D

espite substantial improvements in education, professional development and political participation, women remain underrepresented in leadership positions in politics, and Georgia is no exception. In 2017, the country ranked in 94th place (out of 144), according to the Global Gender Gap index (GGI)1, which indicates that Georgia is not performing well in closing the gender gap. The GGI serves as a comprehensive and consistent measure for gender equality, which can track a country’s progress over time. Economic participation and opportunity, educational attainment, health and survival, and political empowerment are the four main determinants by which the GGI measures gender parity. It does not come as a surprise that out of these four categories, the most problematic for our country is the political one. For political empowerment, Georgia is ranked as 114th, with a score of just 0.0932. However, Georgia is not alone here - the worldwide gap between women and men on economic participation and political empowerment is wide (only 58% of the economic participation gap has been closed). And here comes a question - what measures should be taken to solve this problem and reach gender balance in political institutions in our country and worldwide? The Working Group on Women's Political Participation (Task Force) believes that introducing a legislative gender quota system in Georgia is the answer. In many countries, policy-makers have introduced gender quotas in politics, and this is perceived as one of the most popular remedies for overcoming the problem - in fact, half of the countries of the world today use some type of electoral quota for their parliaments. A gender quota refers to requirements for the number of women in political positions. Changing the gendered nature of the public sphere, and inspiring women to get more politically involved, underlines the core motives for introducing this policy. Most scholars recognize three basic types of quotas: reserved seats, party quotas, and legislative quotas. A reserved seats quota system guarantees women representation in the parliament. It is used as a more direct way of regulating the number of women in elected positions. This system reserves positions for which only female candidates can com-

pete. Notably, out of the three types of quota systems, reserved seats are the least popular (see Figure 1). At their most basic, party quotas are measures adopted by individual parties on a voluntary basis. Political parties set targets to include a certain percentage of women as election candidates. Given that voluntary party quotas are not mandated by law, they are not legally binding, and so there is no sanction system. The only way governments can intervene in party quota cases is to incentivize the parties to increase the number of women in their electoral lists in different ways (financial incentive systems are the most widespread). This is the case in Georgia also - since 2011, parties that include two women for each 10 candidates receive 10% more core funding from the government. In 2014, incentive funding was increased further. Legislative quotas tend to be found mostly in developing countries, especially Latin America, and post-conflict societies, primarily in Africa, the Middle East, and Southeastern Europe. This is the newest type of quota policy, first appearing only in the 1990s. Legislative quotas are mandatory provisions that apply to all parties. This quota system refers to the electoral process - parties are obliged to include a certain number of women in their candidate lists, mostly in the 25% to 50% range. Moreover, parties can only replace a candidate with a candidate of the same gender; however, if no such candidate exists, the mandate is canceled.

Moving on to Georgia, with the goal of making Georgian women more active and empowered, the Task Force initiated the introduction of a gender quota system in 2017. This draft law proposed a 50% quota for the next parliamentary election: that is, every other person on the list should have been of a different sex. The legislative initiative was presented to the Parliament but was rejected in March, 2018. However, supporters in Parliament and civil society promised to initiate a new version of the law, the details of which remain unknown. You may hear success stories about how gender quotas changed political empowerment patterns and reduced gender gaps. According to GGI, Iceland has closed more than 70% of its gender gap, followed by Nicaragua, Rwanda, Norway and Finland. These stories are intriguing, however, political environments, institutional development and political will are still country-specific factors that can stop each type of gender quota system from being “a silver bullet.” As summarized by the World Development Report 2012, “Gender Equality and Development,” gender quotas, in theory, have the potential to correct market failures in the existing system. This instrument could potentially improve the aspirations of women and help them overcome

self-imposed stereotypes, and may also reduce statistical discrimination due to lack of information on female abilities, thereby changing attitudes and social norms towards women in the long-term. On the other hand, such measures could also reduce efficiency, if less able and qualified women are to be selected and promoted through application of this tool. Quotas could also have an adverse impact on incentives for females to invest in their education and self-development. Last, but not least, quotas can further undermine the image of women as qualified candidates, since they help generate beliefs that female candidates succeed only because of the artificial policy measures put in place. This belief could actually become self-fulfilling, if it disincentivizes qualified women from entering a political race. While it has been demonstrated that in many countries quotas have led to a significant increase in female representation, especially so in closed list proportional representation systems, empirical evidence analyzing the impact of such policies remains limited. Possible correlations between policy outcomes and quotainduced increases may not reflect the causal impact of quotas and reverse cau1 2

sation may also be the case. In other words, is it female representation that changed outcomes for women, or is an improved environment for female politicians strengthening gender representation in parliaments? Moreover, other factors, such as boosting overall female empowerment in a country, can determine both policy outcomes and quotainduced increases, but this cannot be interpreted as a causal relationship. Evidence from a couple of countries that have provided researchers with a more robust venue for causal impact analysis of gender quotas is mixed at best. Randomized allocation of gender quotas at the local government level in India has been shown to reduce the corruption practices of local bureaucrats; however, against expectations from female leaders for more pro-female policies, the same studies cannot confirm impact of gender on the policy outcomes. Albeit in a different context, the introduction of gender quotas at the corporate board level in Norway has adversely influenced shortrun profits of the companies affected by the policy. While nobody questions the necessity of empowering women in Georgia, broader tensions also need to be considered if quotas are to be used to increase women’s political representation. Limiting voters’ rights to vote for the candidate he/she thinks is best inherently undermines democratic principles. So this distortion has to be balanced against expected benefits; however, as mentioned above, debates about merits of such interventions remain unresolved in the academic literature. Introduction of a strictly enforced 50% legislated quota will most likely increase women’s representation in the government. However, by artificially correcting outcomes, it is highly unlikely that we will be treating underlying causes. Unless we have better understanding as to what really deters Georgian women from entering and succeeding in a political race, the risks and costs remain unwarranted. An option one could take is to replicate the Indian “experiment” and introduce quotas on a rolling basis at the local government level. This “natural experiment,” as researchers like to call it, could help bring about more certainty and free policy debate from ideological bias.

Global Gender Gap index is calculated by the World Economic Forum Global Gender Gap index scores are on a scale from 0 (imparity) to 1 (parity).

Figure 1: Number of Countries by Gender Quota Types

10 Galaktion Street Source: International IDEA; Quota project

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


BUSINESS

GEORGIA TODAY APRIL 10 - 12, 2018

5

m to Finish Suspended Constructions of Center Point Development Company 2

BY THEA MORRISON

T

wo development companies of Georgia, Center Point and m2, have signed a memorandum which envisages that m2 will finish all suspended constructions of Center Point Company, which in the past mishandled $310 million paid by around 6,200 customers for the construction of their flats. Under the memorandum, m2, which carries out premium-line constructions in prestigious regions of Tbilisi, gave Center Point six months to fulfill their pre-conditions. If Center Point fulfills the conditions, within three years m2 will finish all suspended constructions that were started several years ago by Center Point. One of the pre-conditions given by m2 is that Center Point must transfer to them free real estate owned by Center Point. "Free territories on which Center Point did not start construction or were not going to build residential flats should be separated from the problematic land

and handed over to m2. In return, m2 will undertake the responsibility to finish all suspended constructions of Center Point,” said Irakli Burduladze, General Director of m2. The Head of the construction company Center Point board, Guram Rcheulishvili, met with developers and informed them about the memorandum signed with m2. “In return for giving them our real estate, we are hiring m2 to finish all the constructions launched by Center Point years ago,” Rcheulishvili told the developers. The affected developers claim they will not sign any agreements with m2 until they receive guarantees that all of them will be provided with flats. The Center Point Case is the biggest construction scandal in Georgia. The company was established in 1999 and aimed to raise capital from citizens to implement construction projects. It was a conglomeration of 70 companies, 55 Limited Liability Companies (LLC) and 15 individual partnerships, owned by the three well-known people in Georgia: Vakhtang Rcheulishvili, Maia Rchuelishvili, and Rusudan Kervalishvili. The company went bankrupt following the 2008 war. Dexus, a company

Tbilisi Carpets Gallery Pekini st.36 +995555763366

which had been managing Center Point Group’s assets since September 2010, pledged to finish suspended constructions within three years. The company

was established on 23 August 2010, just two weeks before undertaking the management of Center Point Group’s construction projects.

However, Dexus worsened the initial conditions for the affected customers by asking them to pay burdensome taxes and additional costs for their construction projects. According to NGO Transparency International Georgia, Dexus became involved in an allegedly illicit deal through which the founders of the Center Point Group claimed customers' valuable property. In early April 2017, Tbilisi City Court sent the founders of the Center Point Group construction company, former Vice-Speaker of Parliament Rusudan Kervalishvili and her sister Maia Rcheulishvili, to prison for four years for embezzlement and misspending of clients’ money. The case has been ongoing for more than four years. The sisters are accused in misspending $5,548,341 and 20,692,408 GEL. Guram Rcheulishvili was also detained on charges of embezzlement of 19 million GEL. He was released on April 7, 2017, after paying bail worth 30,000 GEL. m2 was established by JSC Bank of Georgia in 2006 and since then has been a significant player in the real estate market in Georgia.


6

BUSINESS

GEORGIA TODAY

APRIL 10 - 12, 2018

Aid the Exodus! OP-ED BY TIM OGDEN

T

oday, I will propose a radical scheme, although not in the down-with-theWest-Allah-hu-akbar sort of way. If anything, this is something of an expansion on my piece last week about the Georgian Tourist Administration. If you’ve seen anything about Britain on the news in recent weeks, you’ll know that the old place isn’t what it used to be. Russian spies dropping like flies are one thing, but even England isn’t so far gone as for this to be a regular thing; once every five years or so, perhaps, but no more frequent than that. Street violence is another matter. You might remember a few months ago, I wrote that I had never felt safe in England, and despite never running into any trouble during my years of residence there, I was forced to defend myself in September during a visit home (and there’s irony, if you like; eight years in Georgia and never a flutter of danger, but one trip home and I’m putting a man charging at me to sleep). It vindicated all my worst feelings about Britain, and made me feel grateful that the bulk of the family brood is in France, while I am hunkered down in my apartment-cum-bunker in Tbilisi. Like most people, I take a tingling satisfaction in being proved right, but I can’t say that the numbers of stabbings, acid attacks and general violence of this year has done much to make me feel better about the fact that people in Georgia and elsewhere are finally seeing what I mean when I talk about how unsafe the streets of Britain have become. London has already overtaken New York

in the number of murders done this year, and we’re only into the start of the fourth month. Not bad for a country that, unlike the USA, does not allow firearms to be sold to the general populace…and yet one of the killings last week was with a pistol. Congratulations, Britain, you have shown that there is always one depth left unplumbed. On that note, I recall in 2011 two police officers in Manchester were killed by a grenade. Yes, you read that right. A grenade. And the regular police in Britain don’t even carry handguns. I’m sure that nobody else was reas-

sured by the London Police Commissioner’s claim that ‘we are not in a crisis’. There are two ways to read that, of course. One is that whenever someone says ‘we are not in a crisis’, you can be sure that really it’s time to abandon ship and take to the lifeboats. The other is that the Commissioner is telling the truth, and this is simply business as usual for our capital city, the former heart of the Empire, but the Press hadn’t bothered to take any notice until now. Choose which of those is more frightening. I’m not the only one to be concerned

– read through the trawl of comments on the BBC or Sky News Facebook pages and you’ll see plenty of people expressing horror and outrage, undercut by the fact that they know nothing is really going to be done about any of it. These are the people I feel most sorry for, because if I were not resident in Georgia, I would be one of them. Various news outlets and commentators have claimed that it’s the fault of the Labour Party, since London’s Mayor is one of them, a n d o t h e rs h ave blamed the Conservatives, since they cut police budgets in recent years (mostly because the economy had been left in a total shambles by Labour, but that’s a discussion for another time). Further debate is centered on how Britain needs more youth programs, so that idle young people don’t turn to crime. None of that answers me – or many other people either, I’m sure. More youth programs? One example was a music recording i n i t i a t ive, wh i c h taught at-risk youths how to become DJs. Well, I for one would not be very reassured by the fact that young men are capable of stabbing me if they are not provided with vinyl. When I was a lad, at home and bored, I never felt the need to commit crime. This sort of nonsense ignores the key issue. The same goes for the numbers of police on the streets: more police officers on the streets will not address the fact that somewhere along the line, something went very, very wrong with Britain. But exactly what happened and when is not the point of my rant today, nor is

it pervasive to my radical scheme. My sympathy is all for people who feel trapped where they are, and with Brexit looming on the horizon, their options to emigrate will soon become even more limited. This is my radical idea. I’m not sure if you’ve ever had to call a plumber or electrician or consult with a builder in Georgia, but I have, and found the experiences alarming every time. Once, my electricity was cut off, and somehow a Georgian-speaking friend and I ended up with a small, semi-drunk man as the only electrician we could find. In a dispute with the representative from the Telasi electricity company, the latter ended up socking the former in the jaw before our stout, drunk hero wrestled him to the ground. It took a third party to solve the issue as they rolled around the floor shouting about mothers and caving each other’s faces in. I’ll not claim that my experience of electricians and Telasi were typical of Georgia, but I’d not be surprised. I’m sure there are plenty of electricians, plumbers and builders in England who are as sick and tired of the country as I once was. I’m sure they’d have moved to France, Italy or Spain years ago if they’d had the language skills and opportunity. Georgia could serve as an admirable substitute; the place needs skilled workers, and whatever savings they could muster in England would go far further here. Of course, any government-sponsored or private sector initiative would have to be honest and say that a Western salary couldn’t necessarily be guaranteed, but that quality of life would be higher – rent, property (and more importantly) wine, beer and food are all incredibly cheap here. Encouraging immigration from the West might sound like madness, but I think it’s a neat idea, and everybody (apart from Britain, anyway) would all reap the benefits. I for one will be glad when I hear an Estuary English voice in Tbilisi, sucking through his teeth and shaking his head at the work ahead, muttering ‘More than my job’s worth, mate, more than my job’s worth…’


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BUSINESS

GEORGIA TODAY

APRIL 10 - 12, 2018

British-Georgian Classic Car Rally Set to Promote Georgia EXCLUSIVE INTERVIEW BY KATIE RUTH DAVIES

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n May 27, female track car driver and classic car racer Zoe Whittaker will be launching the first classic car rally in Georgia as part of her ongoing project ‘Driving with Zoe,’ which will see numerous classic cars rallying around the Georgian countryside with drivers taking in the best sights and Georgian hospitality, finalized by a Gala dinner on June 1 to raise funds for a charity that caught Zoe’s eye on her last visit here: the Temi Community. GEORGIA TODAY caught up with her a second time to find out the latest news.

TELL US THE LATEST ON GEORGIA’S FIRST EVER HISTORIC CLASSIC CAR RALLY We are organizing this rally as a joint project with the British Georgian Chamber of Commerce (BGCC). The project has a great importance for promoting Georgia and is truly multidimensional. The first ever classic car rally is going to be filmed by the ABK studio, and we have international press and media covering the project (BBC World Service, Kazakh TV7, Ukrainian TV, FT Weekender, and others). We’ve got many government officials now backing the rally, including HE Ambassador of Georgia to the UK, Tamar Beruchashvili and HE Ambassador of the UK to Georgia, Justin McKenzie Smith. We also have the Mayor of Tbilisi starting the rally and have huge support from the Minister of Tourism and Georgian Automobile Federation, along with all our project partners who have been instrumental in helping with the organization of the rally, such as Georgian Airways, Rooms Hotel, Trans Transit, Benefit insurance, Premier Events, Blue Water Shipping, among many others. We have several big sponsors supporting the event and have had a great response from the press and media globally with the BBC World Service covering the rally along with the Financial Times, Harper’s Bazar, and Octane Magazine, to name just a few. We can also confirm that the Georgian rally will now be an annual event with next year’s rally covering some of the Silk Road trail from Batumi to Baku, and we have several beautiful pre-war cars already signed up for it.

WHICH HISTORIC CARS WILL BE PARTICIPATING IN THE 2018 RALLY? We are pleased to say that we have ten classic cars confirmed for the rally. Half the participants are from the UK and half

from Georgia, which is what I wanted to achieve. I wanted to bring this historic rally to the people of Georgia as well as to those in the UK. The cars will be on display in Tbilisi as part of the 100 Years of Georgian Independence on Saturday 26th May. We have a vast array of cars attending the rally- from the oldest, a 1937 Rover and 1954 Jaguar Mark 2, to the youngest which is a 1980 Mercedes 280SLC. I will be in my 1957 Porsche 356A. This year we might have Jen Cobb, who is a female NASCAR driver in the States join us for part of the rally, but this is

dependent on her racing schedule.

YOU HAVE CHOSEN TO RAISE AWARENESS FOR TEMI VINEYARD THROUGH THIS RALLY. TELL US ABOUT IT Temi Community is a project founded by Martin Pope. The community only employs people with disabilities and the odd traveling student looking for summer work. They are striving to be self-sufficient, from having their own wine production, bakery and growing their own fruit and vegetables, to producing wine to sell to help support and

develop the community. One of my friends in the UK introduced me to Martin Pope, who has lived in Tbilisi with his Georgian wife, Maka Gotsiridze, since 2007. Martin is the Honorary Chairman and principal benefactor of Temi Community. He invited Mako Abashidze and myself down to Kakheti to see things for ourselves. What we found was a group of over 60 people, from infants under one to senior citizens over 70, some half of which have learning difficulties and special needs. The ambiance was incredible; this mixedability group living as a large, extended

and happy family, all caring for each other as best they can. The genuine smiles we witnessed were a real testament to the work and leadership of Nika Kvashali, the charismatic, but low-profile President who started Temi 30 years ago and has lived in the community near Gremi village continuously since then. The Temi Community is striving to develop sales of their prize-winning, organic wine and wine tourism as a way of making themselves financially independent. For this to happen, Temi needs to raise its profile and be able to raise money so that they can increase their wine sales. Not only do they need funding to help grow the business but most importantly, they need financial support to be able to afford the psychiatric and therapeutic care that many of their community members need and deserve. Mako and I agreed that we would do our utmost to assist Temi to raise their profile and to "help them to help themselves". What better way to do this than to make them one of the stops on our classic car rally and a beneficiary of our Gala Dinner? So, early morning on the 27th May, you will find our classic car rally starting from Tbilisi and, after visiting Temi, we'll spend the night at Kvareli Eden, not far away.

TELL US MORE ABOUT THE GALA DINNER, INCLUDING THE PROGRAM OF ENTERTAINMENT AND AUCTION ITEMS The Black-Tie Gala Dinner is to celebrate the launch of the “Driving With Zoë” projects and to celebrate Georgia’s first historic classic car rally and, most importantly, to raise awareness for the Temi Vineyard and Community who help people with disabilities into the working environment. The Gala will take place on Friday June 1 at the picturesque Underwheel venue in Tbilisi. The event will be attended by members of the UK parliament, Ambassador Beruchashvili and Ambassador Smith, as well as the Mayor of Tbilisi, Kakha Kaladze, and other representatives of the Georgian government and international businesses. The historic cars that will have participated in the historic rally will be on display at the venue. We also have a full program of entertainment, including an auction which will have some specially selected items for sale to raise money for the charity, Temi. Oliver Pool, famous British musician and classical piano performer, kindly agreed to arrange the entertainment program for the eveninghe will be performing himself with Georgian and British friends. We also have a nice selection of auction prizes which we would like to keep secret until the Gala.


BUSINESS

GEORGIA TODAY APRIL 10 - 12, 2018

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The Paradox of Manganese & Wine – Zestafoni, Imereti Region BY BENJAMIN MUSIC

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hevaluechainisanestranged expression to many travelers, yet it is the reason for Zestafoni’s existence. Reworking raw materials for high-quality products is an easy explanation. For example, if timber is used to manufacture a table, selling the table gives you a higher monetary return than selling the timber by itself. Well, welcome to Zestafoni, a town without timber, but with ferroalloy plants. Over decades, trains have wheeled in and out, transporting processed manganese to every single corner of the world. At one point, Zestafoni supplied 6% of world demand, enabling countless steel

constructions to rise out of the ground. Now, the glory days are over, leaving the city to its own destiny. Dwellings seem abandoned and the search for a good place to eat comes to a quick halt when realizing the lack of restaurants in general. A park and Soviet monuments praising the workers are just a brief escape from the city's lack of amazement. Occupying both banks of the Kvirila River, visitors are urged to look at the outskirts to discover culinary beauty. The decaying industrial aspect, weighing heavy on the city’s character, has generated momentum for the surrounding wineries to sell their red and white gold globally. Various signs suggest a diversion from the main road into the hilly backcountry, almost imposingly serving as a warning from the ugliness of the city center, into which the main

road inevitably leads. These signs symbolize the light at the end of the tunnel, allowing escape into a land of milk and honey, or rather wine in this case. At the end of the narrow dirt roads, wine cellars show their immense magnificence, inviting you in for a little tasting. When departing, it is common for a car’s trunk to be heavy with wine bottles for many evening to come. A place neither to stay nor to eat but rather to admire while pit stopping, Zestafoni exhibits a paradox worth understanding and appreciating. Simply don’t forget about the wine when doing so. For more travel tips and hidden wonders to discover around Georgia, check out WHERE. ge, updated daily with new locations and blogs to spice up your stay in beautiful Sakartvelo.

A Zestafoni view. Image source: emc.org.ge

Georgian Bar Association Welcomes German Judges, Lawyers, Legal Experts BY BENJAMIN MUSIC

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he Georgian Bar Association welcomed an international delegation of lawyers to Tbilisi to discuss the reforms and structural arrangement of the Association. Executive Director Davit Asatiani, Giorgi Checheani, and Director of Training Center, Ketevan Turazish-

vili, hosted the delegation. “The guests were interested in the structural arrangement of the Bar Association, on-going reforms, implemented projects and legislative initiatives. The Chairman of the Bar Association talked about the activities of newly commissioned committees and commissions, the Lawyers' School, qualification exams and continuing legal education,” explains the Association. The delegation mainly consisted of German legal experts, such as German

Federal Constitutional and Administrative Court judges, a member of the Ministerial Council in the Bundestag of Germany, and the Advocate and Chief Prosecutor in the Federal Supreme Court. This meeting is part of a multitude of cooperation agreements between Germany and Georgia to foster growth and the exchange of ideas and expertise. The German Foundation for International Legal Cooperation (IRZ) arranged the meeting.


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BUSINESS

GEORGIA TODAY

APRIL 10 - 12, 2018

Kovzanadze: Global Vision, Extraordinary Approaches & Fundamental Changes Needed year 2018 will still be unemployment, Lari fluctuations and the economic sustainability of our major trading partners. Overall, focusing on the current economic challenges is not sufficient for us: we need extraordinary approaches, deep reorganization of the economy and institutional changes to build a foundation for fast and sustainable growth of the next millennium where Georgia will be notably marked in the world economy. The problems impeding the fast, sustained and inclusive growth of our economy are more global, fundamental and institutional than the problems that we face day today.

BLOG BY IRAKLI KOVZANADZE, CHAIRMAN OF THE BUDGET AND FINANCE COMMITTEE

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eorgia’s results for the year 2017 were mostly positive. Real GDP growth exceeded the forecast of 4% and reached 4.8% y/y growth, current account deficit reduced from 12% of GDP to 7%, tourism increased by 28%, export increased by 29% and the budget deficit reduced to 3%. The State budget revenue target was met by 101% (the actual revenues exceeded the target by 131 million), among them, the tax revenue target was met by 100.1% or the target was exceeded by GEL 11.3 million. The expenditure target was met by 100%. This is a great achievement, but the governing team has a higher ambition. The main challenge to the Georgian economy in 2017 was inflation, which reached 6.7% instead of the targeted 4%, and the exchange rate that fluctuated significantly through the year. The high level of unemployment is one of our key challenges, as well as the low level of household income and high dollarization of the economy. If not for this high dollarization, the Georgian people would not feel the exchange rate fluctuations so painfully. 2017 was an important year from the perspective of economic reform. The deferred profits tax, or the “Estonian model” of profits tax- was initiated by the Georgian authorities to help businesses invest. It’s initial positive results are already clear: reinvestment increased by 500 million (as part of the FDI), according to Q3 data available for 2017 (the annual figures will be available shortly). It will take around two years to see the complete positive result of this reform. The deposit insurance system that I advocated for the introduction of in as early as 2005-2006, the draft law of which was not then supported, was at last implemented. By 2017, Georgia was the only country in Eastern Europe and the whole Post Soviet space that lacked a deposit insurance system. The system was enacted in 2018 in Georgia; however, if we had implemented the deposit insurance earlier, presently, we would have insured deposits of a much higher amount than GEL 5000, which is the present threshold. The deposit insurance system provides security to depositors, increases trust towards the banks, protects from fluctuations, and increases the stability of the banking and financial sector, leading to positive economic outcomes. I have noted continuously that an adequate monetary policy, strict banking supervision and effective deposit insurance system are the three main pillars of the stability of the country’s financial sector. There were significant strides made to strengthen the state insurance supervision and impose compulsory insurance requirements in certain cases (for example, for vehicles registered in foreign countries, for the owners of places of public gatherings, etc.). Such efforts are important for the development of the insurance industry, minimization of risks and creation of long-term investment capital. The insurance sector is at the initial stage of development in Georgia. There is now stricter supervision for banks and non-bank credit institutions. For years, society has been complaining

SECTORAL DISTRIBUTION OF OUR ECONOMY

about commercial banks owning and managing assets that are outside the banking profile through Bank Holding Groups and various companies managed as ‘pyramids’. By the end 2017, the National Bank of Georgia (NBG) was given a right through a legislative amendment to implement regulation and supervision of three additional directions, other than banks, including socalled banking holdings (including assessment of effectiveness of the managerial decisions), financial groups and non-bank credit institutions. The NBG was given the tools and the responsibility to ensure order in this sector and the process is already underway. Key measures of capital market reform will be implemented in 2018. In 2017, the Parliament of Georgia supported the initiative of the government that revenues from shares, bonds and securities (including treasury bills, state or corporate bonds) be excluded from income tax. This amendment ensured the similar tax treatment of bonds and the banking sector deposits; a step forward towards development of the securities market in Georgia. But these positive statistics have not yet found their way into the lives of the Georgian population. Economic growth is important as its results impact on the life on every member of society. Our aim is inclusive growth, which needs time. There are reasons impeding direct transmission of the economic growth of the country to the revenues of our citizens. On one hand, we need more economic growth, but high dollarization is a significant negative factor. Despite dollarization decreasing over the last few years thanks to the measures taken by the NBG, it still remains high (in 2017 deposit dollarization reduced to from 71 to 66%, while loan dollarization reduced from 65 to 57%). Half of loans of physical persons in Georgia are denominated in a foreign currency, while their income is in local currency. Thus, during the 70%devaluation of the past years, the debt service costs of these families increased by 70%. For example, if a person’s income was GEL 1,700 per month and he had a loan in foreign currency (USD), to service his debt he needed USD 500 a month. He would have needed GEL 850 before the devaluation and GEL 1,300 to service the same debt after the devaluation, while his income in GEL terms remained

unchanged. Defaulting on debt would mean a loss of the pledged apartment, other real estate or some other asset. He was forced to reduce his consumption, spending on food, clothes, other needs, utilities, entertainment, etc.: a heavy burden for him. On the other hand, this reduces the aggregate demand and negatively affects economic growth. The priorities of the government and the team for 2018 can be grouped in the following directions: • In 2018, the government will spend GEL 4 billion on spatial planning, infrastructural development, and business facilitation. This will improve infrastructure in towns and the regions by reducing the gap between the center and the rest of the country, as well as creating tens of thousands of new jobs and faster economic growth. • Pension reform – Georgia intends to move to the accumulating pension system starting from Q3, 2018, where the employee, the employer and the state will all contribute to the pension scheme. This is not a simple reform. The government expects the cost of this reform will reduce the budget revenues by GEL 40 million and budget expenditures will increase by GEL 150 million. Even though it is costly, it is a vital step for sharing social responsibility and protecting pensioners in the long term. At the same time, the reform will create the investment resource and a new source for activation of capital markets in the country. • Capital market reform- the legislative changes here are in line with the best international experience and free market principles. Capital market reform will encompass the pension reform and the insurance reform mentioned earlier. Ultimately, we will get a dynamic market for bonds and capital which will be able to compete with the banking sector in scale and rules of the game. To put is simply, today, the banking sector is the main channel if we need to borrow or deposit. After the reform of the capital market, the market will be diversified, and there will be a healthy alternative in the form of securities. • Automatic reimbursement of VAT. This means that companies will now be able to use about GEL 500-600 million a year, that was previously frozen and kept out of circulation. Automatic reimbursement of VAT will expand business activity. The main economic challenges of the

Georgia’s economic sectoral structure is not competitive and fails to respond to modern challenges. 3/4 of our consumer market is import-dependent; respectively, trade is a very important sector of our economy (16% of GDP), while industry (17% of GDP) and the service sector are still underrepresented. This is not the way forward. We will continue to lag behind the European countries. Nowadays, our government is trying to facilitate exports by creating export facilitation programs, but would not it be better and cheaper to support import facilitation? At the same time, the macroeconomic effect would be the same and I think the results would have been seen faster.

AGRICULTURE AND LAND REFORM Agriculture employs 45% of the country’s labor force and produces only 9% of the GDP. Moreover, even with the unprecedented state support of this sector over the last few years, the share of agriculture in GDP is declining. The reduction of the share of agriculture in GDP is not a problem by itself, as the share of agriculture in the GDP of developed countries is smaller: 0.8% of GDO in Germany, 1.2% in USA, 1.8% in France, 28% in Turkey, and 30% in Bulgaria. The most important feature is the output, i.e. the volume of the produce created in the sector of agriculture. We have no modern knowledge or technologies in agriculture; productivity in the sector is very low. The land parcels of physical persons are on average 1.2 hectares, while a large part of the land is still owned by the State and is excluded from the production process. We can’t be competitive with such a setting. Land needs to have an owner (excluding the exceptions, of course); farms should merge and increase. In any other situation, agriculture in Georgia will never become a sustainable, growing and successful business.

ECONOMIC DISPARITY AMONG THE REGIONS We have Tbilisi, a major city with 35% of the country’s population and 75% of the country’s business sector. (New York is 9% of the USA economy; London is 22% of the UK economy, Tokyo is 32% of the Japanese economy, Erevan is 41 % of the Armenian economy). The fact that the unemployment level in Tbilisi is 21% while it is only 5% in rural areas is a paradox, because we all know that the jobs are in Tbilisi; that’s why everyone tries to go and live there.

URBANIZATION Tbilisi, then Batumi, is where economic activity is intensifying. There is some limited activity growth in Kutaisi. This

large concentration is an economic and social impediment. It is also a complex and long-term issue. Georgia will still see the population moving out of villages and increasing the population of the large towns. Without this, Georgia will never become competitive globally, nor regionally. This is a world trend- in the USA, the rural population is 18% of the total population; 25% in the EU, 26% in Switzerland, 26% in Turkey, 37% in our neighbor Armenia, and 45% in Georgia. The country needs to develop a long-term policy and spell that into tactics. We shall study the situation and assess the economic, social, transport, communication and demographic trends of the potentially growing cities such as Kutaisi, Zugdidi, Anaklia, Telavi, Gurjaani, Gori, Akhalkalaki, where the conditions allow us to host businesses and labor force. The state may consider constructing municipal houses, apartments, provision of dwelling to families in need, granting some allowances such as providing land to businesses for a symbolic price of GEL 1.

IT Considering the modern tendencies and realities, we must actively work to convert Georgia into an IT hub providing electronic technology services and financial technology services, including blockchain technologies. These ideas have both supporters and opponents. At the same time, Georgia has comparative strengths and weaknesses. Overall, these are the technologies of the future, still un-pawed land, where Georgia needs to find its niche quickly.

TRANSPORT The Georgian authorities strive to establish Georgia as a transport hub. Some results are already apparent, with projects such as Karsi-Akhalkalaki railways, Anaklia Port, Tbilisi, Kutaisi Airports making Georgia more attractive for transport and transit. There is one more possibility, yet undeveloped, which I think deserves attention: water freight via the Black Sea with partners such as Romania, Bulgaria and Ukraine. International trade and transport specialists would agree that adding such a connection would enhance Georgia’s role as a transit hub in the region. Such initiatives deserve the government’s support.

GEORGIAN MARKET GROWTH Even though Georgia is a star in the Doing Business rating (political stability, low corruption, simplicity of starting a business, low taxes, etc..), Georgia is still limited by its market size (3.5 million people, o/w 1.2 million are the labor force) to have an abundant aggregate demand. Georgia signed the free trade agreements with the EU and China and is working with India to sign a trade agreement. This will expand possibilities for our country to trade with goods and services. It will also help export and import capital. The free trade agreements are not about free relocation of the labor force. I trust we shall start negotiations with some of our friends and neighbors to discuss possibilities of creating a united market. The above is my professional viewpoint. I believe we need a global vision and drastic, fundamental, deep-rooted changes, or else we will be caught in a vicious circle with limited choice of growth rates between 4% or 6%, pensions of GEL 180 or GEL 220 a month; and exchange rates of 2.6 or 2.4. We need to surpass these details and attain new, higher levels.


BUSINESS

GEORGIA TODAY APRIL 10 - 12, 2018

International Monetary Fund Mission Positively Assesses Georgia's Economic Indicators

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he International Monetary Fund (IMF) praised Georgia's Economic Indicators. According to the Ministry of Economy, First Vice Prime Minister of Georgia, Minister of Economy and Sustainable Development, Dimitry Kumsishvili met with the Head of International Monetary Fund (IMF) Mission, Mercedes Vera-Martin and other members of the mission. The mission is currently carrying out the second

The growth of reinvestment in 2017 amounted to 129.6% ($401.9 million) putting total reinvestment volume at $712.1 million

review of the Advanced Financing Mechanism program in Georgia. The program, which started in 2017, is part of a joint effort by the Georgian government and the IMF to improve the economic efficiency through new financing methods. Besides discussions regarding the program, the meeting entailed a thorough debate on macroeconomic indicators and current structural and

economic reforms. “Georgia completed 5% of real economic growth by 2017 and carried on with 5.5% growth in February 2018, which, as of the first two months of 2018, constituted a 4.9% growth on the whole,” reads the statement put out by the Ministry of Economy. First Vice Prime Minister of Georgia, Dimitry Kumsishvili presented the IMF mission with the

positive figures of Georgia's economic growth. “Positive indicators are posed by positive dynamics in a number of directions, including turnover of enterprises, increased exports, number of tourists and money transfers,” the statement continues. Commenting on the figures, the IMF delegation positively evaluated the reforms and the continuous growth rate

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Georgia completed 5% of real economic growth by 2017 and carried on with 5.5% growth in February 2018 of the Georgian economy. It acknowledged the positive impact of the reforms in strengthening business activity. Alongside discussions on economic performances, Kumsishvili presented the IMF the latest assessment of the international rating company FITCH. In particular, the rating of Georgia has changed from Stabile to Positive, a fact extremely important for investors. According to the Ministry, the first Vice Prime Minister emphasized the profit tax reform that helped to increase the volume of direct foreign investments in Georgia. In particular, the growth of reinvestment in 2017 amounted to 129.6% ($401.9 million) as a result of which the total reinvestment volume totaled $712.1 million. “The share of reinvestment equaled 38.2% of total foreign direct investment and increased by 18.8% compared with the previous year. The increase in reinvestment clearly indicates the growth of investor confidence and positive expectations towards the country's business environment,” cites the statement the Minister, and continues: “The increase in reinvestments has contributed to the profit tax reform that allows the private sector to direct their earnings towards new investments and enhances business activity as it further increases the attractiveness of the country's investment.”


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BUSINESS

GEORGIA TODAY

APRIL 10 - 12, 2018

Euronews Journalists Visit Georgia’s Adjara BY THEA MORRISON

Photo: Mikheil Saakashvili Facebook Page

Saakashvili Praises Trump for Sanctions Against Russia BY MÁTÉ FÖLDI

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n a Facebook post dated April 7, former President of Georgia, Mikheil Saakashvili, praised Donald Trump for the US sanctions against senior Russian officials and businessmen placed the previous day.

“The sanctions imposed by the US administration against Russian oligarchs, including Putin's son-in-law, are unprecedented. I most of all liked the sanctions imposed against Deripaska, who has lost a quarter of his capital since the sanctions. Deripaska was conducting a campaign against me in the international press. Bravo, Donald Trump,” Saakashvili wrote.

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he journalists of popular media outlet Euronews program “Adventures” are making a film about Georgia’s western region Adjara. The journalists have already traveled to mountainous Adjara, ski resort Goderdzi and Mtirala National Park. They have also filmed the Black Sea Coastal city Batumi and its sights. Up to a million viewers of Euronews will be able to see the film late April. Euronews journalists will visit Adjara twice more before the end of the year. In the summer, they will prepare a long blog about travel in the region and in the autumn, the crew of program "Focus" will shoot the World Chess Olympiad in Adjara. In addition to the programs, a special video of Adjara will also be broadcast on Euronews. Through the broadcaster, the products and services of the Georgian region will be shown in more than 200 countries. “Last year, we launched a successful

advertising campaign on Euronews, but this time it is more diverse. Attracting tourists to the region, creating a positive image of the country and region, should be done by such media outlets,” Nino Khakhubia, Head of Public Relations and Advertising Service of the Adjara Tourism Department, stated. She added that journalists from all 16

target countries will be invited to Adjara to introduce their citizens to the region via interesting articles, blogs, reports and programs. Last year, in September, Euronews dedicated a story to Georgia’s Adjara, noting that it is Georgia’s third largest city and the capital of the autonomous Adjara region.


BUSINESS

GEORGIA TODAY APRIL 10 - 12, 2018

The Growing Business of ‘Hookup Culture’ Sees a Call for More Female-Friendly Hookup Apps BY KATIE RUTH DAVIES

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t’s difficult for women to get terribly excited by a photograph of a nude stranger on their phone. It’s just not how women are built. Yet the electronic transfer of one’s genitals to another person’s cellular device is more common today than ever. And that is a problem, according to Hook Up Dating, an aptly-named dating app that most of its three million users identify by the acronym, HUD. “Here at HUD, we appreciate the idea of building sexual tension and chemistry ahead of the first date; after all, we are a hookup dating app, but some of these pics turn off our female users,” said Darren Shuster, an official spokesperson for the company. “We like to give women a choice of whether or not they want to see the nude pics. We’re all adults here.”

FOR THE SAKE OF WOMEN EVERYWHERE “It’s getting pretty ridiculous out there,” Shuster said. “In the old days, they would call people sharing their genitals ‘perverts’ and ‘flashers,’ and I’m pretty darn sure it remains illegal. Women just don’t like pics of strange men’s junk on their phones.” According to Elite Daily, some guys are even Airdropping their nude pics to unsuspecting subway riders in New York City: “If you have an iPhone and your AirDrop setting is on ‘Everyone’ instead of ‘Contacts Only’ or ‘Receiving Off,’ you could become a target of the AirDrop Dick Pic,” Shuster warned.

THE SOLUTION: THE NUDE PIC AUTO-BLUR Looking to address the issue, HUD is deploying artificial intelligence developed by Google to identify nudity. Boasting more than 3.1 million users, Shuster says, the company simply could not hire

enough human reviewers to manually identify male reproductive organs, so HUD turned to Google’s Cloud Vision artificial intelligence software to detect explicit adult content. “I’m happy he’s excited and proud to share his private parts,” one female member of HUD said. “But I’m not thrilled with the idea of him sharing it with the world on a dating app.” It’s important for all parties, especially within the hookup culture, to feel safe and in control of what’s put in front of them. “It’s true that some women may welcome nude pics,” Shuster said. “And we want to give our female users a choice: To accept the adult content or not. But no more random, private part surprises.” HUD boasts 3 million+ users and was named “One of the Best Hookup Dating Apps” by Refinery29.

A Closer Look at the Russian Embargo on Abkhazian Products OP-ED BY ZAZA JGARKAVA

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here was panic in occupied Abkhazia last week when Russia closed the border on River Psou to natural products cultivated in Abkhazia, blaming the invasion of Asian Stink Bugs. According to Official Moscow, instead of bombs and tanks, Georgia is using the Stink Bugs against Abkhazians. In order to stop this “biological sabotage”, the defacto regime arranged a similar ban on the River Enguri as exists on other borders in Georgia. However, by doing so, it actually declared a food blockade against its own regime. The only astonishing thing here is that Sokhumi is angered not with Tbilisi, but with Moscow. “We have known for a long time that this pest was spread from Tbilisi, nevertheless, Russia continues trading with Georgia, but has punished Abkhazians instead,” said Beslan Tsvinaria, Head of the so-called “Customs Committee” of the occupied Abkhazia. It is interesting to know why the Kremlin suddenly began fighting the pest, and it is difficult to believe that the phyto-sanitarian services of Moscow were unaware about the capabilities of the Stink Bug with regards to borders and the fact that by closing the borders you can’t stop it from migrating. Therefore, it is very likely that the reason behind announcing quarantine in Psou goes beyond the bug and has more to do with politics. Until April 2, the date Russia imposed the ban on Abkhazian fruits, vegetables and greens, Russian media was accusing half the officials from the defacto regime of having connections with the British Special Services. The Director of the Russian theater, there, a TV journalist, the Minister of Foreign Affairs, the Defense Minister and many others, were one after the other accused of being “British Agents.” The dissemination of the list of Abkhazian spies followed the scandal of the so-called Skripal case, seeing Britain and the international community expelling more than 100 Russian diplomats from their respective countries. Russia responded by “exposing” British spies. The Russian FSB became interested in the affairs of its own ‘colony’ Abkhazia after it turned out that the majority of Abkhazian non-governmental organizations

Image source: corneliucazacu.com

where financed by an organization with headquarters in London. Moreover, it was discovered that officials of de-facto Abkhazia were appointed under the protection of the Abkhazian “Honorary Consul to Britain,” the well-known Kartvelologist George Hewitt, who is married to an Abkhazian woman. It seems strange that only now the Russian FSB found out about Hewitt’s London-Sokhumi protectionism. More likely, this institution itself was the one controlling the processes: the problem arose when the Skripal scandal turned everything upside down. Unlike Russia, those in Sokhumi connected the British Agent’s scandal with the Georgian Special Services right away. They concluded that Tbilisi wants to see Abkhazian society left without authorities, leaving the Abkhazian state in stagnation. Yet, for some reason, Sokhumi decided that it doesn’t owe Moscow anything and started the wave of ‘passportization’ of the Abkhazian population, that is, replacing the old passports with new. To Moscow’s ‘surprise’ it turned out that these ‘new’ passports are being given not only to Georgians from Gali, but also to the majority of Russians as well. It is well-known that Russians have been expelled from apartments and not given the rights to property; but seizing their passports and replacing them with temporary permits, as well as giving new passports only to ethnic Abkhazians and to decedents of Kanji-Ogli-like ‘Muhajirs’, is such an audacity that Russia finally decided to punish the separatists. Now, the regime of Khajimba has only two roads to take: either fulfill a number of ultimatums raised by Moscow, including giving out the passports to Russians and legalizing their property, as well as agreeing to free trade of property, which will lead to the overthrow of his government, or be stubborn and send Abkhazia back into the Stone Age once and for all – which, sooner or later, will also lead to the same outcome. It seems Abkhazians need to get used to the fact that they represent nothing but pawns on the chessboard, with Russia doing what it wants and needs with them.

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BUSINESS

GEORGIA TODAY

APRIL 10 - 12, 2018

Live Casino Conquers Tbilisi Jacob Claesson On Opportunities & the Evolving Industry EXCLUSIVE INTERVIEW BY BENJAMIN MUSIC

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he internet often poses opportunities and problems unnoticed by the wider public. Though data security and personal privacy are fiercely discussed, the impact on individual sectors lags dangerously behind, often threatening whole industries themselves. For centuries, the human experience formed an essential aspect of betting, winning and losing money. From shady gambling houses in New York’s underground during the prohibition to luxurious state-run roulette tables in Monaco, casinos are a fundamental part of our society. The arrival of the Internet also changed the way gambling is conducted. The friendly dealers living off the tip from successful players found their new enemy in computer-controlled algorithms offering gamblers the chance of winning from home over the World Wide Web. The strengthened animosity and laziness, coupled with the increased numbers of players, exhibited still revealed yet another problem. How to create a personal and intimate relationship with the gamblers without forcing them to leave their couch? Evolution Gaming found a perfect solution as they implanted the human dealer into the computer screens, coalescing the bank, the player, and the gaming table wherever one desired. We sat down with Jacob Claesson, Head of Operations Georgia, to pick his brain on the new production hub opened up in Tbilisi and the impact it has on the city.

HOW DID EVOLUTION GAMING START OFF ITS BUSINESS? WHAT WAS THE MAIN MOTIVATION? Evolution was founded in 2006 when a live gaming Internet offering in Europe was less pipe-dream, more broadband myth. The accepted view was that live gaming over the Internet - a real-time video stream of an actual live game, dealer and result - could not be offered

at a sufficient service level. Evolution had a clear vision to take the online gaming experience to the edge of what was achievable. Incorporating higher production values within a regulated environment, Evolution sought to offer an online game akin to the live gaming experience to an increasingly demanding European audience.

DID THE BEGINNING GO SMOOTH OR WAS IT RATHER A BUMPY START? WAS THERE AN UNMET NICHE AND DEMAND? Evolution began life in a small studio in Riga with a handful of staff in late April 2006. During those early stages, one challenge was overcoming the perception of Live Casino as a novel addition to an online gaming site and converting it into a must-have key component. Over the course of the next decade, Evolution revolutionized the Live Casino sector and the next challenge was keeping up with the intense period of growth as the demand for our products and services continued to grow. The company, which now has studios and offices in Latvia, Malta, Romania, Italy, Spain, Belgium, Sweden, the United Kingdom, the Netherlands, Estonia, Canada and of course Georgia, has adapted perfectly to the demand. Another challenge is staying ahead of the curve in terms of the latest technology developments. Technology, as the company name suggests, is continually evolving. Evolution’s continuous investment in the latest innovations and R&D has enabled us to push the boundaries and continue to increase the gap between our competitors and us. We are very thankful to have such talented and passionate employees working for us, who have come with us on this journey of always striving to be one step ahead.

HOW DID YOU REVOLUTIONIZE LIVE CASINO? Everything in the whole Evolution package is of a uniformly world-class standard. That is what keeps us ahead of the competition and why competitors find it difficult to close the gap. That and the fact that we are constantly innovating, constantly driving ourselves forward, and never being content to sit back. We continually push boundaries in

terms of product innovation so that we can take the player experience to new levels. Examples of this include our award-winning Immersive Roulette, our Baccarat Squeeze options, Dual Play Roulette and Baccarat solutions, as well as Dream Catcher, the first title in our new game category Live Money Wheel. The games are not the only focal point – there are so many things behind the scenes that continue to widen the gap between ourselves and our competitors, such as our Game Integrity and Risk operations, which are paramount in our operations. This is another aspect where we have invested heavily in innovative solutions in this field and where our level of experience is difficult to beat.

HOW DID YOU CHOOSE TBILISI AS THE LOCATION FOR ANOTHER PRODUCTION HUB? We have been launching new tables and dedicated environments across all of our studios at an intense rate for some time. This fast pace is set to continue for the rest of this year. As part of our commitment to everincreasing our gap with the competition, we took the decision to establish our next major studio in Georgia to support these needs. From this studio, we will continue to expand, offering our services to additional customers and markets. As ever when we look to open an additional facility, we do a thorough review of the market and country to find the best possible place to invest in. The decision to open in Georgia was the result of a detailed scouting operation beforehand. Tbilisi is a fast-growing city, offering strong development and investment opportunities, so it offered the perfect location for us. We viewed a number of locations and this property was the best that met our selection criteria in terms of studio requirements, as well as in terms of future growth and development. As ever, Evolution has very ambitious growth plans and the Tbilisi studio is no exception. The Tbilisi studio will act as a service hub for multiple markets and licensees. The Tbilisi studio is a total of 8000 sqm and located in Didube. We are currently going through extensive works in the building in order to create a very

Photo: Jacob Claesson - Head of Operations Georgia

attractive and inspiring place to work – including a free gym for all employees and a fantastic terrace.

GEORGIA HAS MANY CASINOS FOR ITS SMALL SIZE, DID THIS PLAY A ROLE IN YOUR DECISION-MAKING PROCESS? Not at all actually. As our licensees are located all around Europe, and it is their increasing demand that we are looking to satisfy with our studio here in Tbilisi, it did not play into the decision making. We looked for a country where we saw favorable business opportunities, in combination with a talented workforce with good English skills.

HAVE YOU EVER THOUGHT OF OPENING UP A PHYSICAL CASINO AS WELL? No, we have not. At Evolution our focus is purely on being the world’s leading Live Casino provider. We have 400-plus tables operating across our nine studios, as well as a growing number of Dual Play installations in land-based casinos. With our expansion into Georgia, we have ambitious growth plans for the studio for the rest of the year so that we can continue servicing our customers and providing them with the worldleading service they have come to expect.

WHAT ARE THE MAIN DIFFERENCES IN LIVE CASINO BETWEEN NORTH AMERICA AND EUROPE?

Photo: Evolution Gaming

Historically, we have been very focused on the European market and it was only in January of this year that we opened our Live Casino studio in British Columbia, Canada. This marked a very exciting period of growth for us, as it was our first major expansion outside of Europe. It is based in the New Westminster Vancouver area of British Columbia and provides Live Casino games and services for BCLC (British Columbia Lottery Corporation). This is an agreement of high strategic importance to Evolution and the start of a potential expansion into North America as a whole. Canada is a regulated market, where each province has its own gaming

and lottery operations under government management. The studio was initially built for BCLC, but with the intention of serving other provinces over time.

TO WHAT EXTENT IS TBILISI DIFFERENT TO THE OTHER LOCATIONS? Much like when we started our operations in Latvia back in 2006 there are many people that have not heard about us yet. This means we need to be active in explaining what kind of company we are and what opportunities we can offer potential future employees. We have seen that many Georgians are very excited about the idea of working for an international company. We have seen a huge interest in all our vacancies, with well over 1000 applications so far.

ARE YOU STILL LOOKING FOR STAFF? WHERE CAN PROSPECTIVE EMPLOYEES APPLY? To date, we have created 130-plus new jobs for local people and we expect to create a total of around 900 new jobs by the end of this year alone. We’re very happy to be creating this number of jobs in Georgia. All our open positions are listed on our Career-page www.evolutiongamingcareers.com where candidates can easily browse for the open positions in Tbilisi. Our employees are central to our business, and we are committed to providing a working environment where people want to work, challenge themselves, perform and develop a rewarding career. For most roles the only requirement is to speak English, as it is our business language, the rest we teach during paid training. We have a strong company culture and happy that we are able to offer flexible work schedules to our employees. A large number of our employees are students who combine their studies. Of course, after they finish their studies, there is a wealth of career opportunities with us and we hope that they choose to continue their career with us at Evolution.


POLITICS

GEORGIA TODAY APRIL 10 - 12, 2018

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Turkey’s Cooperation with Russia Unlikely to Influence Ankara-Tbilisi-Baku Alliance away from the Georgian transit corridor. Indeed, there are reasons for Turkey to worry, as Russia recently moved makeshift border signs of the Samachablo (the so-called South Ossetia) demarcation line further south, threatening the vital East-West highway connecting the Caspian and the Black seas. Ankara is thinking about increasing Georgia and Azerbaijan’s military capabilities and we have seen that the Trilateral Format of cooperation between the three countries has boomed since its inception in 2012. Another area of different worldviews between Russia and Turkey is the simmering NagornoKarabakh conflict. Russia has its own agenda for conflict resolution. In fact, Moscow would prefer to keep the existing status quo as long as possible,

but constant fighting with occasional radical spikes in clashes leaves little room for keeping the existing formula. That is why Russia would always want Turkey (as Azerbaijan’s ally) be as much distanced from the conflict as possible. Thus, when we analyze the rapprochement in Russo-Turkish relations, there is a range of issues which the countries fundamentally disagree on. Any changes to the Turkish position in the AnkaraTbilisi-Baku axis will lead to even bigger Russian influence in the South Caucasus. Moreover, beyond the immediate South Caucasus region, the breakdown or even weakening of the Ankara-TbilisiBaku axis will also limit Central Asian states’ potential for using the Georgian corridor in the future for trade with Europe.

Image source: rojavanetwork.net

OP-ED BY EMIL AVDALIANI

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ussia and Turkey have recently enjoyed a definitive improvement in bilateral relations ever since the downing of a Russian plane by the Turks in the skies of Syria in late 2015. On the surface, the rapprochement which is reflected in constant exchange of supportive diplomatic statements and bilateral visits might indeed have repercussions on a wider region which the two states border on. Analysts in the Caucasus have become alarmist over the recent period as to how far Russia-Turkey cooperation might go, with some supposing that Georgia and the rest of the South Caucasus will be negatively affected. It will be shown though, that the Russia-Turkey cooperation is rather an ‘alliance of convenience’ based on current circumstances. Deep inside, both countries actually share fundamental differences which will make it unlikely for Turkey to abandon its geopolitical outlook for the South Caucasus. First, we must outline the reasons for nascent Russia-Turkey cooperation. Turkey’s foreign policy has been evolving over the past several years and the reason for this is the ongoing conflicts in Iraq and Syria. A look at the map of the Middle East shows that most of Turkey’s borders are in the Middle East, making it in Turkey’s natural interests to be actively involved in the neighborhood. This, from a geopolitical perspective, clashes with what Russia pursues in Syria, but there have been interesting circumstances which have aligned Moscow and Ankara’s policies with regards to the Middle East. Both share somewhat ambiguous relations with the US. Although Turkey is a NATO member and quite naturally should have been closely aligned with the western powers in Syria, Ankara was wary of the US military aid to the Kurds in Syria and other issues on the future of Assad’s regime. Russia is also concerned with the US actions in Syria and within the wider former Soviet space. Another interesting point of convergence is that Turkey and Russia share difficult relations with

the EU. Ankara has been strongly criticized by Brussels of late, while Russia has been in a standoff with Europe over Ukraine since 2014. There is a purely military and economic basis for the cooperation: the selling of Russian S-400s to Turkey; Russian participation in the construction of the Akkuyu nuclear plant in Turkey and the progress on the massive Turkish Stream gas project which will enable Russia to bolster its gas exports to south Europe by circumventing Ukraine. These steps are important, but it is far from clear that they will move beyond ‘flirting’ and solidify their stances in the geopolitical realm. Indeed, Turkey and Russia still remain geopolitical rivals, with opposite interests in several strategically vital regions. One such theater is the Black Sea region. Turkey’s geographic position gives it the longest shore on the Black Sea and natural control over the Bosporus and Dardanelles straits, making the country capable of projecting its military and economic power across the entire Black Sea. The area has historically been a battle ground between the Russian and Ottoman empire since the 18th century, followed by the Cold War military dispositions. Thus, Turkey, like Russia, has a natural interest in extending its zone of influence in the Black Sea, leaving little room for the two countries to find a foundational compromise in the longer run. To this should be added Russian military moves in the region since 2014, when Moscow incorporated the Crimean Peninsula which, due to its geographic position, gives the Russians the upper hand in terms of military infrastructure and the ability to cover all the shores of the Black Sea. To the east of the Black Sea in the South Caucasus, Turkey and Russia share somewhat different views on the region. Ever since the collapse of the Soviet Union, Turkey has actively worked on reconnecting the South Caucasus region to its growing energy consumption market by initiating/facilitating various east-west energy and infrastructure projects. The Baku-Tbilisi-Ceyhan and Baku-TbilisiSupsa pipelines, as well as the new Baku-TbilisiKars railway, are only some of the major projects Ankara is currently supporting. It is in Turkey’s vital interests to keep Russia

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Issue #1038 Business  

April 10 - 12, 2018

Issue #1038 Business  

April 10 - 12, 2018

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