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Issue no: 904/57

• DECEMBER 13 - 15, 2016

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue... Georgian Taxi Firms Receiving 70% Fewer Calls as Yandex Taxi Enters Georgian Market NEWS PAGE 2

Is Georgia Heading towards an Oversupply of Hotels? ISET PAGE 4

Impact Hub Tbilisi: Work, Connect & Generate Ideas

FOCUS ON TOP INVESTORS Geostat releases list of Top Investors in the Georgian economy as business & banks invest in the future on the ground

PAGE 6

MFA: No Georgians Affected During Istanbul Blasts BY THEA MORRISON

T

he Ministry of Foreign Affairs (MFA) of Georgia reports that there are no Georgians among the casualties of two blasts that occured in the center of Istanbul, Turkey on

Saturday. MFA announced two hotline numbers for Georgian citizens in Turkey, in case they need any assistance or support. "The MFA of Georgia condemns all forms of terrorism, shares the sadness of the victims’ families and the Turkish government and wishes the injured a quick recovery,” the Goergian MIA stated. Two major explosions occured place in Istanbul late on Saturday, leaving around 38 people dead and at least 166 injured. BBC reports that the Kurdish militant group

Saturday’s blasts in Istanbul left 38 dead and hundreds injured. Source: newsok.com

TAK claimed responsibility for the attacks near the Vodafone Arena where a car bomb destroyed a police vehicle and a suicide bomber blew himself up nearby after a top-division football match. Georgia’s President, Giorgi Margvelashvili, condemned terrorist acts and expressed his sorrow over the developments in Istanbul. “Georgia strongly condemns such brutal acts

Radisson Blu Iveria Installs Electric Charger Station PAGE 7

Pasha Bank Holds Conference on Sustainable Energy Development in Georgia

PAGE 9 of violence and terrorism,” his statement reads. Prime Minister of Georgia, Giorgi Kvirikashvili also extended his condolences to the families of deceased and injured in the attack. "I strongly condemn all forms of violence that claim the lives of civilians,” he said in a statement, adding that terrorism is the greatest form of cruelty in the world.

Biomass Briquettes: the Budget & Environmentally Friendly Alternative to Firewood SOCIETY PAGE 12 Prepared for Georgia Today Business by

Markets Asof09ͲDecͲ2016

STOCKS BankofGeorgia(BGEOLN) GHG(GHGLN) TBCBankGroup(TBCGLN)

COMMODITIES CrudeOil,Brent(US$/bbl) GoldSpot(US$/OZ)

INDICES

Price

w/w

m/m

Price

w/w

m/m

GBP33.79

+9,0%

+16,9%

GEOROG04/21

104.19(YTM5.65%)

+0,5%

Ͳ1,1%

GBP3.75

+1,6%

+5,6%

GEORG04/21

BONDS

108.90(YTM4.58%)

+0,4%

Ͳ2,5%

GBP15.00

+7,1%

+14,3%

GRAIL07/22

106.44(YTM6.36%)

Ͳ0,1%

Ͳ4,6%

BGEOLN07/23

100.00(YTM6.00%)

+0,6%

Ͳ1,8%

Price

w/w

m/m

54,33

Ͳ0,2%

+17,2%

1159,86

Ͳ1,5%

Ͳ9,2%

CURRENCIES

Price

w/w

m/m

GEL/USD

2,5950

+1,6%

+5,5%

GEL/EUR

2,7480

+0,5%

+2,8%

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w/w

m/m

GEL/GBP

3,2636

+0,5%

+7,0%

FTSE100

6954,21

+3,3%

+0,6%

GEL/CHF

2,5516

+1,1%

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17733,12

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+0,8%

GEL/RUB

0,0415

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+7,2%

DAX

11203,63

+6,6%

+5,2%

GEL/TRY

0,7463

+2,6%

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19756,85

+3,1%

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GEL/AZN

1,4428

Ͳ1,1%

Ͳ0,5%

5444,50

+3,6%

+3,7%

GEL/AMD

0,0054

+1,9%

+5,9%

NASDAQ MSCIEMEE

Ͳ2,6%

141,15

+4,8%

+8,1%

GEL/UAH

0,0995

+1,0%

+3,4%

877,85

+2,9%

Ͳ0,3%

EUR/USD

0,9469

+1,0%

+3,3%

SP500

2259,53

+3,1%

+4,5%

GBP/USD

0,7952

+1,2%

Ͳ1,3%

MICEX

2208,53

+3,7%

+9,8%

CHF/USD

1,0171

+0,6%

+3,3%

MSCIFM

2412,72

+1,5%

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RUB/USD

62,4636

Ͳ2,1%

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MSCIEM

GTIndex(GEL)

908,65

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+0,0%

TRY/USD

3,4772

Ͳ1,2%

+8,3%

GTIndex(USD)

697,25

Ͳ0,5%

Ͳ4,6%

AZN/USD

1,7694

+0,2%

+4,2%


2

NEWS

GEORGIA TODAY

DECEMBER 13 - 15, 2016

Georgian Taxi Firms Receiving 70% Fewer Calls as Yandex Taxi Enters Georgian Market BY NATIA LIPARTELIANI

T

axi companies have asked the Competition Agency to carefully watch the activities of Russian taxi company Yandex, a new entrant onto the Georgian taxi market. Georgian taxi companies told news agency Commersant that due to Yandex entering the market with dumping prices, the customer calls to other players have decreased by 70 percent. The founder of taxi company 200-200, Nika Khoperia, told Radio Commersant that the Competition Agency requires Yandex to set rates relevant to the market value and be involved in ‘fair competition’. “Yandex has the good financial capability to begin, at the initial stage, paying

drivers from its ‘own pocket.’ As a result, lower prices of course lead customers to choose them over other companies and forcing us, after their entrance onto the market, to cut the salaries of several employees,” Khoperia claimed. Khoperia also noted that there is a threat that Yandex may wish to acquire the whole market at which point it can increase the fares considerably. The head of the Taxi Drivers' Union, Nana Pilauri, says that the real name of the taxi company ‘Yandex’ is unknown as there is no information available about it in the business registry. Pilauri also claims that the company is not paying taxes. Pilauri says that they have appealed to the Competition Agency and observations are already underway. She, like Khoperia, claims that Yandex Taxi’s goal is to attain monopoly in the market, after which, she says, it will set its own rules.

National Food Agency Activates Bread Labeling Control National Food Agency tightens bread regulations. Source: bpn.ge

BY THEA MORRISON

G

eorgia’s National Food Agency (NFA) held a meeting with representatives of bread companies on Sunday and announced that it is to start close bread labeling control. The NFA stated that it was obligatory to have complete information about the ingredients and nutritional supplements of bread on the label. “Public interest towards bread, the primary consumption product, is very high and it is important for customers

to have full access to reliable information,” NFA head Zurab Chekurashvili stated at the meeting. The Agency will continue permanent monitoring of products, including bread, and, in case of violations, producing companies will be fined. In 2015-2016, in total 219 business operators were checked and 19 companies were fined for violation of labeling rules. Chairman of the Association of Bread Producers, Malkhaz Dolidze, welcomed NFA’s decision to tighten bread regulations and said this step would protect consumers’ rights and is necessary for regulating the market. The NFA reports that bread producing

companies approved of the new regulations and expressed readiness to cooperate with the Agency in order to produce high standard bread products. The Georgian government and Ministry of Agriculture decided to impose certain rules, regulations and standards regarding importing flour and bread products and producing bread in order to ensure safety of the product and its compliance with European standards. The new regulations were introduced at the beginning of 2016, which meant new requirements for labeling, wrapping and producing standards. In case the bread producers fail to follow the new rules, they will face fines or will be forced to leave the market.

Designboom: Tbilisi Rike Theater and Exhibition Hall among Top 10 Cultural Centers of 2016 BY THEA MORRISON

D

esignboom, a famous international daily web magazine covering the fields of industrial design, architecture and art, has named the Tbilisi Music Theater and Exhibition Hall, located in the Rike Park in the center of the city, among the TOP 10 Cultural Buildings of 2016. “Completed by Italian architecture studio Fuksas, this tubular structure belongs to the music theater and exhibition hall in Tbilisi’s Rike Park, Georgia. The distinctive funneled form was conceived as ‘a periscope to the city’,

The Theater and Exhibition Hall was designed by Italian architecture studio Fuskas. Source: Designboom

framing views of the river. Inside, the two volumes house a music theater and an exhibition hall,” the Designboom article reads. The eye-catching cultural complex was built on the bank of River Mtkvari. Located within the city’s Rike Park, the building is composed of two sculptural tubular elements that both open up onto the adjacent green space. Connected via a shared retaining wall, the two volumes were built to house a 566-seat music theater and an exhibition hall. The north part of the building contains the set up for the Music Theater Hall, with a foyer and other facilities, together with technical spaces for theater machinery and storage space. The Exhibition Hall opens its great

entrance with a ramp that brings visitors from street level while the Music Theater Hall is raised up to allow visitors in the foyer and cafeteria a view over the river and city skyline. It is a periscope to the city and looks towards the river, framing the historic core of the Old Tbilisi. The complex is located close to a Public Service Hall, also designed by Fuksas, which was completed in 2012. The construction process of the Theater and Exhibition Hall was launched in 2010 and is still ongoing. The list of Top 10 Cultural Centers of Designboom also includes buildings from Germany, Saudi Arabia, the United States, Italy, China, Greece and Taiwan.


NEWS

GEORGIA TODAY DECEMBER 13 - 15, 2016

3

TBC Bank to Support Mountain Resorts Development Company of Georgia BY NINO GUGUNISHVILI

T Azerbaijan Georgia’s

BC Bank and the Mountain Resorts Development Company of Georgia announced their partnership plans at a press conference on Fri-

Top Investor in 2016 BY THEA MORRISON

A

report by Georgia’s National Statistics Office (Geostat) says that Azerbaijan is Georgia’s top investor in the third quarter of 2016, and the first and second quarters of the year as well. Azerbaijan invested USD 151 million in Georgia's economy in Q3, 2016, which is 15.1 percent less than in the same period of 2015. Moreover, Geostat says Azerbaijan was also the top investor in 2015. In the Q3, 2016, Azerbaijan’s investments amounted to 33 percent of all investments made in Georgia's economy. Turkey ranks second in terms of the volume of investments in Georgia in the same period with USD 111 million (24 percent of all investments) during the reporting period, while Luxembourg

ranks third with a total investment of USD 52 million (11 percent of all investments). The United States, Czech Republic, the Netherlands, China, Japan, Panama and Cyprus are also on the list of Georgia’s main investors in Q3, 2016. Overall, in the nine months of 2016 Azerbaijan invested USD 434 million in Georgia, which is 9.6 percent more than in the same period of 2015. In total, USD 463 million was invested in Georgia’s economy during the reporting period, which is 4.1 percent less than in Q3, 2015. Geostat says the largest amount of direct foreigninvestments(FDI)wasimplemented in the transport and communications fieldUSD140million-whichamountedtoaround 30 percent of total FDI. In the second place is investment in the construction business at USD 69 million, followed by investments in the processing industry at USD 62 million.

day. The five-year cooperation plan entails setting up innovative pay systems that will be available for visitors in all mountain resorts throughout Georgia from this winter season. New Multi Cards will allow skiers to buy ski-lift tickets in advance either through internet banking, card or pay box, without having to stand in line. The Multi Card top-ups will also soon be available through TBC Bank pay machines. Within the five year partnership plan, TBC Bank is also taking on responsibility for developing mountain resort infrastructure in Georgia, namely in KokhtaMitarbi (Bakuriani), Gudauri, Goderdzi and Tetnuldi resorts, with up to USD 20 million already invested. December 10 is the official opening date for Gudauri, Didveli (Bakuriani) and Goderdzi ski resorts. Tetnuldi is to open on December 24, followed by the new skislope in Bakuriani at Mitarbi, which will also feature new apart-hotels and a completely renewed infrastructure, in 2017. “TBC Bank is launching a long term partnership with the Mountain Resorts Development Company of Georgia, to unite our efforts and create analogues of the world’s leading mountain-ski resorts and their infrastructure,” said Mamuka Khazaradze, TBC Bank co-

Mamuka Khazaradze and Alexandre Onoprishvili at the conference

founder and Chairman of the Board. “We want the visitors to these resorts in Georgia to have the same comfort they would get in Switzerland or France. Our collaboration is an outstanding possibility to promote and market our country. Having all these mountain resorts is a unique advantage that only Georgia holds in the region. We plan to develop Mitarbi as a Ski In - Ski Out concept that is relatively new for Georgia, where visitors will have the chance to get every service needed within walking distance, be it hotel, café, or access to the ski slope. Everything will be done according to the highest international standards. We believe that the time for chaotic constructions is over and we will do our best to sustain the authenticity of the place. We’re planning to plant trees, too, since, unfortunately, some of the areas have been severely damaged,” he said,

further emphasizing the importance of the Public-Private Partnership (PPP) between the Ministry of Economy and Sustainable Development of Georgia, Mountain Resorts Development Company and TBC Bank. “It’s the first time in Georgia that a mountain resort, namely Mitarbi, will develop according to a master plan and we hope it will become an international brand and a very popular tourist destination,” said Alexandre Onoprishvili, Director of the Mountain Resorts Development Company. “We also plan to develop Mitarbi as an eco-resort with electric cars and ski only, as is done in France. Experts say that Georgia has an exceptional chance now, and we expect Mitarbi village to fully correspond to the modern mountain resorts of the 21st century. Our Partnership with TBC is extremely important for us,” he added.


4

BUSINESS

GEORGIA TODAY

DECEMBER 13 - 15, 2016

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.

Is Georgia Heading towards an Oversupply of Hotels? BY OLGA AZHGIBETSEVA

C

itizens of Georgia’s capital recently witnessed the luxurious Biltmore Hotel Tbilisi grand opening. The USD 140 million investment by the Dhabi Group supplied the market with 214 luxury rooms and suites. The USD 2 million opening, huge building and central location (right on Rustaveli Avenue) made the appearance of this hotel on the market very noticeable. However, with much less lavish ceremonies, in total 37 hotels were opened in Georgia just this year, as reported by the Georgian National Tourism Agency (GNTA), which amounts to an additional 1,472 rooms. Even more impressive is what’s in the pipeline for hotels in the upcoming years (2016-2018): 84 more hotels, with 9,060 rooms and 10,525 beds (source: GNTA). And these numbers do not include hostels, Airbnb offerings and some smaller properties, which are mushrooming all around the country. World-renowned brands such as the Intercontinental, the Hyatt, Pullman Hotels and Resorts (Axis), and the Marriott Autograph Collection will soon enter the Georgian hospitality market. The graph below shows the number of rooms

available in Tbilisi and the regions, the pipeline, and the percentage increase. Tbilisi is leading in the number of rooms available, and will have about 9,500 by the end of 2018 (a 53% increase); the Adjara region, although in second place by number of rooms available in the country, will experience the highest increase at 74%. Guria, which currently offers only local low scale hotels and guest houses, will experience a 63% increase in number of rooms. The most noticeable will be the arrival of the Marriott Autograph Collection- Hotel & Spa Resort in Shekvetili, Guria. Opening a high class international hotel in this location will attract domestic and international tourists. The recent surge in the number of hotels and hotel rooms is a very good indicator of economic progress and the confidence of international and domestic investors in the future of the country. On the other hand, an excessive supply of hotel accommodation can have a significant negative effect on hoteliers if internal and external economic conditions turn out to lag behind expectations. According to an influential piece of work by Abel (1983), “Optimal Investment under Uncertainty,” in a competitive environment with uncertain output prices, businesses with high adjustment costs will tend to increase their capacity relative to complete information setting. In the hospitality business,

this means that at the investment stage, investors will rationally decide to provide excess supply, so that if it turns out that market conditions are very good, they can increase supply relatively easily, but this also means that in an economic downturn, excessive supply will further exacerbate the consequences of adverse economic shocks. Balancing between demand and supply in an environment with uncertain prices is therefore an important challenge faced by investors and policy makers. To understand demand conditions in the market, hospitality business investors and management professionals often refer to indicators such as Occupancy and Average Daily Rates (ADR) . As reported by Colliers International, the average occupancy rate in Tbilisi is 68% for international upscale brands, which is high in comparison with cities in Eastern European countries (58% on average by STR Global). Occupancy rates for other classes of hotels are also relatively high. According to Nikoloz Kevkhishvili, the Head of Evaluation and Advisory Department of Colliers International, occupancy rate higher than 60% is one of the indicators for high demand and undersupply. ADR is also significantly high: $109 (average for upscale, midscale, economy class, international and local) Performance Indicators/ Occupancy Rates

supply in Batumi will not hurt existing hoteliers significantly. Occupancy rates for other classes of hotels are even weaker. The hospitality business in Adjara is strongly seasonal, which means that during peak seasons, hotels in Batumi are quite busy, but remain relatively idle during off-season, which creates additional vulnerabilities for other markets. The increasing trend in supply, despite relatively weak or weakening demand conditions, can to some extent be explained by the increasing inflow of tourists to Georgia. With a 26.6% cumulative average growth rate in the period 2005-2015, tourist inflow has steadily continued its rise, and is expected to reach 8 million tourists by 2020, assuming same growth rate in number of tourist arrivals. However, this is not guaranteed unless backed up by adequate economic and policy environment, which according to the World Economic Forum (WEF) is not very favorable. According to the WEF Travel & Tourism Competitiveness Index for 2015, Georgia stands at 71 out of 141 countries. The Index is divided into 14 pillars, with 1-7 (best) scores in each (see the graph). The Index indicates the weak points of the Georgian tourism sector, and indicates the direction for

Tbilisi

Batumi

2014

2015

International Upscale Brands

66%

68%

International Midscale Brands

72%

65%

Local Upscale and Middle Class

59%

65%

54%

Local budget/economy class

57%

49%

30%

Kutaisi

2014

2015

2014

2015

40%

45%

N/A

N/A

N/A

N/A

43%

46%

50%

33%

38%

44%

Source: Colliers International (2016)

in Tbilisi and $75 in Eastern European cities. Leah Rusia Beselidze, Head of the Consultancy Team of Cushman & Wakefield, explains that the hotel pipeline consists of a number of midscale international brands (4 and 3 star hotels). Currently, this class of hotels is underrepresented in Tbilisi market, which creates additional pressure on demand for upscale 5-star hotels. The upcoming supply of new accommodation units should lower the occupancy rate and ADR in Tbilisi. In general, the hospitality industry in Georgia will become more balanced, with quite a wide choice of different types of accommodations. The entrance of foreign brands into the local market will put Georgia on the touristic map for new customers, and will further enhance the country’s image as a touristic destination. While the above performance indicators are quite strong, albeit showing a weakening trend, they hold true mostly for Tbilisi. For example, the occupancy rate in Batumi for international upscale and midscale brands stands at 45%, which is well below the 60% rate which guarantees that the upcoming

further development. While Georgia gets high scores on some pillars like Safety and Security and Health and Hygiene, some other pillars are scored quite low, 1-2. Transportation and better connections are still one of the biggest issues. One of the lowest ranked pillars, Air transport infrastructure (score 2), includes sub-indices such as number of operating airlines, available seat kilometers, aircraft departures and etc. With three international airports in the country, a very low number of directs flights are available, with a high portion of flights scheduled in the night to early morning time. Development of this pillar will positively affect the number of tourists arriving from non-neighbor countries. The lowest ranking pillar is Cultural Resources and Business Travelers, which includes: number of international association meetings, number of sports stadiums, and number of World Heritage cultural sites. The latter sub-index is rather hard to improve, though with a better promotion strategy it is doable. Continued on page 8


6

BUSINESS

GEORGIA TODAY

DECEMBER 13 - 15, 2016

Impact Hub Tbilisi: Work, Connect & Generate Ideas

INTERVIEW BY NINO GUGUNISHVILI

G

EORGIA TODAY met with one of the founder’s of Impact Hub Tbilisi, Ketevan Ebanoidze, to talk about a new venue she and her two friends, Giorgi Akhalkatsi and Elene Zhvania, recently opened.

WHAT IS IMPACT HUB TBILISI? Impact Hub is a global community network that as well as offering a wide variety of interesting projects for people of different professions and organizations, brings a common workplace and space to its members. From Amsterdam to Singapore and now Tbilisi, Impact Hubs can be found in over 85 cities around the world with more than 15,000 members. It’s a place for enthusiastic, motivated individuals who are ready to share their experience to create a better tomorrow, who want to influence and have an impact on society development in any sphere, be it their city or their country. There are three main components on which the concept of Impact Hub stands: 1) It’s the community of people who gather in each Impact Hub; 2) It’s content: programs, ideas, projects and events that are realized in all the impact hubs around the world, and;

3) It’s infrastructure: the facility that each Impact Hub offers to its members. Impact Hub members benefit from a global community that brings guidance and access to resources, inspiration and collaboration opportunities which are shared through all the Impact Hubs worldwide for a growing positive impact on the world.

we became members of the global International Impact Hub family! We’re so proud of it, because we did it in a very short period of time- in only seven months! As the global organization committee said, it’s been almost a recordbreaking result, since it usually takes at least eighteen months to open an Impact Hub anywhere.

WHAT MADE YOU DECIDE TO OPEN ONE IN TBILISI?

NOW, YOU’RE UP AND RUNNING, WHAT ARE YOUR GOALS?

First, the idea of creating Impact Hub Tbilisi came to George [George Akhalkatsi, one of its founders together with Ketevan Ebanoidze and Elene Zhvania] while he was living in London next to one of the first Impact Hubs in the world. He then shared the idea with us and we didn’t hesitate, because we knew Tbilisi needed a place where ideas could be generated and shaped. We started working on the project in February 2016. The process of becoming a member of the International Impact Hub community turned out to be both challenging and exciting at the same time. The accreditation process for membership had several important stages: pre-candidate stage, candidate stage, initiation stage, and so on. We had to do market research, create a business model, understand the look of the community, realize several projects…we also made two video-pitches and in the end, with a final product and a business plan made in October 2016,

We want Impact Hub Tbilisi to be a place where new ideas are born, not just a venue or a space where you can simply work. We’re trying to connect all our members with each other and maximize the contribution of every member to the hub through the generation of new ideas and projects. We want to contribute to the process of civil society development, and we think that Impact Hub Tbilisi is an open and transparent place for that. From the very start Europe Foundation in Georgia has been our main partner and without it, it would have been extremely difficult to realize our idea. We share the same vision with Europe Foundation- we both believe that it’s vital to form a strong and diverse civil society.

TELL US ABOUT IMPACT HUB TBILISI MEMBERS Luckily, from the first day of opening,

we had a chance to feel and see the effect of the Hub. Today, we have 15 individuals and two organizations as members. The interaction between all of them was immediate. We wanted to reach multiple segments. In a way, our ambition is to have a community of free professionals and civil activists who combine their efforts for a better tomorrow. To our members we provide access to the global Impact Hub network worldwide, with lots of resources available; from programs, initiatives and innovative ideas to a variety of projects. As a member of Impact Hub Tbilisi you can gain information on all activities and programs in other hubs around the world and implement them locally. Our membership packages are quite flexible: from 20 to 390 GEL (fixed desk, locker, and a card which gives you access to the space all week, day or night). We’re particularly happy to be located at Fabrika - a popular meeting point and a place where young people with wonderful new ideas always gather.

WHAT PROJECTS ARE YOU CURRENTLY WORKING ON? One of the projects we’re planning and are currently working on is a Social Impact Award program. It’s a student contest-program that aims to make students more active and more aware in the social entrepreneurship sphere. In a way, it’ll be a competition of ideas,

ROUTING

TBILISI ISTANBUL ATATURK AIRPORT ISTANBUL ATATURK AIRPORT TBILISI TBILISI ISTANBUL SABIHA GOKCEN AIRPORT ISTANBUL SABIHA GOKCEN AIRPORT TBILISI BATUMI - ISTANBUL ISTANBUL - BATUMI

10 Galaktion Street

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

where students are offered the chance to create a business-model from an idea, which can then lead to the creation of an enterprise. It’ll have more of an educational emphasis and it’s not important how many participants win. The educational process itself is essential here. The program is set to start in February 2017 with a series of workshops with four main themes: social entrepreneurship, generating ideas, business model creation and business planning. The second cycle of the program consists of receiving applications from participants, after which an independent jury will select eight final groups, where not necessarily all members of the groups will be students, just 50 percent. Non-student applicants under the age of 35 can also apply. These groups will have a very intense two month incubational period with their mentors and they will learn how to make financial models, marketing strategies, etc, basically, they will learn everything that is needed to run a business enterprise. At the last stage, the jury will select three winners based on the best business plans prepared. The three winners will be awarded with EUR 2000 and a one week trip to Belgrade, where they meet with all the other Social Impact Award winners. When they return to Georgia, they’ll have a one month Impact Hub Tbilisi membership and the possibility to work in cooperation with Europe Foundation. If their projects succeeds, they can get an additional funding of EUR 20,000 from the Foundation. The Social Impact Award is an internationally licensed program held in 20 countries and Impact Hub Tbilisi is a participant. Another program we want to get started is the Business Model Challenge - offering trainings for start-ups in marketing or improving their financial and business models. In October 2016, we hosted an international MitOst festival, with two very interesting panel discussions on urban development of cities and social entrepreneurship. One of the main focuses of Impact Hubs everywhere is social entrepreneurship, so we try to be in tune. We’re planning to organize a monthly platform of successful female entrepreneurs in Georgia, as well as series of events titled ‘Look Who’s in Tbilisi’ through which our Impact Hub members will meet with professionals visiting our city. Overall, creating Impact Hub Tbilisi was a thrilling experience for us, both for me and Elene; it was our first attempt to do something completely new, independently. George, as a successful entrepreneur already, has been our motivator; we’ve learned a lot along the way.

FLIGHT NUMBER

TK 387 TK 385 TK 383 TK 386 TK 384 TK 382

WEEK DAYS

DEPARTURE

ARRIVAL

EVERYDAY

05.50 11.45 18.10 01.40 07.30 13.55

07.25 13.25 20.00 04.55 10.50 17.15

07.40

09.00

20.45

00.10+1

17.50 13.55

19.10 16.55

TK 381 EVERYDAY TK 380 TK 393 TK 392

EVERYDAY


BUSINESS

GEORGIA TODAY DECEMBER 13 - 15, 2016

7

Radisson Blu Iveria Installs Electric Charger Station BY NATIA LIPARTELIANI

O

n December 5, Radisson Blu Iveria opened an electro car charger station, making it the first company in Georgia to join the innovative project by E-space in order to contribute to the country's infrastructure development and promotion of electric vehicles. Within this initiative the hotel aims to challenge other companies to take care of the environment and ecology. The opening ceremony was attended by the representatives of City Hall and the Land Transport Agency. Vice Mayor of Tbilisi, Irakli Lekvinadze, talked to GEORGIA TODAY on the importance of having electro charger

stations for electric vehicles. “E-space is a company that carries out actions to develop electric charger equipment throughout the country. The recent opening was an important step towards promoting electric vehicles which are vital for our city Tbilisi, as we believe that the promotion of electric vehicles directly relates to the improvement of the environment and decrease in pollution. That is why we support E-space and every other company that approaches us with such initiatives,” he said. The executive director of E-space, Sulkhan Gvalia, also talked about the importance of promoting electric vehicle infrastructure. “Our company started to create infrastructure for electric vehicles in order to popularize the eco-friendly technologies of future. We have installed two

chargers already with the support of Tbilisi City Hall. Radisson Blu Iveria is the first hotel to follow our initiative and give us a parking slot,” Gvalia told us. The General Manager of Radisson Blu Iveria, Jordi Kuijt, expressed the company’s enthusiasm for carrying out such Corporate Social Responsibility (CSR) activities: “We as a hotel always focus on sustainability- we already have a Green Key Certificate which stands for taking care of the environment, and this fits in perfectly with the E-space initiative- something which it is new and innovative for Georgia, while in other European countries it is already standard practise. It would be nice to have that standard in Georgia as well. In Amsterdam, I was driving around in an electric car. Now with a charger station here and the future installation of others, I’ll be soon able to do the same in Georgia. It will make a huge difference environmentally. It is pure CSR activity: we not doing it for any commercial reasons,” Kuijt told GEORGIA TODAY. The 2016 data from the International Energy Agency claims Georgia is the first among the countries of the world in air pollution-related deaths. For this reason, it is crucial that the private sector engages in activities related to the improvement of environmental factors here. From December 5, Radisson Blu Iveria is offering free use of the hotel parking lot at the charger station for one year in a joint project between Radisson Blu and E-space, and part of the social campaign "More Oxygen to the City."


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BUSINESS

GEORGIA TODAY

DECEMBER 13 - 15, 2016

RETAIL FPI | ISET’s Retail Food Price Index Is Two Years Old

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fter a temporary increase at the end of October, driven by seasonal fruits and vegetables, in the last two weeks of November, ISET’s Retail Food Price Index decreased by 0.1% m/m (compared to the last week of October) and 12.1% y/y (compared to November 2015). We recorded the biggest drops for bananas (-12%), tomatoes (-12%), and beef (-7%). On the other hand, prices increased most for cabbage (10%), plums (8%), and cucumber (2%).

RETAIL FPI THROUGH TWO YEARS ISET-PI’s Retail Food Price Index (Retail FPI) was launched in November 2014, in cooperation with Georgia’s largest retail chains, including Carrefour, Goodwill, Fresco and SPAR. While individual retailers’ data is kept confidential, average prices from all stores are combined to form a comprehensive index, as well as price indices for individual products or product categories (e.g., grocery, vegetables, dairy, etc.). The two-year dynamics of Retail FPI looks as follows (previous month=100): Competition among Georgian retailers is getting quite fierce. The following figure provides a comparison between the minimum and maximum prices offered by Georgia’s supermarkets. It is noticeable that there is a big divergence between minimum and maximum Retail FPI during November-December 2015. Interestingly, in November 2016, we still observe a gap between those indicators. We may expect that the difference will become even larger next month. We suspect that this divergence is due to one supermarket being able to please consumers with lower prices and promotions for the upcoming holidays.

ISET FPI VS GEOSTAT FPI It is interesting to compare ISET’s Retail FPI to Geostat FPI. In most cases, the changes in indices coincide or only slightly differ from each other. However, for August-October 2015 and 2016, the differences between the ISET and Geostat indices are significantly large. One possible explanation is that ISET FPI is comprised of 33 food products that account for 75% of food spending by an average Georgian household, while Geostat monitors the food basket that includes 92 products. It might be the case that the increase in Geostat food prices can be accounted for by the increase in prices of those goods that are observed by the National Statistics Office of Georgia, but are not observed by ISET. The second and more convincing reason for the divergence of food price indices in some cases may be the observed objects. As mentioned above, ISET FPI observes prices in the biggest supermarket chains in Georgia, while Geostat collects data not only from the biggest supermarket chains, but also from bazaar

Is Georgia Heading towards an Oversupply of Hotels? Continued from page 4

and bazaar-type objects and stores. A very observant consumer would notice that the Geostat FPI is lower in December. The above difference in the amplitude of price reductions can be interpreted as a result of much higher price volatility in the bazaars and small stores than in the supermarket chains. This implies that the competition among the retailers in bazaars is stronger than between the supermarket chains in the food market during the season of holiday shopping fever. To be more precise, small retailers are able to put out the products for sale faster than the supermarket chains. Accordingly, they increase the supply of food in the market and, therefore, “the invisible hand” leads prices to be more rapidly reduced in the bazaars than in the supermarket chains. In addition to this, it may be the case that the supermarket chains target different segment of consumers, and they are not concerned with the more rapid decline of the prices in the bazaars. It turns out that Georgian consumers are faced with a difficult decision for the New Year: if Georgian consumers do not care about brands, commercials, and the pleasant environment provided by the supermarkets, they will head to the bazaars in order to buy cheaper food for the holidays.

The first two, on the other hand, should be considered more actively. A higher number of international meetings will help to address the problem of seasonality, which is peculiar to the winter and summer resorts of Georgia. So-called MICE (Meetings, Initiatives, Conferences and Events) tourism will help to attract tourists throughout the year. Even more, MICE tourism has the potential to become a new Georgian niche at the regional level. However, this type of tourism is highly dependent on the previously discussed pillar of better air connections. The policy for further development of the tourism industry should be expanded to cover other

tourism supporting sectors. Improvements implemented in low-ranked pillars will lead to better enhancement of the net benefits of investments to-date in the hospitality sector. Better air connections and diversified tourism segments will help keep the demand increasing. To go back to the title of this article, the answer is probably no, not yet at least, but Georgia needs to keep upgrading policies and infrastructure faster than the growth in tourists and hotel numbers to keep both the investors and tourists happy. ISET-PI would like to express its gratitude to GNTA, Cushman & Wakefield and Colliers International for the interviews and information provided.

Dispute over Patarkatsihvili Family in London’s Appellate Court Ends with Chkhartishvili Win

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n December 9, London's Appellate Court rejected the suit of Patarkashishvili’s companies against Vano Chkhartishvili, thus bringing an end to the three-year dispute inspired by dishonest forces. Chkhartishvili won every trial against the family in Georgia as well as abroad. The first case, which focused on the most valuable asset- controversial actions regarding the Kulevi Terminal- on October 2013 in the UK Virginia Court ended with Chkhartishvili's victory. The dispute was also taken up in the Georgian Court, where Vano Chkhartishvili won both the first and second instances. London's Appellate Court thoroughly examined the Patarkatsishvili companies' claims against Vano Chkhartishvili and rejected them, and canceled the first instance of London Judge Peter Smith's decision. It should be noted that, recently, a panel of judges in England suspended Peter Smith’s right to judge due to his “erratic” behavior. The decision of London's Apellate Court is final, as in the Supreme Court only legal topics of particular public interest are discussed, or those that legally have no precedent. “Despite the unjust claims, during the entire process of the dispute, we have never carried out actions that would compromise the memory of Badri Patarkatsishvili or his family's reputation,” say Chkhartishvili’s representatives. Chkhartishvili’s side hopes that with the December 9 decision of the London court, the Patarkatsishvili family will take the relevant steps and apologize for discrediting Vano Chkhartishvili through smear campaigns in the media as carried out throughout the last four years. “The public should know that Patarkatsishvili's family sided with fraud and false witnesses who

carried out psychological terror through blackmail against Vano Chkhartishvili- this will receive an adequate response,” Chkhartishvili’s representatives say. “Chkhartishvili will soon hold a special briefing at which the public will be exposed to members of that group and their criminal actions.” “For businessman Vano Chkhartishvili, this dispute was, primarily, a matter of dignity, and we are glad that the truth was exposed and approved by the world's most authoritative and impartial court in the UK.”


BUSINESS

GEORGIA TODAY DECEMBER 13 - 15, 2016

Pasha Bank Holds Conference on Sustainable Energy Development in Georgia

Speakers of the conference. Source: Pasha Bank

BY NINO GUGUNISHVILI

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he second business conference hosted by Pasha Bank within the framework of MEETING ROOM focused on the topic of ‘Sustainable Energy Development in Georgia - The Case for Hydro Power Plants,’ on December 6 at the Radisson Blu Iveria Hotel, Tbilisi. The participants of the conference discussed topics related to the development, perspectives and challenges the sphere faces today, bringing together state officials and representatives of the private sector to discuss pricing and policy regulations, financing of Hydro Power Plants (HPP), business ethics and corporate social responsibility, experiences of working in the energo sector in Georgia, and policy trends. Mariam Valishvili, Deputy Minister, Ministry of Energy of Georgia, talked about the policy trends in promoting sustainable energy development in Georgia. “Sustainable Energy development has vast perspectives in our country; it’s a resource that we still have to use; technology that we still have to implement. The market is gradually increasing, which will hopefully bring us to the standards existing in European countries. State policy will focus on supporting the investments needed for the sector,” she said. Giorgi Pangani, Commissioner of the Georgian National Energy and Water Regulatory Commission, made a presentation on pricing policy and regulations in the electro energy sector, followed by Ketevan Sandroshvili, Head of the International and Investor Relations Department at the Electricity Market Operator (ESCO), who talked about ESCO functions. “Our main challenge today is to create a platform and technical infrastructure for

Understanding the long-term impact of investment in hydro power is essential, as is the need to build the right infrastructure

commercial trade principals. It’s very important to have all the market players involved,” she emphasized. Giorgi Abramishvili, Managing Partner of Energy Solutions, also spoke of the development potential in Georgia, and went on to introduce his company, which specializes in hydro project management, development, research and consultancy in the hydro sphere. “Georgia has so many possibilities in Hydro; you should invest in it, understanding of course that you should not contribute to ruining the environment and nature by doing so,” said Radoslav Dudolenski, Chief Executive of Hydrolea. “Understanding the long-term impact of investment in hydro power is essential, as is the need to build the right infrastructure.” The Shuakhevi HPP project being carried out by Adjaristskhali Georgia LLC is the first hydropower project in Georgia to be certified by the United Nations Framework Convention on Climate Change to reduce carbon emissions. "Shuakhevihesi" is to produce 450 million kilowatt / hour electricity and reduce greenhouse gas emissions by more than 200,000 tons per year. After completion of the Shuakhevi project, Georgia will have a 187 MW worth capacity clean energy producing plant which will generate enough electricity for the entire population of Georgia throughout winter and summer. When the capacity for generating electricity is greatest, Georgia will export its energy to Turkey. “Ours is one of the largest investments in the hydro business in Georgia,” Ronny Solberg, CEO, Adjaristskhali Georgia LLC, said. “We’re finishing the project in January-February 2017 and will begin integration in March. We are building 37.5 kilometres of transfer tunnels, probably the longest ones in the Black Sea region.” Solberg also touched on business ethics and corporate social responsibility in his talk: “We’re very focused on taking care of the environment around us. Safety is an issue that we discuss every day; we have integrity, and we keep our promises,” he said. “Every roof can become a generator,” Hydrolea’s Dudolenski said. “The cost of Solar panels is going down, so sooner or later people will see it’s cheaper to have solar energy and even sell it. Shopping malls often use hydrogen and they can even produce their own electricity, this is also the risk that I see for my generation,” he added in his talk about the risks and trends of the market that may affect investment possibilities in the sphere. The last part of the conference focused on the financing practices of Hydro Power Plants and was presented by Goga Japaridze, CCO, Member of the Board of Directors, Pasha Bank. The conference was supported by the Ministry of Energy of Georgia, Electricity System Commercial Operator and the Georgian National Energy and Water Regulatory Commission.

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BUSINESS

GEORGIA TODAY

DECEMBER 13 - 15, 2016

Dechert Georgia LLC Brings a Unique Perspective to Georgia’s Legal Market INTERVIEW BY NATIA LIPARTELIANI

find it a good and easy place to do business. We think it’s a place with very talented individuals and huge potential.

D

WHAT ABOUT THE COMPANY’S FUTURE PLANS?

echertLLPisaninternational law firm with more than 900 lawyers and top-ranked practices in corporate and securities, finance and real estate, complex litigation and international arbitration, financial services, asset management and capital markets. Dechert has a large global presence with 29 offices worldwide and is recognized globally as a top firm. The firm opened an office in Tbilisi in 2012, and while working closely with colleagues in the UK, US, France, Russia and United Arab Emirates provides a full range of services and worldwide legal practices relating to Georgia and the surrounding region. To find out more about the company, its key practices, and challenges in the Georgian legal market, GEORGIA TODAY sat down with Dechert Georgia’s national partner Archil Giorgadze and managing partner Nicola Mariani (member of the NY, Paris and Quebec Bars).

DECHERT WAS FOUNDED IN THE UNITED STATES NEARLY A CENTURY AGO AND HAS EMERGED AS A GLOBAL FIRM SINCE. WHY DID IT CHOOSE TO OPEN A BRANCH IN TBILISI? Nicola: There was clearly an interest for Dechert to come to Georgia because of its regional appeal and the fact that very few international firms operate in Georgia. It is an easy place to build and develop a business, and there are no corruption issues.

COULD YOU TELL US THE KEY PRACTICE AREAS OF DECHERT IN TBILISI? Nicola: Our main practice area is corporate law and mergers and acquisitions. Our sectors of practice include telecommunication, energy, and many of the country’s big infrastructure and hydro projects. Archil: In addition, we have been present in almost every capital market deal in Georgia. This year we participated in

two major capital market deals. Recently we have started to provide more development and advisory services, including to the government, which involves providing assistance in developing the country’s legal system. The two projects we can identify in this respect include working on legislation covering private-public partnerships with the Ministry of Economy and Sustainable Development, as well as working with the Ministry of Justice to develop specialized commercial and tax chambers in Georgia to deal with high value and complex commercial disputes. We have also worked extensively in the field of corporate restructuring and assisting foreign investors in completing their investment obligations.

HAS INTERACTION WITH THE GOVERNMENT GONE SMOOTHLY? Nicola: We work closely with the Georgian government and we see how open and transparent they are. I always tell my clients, especially foreigners, that there are very few taxes in Georgia and, to the extent that you comply with your obligations, investors will run into very few problems.

THERE HAS BEEN AN INCREASE IN FOREIGN INVESTMENTS IN GEORGIA DUE TO THE SIMPLIFIED TAX

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SYSTEMS. ARE THERE ANY DRAWBACKS TO THIS? Nicola: Are there shortcomings? Yes. Does the government know this? Yes. Should it be simplified? Absolutely. Should the implementation of tax audits be reviewed? Absolutely. Are steps being taken? Yes. It is interesting because some of the findings show that it is not so much the tax code, but the efficiency and the implementation of audits that need to be reviewed. Most of our clients have no problem with being audited or reassessed (if they have to pay). However, they want to make sure that it’s done within a short period of time, which takes us to the real issue: how should it be reformed? Archil: One of the main problems which foreign investors have faced in terms of taxes is the audit process and the process of appeal for any tax liabilities which involves a long wait. The GoG has taken several initiatives to simplify this process and make it quicker; they have introduced special systems within the revenue services in the Ministry of Finance. The GoG agrees with the business community that it needs to set up a special tax court which won’t consider all the tax claims, but would consider taxes that are above a certain threshold. The idea behind this tax court is to have specialized judges with specific experience in tax so they can decide cases quickly and

professionally. This can be a huge relief for businesses because it prevents long tax disputes that drain the resources of companies and basically slow down the future development of businesses.

HAVE YOU NOTICED ANY MAJOR GROWTH IN GEORGIA’S LEGAL MARKET SINCE 2012? Nicola: What we’ve seen during past years is that investors are becoming more sophisticated. More and more global and international players are coming to Georgia, which is a good thing. However, Georgia does not live in a vacuum. There is a currency crisis throughout the region and there are external shocks from a regional perspective, but even within a difficult regional environment, Georgia is still growing. Should it grow more? Absolutely, but in terms of the legal market we see continuous growth.

WHAT ARE THE KEY CHALLENGES IN TERMS OF OPERATING IN THE GEORGIAN LEGAL MARKET? Nicola: It’s a relatively small market, but competitive. There is a growing number of local law firms, and in terms of the talent pool we are quite lucky that lawyers in Georgia are well trained and speak many languages, so we—Dechert—actually see Georgia as a regional base for future growth. We really like doing business here and

Nicola: We have developed a model for organic growth with some universities; a good model where we take students and train them as trainees and then promote them to the junior associate level. These programs have worked well for us and we intend to continue in this respect. We’re also very proud to have been the lead lawyers and lead negotiators for the GoG on key infrastructure project. It is good experience for our team. We’ve been involved in the negotiation of the Tbilisi International Airport BOT as well as the Anaklia Black Sea Deep Water Port project. Archil: When we talk about developments in the legal market, we note that more and more sophisticated investors are coming into the country who require legal services that are up to international standards. One of the best ways to upgrade the legal services provided in the country is to draw on experience from our offices globally. Almost every deal we worked on, we’ve done so together with our international offices from London, Dubai, and Paris which means we’re trying to bring standards which are acceptable and widely employed in those jurisdictions. The substance of law is Georgian, of course, but as in every service field there are certain standards which the country needs to be aware of; this also helps other law firms as well, because when we compete, we also learn from each other. The standards and experience we bring are not only beneficial for our company but for the entire Georgian legal market.

HOW DO YOU SEE THE NEXT FIVE YEARS IN GEORGIA? Nicola: We are optimistic. The number of infrastructure projects is on the rise which means exciting and quality work for law firms. We are also seeing a growing interest from private equity funds for Georgian companies. We are therefore looking forward to growing our practice with the growth of the country!


BUSINESS

GEORGIA TODAY DECEMBER 13 - 15, 2016

11

IFC, EBRD Help Aversi Pharma Expand Access to Quality Healthcare Services in Georgia

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FC, a member of the World Bank Group, and the European Bank for Reconstruction and Development (EBRD) are supporting Aversi-Pharma, one of Georgia’s leading healthcare providers, in expanding access to affordable, high-quality medical care. IFC will provide a EUR 13 million loan to Aversi, supporting a drive by the company to expand its network of healthcare facilities and provide advanced medical services across Georgia. The EBRD will contribute a EUR 5 million loan to the company’s development. The loans will finance the construction of an advanced oncology center in Tbilisi and an outpatient clinic in Telavi, East Georgia. They will also support the acquisition of state-of-the-art medical equipment for both clinics. Many of those services are scarce in Georgia, especially in the country's outlying regions. “Accessibility to affordable, high-quality healthcare services is vital for Georgia,” said Paata Kurtanidze, Aversi's founder. “It contributes to the well-being of our society, promotes the country’s development, and reduces poverty. With support from international finance institutions, we plan to meet increased demand for quality healthcare services in Georgia.” Bruno Balvanera, EBRD Director for the Caucasus, Moldova, and Belarus, said: “We are proud to continue our successful cooperation with Aversi. This project is extremely important for the welfare of the population and will help to improve the healthcare infrastructure of the country. EBRD strives to support Georgia in all its aspects of economic development. This project is also important as it fits with EBRD’s strategy to promote higher energy efficiency, competitiveness, innovative product development, and corporate governance standards among local private companies.” Jan van Bilsen, IFC Regional Manager for the South Caucasus, said, “Compa-

nies like Aversi demonstrate the impact that the private sector can have on the healthcare industry in developing countries. As the world’s largest multilateral investor in private health care in emerging markets, with over a USD 1.6 billion committed portfolio in health services and life sciences, we provide private companies with long-term financing and global expertise. That enables them to improve the reach and quality of medical care, making life better for people in countries like Georgia.” As a result of its expansion, Aversi, which is one of the largest employers in the country with over 8,000 full-time workers, is also expected to create new jobs. As part of the project, Aversi Pharma

will also receive up to USD 127,000 in grants under the EBRD’s FINTECC capital improvement program. The grants will help the company install insulation, efficient heating systems, improved ventilation, and building management systems in its hospitals. In 2015, the EBRD provided the company with financing to expand a hospital in Marneuli and to renovate the Infectious Diseases Hospital in Tbilisi. Private companies are a key part of Georgia's healthcare system, providing more than 80 percent of the health services in the country. Patients pay only the difference between the fee of the healthcare providers and the State's universal health coverage, which makes

healthcare services more affordable for the population. The government reimburses hospitals for the services they provide to patients. Georgia became an IFC member in 1995. Since then, IFC has committed more than USD 1.2 billion in long-term financing, of which USD 436 million was mobilized from partners. Those investments covered 55 projects in the financial services, agribusiness, manufacturing, and infrastructure sectors. In addition, IFC has supported more than USD 331 million in trade through its trade finance program, and implemented a number of advisory projects focused on developing the private sector in Georgia. In fiscal year 2016, IFC invested almost USD 19

billion in developing countries worldwide. IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with 2,000 businesses worldwide, it uses its six decades of experience to create opportunity where it’s needed most. The EBRD, owned by 64 countries and two intergovernmental institutions, is supporting the development of market economies and democracies in countries from central Europe to Central Asia. The EBRD is a leading institutional investor in Georgia, with about EUR 2.87 billion invested in various sectors, from energy to agribusiness.

Georgia among Top Destinations on the Rise on TripAdvisor marketing campaign on TripAdvisor, reaching ten targeted markets of Azerbaijan, Germany, Italy, Israel, Poland, Ukraine, Turkey, Armenia, Khazakhstan and Russia. “For six months promotional banners were seen by millions of people in each of the ten aforementioned countries. The marketing campaign helped to promote Georgia and increase tourist flow to the country,” said Giorgi Chogovadze, Head of the GNTA. One of the internet’s largest and most popular travel sites, TripAdvisor has 340 million unique vistors monthly with 350 million reviews and comments posted and more than 6.5 million hotels, restaurants and destinations listed.

BY NINO GUGUNISHVILI

S

umming up the year of 2016, TripAdvisor has named Tbilisi among the top ten destinations on the rise in the world, coming in at 9th place. Other popular destinations include San Jose Del Cabo Mexico (1st place); Whistler, British Columbia (2nd); Jericoacoara, Brazil (3rd); Kihei, Hawai (4th); followed by Baku, Azerbaijan; El Nido, Phillippines; Eilat, Israel; Las Palmas De Gran Canaria; Tbilisi; and Johdpur India in 10th place. The Georgian National Tourism Administration (GNTA) has held a massive

Tbilisi. Source: Trip Advisor

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SOCIETY

GEORGIA TODAY

DECEMBER 13 - 15, 2016

Biomass Briquettes: the Budget & Environmentally Friendly Alternative to Firewood BY BAIA DZAGNIDZE

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or Georgia, forests are a valuable natural resource covering about 40 percent of the country's territory. The biodiversity is important to the economic growth of the country as it provides the necessary household resources for the rural population. Currently, the forests are significantly tarnished as a result of human impact. High levels of poverty in rural areas and lack of alternative sources of energy increases anthropogenic pressure on forest ecosystems and leads to the obtaining of timber with illegal and unsustainable methods. Unsustainable forest management reduces the biodiversity and harms rural residents. Forest deprivation results in decreased resources and frequent natural disasters, which, again, worsens the social conditions of the rural population. It is a known fact that demands on heating resources increase with the growth of the population. Wood consumption by household is significantly higher than the amount forests can pro-

duce. 67 percent of Georgia’s rural population uses firewood for heating purposes, which is a heavy burden on our forests. In order to tackle the problem, the government should introduce other types of heating options to its population. And biomass briquettes are a great alternative due to the long lasting blaze, price and low negative effect on the environment. Biomass briquettes are pressed bio fuel made from dehydrated wood chips and agricultural waste. After collection of bio mass, the goods are shredded and later on pressed under high pleasure without any glue or other artificial additives. A factory manufacturing such briquettes was built in Matani village, Kakheti region, in April this year. According to Egnate Abashidze, the site manager, the partner organizations, together with Friends of Green Earth brought machinery and specialists from Germany. The task of building the factory was given to the National Forestry Agency management by the municipality for a 2-year usufruct period. “The factory uses the unused biomass found in the forest, which in its way helps in cleaning up the forests,” notes

ture in such briquettes is 8-12 percent, which guaranties a clean and efficient blaze, with less smoke and ashes. And the financial benefit of a briquette is significant. Let’s say that a family needs 10 cubic meter firewood (aprox. 10,000 kw/hour) costing 600-1000 GEL. To get the same energy a family can buy 1.5 cubic meter briquettes with the energetic value of 8,000 kw per hour for only 330 GEL and add 3 cubic meter firewood for 180-300 GEL. In the end, the family gets 1,000 kw/hour as a bonus and spends only 510-630 GEL. Abashidze notes that currently, the organizations are working with the government to replace wood with briquettes especially in those educational institutions where firewood is a main fuel for heating. “Additionally, CENN is working on awareness-rising campaigns among population to promote the benefits,” he added.

Abashidze, continuing that one piece weighs 800 grams and requires only 6 cubic meters of shredded and dried biomass for its production. Compared to firewood, the briquettes have a higher heat and energy capacity – one cubic meter firewood blazes for

1,000 kw per hour, while the same number of briquettes burn for 5,500 kw per hour. Additionally, transportation of briquettes is much easier and does not require large vehicles. Its environmentally friendly characteristics are also to be noted. The mois-

The Biomass Briquettes factory is a UNDP funded project implemented by the NFA in cooperation with CENN (Sustainable Forest Governance in Georgia project, funded by Austrian Development Cooperation), the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) and The Greens Movement of Georgia


Issue #904 Business