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Issue no: 928/69

• MARCH 14 - 16, 2017

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue...

First Diplomatic Ski Competition Held in Gudauri NEWS PAGE 3

Direct Foreign Investments in 2016 in Georgia: Preliminary Results Announced

FOCUS

PAGE 5

Tourism Market Watch

ON SMOKING

ISET analyses the pros and cons of the new Tobacco Control Law

GALT & TAGGART PAGE 6

Kaspersky Lab Presents Digital World Threats

PAGE 4

Batumi Calm after Saturday Clashes BY THEA MORRISON

T

he situation in Georgia’s Black Sea city, Batumi, has returned to calm after Saturday night’s clashes between protesters and law enforcement officers left more than 30 injured and around 40 detained. The confrontation began when a man refused to accept a fine for having parked in an incorrect location. The man and his companion were arrested for disobeying a policeman, after which a large-scale protest ensued, seeing hundreds of locals gathered at the police department to demand the release of the detained and the resignation of the Gori-origin police head. Continued on page 2

Photo by adjaratv.ge

PAGE 8

TBC Bank’s ‘Startuper’ Promotes Entrepreneurial Spirit PAGE 15

Fukuyama on Putin, Misha & Bidzina POLITICS PAGE 11 Prepared for Georgia Today Business by

Markets Asof10ͲMarͲ2017

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

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

INDICES

Price

w/w

m/m

BONDS

Price

w/w

m/m

GBP29.87

+1,9%

Ͳ3,3%

GEOROG04/21

105.31(YTM5.30%)

Ͳ0,1%

Ͳ0,2%

GBP3.60

Ͳ1,2%

+4,8%

GEORG04/21

110.52(YTM4.05%)

Ͳ0,6%

Ͳ0,8%

GBP14.08

Ͳ0,5%

Ͳ2,6%

GRAIL07/22

110.00(YTM5.55%)

Ͳ0,5%

+0,3%

BGEOLN07/23

101.44(YTM5.73%)

Ͳ0,1%

Ͳ0,2%

Price

w/w

m/m

51,37

Ͳ8,1%

Ͳ9,4%

CURRENCIES

w/w

m/m

1204,64

Ͳ2,4%

Ͳ2,3%

GEL/USD

2,4995

Ͳ0,3%

Ͳ4,8%

GEL/EUR

2,6686

+0,2%

Ͳ4,5%

w/w

m/m

GEL/GBP

3,0412

Ͳ1,4%

Ͳ7,2%

FTSE100

7343,08

Ͳ0,4%

+1,2%

GEL/CHF

2,4727

Ͳ1,2%

Ͳ5,6%

FTSE250

18961,42

+0,4%

+1,3%

GEL/RUB

0,0424

Ͳ1,2%

Ͳ5,6%

DAX

11963,18

Ͳ0,5%

+2,5%

GEL/TRY

0,6699

Ͳ0,9%

Ͳ5,6%

DOWJONES

20902,98

Ͳ0,5%

+3,1%

GEL/AZN

1,4028

+0,2%

Ͳ7,1%

5861,73

Ͳ0,2%

+2,2%

GEL/AMD

0,0051

Ͳ

NASDAQ

Price

Price

Ͳ5,6%

MSCIEMEE

141,11

Ͳ3,7%

Ͳ6,6%

GEL/UAH

0,0935

+1,2%

Ͳ3,0%

MSCIEM

926,14

Ͳ0,5%

Ͳ0,4%

EUR/USD

0,9369

Ͳ0,5%

Ͳ0,3%

SP500

2372,60

Ͳ0,4%

+2,4%

GBP/USD

0,8222

+1,1%

+2,7%

MICEX

1973,96

Ͳ4,0%

Ͳ8,7%

CHF/USD

1,0109

+0,3%

+0,8%

MSCIFM

2541,12

Ͳ0,7%

Ͳ1,9%

RUB/USD

58,9825

+1,3%

GTIndex(GEL)

1177,93

Ͳ

+0,1%

TRY/USD

3,7316

+0,7%

+0,9%

GTIndex(USD)

887,17

+2,3%

+5,1%

AZN/USD

1,7745

Ͳ0,4%

+1,7%

+1,2%


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NEWS

GEORGIA TODAY

MARCH 14 - 16, 2017

President Initiates Public Campaign to Review Constitution

BY THEA MORRISON

G

eorgia’s President, Giorgi Margvelshvili, has initiated a new campaign – The Constitution Belongs to Everyone, which aims at holding public discussions over possible changes to the Georgian Constitution, including the model of the election system, local self-government and the people’s role in monitoring politicians. The presentation of the campaign was held on March 10 at the Presidential Palace, and around 200 guests from political parties, diplomatic corps, non-governmental organizations (NGOs) and the media were invited to the event. Although amendments to the Constitution are discussed by the Constitutional Commission, which was set up in December 2016 to elaborate a package of constitutional amendments by April 30, 2017, the President believes its format is unacceptable and resembles the previous ones, where society was not properly involved. “The Constitution unites us all… It is the free will of free people living within one unique space…. It is a contract signed by the individual citizen with other citizens and the State on how they should function as a nation and country,” he said. Margvelashvili stated that his campaign would be spread throughout the country and would allow

every citizen and every group of people to express their opinions about the Constitution. “We will give everyone the opportunity to express their opinion and we believe this process will also help the Constitutional Commission,” the President added. Following the presentation of the campaign, the President held a dinner with the representatives of the diplomatic corps. Margvelashvili once again underscored the importance of broad discussions and active public involvement in the amendment process of the country’s most important document, the Constitution. Members of the ruling party Georgian Dream (GD) were also invited to the event, but declined, instead calling on the President’s Administration to take part in the work of the Constitutional Commission. Vice-Premier and Energy Minister, Kakhi Kaladze, commented on the Presidential initiative. “There is a Constitutional Commission which works on changes to the Constitution. Who the President is going to meet or whom he will hold consultations with is of no interest to me. I am interested specifically in the Commission’s work and what output the Commission will offer,” Kaladze said. Representatives of non-governmental organizations, constitutionalists, oppositional politicians and diplomats are to be involved in public discussions.

Batumi Calm after Saturday Clashes Continued from page 1 When protesters, mostly youth, began to throw stones, damage police cars and private property and set fire to a number of vehicles, police are said to have responded with tear gas and rubber bullets. Media reports quote opposition politicians as saying the citizens of Batumi were angered by what they see as disproportionately high fines by police for minor traffic offenses. 33 people were left needing medical attention, 15 of whom were law enforcement officers. An investigation into the case is underway. The Prime Minister of Georgia, Giorgi Kvirikashvili, later stated that upon the request of Zurab Pataridze, Head of the Adjara Government, each person under administrative detention had been released until the issue can be thoroughly investigated, “in order to avoid further tension”. Rumor began circulating of political motivation behind the large and violent protest, rumors which the Government head seemed to support. “This incident shows how a harmless, everyday occurrence can used by destructive political forces to escalate a situation,” the PM said. “Unfortunately, these forces are willing to undermine the very foundation of stability in the country- they inten-

tionally provoke acts of vandalism and abuse representatives of state authorities who have been instructed by us to maintain minimum-level response in order to avert possible complications,” the PM said following criticism that the event could have been avoided had officials acted sooner. The PM went on to urge citizens to obey the law and respect the state institutions. On Sunday, PM Kvirikashvili visited Batumi and the Interior Ministry detachments to thank the law enforcement officers for establishing order and avoiding further escalation of the situation. The Prime Minister reiterated that the state will severely punish those who violate the law and disrespect its institutions. "I thank you for your heroism and patience. Law enforcement officers used as much force as necessary to maintain stability and protect the rights of our citizens[...]I want you to know it and to be proud because last night we walked a tightrope, but now we can proudly say that we used just enough force to maintain stability in the country,” Kvirikashvili told Batumi law enforcers. The PM also visited those injured and hospitalized after the clashes, and spoke with locals on Batumi Boulevard, who told him that, despite the provocation, the incident had been defused as peacefully as possible.


NEWS

GEORGIA TODAY MARCH 14 - 16, 2017

PM Kvirikashvili Responds to MEPs over Rustavi 2 TV Case BY THEA MORRISON

G

eorgia’s Prime Minister, Giorgi Kvirikashvili, has replied to the letter of 17 European Parliament Members who express their concern regarding the court dispute over private company Rustavi 2 TV. Kvirikashvili thanked the MEPs for their interest towards the Rustavi 2 case and said that Georgia had achieved significant progress on the path to constructing a modern, democratic country. “You have expressed many times that you back Georgia’s European agenda and appreciate our efforts in terms of fighting important foreign and internal challenges. Taking this into consideration, your letter of March 7 was very unexpected. I was astonished when I read the serious accusations in it,” Kvirirashvili’s letter reads. The PM said that the freedom of media is guaranteed by the Georgian Constitution, noting its significance for the government. “I can proudly declare that no period of history has experienced such diversity of opinions,pluralismandhotpoliticaldebates as we see today in our media. Today, Georgian media is far freer from governmental interventions and criticizes it much more freely than at anytime prior,” the letter reads. The PM also added that while there were only three TV Channels before 2012, now that number has reached 13. He added that accusing Georgia of pressuring a TV company, as well as the court, is both baseless and unfair. “The dispute over Rustavi 2 represents a heritage of a past when the right of property was often violated and freedom was sacrificed to political aims…It was our task

to restore Georgia’s judiciary system, provide judiciary independence and restore social confidence towards that judiciary system,” the PM wrote. Kvirikashvili concludes by assuring the MEPs that the government is ready for cooperation, cares for the protection and strengthening of democratic institutions, and aims to provide protection of private property, to strengthen the independence of the judiciary system and safeguard an open and pluralistic media environment. “The government will do everything to continue the country’s development on the basis of European and democratic values,” the letter reads. The MEPs sent their letter to PM Kvirikashvili last week to express their concern regarding the ongoing “pressure” on the private, independent TV channel Rustavi 2. “Rustavi 2 is the most popular Georgian TV outlet, which has been the target of attempts of forceful change of ownership for the past two years. The ongoing pressure on this independent TV channel reached its most alarming stage on March 2,withthedecisionoftheGeorgianSupreme Court to transfer the ownership rights of Rustavi 2 to former co-owner and government ally, Kibar Khalvashi,” the letter of MEPs reads. The MEPs underline that change of the channel’s ownership rights and the resulting change in its editorial policy, turning Rustavi 2 into another government-friendly media outlet, would seriously impede the quality of democracy and free media in Georgia. “This would undermine Georgia’s ability to comply with the obligations it has undertaken as a signatory country of the Association Agreement with the European Union,” the letter says. The MEPs went on to state that particularly regretful was the decision of the

Georgian Supreme Court, made against ongoing public protest, behind closed doors and in absentia of the parties concerned, one day after Georgia was granted visa-free access to the Schengen Zone. The politicians also welcome the measure applied by the European Court of Human Rights (ECHR) on March 3, instructing the Georgian authorities to suspend enforcement of the decision of the Supreme Court of Georgia and calling on Georgian authorities to refrain from any interference with the editorial policy of Rustavi 2. “We call on the Georgian authorities to refrain from using the judiciary system to achieve a politically expedient outcome and impede the independent editorial policy of Rustavi 2. We call on the European Commission and the European External Action Service (EEAS) to give a critical appraisal of the actions of the Georgian authorities and demand full compliance with the obligations the Georgian authorities have undertaken vis-à-vis the European Union,” the letter reads. The MEPs added that the European Parliament will continue to support the ongoing efforts of Georgia to build a modern, democratic state, based on the principles of rule of law and respect of fundamental political and human rights. The Rustavi 2 TV dispute started in August 2015 when its co-owner, Kibar Khalvashi, filed a lawsuit to reclaim his shares, saying he was illegally deprived of his company under the previous United National Movement (UNM) government. The case was handed to the Grand Chamber on November 21, 2016. On March 2, 2017, the Chamber, which consists of nine judges, ruled that 60 percent of Rustavi 2 TV shares were to be given to Khalvashi and the remaining 40 percent to Panorama LTD, a company owned by him. On March 3, the ECHR suspended enforcement of the March 2 verdict until March 8. On March 7, the ECHR prolonged the suspension over the case until the Strasburg Court can make a final decision over the dispute.

3

First Diplomatic Ski Competition Held in Gudauri

D

iplomats competed for the first time in a Diplomatic Ski Competition, launched in Georgia by the Ministry of Foreign Affairs and coorganized by the Mountain Resorts Development Agency. Foreign diplomats accredited to Georgia, members of the Government and officials of the Foreign Ministry took part in the competition which revealed winners in various categories. Barbara Köhler, spouse of the Swiss Ambassador to Georgia, and Peter Danis, Project Manager of the EU Delegation to Georgia, won nominations for female and male foreign diplomats. Irina Klimiashvili (Ministry of Foreign Affairs) and Shota Brelidze (Georgian National Tourism Administration) also won.

The Foreign Minister and Deputy Ministers awarded the winners with special cups. The Diplomatic Ski Competition aimed to promote Georgia as an important ski destination and to encourage trips to Georgia’s ski resorts during the spring season. The competition was supported by the Mountain Resorts Development Company Ltd under the Ministry of Economy and Sustainable Development, which provided the ski track and necessary equipment for the competition. On the sidelines of the Diplomatic Ski Competition in Gudauri, Georgian Foreign Minister Mikheil Janelidze, together with the heads of the diplomatic missions and the Mtskheta-Mtianeti Governor, opened the Gudauri Inn Hotel, which was built within the framework of the Host in Georgia State Program.


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BUSINESS

GEORGIA TODAY

MARCH 14 - 16, 2017

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.

How to Prevent the Tobacco Law from Going Up in Smoke? BY GIORGI MZHAVANADZE

A

fter a hike in excise tax on cigarettes in January 2017, the Parliament of Georgia is to introduce legislative changes to the existing tobacco control law (TCL) in March. Since its enactment in 2003, TCL has been modified several times. However, the recently proposed changes can be considered the most radical step towards a tobacco-free society in Georgia. The new draft law comprehensively covers production, packaging, marketing, advertising, selling and consumption of tobacco, and other activities of the tobacco businesses. The main changes can be defined as follows: 1. Consumption – total ban on smoking in public places (restaurants, café-bars, stadiums); 2. Advertising – total ban on all kinds of advertising (outdoor, printed); 3. Marketing activities – total ban on all kinds of marketing activities; 4. Product placement – total ban on visible placement of tobacco product at the point of sale; 5. Packaging – increasing size of health warning from 30% to 65%; 6. Other tobacco products – including e-cigarettes in tobacco products (applying same regulations to e-cigarettes); 7. Industry exclusion – not allowing public officials to meet with representatives of tobacco business; 8. Industry liability – imposing liabilities for dam-

age caused from production and consumption of tobacco product on tobacco business; 9. Philanthropy – total ban on tobacco businesses donating to various social and cultural purposes. Initiator of the new TCL, Guguli Magradze explains the necessity of the changes with some dramatic statistics: “Georgia takes second place by number of smokers in the world”. Apparently, this statement is an exaggeration, but it is not too far from reality – according to the World Health Organization, Georgia takes 6th place out of 129 countries by smoking prevalence among males aged >=15 years (57.7% in 2015). In addition, smoking prevalence among females in Georgia constituted 5.7% in the same year, while the prevalence of current tobacco use among adolescents aged 13-15 years was 16.5% and 7.8% for boys and girls correspondingly. There is a common misconception in Georgia that most if not all of the changes to the existing laws are obligatory under the new EU Association Agreement. It is true that the Agreement requires Georgia to approximate the laws, regulations and administrative provisions concerning the manufacture, presentation, sale, advertising and sponsorship of tobacco products. However, not all proposed changes to the TCL are obligatory under the EU Association Agreement and have the deadline 2018 and 2020. Some of them are just EU recommendations or are initiatives of the law authors. If we compare Georgian legislation to other countries in the region, similar TCLs were recently adopted in Turkey, Ukraine and Russia. Strict laws on tobacco control were implemented long ago in

most European, North and South American countries. No doubt, given the prevalence of smoking in the country, Georgia’s laws are in need of an update. However, the coin always has two sides. Here, I will try to impartially analyze both, the possible positive and the negative effects of the new TCL (not an easy task for a non-smoker). PROS OF TCL: 1. Removing a negative externality for non-smokers. Probably the most restrictive and ‘’uncomfortable’’ proposition for smokers is the proposed total ban on smoking in public places including cafébars, restaurants, stadiums and public transport (including private taxis). While this is good news for non-smokers, smokers might argue that the law is becoming increasingly restrictive, limiting their freedom. Although, when speaking about freedom, one should be careful: “Your Liberty to Swing Your Fist Ends Just Where My Nose Begins” (Oliver Wendell Holmes, Jr.). From an economic standpoint, smoking has a negative externality effect on the health of those who happen to be nearby (i.e. passive smokers). Thus, smokers’ freedom may violate the freedom of non-smokers to lead a healthy lifestyle. 2. Smokers cutting down or quitting smoking. Empirical evidence from several studies shows that bans on smoking in public places do not just protect non-smokers, they also create an environment that encourages smokers to cut down or quit smoking by reducing opportunities to smoke and by reinforcing non-smoking social norms. For instance, in New York City, a ban on smoking in bars and restaurants (and a large increase in the tax on cigarettes) which came into effect in 2003 is being credited with contributing to an 11% decline in the number of adult smokers from 2002 to 2003. This was one of the steepest short-term declines ever measured, according to surveys commissioned by the city. 3. Discouraging new smokers. Considering the experience of other countries, implementation of a total ban on advertising and marketing is the most problematic step for legislators due to strong lobbing from tobacco and advertising businesses. Empirical evidence shows that a fully comprehensive advertising ban covering all media and all forms of direct and indirect advertising reduces tobacco consumption and reduces the social desirability of smoking in particular, among young people. The World Bank optimistic estimation is that comprehensive bans can reduce tobacco consumption by around 7%. Research studies highlight that the most effective TCLs are based on a comprehensive approach, which includes the majority of the initiatives listed above, as well as gradual increases in the excise tax on cigarettes and increasing awareness about the negative effects of smoking on health. 4. Experience of neighboring countries. To eval-

uate the possible effect of proposed changes on smoking behavior in Georgia, we can use the experience of neighboring countries which implemented similar legislation in the recent past (Turkey in 2008, Ukraine in 2008-2010, Russia in 2013). The effect on smoking was similar in these countries - active consumption of tobacco products declined from 31.2% to 27.1% and from 25.6% to 21.8% in 2008-2012 in Turkey and Ukraine, respectively. According to the Russian Health and Social Development Ministry, active consumption of tobacco products decreased by 17% in two years after adoption of the law. Based on this information, the authors of the new TCL conclude that in the first year after implementation of the law, active consumption of tobacco in Georgia will be reduced by 2%, while in the next four years on average by 1% (assuming there will be no other changes, such as further increase of excise tax). This will not only decrease spending on cigarettes, but will also improve health outcomes and labor productivity of the population (outcome which in itself is difficult to quantify). CONS OF TCL: 1. Advertisement and marketing losses. The benefits which would bring a new law on tobacco control, will of course be accompanied by painful financial losses not ony for tobacco and related businesses, but also for retailers and for advertising and marketing companies. A total ban on advertising will harm the outdoor advertising companies, which estimate that “30-35% of revenues come from advertising tobacco products”. Just to give an idea about the total possible loss to this industry: the overall tobacco industry budget for advertising and marketing was above 60 million GEL in 2016. 2. Retail sector losses. As other types of tobacco advertising and promotion are restricted, package displays and adverts at the point of sale (POS) have become increasingly important in the marketing strategies of tobacco companies. Tobacco businesses pay retailers for prominent display space, including displays behind the counter facing customers, and counter top displays. The total retail universe for tobacco product is around 10,000 POS. Out of that total universe, selected retailers have contracts for placement, and prices vary from 1,000 GEL to several thousand GEL per year. The average payment is 6,000 GEL per contracted retailer for one Tobacco Company per year. Rough calculations show that this is around 35 million GEL in annual income for retailers from the tobacco industry just for product placement. 3. Loss of philanthropic contributions. Today, the tobacco industry is involved in various philanthropic activities, spending millions of GEL every year. For example, in 2016, it provided support to art institutions and theaters, including projects to alleviate poverty, as well as other social and public projects. Continued on page 7


BUSINESS

GEORGIA TODAY MARCH 14 - 16, 2017

5

Direct Foreign Investments in 2016 in Georgia: Preliminary Results Announced BY NINO GUGUNISHVILI

O

ver 1.6 billion USD (1.645 million) is the number for foreign direct investments (FDI) in Georgia in 2016, shown by preliminary results published by the National Statistics Office of Georgia (Geostat). This is said to be 22 percent higher than the preliminary results from 2015 and 5 percent higher than the adjusted results for 2015. Reinvestments also increased in 2016, amounting to 32 percent of total FDI. $330 million in FDI were allocated in the fourth quarter of 2016, which is 23

percent higher y/y and 1 percent higher compared to the adjusted results of the fourth quarter of 2015. “Increased investment flows over recent years are the result of the economic and structural reforms implemented by the Georgian government, which had a positive impact on investors,” said Nino Javakhadze, Deputy Minister of Economy and Sustainable Development, highlighting that the considerable progress achieved on the way of democratic reforms in Georgia had helped to improve the business environment in the country and the development of various economic sectors. "The ongoing economic and taxation system reforms, support to small and medium businesses, visa liber-

alization and the free trade agreement signing are all factors increasing Georgia’s investment potential,” Javakhadze said. Georgia also to improve its economic freedom and doing business indicators. The top sectors for FDI in Georgia for 2016 are transport and communications, at $645 million, the energy sector at $203 million, and the construction sector at $163 million. The top three countries with FDI in Georgia are Azerbaijan, with $578 million, followed by Turkey with $272 million and the UK with $121 million. The Netherlands and Czech Republic are in fourth and fifth place with $95 million and $93 million foreign direct investments in Georgia, respectively.

Spring Welcomes Oetinger onto the Georgian Market

E

veryone knows beer tastes better the warmer the weather…and beer lovers are always on the look-out for something new. Well, with the new spring season comes the new beer Oetinger.

Oetinger, a real Bavarian Beer, has been brewed since 1731 with strict observance of the German Beer Purity Law. History proves that Oetinger is the most consumed beer in Germany. And now it can be enjoyed by Georgian beerlovers, too.

A unique combination of light color malt, aromatic hops and soft water creates a clear, golden liquid, which, along with various flavors, offers higher-thanaverage bitterness. Enjoy!


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BUSINESS

GEORGIA TODAY

MARCH 14 - 16, 2017

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

Tourism Market Watch FOR GEORGIA TODAY BY KAKHABER SAMKURASHVILI

S

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

GEORGIA’S AIR CONNECTIVITY SET TO EXPAND SIGNIFICANTLY IN THE COMING MONTHS Wizzair announced flights from Kutaisi to London starting June 2017, while Georgian Airways will also be adding flights from Tbilisi to London, Prague, and Beirut in the near future. Notably, none of those markets are currently served via direct flights from Georgia. The low-cost airline, Fly Dubai, has announced its intention to launch seasonal flights from Batumi to Dubai in the summer of 2017. Intensified air transportation with the Middle East can be attributed to the growing number of visitors from that region. The number of international arrivals from the Middle East was up 55.7% y/y to over 88,000 in 2016.

NUMBER OF INTERNATIONAL ARRIVALS UP 2.1% Y/Y TO 0.37MN IN FEBRUARY 2017

BRANDED HOTEL SUPPLY IN GEORGIA SET TO INCREASE FURTHER IN THE COMING YEARS

NUMBER OF INTERNATIONAL ARRIVALS UP 10.5% Y/Y TO 0.76MN VISITORS IN JANUARY-FEBRUARY OF 2017

Alliance Group, a major player in the Georgian real estate and hospitality sectors, has announced plans to construct a Wyndham Garden hotel on Chavchavadze Avenue. The premium class project will be the group’s first in the capital city of Georgia, with most of its projects to date located in the Adjara Region. A 100-room Courtyard by Marriott is expected to start operating in the Alliance Palace in Batumi by 2018. Furthermore, Alliance Group plans to build a 4-star, 100-room Ramada Resort hotel by 2018 in the newly established winter resort Goderdzi, which currently only features about 100 hotel rooms in total. Several new hotels will be opened in Georgia under Golden Tulip management. An 80-room Golden Tulip hotel in Tbilisi is set to open in the summer of 2017. US$ 12mn was invested in the project, which will be Louvre Hotel Group’s second hotel in Georgia after Golden Tulip Borjomi started operating in 2016. Another hotel under Golden Tulip management is expected to open in Telavi, in the former Intourist hotel, by end-2017. Other Golden Tulip projects were announced for Tskaltubo and Borjomi in 2017-2018. In addition to the strong branded hotel development pipeline, a 40-room, 5-star, local luxury boutique hotel, Plaza de Liberte, is set to open in the summer of 2018 in Freedom Square, diversifying the Tbilisi boutique hotel offering.

The number of visitors increased from all major countries except for Turkey (-11.6% y/y), while the number of visitors from Azerbaijan was flat (+0.1% y/y). Russia and Ukraine posted double-digit growth rates, while Armenia (+18.2% y/y) was the single largest contributor to overall growth.

Of the top five source markets, there was growth from Armenia (+7.7% y/y), Russia (+31.4% y/y), and Ukraine (+10.6% y/y), while arrivals were down from Azerbaijan (-6.6% y/y) and Turkey (-21.0% y/y). Arrivals from the EU were up 18.5% y/y to over 12,000 visitors.

while the number of Israeli visitors during the same period is up 65.0% y/y to over 3,000 visitors. Arrivals from the EU were up 21.9% y/y in the first two months of 2017 with Germany (+35.4% y/y), Poland (+30.2% y/y), and UK (+26.2% y/y) driving the growth.

TOURIST CATEGORY CONTINUES TO DRIVE ARRIVAL GROWTH IN FEBRUARY 2017 The number of overnight visitors (‘tourist’ category) was up 16.4% y/y and accounted for 38.0% of total international arrivals. Same-day arrivals were down 9.1% y/y, while the number of transit visitors was up 7.6% y/y in February 2017. The number of tourist arrivals is up 24.3% y/y to 0.29mn in January-February of 2017, compared to 0.27mn in 2016. The number of same-day visitors is down 2.1% y/y, while the number of transit visitors is up 19.9% y/y in the first two months of 2017.

WHILE TOP 4 SOURCE MARKETS ACCOUNTED FOR 86.1% OF INTERNATIONAL ARRIVALS IN JANUARYFEBRUARY OF 2017, SECONDARY SOURCE MARKETS ALSO POSTED ROBUST PERFORMANCES The number of Iranian visitors is up almost 5.4x to over 15,000,

NUMBER OF HOTEL ROOMS IN TBILISI UP 19.5% Y/Y IN 2016, WITH BED CAPACITY UP 12.7% Y/Y Overall, 29.0% of Georgia’s room supply is located in Tbilisi, with international branded hotels comprising 22.3% of the Tbilisi room stock. Hotel turnover increased 9.4% y/y to US$ 220.4mn (13.7% y/y to GEL 520.1mn) and accounted for 41.6% of total HoReCa turnover in 2016.

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

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 MARCH 14 - 16, 2017

How to Prevent the Tobacco Law from Going Up in Smoke? Continued from page 4 Such activities might be banned after implementation of the new law. 4. Possible reduction in employment. Authors of TCL do not consider its possible negative impact on employment. Each of the tobacco importers cigarette companies employ between 100 to 150 people, while local producers employ several times more. According to the KMPG 2016 study, about 22,000 employees were involved in tobacco manufacturing and retail trade in 2014. The new TCL legislation will reduce production and sales, and part of this labor force will definitely be fired. 5. Losses of government budget revenue. From a fiscal perspective, the tobacco industry is an important accumulator of budget revenues. In 2016, according to the Ministry of Finance of Georgia, budget revenues from excise tax on cigarettes alone accounted to 548.6 million GEL, while VAT generated by the tobacco industry was about 200 million GEL. According to ministry calculations, increased excise tax will collect an additional 200 million GEL in 2017, resulting in up to one billion GEL from excise and VAT, not including income, profit and import taxes generated by the industry. Projected decline in tobacco consumption will proportionally reduce budget revenues from the tobacco industry by 2% in the first year after implementation of the new TCL, and by 1% in the following years (about 20 and 10 million GEL). Tax revenue losses from marketing agencies, advertising companies and retailers will be much higher. RECOMMENDATIONS: Despite possible significant financial losses, TCL in Georgia will benefit soci-

ety overall but only if implemented in the right way. Here are some ways to make the legislation more efficient and effective: • Improve the enforcement of existing TCL, which in some cases remains only on paper. For example, there are cases of sales of tobacco products to persons under 18, within a 50-meter radius of educational institutions. The sales of single cigarettes still take place, despite the fact that the existing law prohibits the practice. If the old law is not abided by, there is no reason to believe that a new law will be effective. • Modify and specify definitions. One of the most important paragraphs prohibits the selling of tobacco products under production cost. In the absence of an antidumping law and any legal mechanism of calculating production costs and losses due to “dumping”, this provision is subject to “creative interpretation” and may lead to inconsistent and questionable decisions by the court, such as the recent cases between Georgian manufactures and importers of tobacco. The same goes for point number 8 on the list of the proposed changes, namely industry liability. Liability measures are not specified in the new TCL. • Modifying or removing certain paragraphs. Enforcement of some provisions of the proposed law will be almost impossible, given Georgian reality. For instance, “Smoking is prohibited in any building, except individuals’ personal houses (where he or his family actually lives), specialized laboratories, and prisons”. Considering the proposed definition of a building (any construction with any kind of roof, floor, and walls, which covers no less than 50% of the area), it means that smoking will be prohibited for self-employed car-repair-

ers at their workplaces, in private garages and on the verandas of café-bars. Needless to say, a law that cannot be credibly enforced will lose its appeal to the general public. It may even undermine the credibility of the government. • Introduce pictorial health warnings instead of (or along with) increasing the size of health warnings. Canada, in 2001, was the first country in the world to introduce health warnings accompanied by pictures, occupying 50% of the front and the back of the packs. The Canadian Wave surveys, which were commissioned by Health Canada before and after health warnings increased in size from 25% to 50%, do not demonstrate a large impact on smoking behavior. However, data suggests that pictorial warnings have a greater impact on noticing anti-smoking information, thinking about the health risks of smoking and quitting decisions. • Philanthropic activities by tobacco companies should not be outlawed. This provision could be modified in the way that will prevent the use of these activities for the purposes of advertising tobacco products and companies. • Think of how to minimize losses of employment and revenues. Here, there is no good prescription to follow, but thinking of how to attract new industries to employ people released from the tobacco retail and production sector is an essential part of “selling” the new policy to smokers and non-smokers alike. A regulatory impact analysis could be performed to estimate the costs, the benefits and the possible ways to reduce the costs of the new legislation. The government might consider conducting proper RIA analysis to get a clear understanding about the possible consequences of the planned regulatory changes.

7


8

BUSINESS

GEORGIA TODAY

MARCH 14 - 16, 2017

Georgia to Start Energy Efficiency Projects in 2022

Kapersky Lab Georgia

Georgian officials meeting with the European Commission delegation. Source: Ministry of Economy of Georgia

BY NINO GUGUNISHVILI

U

nder a European Commission initiative, Georgia is to launch energy efficiency projects in the construction sector by 2022, both for public and for private buildings. The topic was discussed during a meeting last week between Ministry of Economy and Sustainable Development officials and the EU delegation headed by Katarina Mathernova, Deputy Director General of the European Commission Directorate General, Neighborhood and Enlargement Negotiations. Georgia had already signed an energy community protocol and taken responsibility to be aligned to

the European directives on energy efficiency for construction, in accordance with the directive’s standards. “Implementation of energy efficiency projects will help to lower energy and gas consumption and will consequently decrease usage costs,” said Irma Kavtaradze, Deputy Minister of Economy and Sustainable Development of Georgia, going on to note the importance of introducing energy efficiency in industry and production areas, as well as transport, “in order to assist the economic and energy security of Georgia, while lowering the expenses for our citizens”. “Georgia will be assisted by organizations of the corresponding profile in the project, who are ready to work with the Georgian side to provide support in logistical and technical areas,” Mathernova said at last week’s meeting.

Kaspersky Lab Presents Digital World Threats BY NINO GUGUNISHVILI

A

presentation for media on the modern threats the digital world faces today was held at the Courtyard Marriott Hotel, Tbilisi, last week, lead by Sergey Novikov, Deputy Director, Global Research and Security Analysis Team at Kaspersky Lab. The findings presented by the Kaspersky Lab representative identified the portrait of the modern internet user today, showing that in every family around the world, on average there are at least six devices connected to the internet. 46 percent of users spend from 20 to 50 hours a week at the computer at home, while 87 percent of internet users keep important information on their devices- passwords, financial details and documents. Novikov named email usage, internet shopping, social networks, online banking and photo or video viewing among the top five activities online. “Paradoxically, however, 40 percent of users do not protect their devices,” he said. “43 percent of users do not protect their smart phones and 79 percent of users assume they are uninteresting to cyber attackers,” Novikov said. The statistics he displayed illustrated that, compared to 1994, when a new virus was found every hour, in 2016, the figures amounted to 310,000 viruses or malware programs found per day. “Today, everyone from large corporations to end users at home have equal chances to become victims of cyber attackers on any device, smart phone, laptop, or desktop computer,” Novikov said. Looking at Georgia specifically, Kaspersky Lab, an international cyber security company founded in 1997 to offer security solutions to protect consumers globally, discovered that every seventh user in the country encountered cyber threats online in 2016, from hacker attacks, fraud, phishing websites, to spam and more, while every fourth Georgian internet user was exposed to “local” threats from USB devices. The data was obtained by Kaspersky Lab through analysis of the internal statistics for 2016, gained through the cloud infrastructure Kaspersky Security Network. The research claims that, on average, Georgian users encounter internet threats an average of eight times a year. They are said to meet with malware programs most often- an average of 42 times a year. Every such activity brings the potential risk of havind personal information, bank account details

46 percent of users spend from 20 to 50 hours a week at the computer at home

In 2016, 310,000 viruses or malware programs were found per day or photo archives stored on a computer stolen through email and social networks. Trojan-Banker Android OS.Spveng q, which steals user’s money through mobile devices, is among the top threats in Georgia. The study conducted by the Kaspersky Security Network illustrates that attacks on mobile devices are on the rise globally, reaching 40 million users in 2016. At the same time, more and more mobile banking applications are at risk. It’s was noted during the presentation that 82 percent of people in the world make financial operations online, and that an average user loses $507 as a result of one cyber attack aimed at stealing money. Corporate businesses are exposed to cyber threats as much as individual users, through espionage, theft of confidential information, DDoS attacks, and mobile threats. Malware, spam, phishing and viruses are usually spread through email, social networks and USB devices, the report says, and internet users should pay attention to the browsers and applications they most commonly exploit- Adobe Reader, Adobe Flash Player, Java, and Office. Children are among the most vulnerable groups of internet users nowadays. While generally being addicted to the internet, they often become victims of cyber bulling, and are exposed to adult content online. Novikov’s presentation highlighted that internet communication tools, social networks and chats are most popular (85 percent) among Georgian children, followed by audio-video content downloads. E-commerce is surprisingly also among the top internet activities for youth in Georgia. The alarming tendency of child cyber bulling and fraud were noted as the most problematic issues that need to be addressed. In order to minimize safety risks, several recommendations were given: • Users should utilize complex tools of internet security- using only licensed products, which can guarantee the reduction of threats, viruses and malware programs. • Attention should be paid to any spam proposals. • Sharing of personal information on social networks should be avoided. • Passwords should be different for all user accounts and changed regularly. The research presented by Novikov was conducted by a B2B International Kaspersky Lab in August 2016, with 12546 internet users from 21 countries worldwide participating in the survey.


BUSINESS

GEORGIA TODAY MARCH 14 - 16, 2017

9

Gazprom Gives Russians the Lowest Tariffs in 14 Years BY DIMITRI DOLABERIDZE

T

he Federal Antimonopoly Service of Russia (FAS) has decided that, from July, household gas is to rise in price by 3.9 percent. It sounds a lot, but if you "divide" this throughout the whole year, it turns out that the growth of the tariff will be lower - 1.8 percent. Whatever the grannies say in their entrance-hall gossip sessions, Russians have not seen such a low price growth in at least the last 14 years. According to the Gazprom data, the last time wholesale prices for gas were so raised was in 2002 - by 1.6 percent. In December, monopoly supplier came out with predictions for the next few years: “tariffs will grow by 3-3.5 percent per year,” Andrei Kruglov, Gazprom's Deputy Chairman of the Board, told journalists. The company's recent calculations confirm this and the documents they submitted are already being approved by the Ministry of Economic Development. In 2018, the cost of "blue fuel" will increase by 4 percent, and in 2019 - by 3.3 percent. For industrial consumers, including large gas thermal power plants, the increase in the cost of gas will be identical, says Gazprom. That said, the calculations prescribed by Gazprom are still too early to be sure: by law, the FAS and its territorial associations are engaged in establishing tariffs for housing and communal services. Therefore, the size of the value must be

coordinated with them accordingly. The service itself, however, has always been on the consumer’s side, guided by the rule "inflation minus". In all likelihood, the growth of tariffs will be lower or equal to the proposal of Gazprom. The growth of the wholesale price for gas is planned to be slightly higher - by 3.4 percent in 2018 and by 3.1 percent in 2019. If Gazprom’s proposals are approved, gas will rise in price more slowly than other goods and services - according to

forecasts of the Ministry of Economic Development of the Russian Federation, the future will see inflation drops of 4.5 percent (2018 ) and 4 percent (2019). Other basic utilities, such as heating, water supply and electricity, will grow at the level of inflation - in 2017 by 4.9 percent, in 2018 - by 4.4 percent, and in 2019 - by 4.1 percent. “Last autumn, Gazprom had a long polemic with the government and demanded a tariff increase above infla-

tion. The fact that the company itself is offering a tariff lower than inflation is a victory for the FAS in the hardware battle with the largest of the resource holders,” notes director of the Energy Development Fund, Sergey Pikin. It is unlikely that such a generous offer can be associated with difficult times in the economy - they have always been difficult. Since the middle of 2015, when it began functioning as a tariff regulator, the FAS has been struggling with the issue of tariffs, “as such the victory over Gazprom was, of course, was very important [for them],” Pikin said. “In Europe, as in Russia, there has been a tendency to lower gas prices,” notes leading analyst at Gas Infrastructure Europe, Bradley Barron. “However, the reasons for this are different - the fall on gas prices following oil [gas prices react to oil quotas with a delay of 6-9 months] reduces the cost of gas for the population by 10-20 percent”. In future, though, prices are still expected to grow: the share of imports is growing, as are oil prices, so it must be expected that over time, gas prices for EU residents will go up. “This happens not of importers’ will, or that of the primary gas suppliers; it happens because of the EU authorities about 60 percent of the price of gas is taxed,” Barron says. Russia, however, will unlikely face such growth - the Federal Antimonopoly Service (FAS) looks at tariffs more strictly than the more flexible Federal Tariff Service (FTS). “It is hardly worth expecting that not only in the next three years, but in general in the foreseeable future, we will return to the same furious rise in gas prices,” Pikin concludes.

Ici Paris Offers New Fragrances of Zadig & Voltaire BY THEA MORRISON

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enowned perfumery and cosmetic chain Ici Paris has introduced the new perfumes of Zadig & Voltaire from France - THIS IS HIM and THIS IS HER. The earliest edition was created in 2009 and the latest in 2016. The new fragrances express an attitude of restlessness, rebelliousness and freedom. Working with perfume maker Beauté Prestige International, THIS IS HIM and THIS IS HER are the result of bottling the brand’s DNA. With elegant notes of sandalwood (Zadig & Voltaire’s signature) in both fragrances, the Zadig & Voltaire fragrances represent how being rock means being yourself. “I can’t image life without fragrance. I like when it leaves behind a trail, asserts a personality. It’s an alchemy between you and someone else,” says Zadig & Voltaire founder, Thierry Gillier. THIS IS HER! is a woody, heady floral scent created by Sidonie Lancesseur and Michel Almairac. With notes of chestnut

cream and benzoin resin adding warmth, the Arabian jasmine, brightened with pink peppercorn makes the fragrance both woody and floral. THIS IS HIM! is also woody, but has a more oriental element, with spicy incense, grapefruit and black pepper. Made by Nathalie Lorson and Aurélien Guichard, the fragrance is for the leather-hard spirit, and is half-incense, half-vanilla. Both soft and strong, these fragrances are for the confident, unfettered modern hero. Visually, the graphic design of the two bottles reflects a revolution of love. Harmonious in nature, the graphic attitude of the black and white contrasting bottles are a visual representation of the essence of the fragrances. Ici Paris marketing and PR Department Head Khatia Shamugia said at the Georgia launch that customers can buy the new perfume in all branches of Ici Paris, available as a 30, 50 and 100 ml Eau de Parfum and with prices from GEL 140 to GEL 250. “Zadig & Voltaire is a French brand which has not yet been represented in Georgia. From now on the perfumes will be available only in one perfumery chain in Georgia - Ici Paris,” Shamugia said.

Welcome to Indian Punjabi Restaurant Sanjha Chulha 1 Mobile +995 596 56 13 13 Phone +995-322-95-96-14 Skype: SANJHA CHULHA Facebook: sanjha chulha indian restaurant mail: order@sanjhachulha.ge Website: Sanjhachulha.ge Agmashenebeli Avenue 130, Tbilisi 0112 Georgia Delivery service are available


10

BUSINESS

GEORGIA TODAY

MARCH 14 - 16, 2017

Carrots in the Spotlight TBC Bank’s ‘Startuper’

Promotes Entrepreneurial Spirit

A

ccording to the Retail FPI, by the end of February food prices had decreased slightly by 0.01% m/m (that is compared to end of January), and by 2.6% y/y (that is compared to February 2016). Although overall FPI did not change very much either m/m or y/y, some foods experienced quite notable changes in prices. Cucumber, carrot, and tangerine prices increased by 25.7%, 9.8% and 6.5%, respectively, whereas eggplant, vegetable oil and tomato prices decreased by 41.7%, 5.8% and 5.0%, respectively.

FLUCTUATIONS IN CARROT PRICES In the last three years, carrot prices have presented quite an interesting trend. In 2015, they were relatively high, then decreased by 40% in 2016, and then increased again by almost 30% in 2017. Such fluctuations (when price increases and decreases consecutively) might be explained by a concept called the cobweb theory, an economic model which explains periodic fluctuations in prices in markets, where decisions about production amounts are made before prices are observed. Agricultural markets fall into this c a t e g o r y, because there is a time lag between planting and harvest-

ing. According to this theory, producers' expectations about prices are assumed to be based on their observations of previous prices. The final outcome of the model might be either convergence to the stable equilibrium price and quantity, or divergence leading to even higher fluctuations in the future. If this theory actually holds in the case of carrots, it means that carrot producers who observed high prices in 2015, decided to produce more in 2016 with an expectation of high prices and thus high profits the following year. However, increased supply in 2016 caused a decrease in prices, which demotivated producers and led to decreased supply in 2017. A shortage of carrots in 2017 led to the high prices again. This trend is exactly in line with the cobweb model. The main drawback of this model is that it assumes that producers are very shortsighted. If this is indeed the case, we hope that Georgian carrot producers learn from their mistakes, and engage in more long-term planning in the future.

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BY NINO GUGUNISHVILI

T

BC Bank recently launched Startuper, a new project to support startups and promote the idea of entrepreneurship and doing business in Georgia. Alongside financial support, startups participating in the project will receive additional services helping them to develop, acquire in-depth knowledge and succeed. GEORGIA TODAY met with Nika Kurdiani, Deputy CEO, TBC Bank, to learn more.

WHY DID TBC BANK DECIDE TO SUPPORT STARTUPS? At TBC Bank, we very well realize that, as a financial institution, we are one of the key contributors to the country’s economy. We employ thousands of people, have thousands of clients, and more than 80,000 business clients that we serve. In other words, we’re a very big corporate player and that’s what I would like to underline: when you’re a big corporate player you have to understand that corporate social responsibility is crucial; that your behavior and the decisions you make affect society and the country as a whole. We’ve been doing a lot in the corporate social responsibility dimension for several years now, be it arts and culture, or rugby, for example. The same goes for the business support programs that TBC Bank started in 2013 together with organizations like IFC and ADB. We’ve been serving large corporations, small and medium size and micro businesses. Now we see that supporting startups is a necessary extension. They need support from an early stage. It shouldn’t only be through banking products, but also through various non-financial services- from trainings, consulting, and third party solutions to marketing and PR support.

TELL US ABOUT THE STARTUPER PROGRAM We divide start-ups into two. One is an idea at the so-called incubation stage, when an individual has an idea, makes a prototype and finds the first client, gets enough money from the first client to make another prototype and, with his own capital invested, starts production. The second stage begins with the sales: if you’ve been able to sell your product for the first three months and you’ve already established that cycle, the risk that you won’t be selling it for

the fourth one becomes lower and that’s when we offer our assistance by providing loans. We will not offer loans at the idea level, but as soon as the startup gets going, we’re there. The program Startuper has different components: operational products like business cards, for example, which are available for clients even at the idea level. I would divide the program into three, actually: non-loan products for all types of startups, loans that we offer after the initial three-month operation period and onwards, and non-financial support like trainings, consulting and more. We’ve put it all together under the program umbrella concept and we’ll be adding even more components to it as it develops.

WHAT ARE THE NONFINANCIAL COMPONENTS THE PROGRAM ALREADY HAS? At this stage, apart from financial products within the program, we offer startupers non-financial components as well: • Trainings in marketing, finance and developing startups • Networking and educational events • One-to-one consultations for startupers • Startuper web-catalogue • Media support We also plan to have various competitions on different topics related to the startup ecosystem and are currently working on creating a partner network of companies who will support startups with discounts or special propositions. In other words, our new Startuper project is to unite many different activities and offers that startupers will benefit from. That’s the main statement. Startuper is a place where you can find numerous products, offers and services that you can use for the development of your startup.

WHAT ABOUT THE FINANCIAL SUPPORT? The Startup loan is for legal entities and entrepreneurs who have a minimum three years’ experience in business management. At the first stage, we intend to have a business category covering startup businesses that operate in the manufacture and service spheres. It is important to mention as well that a company must already have a history of sales for a minimum of three months, which means a startup has to already be serving clients and have sales. The minimum loan for startups is 20,000 GEL, however, lower loans can also be considered. The maximum amount for

loans is 100,000 GEL. Startupers can fill in the application and present their business plans on www.startaperi.ge

WHAT ARE THE LONGTERM RESULTS YOU EXPECT FROM THE PROJECT? There are two things to be considered. One is the general corporate purpose, and the other is a concrete business goal. In terms of business, we have an extremely strong market presence, with every sixth newly established company opening its account in TBC Bank, so we don’t have any issues in that regard. Our purpose is to increase awareness of startupers in general in our country. We want being a Startuper to become trendy. In a way, we want it to be a network of people sharing their new ideas on a daily basis, getting to know each other and connecting. If, with our efforts, there will be more startups and new initiatives created in our economy, at the end our part of corporate social responsibility will be fulfilled. Of course, that’s combined with a long-term business goal and expectations, too. Why are we doing it? Because we’re investing in our future customers.

WHAT IS THE INTERACTION OF STATE AND PRIVATE SECTORS IN SMALL AND MEDIUM BUSINESS DEVELOPMENT? The State is doing quite a lot in that direction- in the last two years alone we’ve seen the launch of a lot of programs: Startup Georgia, Produce in Georgia, the Innovation and Technology Agency and Techno Park projects, as well as programs for agriculture development. All resulted in getting more individuals involved in promoting the concept of startups, be it hackathons or startup weeks, and that’s encouraging. We at TBC Bank got inspiration from that; when we saw how active the State is. In November last year, the Prime Minister presented a startup friendly program in Techno Park, and TBC Bank was one of its first participants. When the State supports the promotion of startups and more new initiatives, the private sector is of course there to assist its development.

HOW WILL THE STARTUPER PROGRAM BE LINKED WITH THE TBC BUSINESS AWARDS? There will be a startuper nomination added and, of course, all of it will be integrated in the wider Business Awards scheme. Check out www.startuperi.ge to find out more.


POLITICS

GEORGIA TODAY MARCH 14 - 16, 2017

Fukuyama on Putin, Misha & Bidzina INTERVIEW BY VAZHA TAVBERIDZE

A

t the Leadership Academy for Development (LAD) forum last week, organized by the Economic Policy Research Center and Stanford University, Panorama TV show and GEORGIA TODAY seized the chance to have a quick chat with world famous political science expert and analyst, Francis Fukuyama. The man who so famously predicted (wrongly, as it turned out) the end of history and proclaimed the eternal reign of the liberal democracy, was more than happy to discuss the concept that seems to have dealt a severe blow to liberal democracies worldwide – Populism.

SO, POPULISM. AN AMBIGUOUS CONCEPT, WOULDN’T YOU AGREE? WHAT’S, FOR EXAMPLE, THE BLURRY LINE BETWEEN POPULISM AND VOX POPULI? There is really no established definition of populism, that much is true. But I think the kind of movements that we’re seeing today in Europe and the United States is based on a very sharp and angry rejection of the political elite and elite policies, particularly related to globalization. It all comes together in a package where you get a single charismatic leader that promises these angry people some solutions that on the surface might be appealing but in the long run won’t help them. And all this because said leader has no intention or competence to put forward a working solution, a well thought-through policy. That’s how populism works today.

LET’S DO SOME GEORGIAN, REAL LIFE CASE ANALYSIS: AMONG OUR SCORE OF OUTSPOKEN MULTIMILLIONAIRES, WE HAVE LEVAN VASADZE, WHO IS VERY MUCH AGAINST LIBERAL DEMOCRACY AND A STAUNCH SUPPORTER OF REINSTATING THE MONARCHY. THE POLLS AT HIS TV APPEARANCE INDICATED

86 % SUPPORT OF HIS VIEWS FROM THE VIEWER. IS THAT MANIPULATION OF PEOPLE’S BELIEFS OR WHAT THE BULK OF GEORGIANS REALLY WANT? I cannot directly comment on this particular gentleman, because I don’t know him. But one thing that’s happening is that there is a class divide – The elites and their voters come out of cities; they are younger, well-educated and tend to be cosmopolitan, while the base support for the populist leaders tends to be older people, less-educated, living in suburban areas. So, in a sense, some of the conspiracy theories and seemingly crazy ideas, like reinstating the monarchy, are things that appeal to people with less education. And the political entrepreneurs exploit it to attract attention and support. However, these crazy ideas are usually built on some grievance that is very real – poverty and lack of access to existing institutions in society. So, I think it’s very important for the policy makers to pay attention to these underlying issues and to try and do something about them rather than trying to go after the symptoms.

IT’S ALWAYS INTERESTING TO HEAR THE VIEWS OF PROMINENT SCHOLARS ON THE GREAT STATESMEN

PUBLISHER & GM

George Sharashidze COMMERCIAL DEPARTMENT

Commercial Director: Iva Merabishvili Marketing Manager: Mariam Giorgadze

GEORGIA TODAY

EDITORIAL DEPARTMENT:

Editor-In-Chief: Katie Ruth Davies

OF MODERNITY. SO, TO ADJUST OUR QUESTION TO GEORGIAN REALITY, WHAT’S YOUR OPINION OF: VLADIMIR PUTIN, MIKHEIL SAAKASHVILI, AND BIDZINA IVANISHVILI? You know, I’m not sure I’d call any of them a statesman. Putin started out as a KGB agent and he is still a KGB agent. He’s nostalgic of the old Soviet Union and is doing everything in his power to recreate it in Russia. I think that Saakashvili is a much more interesting person, because he did some really good things. I think that the state modernization that he undertook after the Rose revolution was remarkably successful. His problem was power- the power went to his head and he misused it and that resulted in this big reaction that drove him out of said power. Ivanishvili doesn’t even pretend to be a politician, so it’s a little bit harder to think of him as a statesman in any way. It’s not a healthy system when you have somebody who is manipulating the political system from behind the scenes, because democracy is supposed to be about accountability, which means that I run for the office, I become Prime Minister or the President, I make decisions, and then, if people don’t like me, they can vote me out of power next time. I think that’s not the case in Georgia and that’s not a good system.

Journalists: Tony Hanmer, Zaza Jgarkava, Maka Bibilashvili, Dimitri Dolaberidze, Maka Lomadze, Tim Ogden, Joseph Larsen, Vazha Tavberidze, Nugzar B. Ruhadze, Nino Gugunishvili, Thea Morrison

11

Apartment Buildings to Be Built for Disabled in Turkmenistan BY DIMITRI DOLABERIDZE

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n order to further improve the social conditions of Turkmenistan's population, the government is to provide housing for disabled people and other persons in need of social protection. President Gurbanguly Berdymukhamedov signed a resolution, according to which the administrations of regions and the capital will conclude contracts with local construction enterprises to design and improve the adjoining territory for one fourstorey multi-apartment residential building for the disabled and persons in need of social protection. Apartments for these categories of the population will be free of charge and will be commissioned in December 2017. In Balkanabat, the implementation of the social project for the construction of free housing for the disabled has already begun with the construction of a house designed for 48 one- and two-room apartments specially adapted for people with disabilities. The project provides ramps, handrails, large-size doorways, etc. Along with this, the apartments are expected to fully meet the high standards set today for modern housing and to offer a comfortable layout, bright rooms with high ceilings, and spacious kitchens. The new residential building in Balkanabat is located in one of the largest residential areas of the administrative center of the Velayat, the 13th microdis-

Photographer: Irakli Dolidze Layout: Misha Mchedlishvili Webmaster: Sergey Gevenov Circulation Managers: David Kerdikashvili, David Djandjgava

trict, surrounded by the necessary social infrastructure - a shopping center, kindergartens, and a school. “Four-storey apartment buildings equipped with everything necessary for people with disabilities will be built in Ashgabat and in all regions of the country by local construction companies,” said President Berdymukhamedov. “Apartments in these houses will be provided free of charge to the disabled and other categories of the population in need of social support. We will continue this work in the future”. Turkmenistan has seen a housing construction boom in recent years- in both cities and rural areas, with thousands of families becoming flat-owners.

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Issue #928 Business  

March 14 - 16, 2017

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