Page 1 georgiatoday

Issue ssue no: 802/6

• DECEMBER 15 - 17, 2015


In this week’s issue...

Let the TV Ratings Race Begin! FOCUS

Tbilisi to Have Environmentally Friendly and Adapted Buses in 2016 PAGE 2

Mass Family Gatherings in Georgia: Tradition of Waste or a Form of Insurance? ISET PAGE 4

Revenue Service Introduces Single Treasury Code for Tax Payment PAGE 8

ON PROGRESS Full steam ahead for television ratings, environmental concerns PAGE and the Silk Road Railway


Ia Antadze, Founder and Chairwoman of the Civic Development Institute

UNDP: Address Challenges and Seize Opportunities of the New World of Work BY KATIE RUTH DAVIES


ccording to the 2015 Human Development Report, two billion people were helped out of low human development in the last 25 years. Now, say the UNDP, focus on work is needed to galvanize progress. Fast technological progress, deepening globalization, aging societies and environmental challenges are rapidly transforming what work means today and how it is performed. This new world of work presents great opportunities for some, but also profound challenges for others. Continued on page 13


Galt & Taggart and PASHA Bank Underwrite GWP’s 6,000,000 GEL Bond Issue PAGE 10

Language and Sustainability: Goethe Institute Concludes another Successful Project PAGE 11

World Presentation of Porsche Carrera 911 Held in Tbilisi PAGE 14 Prepared for Georgia Today Business by

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DECEMBER 15 - 17, 2015

First Chinese Silk Road Cargo Train Arrives in Georgia

The EBRD has allocated EUR 30 million for the purchase of 150 CNG (compressed natural gas) buses


Tbilisi to Have Environmentally Friendly and Adapted Buses in 2016 BY ANA AKHALAIA


ne hundred and fifty environmentally friendly buses are to be added to the Tbilisi bus fleet next year, according to the statement of Tbilisi Mayor Davit Narmania at the presentation of the Sustainable Energy Action Plan (SEAP) that Tbilisi City Hall is actively working on in order to decrease pollution and harmful gases in the city. “We already finished negotiations with

the European Bank for Reconstruction and Development (EBRD), which allocated EUR 30 million for the purchase of CNG (compressed natural gas) buses. 150 buses will be purchased. A tender will be announced and prices will be determined,” said the Mayor. City Hall has also prepared a threeyear strategy on adaptation of the city for disabled people, a project already under way, which has the aim of fully removing barriers for people with disabilities. One step of this is a number of public transport means being replaced with new adapted ones from 2016.

The Economic Affairs Department of Tbilisi City Hall developed the Sustainable Energy Action Plan with non-governmental organization Remission. The plan includes projects for the development of transportation, buildings, municipal infrastructure and green spaces. SEAP was developed in the framework of the Covenant of Mayors Program. Tbilisi joined the Covenant of Mayors in 2010. It aims to reduce CO2 emissions by at least 20% by 2020. According to Covenant of Mayors, SEAP monitoring should be carried out every two years.


he Georgian railway has received its first cargo train from China and has officially launched the Silk Road Project. The project will connect Europe, Eastern Asia, India, Central Asia and the Middle East. The train departed from the Lianyungang terminal in China’s eastern area several days ago. It has travelled through Kazakhstan, Azerbaijan and, after passing through Georgia, will soon arrive in Turkey. Georgian Prime Minister Irakli Garibashvili, together with the diplomatic corps and Georgian high officials, welcomed the first Silk Railway train to enter Georgia. “Today, we start to contribute to international wellbeing. The Silk Road has been a significant ground route connecting Europe and Asia,” PM Garibashvili stated, highlighting that the Silk Road project will bring more investments and stability for Georgia. “We started working on the issue two years ago. I presented the initiative at the UN General Assembly on Georgia’s involvement in the project. We held the

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Silk Road Forum which was attended by 1000 guests from 32 countries. 500 representatives arrived from China. It was a successful beginning,” he said. According to the PM, the Silk Road will be the cheapest and shortest road between Asia and Europe. “We can receive goods in 8-10 days from China and send them to Europe in 3-5 days,” Garibashvili said, adding, “Our country is a part of the scale. It allows us additional chances to become a participant of world economic developments. The Silk Road is an impetus in terms of deepening political, cultural and economic relations,” he concluded. Garibashvili claims his government will make an effort to turn the country into a regional hub and make it attractive for investors. “I would like to remark that our relations with China have deepened in recent years. I paid a visit to China where we finally decided to launch negotiations on free trade and some days ago the Minister of Economy of Georgia signed a memorandum to start those negotiations,” Garibashvili stated. Tbilisi Central Station will receive another cargo train from China before the end of the year and from 2016, as part of the project, thousands of cargo trains will be passing through Georgia.




DECEMBER 15 - 17, 2015


The ISET Policy Institute (ISET-PI, 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.

Mass Family Gatherings in Georgia: Tradition of Waste or a Form of Insurance? BY NINO DOGHONADZE


here is a Georgian joke that goes: “Relatives are the people you see whenever their number changes”. In other words, relatives all tend to gather when any of them gets married, gives birth or dies. As a result, we frequently observe Georgians organ-

be thought of as a form of showing off. What also makes these events akin to conspicuous consumption is the fact that this tradition is increasingly losing favor with the wealthier and better educated Georgians.

IS IT SOMETHING ELSE? Despite many similarities there is one feature that clearly distinguishes these Georgian mass gatherings from typical cases of conspicuous consumption: the

wedding, being prepared to reciprocate in case of need. Given the long-term nature of the resulting financial commitment, it is not surprising that wedding and funeral contributions are enshrined in the Georgian tradition. One might even perceive such payments or gifts as a membership “fee” for being a part of a “club” brought together by kinship or social bonds. However, I would argue that the emergence of this type of club behavior is driven by the insurance motive: you help others when they are in need and thus expect to get help when it is needed for you. As I found out, similar communitybased insurance schemes in the form of funeral contributions can also be found in the likes of Ghana, Ethiopia, Tanzania and other developing countries.


izing mass gatherings to either celebrate or mourn numerical “changes” in their families. While there is a recent trend among the wealthier and better educated people to switch to more intimate, smaller events, the poorer rural people continue to arrange Georgian supras of monumental proportions.

A FORM OF CONSPICUOUS CONSUMPTION? When attending Professor Omer Moav’s lecture on Economic Growth which classified large Indian weddings as a form of “conspicuous consumption”, I started wondering whether the Georgian tradition of mass family events can also be considered in the same manner. Moav defined conspicuous consumption as consumption of goods which serves to show off one’s economic prowess without providing any positive economic benefits. He further argued, based on economics analysis, that it is the poor who are more likely to engage in acts of conspicuous consumption in order to pretend that they are not who they are (poor). Prima facie the grand Georgian supras seem to fit this definition: the poor who organize mass funerals could have invested their scarce resources in much more profitable ways, for instance by investing in own health or education for their children. Organizing funeral feasts for hundreds of guests by the poor could

fact that guests, including relatives, neighbors and other acquaintances are expected to make a sizeable financial contribution. This kind of arrangement makes these events more like an insurance scheme, rather than “bling-bling” consumption. A Georgian family would normally keep a detailed record of guest contributions at an event such as a funeral or a

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Insurance is a form of risk management that is primarily used to hedge against the risk of a contingent, uncertain loss. People crave for safety when facing uncertainty, and death is a rather uncertain event (at least as far as timing is concerned). The ancient Romans are said to have been the first civilization to use insurance to cover the costs of funerals. Today, people who do not want to overburden their offspring with funeral expenses may take life insurance. A community-based insurance through the tradition of funeral contributions may be a handy alternative. Some categories of people are less

likely to purchase a formal life insurance. These are: the poor who cannot afford an insurance product; people belonging to strong and supportive family units; people who do not place trust in financial institutions and would rather participate in a community-based insurance arrangement with people they trust (relatives, neighbors, etc.), or people who have superstitions associated with death and are reluctant to consider any associated arrangements in advance. Weddings also pose a financial challenge for families and are difficult to plan sufficiently in advance. As financial markets are yet to come up with a wedding insurance (at least in Georgia), poor families have the choice of having a large, community-supported wedding; a modest, affordable wedding; or no wedding at all. Economic analysis has it that the poor are more likely to opt for funerals and weddings financed by community-based insurance schemes and will therefore tend to arrange mass social gathering. Similarly, the more educated families

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(who have fewer superstitions about death), and higher-income individuals, are more likely to switch to market-based insurance (or save).

FROM FUNERAL CONTRIBUTIONS TO LIFE INSURANCE There is a lively debate within Georgia whether the tradition of “qelekhi” – the feeding of guests before, during or after a funeral – should be retained or not. For the older generations, this tradition is meant to show respect to the deceased. At the same time, many younger people may consider such meals and associated drinking to be a direct insult to the mourners. For many, compassion from hundreds of people is not a necessary condition for the mourning of a loved one. Moral considerations about “qelekhi” aside, funerals would have been far cheaper without this tradition. In any event, more modest qelekhi attended by a smaller number of guests, would help cut the costs incurred by the relatives of the deceased. The tradition of qelekhi is more likely to survive in large, tightly knit, poor communities where it plays a more important insurance role and where defection (refusal to contribute) is more costly to the individuals involved. In wealthier and more educated urban circles, families are more likely to free themselves from the need to accept or make funeral contributions. By relinquishing this communal bond, such families undertake to finance own family contingencies with their savings or with the help of insurance. As Georgians grow wealthier over time, they will be more likely to switch from informal community-based insurance to life insurance products offered by insurance companies. This has been the trend elsewhere in the world, and to some extent may be already happening in Georgia, judging by the share of life insurance in total insurance. Source: National Bank of Georgia



Valeri Kvaratskhelia, Deputy Minister of Health, announcing plans to increase the number of hospitals in regions of Georgia



eputy Minister of Health, Valeri Kvaratskhelia, has announced that four new hospitals are being built in different regions of Georgia. A multifunctional university hospital in Zugdidi region, Western Georgia, will be equipped with modern technologies and 220 beds. After the conclusion of its construction in 2016, the hospital will provide medical assistance for the residents of the surrounding villages as well as Abkhazia. Classrooms and a library will also be built for students and residents on the hospital territory. Additionally, there will be sports facilities, parking lots, internal roads, parks and ponds and a hostel for residents, families and relatives of patients. The new hospital in Dedoplistskaro, Eastern Georgia, with 25 beds and modern technology, will start functioning in spring 2016 and is set to provide medical assistance for 16 villages with more than 30,000 residents. A hospital with 10 beds and modern technologies is being built in Lentekhi,

Four New Hospitals to Open in Georgia by Close of 2016 north-west Georgia and will open in autumn, 2016, and a further hospital, with 15 beds, will be opened next summer in Kharagauli. According to Deputy Minister Kvaratskhelia, a 20-bed Children’s National Center for Tuberculosis and Lung Diseases is also being planned, which

The Ministry of Economy is working on a bill regarding the coexistence of healthcare facilities with private and public agencies

should be completed by the end of August 2016. Furthermore, the construction of the administrative building for the National Center of Disease Control and Public Health is scheduled. The total cost of the projects is around 60 million GEL. The Deputy Minister also discussed the on-going tender on three large hospitals in Tbilisi: the Republican Hospital, Tbilisi Cancer Center and the Children’s Infectious Diseases Hospital. The winning consortium will be required, together with the Government, to manage, own and operate the hospitals with the public-private partnership projects (PPP) principle. Austrian consortium Alpha medic is the only company to have moved onto the second round of the tender. In total the three hospitals will have approximately 570 beds and their management will decide the number of medical personnel that will need training. According to Deputy Minister Kvaratskhelia, the Ministry of Economy is currently working on a bill regarding the coexistence of healthcare facilities with private and public agencies, as there are no corresponding regulations to date.


The price of making an Imeretian Khachapuri with cheese, butter, flour, yeast, eggs, and milk and energy imput (gas and electricity), is used as a measure of inflation in different Georgian cities by the Khachapuri Index, developed by ISET

ISET: Khachapuri Index Increases by 9.6 Percent in 2015 BY ANA AKHALAIA


he International School of Economics (ISET) has published its Khachapuri Index for November. Khachapuri is a traditional Georgian dish of cheese-filled bread. The price of making an Imeretian Khachapuri with cheese, butter, flour, yeast, eggs, and milk and energy imput (gas and electricity), is used as a measure of inflation in different Georgian cities by the Khachapuri Index (Kh Index), developed by the International School of Economics at Tbilisi State University. In November, the average cost of Imeretian khachapuri increased to 3.66

GEL, higher than the previous month by 1.4% and the annual rate by 9.6%. Considering that the price includes those food prices which are the subject of seasonal fluctuation, the upward trend of the Khachapuri Index is sharper than the official consumer price index released by the National Statistics Office of Georgia, which showed an increase of 0.3% in a month and by 6.3% in a year. In November, the prices of all the ingredients for cooking khachapuri, except flour, had increased: cheese by 14.7%; milk by 10.1%, butter by 5.3%, eggs by 0.9% and yeast by 19.1%. Flour prices had fallen by 0.7% due to the fall of wheat prices worldwide. In advance of the holidays, ISET predicts more growth for the Khachapuri Index in December.




DECEMBER 15 - 17, 2015

Let the TV Ratings Race Begin! BY BEQA KIRTAVA


he coming year already shaping up to be quite a year for the Georgian telecommunications industry. As we reported in the previous business edition of GT, Kantar Media, a new international TAM provider, is set to enter the local market from January 1, 2016 and will monitor the performance of numerous small and regional TV channels whose ratings have never been measured before. But it’s not only the addition of many new television stations that promises a significant change, it’s the ongoing trends and transitions, which, if continued, will paint a completely different scene for the industry that allotted over $48 MLN in 2015. According to the latest figures by TVMR GE, Rustavi 2 is holding on well in first position, followed by Imedi TV, with an estimated weekly audience share of ≈30% and ≈22% respectively. However, not all seems so stable below the top two… with Maestro and Comedy Channel going back and forth constantly. For example, during the week of 16/11/15

The most important aspect is not the ratings of any particular channel, but a free and competitive media environment, the establishment of which is crucial for the progress of both the country and its people

– 22/11/15, Maestro boasted an SHR of 7.13%, while Comedy Channel had only 5.07%. In contrast, the previous week (09/11/15 – 15/11/15) saw the latter being crowned as the winner with 5.77%, while 5.29% SHR holder Maestro lagged behind. Moreover, the most interesting shift in this fierce competition seems to be the ever-growing popularity of GDS, which has managed to dominate Channel 1 (GPB – Georgian Public Broadcaster) every single week since 19/10/15. If we take a look at the previous year, the AMR of the network has grown in

Ia Antadze, Founder and Chairwoman of the Civic Development Institute

every single category, with an astonishing 90% rise in the 25-45 segment. Furthermore, GDS overtook Maestro in the 25-45 section during the first week of November, having left a rather small gap to join the top 3. To help our readers see a more accurately painted picture of the telecommunications industry in 2016, Georgia Today exclusively interviewed Ia Antadze, the Founder and Chairwoman of CDI (Civic Development Institute). “I believe that in 2016 the specifics of the telecommunications market will be determined not only by the ratings of the leading companies, but by the variety of TV programs on different channels. Never over the past decade (and probably even earlier) has the television industry been more diverse and competitive. This enables viewers to seek content which is interesting for them, not only on the leading channels, but throughout the entire array. I think that in 2016 the ratings, which have so far been concentrated on two TV companies, will disperse and after a year the general picture will depict a more competitive environment. The diversity of the telecommunications market is determined by two major factors: 1) the simplification of TV regulations and the transition to digital broadcasting and 2) the entrance in the three-year election cycle. In 2016, the Georgian Dream coalition will try to gain the majority in

parliament for the second time, which is a huge challenge for both the government (in terms of its relations with the media) and the media itself. Will the television industry remain free during the elections period? – This is the main question today, which will be answered in the next few months. It is hard to predict whether the debut of Kantar Media will dramatically change the overall picture, because if TV ratings are measured correctly, no matter how many TAM providers do it, the results should be quite similar. However, having a more competitive environment is always beneficial. Last but not least, despite the fact that Comedy Channel scores high, it is a different type of TV channel and is less involved in the development process of society. Thus, in a free, competitive environment, the rating dynamics of Rustavi 2, Imedi, GDS and Channel 1 will be particularly interesting to observe. I believe that Channel 1, as well as GDS, are capable of being very serious competitors for any TV company. In conclusion, the most important aspect is not the ratings of any particular channel, but a free and competitive media environment, the establishment of which is crucial for the progress of both the country and its people.” So, what does 2016 really hold for the television industry? We’ll soon see.




DECEMBER 15 - 17, 2015

Revenue Service Introduces Single Treasury Code for Tax Payment BY EKA KARSAULIDZE


he Ministry of Finance and Revenue Service (RS) of Georgia has presented a new tax payment simplification reform, whereby 125 treasury codes for tax payments reduced to 1. The aim of this is to eliminate the often expensive challenges with the treasury codes system and to improve

the business-enabling environment within Georgia. The new reform will enter into force from January 1. In the earlier tax payment system, taxpayers had to choose among 125 different treasury codes. Mistakes were often made when selecting codes, resulting in inaccurate transactions and complications for taxpayers. To move an amount from one account to another, companies had to run additional procedures in the Revenue Service that required time. Now, by simplifying tax administration, busi-

Milo Stevanovich, Chief of USAID’s G4G, Giorgi Tabuashvili, Director General of the Revenue Service and USAID Mission Director Douglas Ball at the tax payment simplification reform presentation. Source: USAID project G4G

nesses will save time, money, and reduce their risk of acquiring penalties by mistakes being made. With the new initiative, tax payment transactions will decrease considerably as will the refund time for overpaid taxes. Representatives of the Revenue Service noted that reform was much needed as the large volume of treasury codes created problems not only for taxpayers but also for RS employees. “Taxpayers will no longer be liable to specify the correct code, and in case of an error, to have to

spend time and money fixing it,” said Deputy Minister of Finance and Director General of the Revenue Service of Georgia Giorgi Tabuashvili. “That will be the job of the RS now, with Revenue Service software ensuring that payments are distributed correctly, according to the declared liabilities.” As a result of the reform, taxpayers will save about 500,000 GEL and the number of transactions will be reduced by 5000. VAT refund time will be reduced from three months to one month and RS staff

will save 11,200 hours annually. The tax payment simplification reform was supported by USAID and included technical assistance in legal drafting, modification of the IT system and training for RS employees. “Simplification and affordability of payment reform is crucial to the government, local residents and businessmen who are interested in the business construction in Georgia, which in total contributes to the economic growth of the country,” said USAID Mission Director, Douglas Ball.




DECEMBER 15 - 17, 2015

Galt & Taggart and PASHA Bank Underwrite GWP’s 6,000,000 GEL Bond Issue


n December 10th, GWP issued 6,000 bonds with nominal value of GEL 1,000 each, the placement agents and underwriters being PASHA Bank Georgia and Galt & Taggart. The bonds have a two year tenor with quarterly coupon payments. Coupons are referenced on the National Bank of Georgia refinancing rate and carry a margin of 7.5% over the reference rate. At present the annual interest rate of the bonds is 15%. “The fact is that for the time being more financial institutions express willingness to invest in our company as the company’s credibility has increased, which is confirmed by Fitch rating

assigned to GWP recently,” Giorgi Tskhadadze, CEO of Georgian Water and Power, stated. “Diversification of credit resources is of vital importance for Georgian Water and Power in the mid-term and longterm perspective. For GWP it is a second round of bonds emission for the amount of GEL 6 m now, to be placed in full. The first placement of bonds for GEL 2,6 m was effected in August of current year. New management of GWP is willing to cooperate with various financial institutions and funds to implement the projects significant for the company’s development,” Giorgi Vakhtangishvili, CFO of Georgian Water and Power, pointed out.

Diversification of credit resources is of vital importance for Georgian Water and Power in both the mid-term and long-term perspective

“PASHA Bank enjoys significant experience in securities underwriting in its home market, Azerbaijan, and we plan to apply this expertise in Georgia and actively contribute to the development of the local capital markets. In May, PASHA Bank arranged FINCA Bank Georgia’s GEL 20,000,000 bond issue and we are glad to be partnering with GWP and Galt & Taggart this time. We took this opportunity to extend our partnership with GWP, in March, 2015 PASHA

Bank issued the term loan facilities to Georgian Water & Power and Rustavi Water Company with the combined principal of GEL 22.5 million,” commented the CEO of PASHA Bank Georgia. “We are glad that with the help of Galt & Taggart, the bond issue of one more Georgian company was accomplished. Galt & Taggart has already contributed to the issuing of over GEL 100 mln worth of local bonds, supporting the develop-

ment of local capital markets and creating access to the financial recourses that are very important to the growth of the companies. Thanks to its team of professionals and the experience Galt & Taggart has become a leading company in Georgia providing investment banking services. I would like to thank everyone who worked on this deal and wish success to GWP,” Archil Gachechiladze, commented the Chairman of Supervisory Board of Galt & Taggart.

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Policy Makers and International Donors Reach Out to Georgia’s Farming Community with Education Conference BY ROBERT ISAF


rey skies sifted an even light over the abandoned industry on the Mtkvari’s left bank, a thought-provoking backdrop for participants of the National Conference for Agricultural Extension for Georgia, which opened early Monday morning at the Radisson Blu. Agricultural Extension – sometimes referred to instead as Agricultural Advisory Services – refers to programs of continuing education in the agricultural sector which attempt to increase the theoretical knowledge and practical skills of those who work the land. Georgia’s badly lagging agricultural sector would, conference organizers premised, benefit immensely from an expanded Agricultural Extension program. By any account, Georgia needs change. Although roughly 50% of the population is engaged with agricultural work – a purposefully broad phrase, one of many used to allow for the purely subsistence farming occurring in rural areas across the country – only less than 10% of the country’s GDP comes from agriculture. Over the course of the day, this depressed state of country affairs was illustrated for the audience in various ways. The share of GDP was at one point contrasted with Armenia – agriculture contributes

to 23% of the GDP there. A slide was shown indicating that, seen from above, a single French farm worker appears to be as productive as six of his Georgian counterparts. The findings of a recent survey of farmers in Georgia, which aimed to “better estimate the gap in (agricultural) knowledge”, were presented in-depth by Dr. Florian Biermann of the International School of Economics (ISET), offering some of the day’s most cutting insight. On average, surveyed households were farming only around 0.8 hectares of land. Nearly fifteen hundred of them were working on less than 0.4 hectares. The real question of the conference, however, wasn’t how much land individuals have to work with, but rather how much individuals know about the art of cultivation. “What determines agricultural productivity? Of course – ” this is Dr. Biermann, spreading plain the logic behind Agricultural Extension as a policy pursued – “of course there are couple of factors. There is the use of technology; capital availability; there are natural conditions; but there is also knowledge and skills. And knowledge and skills play a special role in generating agricultural productivity. Because knowledge and skills not only directly affect agricultural productivity, they also affect how you can use technology. Whether you have capital available - if you can’t write a good business plan it’s difficult to get a good loan from the bank.

Although roughly 50% of the population is engaged in agricultural work, less than 10% of the country’s GDP comes from agriculture. Photo:

And it also helps you to deal with natural conditions. On the other hand, if you don’t have this knowledge, it can really stifle all these other areas, all these other areas of productivity.” The trouble faced by Georgia today, then, long recognized but better quantified by the survey, is exactly the lack of contemporary, context-specific, business- and technology-savvy knowledge and skills. Over the last four years, only 4% of survey respondents reported having received agricultural training; in the last three years only 10% reported having received any kind of advisory service assistance or consultation at all. The payoff of properly increasing the nation’s aggregate agricultural knowledge could be huge. Closing the knowl-

edge gap in soil preparation by one “step”, Dr. Biermann explained by way of example, could increase wheat production per square meter by 80 grams. The conference was organized jointly by the United Nations Development Programme (UNDP) in Georgia, the Swiss Cooperation Office in the South Caucasus, the Ministry of Agriculture of Georgia, and the Ministry of Education and Science of Georgia. The farmer survey had taken place under the auspices of the UNDP in Georgia; its deputy head, Shombi Sharp, provided the first opening statements. “Here, we’re targeting farmers of all different sizes, providing them with the tools, knowledge, the information that they need to be able to improve their

crop output, improve incomes and livelihoods for their families,” Mr. Sharp said. “The evidence is quite clear from international experience that a welldeveloped system of Agricultural Extension is a key prerequisite of a modern society.” Representatives from Switzerland and Denmark were also on hand, discussing their experience with Agricultural Extension policies and programs. The conference continued with a panel discussion and unconventional bistro-counter interview – all parties stood at small tables on the hastily rearranged stage, where minutes earlier 9 plush chairs had lounged – after lunch. Further workshops and field visits took place Tuesday and Wednesday of this week.




Language and Sustainability: Goethe Institute Concludes another Successful Project BY MERI TALIASHVILI


he Goethe Institute largest project Connected for a Sustainable Future concluded on December 5th, being was one of the most successful and prolific projects conducted by the institution. 32 schools, 100 pupils and 1000 teachers discussed the world’s most crucial, and environmental, issues within the different disciplines via the German Language from spring to winter, considering the environmental problems in a history, art and biology context. All this with the guidance of international professors from Germany and Vienna. 11 graduates visited Akhaltsikhe, Kutaisi, Tbilisi, Rustavi, Vani and Zugdidi schools and delivered hands-on seminars on sustainable development for the first time in Georgia. Georgia Today attended the conference and interviewed Eike Pockrandt, coordinator of the project at Goethe Institute in Georgia about the aims and the results of the projects. A special handbook was written and published during the project dedicated to it.

EIKE, CAN YOU TELL US WHAT THIS PROJECT DEALT WITH? Connected for a Sustainable Future was launched in July by the Goethe Institute and funded by the German Ministry of Foreign Affairs. It is the part of the Eastern partnership of Germany and involves people from the Eastern countries. The project was divided into three different phases: 1) Strengthening German as a

Foreign Language in the South Caucasus; 2) Connecting language teaching with important issues; and 3) Reviewing and explaining aspects, challenges and opportunities of sustainable development. The reason we decided to foster German language strengthening is that German is no longer taught in the South Caucasus. It is very sad that for future success, young people and educational institutions choose to learn those languages which are more profitable. We believe that the German language is more favorable in terms of the future higher educational and professional opportunities and, more importantly, in terms of thinking and action. As for why we should connect language with

Language is a living phenomenon and it should be practiced, used and strengthened via modern challenges and issues

important issues, language is a living phenomenon and it should be practiced, used and strengthened via modern challenges and issues that aim to interest young people to learn. What’s more, Armenia, Azerbaijan and Georgia have rapidly succeeded in the last few years. Usually, young people ask what this development is for and how it will be continued. So we want them to get connected with each other through language.

HOW MANY SCHOOLS WERE INVOLVED IN THE PROJECT? 32 schools in total and most of them from rural areas. Approximately, 100 teachers and 1000 German language learning pupils were involved in it. Additionally, we organized a one-week summer school for teachers on the Black Sea; six training courses for teachers in three countries, 50 local initiative projects, as well as an Agriculture and Environmental Pedagogy students exchange. In the framework of the project, we invited international professors like Stphan Wakwitz, Wilhelm Linder, Birgit Kare, Bernadet Veress, Stefan Schleicher, Christine Wogowitsch, Hildegard Kurt, and Gerlinde Massoudi to deliver practical and methodological seminars to teachers. The project has enabled teachers to speak about the issues they never thought they would be capable of. Pupils would go to the lake to check the quality of it, and also discover flora and fauna around the school and this was conducted in the German language of course. It has never been done before and exactly this was our aim to teach them all something totally new.

Eike Pockrandt, coordinator of the Connected for a Sustainable Future project at the Goethe Institute

HOW SATISFACTORY IS THE LANGUAGE PROFICIENCY IN REGIONAL SCHOOLS? Honestly, it is a big problem. It is taught as a foreign language and only for two hours per week. This is not sufficient to learn the language. I am not an expert in this field but it is up to the Ministry of Education, That said, we have met teachers and students who have an excellent knowledge of the language.

WHAT ABOUT FUTURE PLANS? The Goethe Institute and all working here are hoping to continue this kind of project but it depends on the German Government. Yet since this project has been so successful, we all hope that we will not stop here. Gerlinde Massoudi, Deputy Director of the Goethe Institute: “I think that this topic is very modern. We want to have topics in our classrooms dealing with current issues not only from literature, science or mathematics. Sustainability is connected to the Paris Climate Change Conference; questions which are very important for the entire

world. It is very important to us. It shows how language learning can be useful for the children. For example, they learn German language and they can read text, newspapers, journals in this language about world news and current events that is motivating for the children. In a very limited time we managed to carry out fifty projects in Azerbaijan, Armenia and Georgia where we connected children with government officials to define what the children wanted to change in their schools. They told them what their problems were and asked for help. It is a very interesting for them to be an agent of change in this dysfunctional world. In Armenia, the schoolchildren asked the City Mayor to plant trees on the hills and then he decided to give away more than 1500 trees to plant and those little children turned this small project into a city project. Here, in Georgia, in one of the villages of Kutaisi, the schoolchildren and the teachers visited lakes and laboratories to carry out tests. Through these sorts of activities, children develop as social persons.




DECEMBER 15 - 17, 2015

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 or contact us at

Russo-Turkish Standoff: Implications for Georgia BY ALIM HASANOV


urkey and Russia, Georgia’s two largest neighbors, have combined economies of US$ 2.7tn. The relationship between the two has worsened following the recent downing of a Russian jet by Turkey. Russia’s reaction was immediate – policies limiting Turkish imports, prohibiting charter flights to Turkey, and advising its citizens to avoid travelling to Turkey. These policies will impose costs on both economies, with some spillover to the neighboring countries. However, a detailed analysis indicates that the interdependence between Turkey and Russia is limited, with even fewer possible implications for Georgia. Turkey’s exposure to Russia is comprised largely of Russian natural gas imports and revenues from Russian tourists. While we do not expect Russia to cut gas deliveries, we think that fewer Russian tourists will travel to Turkey. Turkish exports of

agricultural goods and textiles to Russia are likely to fall, but their share in total exports is low. Some of the loss will likely be compensated by the newly signed EUR 3.0bn deal between Turkey and the EU for managing Middle Eastern migrant inflows. In 2014 Russia accounted for just 3.8% of total

Turkish exports (US$ 5.9bn out of a total of US$ 157.6bn), which fell further to 2.5% in 10M15, as the economic contraction in Russia depressed demand

for foreign goods. Turkish exports to Russia are dominated by textiles and clothing, fruits and vegetables, machinery and electronics, and transport. While the overall dependence is limited, the Turkish agricultural sector exhibits high vulnerability, with Russia accounting for 12.7% (US$ 1.1bn) of total Turkish fruits and vegetables exports in 2014 (US$ 8.4bn). With that said, Russia banned the import of only 18 items (including certain fruits and vegetables) from Turkey starting January 1, 2016. Exports of these items totaled US$ 0.8bn in 2014 (12.9% of total exports to Russia) and have declined 2.3% y/y in 10M15. This fall will accelerate in 2016 once the ban takes effect. However, given the low share in total exports, its impact should be minor. Contrary to exports, Turkey is highly dependent on Russia for natural gas imports. Overall, Turkey imported 49.3bcm of natural gas in 2014, including 7.3bcm of liquefied natural gas (LNG). Slightly more than half of this gas demand (27.0bcm) was met by Russian gas, with the rest being imported from Iran (8.9bcm), Azerbaijan (6.1bcm), and other countries (7.3bcm). As Turkey used the largest share (48.1%) of its natural gas consumption for electricity generation, any disruption in Russian gas supply could negatively impact Turkey’s electricity generation. The country is expected to partially lessen its dependence on Russian gas starting in 2018, with an additional 6bcm of gas imports from Azerbaijan (already contracted). It is unlikely that Russia will cut gas supplies to Turkey as natural gas exports are a major source of Russia’s export revenues and Turkey is its second biggest customer after Germany. Cutting gas supplies to Turkey would mean loss of revenues, which are already suffering from the US-EU sanctions. Russia’s weak external position due to the low oil prices reinforces this argument. FDI from Russia in Turkey has generally been low. Of the US$ 101.4bn of FDI in Turkey from 2007 to September 2015, only US$ 3.3bn (3.3%) came from Russia. It is highly unlikely that Russia will constrain operations of Russian businesses in Turkey. Turkish investments in Russia are not expected to be hurt directly by sanctions either, as Russia does not intend to limit operations of Turkish subsidiaries registered as separate entities in Russia. However, an indirect impact on these companies cannot be ruled out, as they might run into problems procuring Turkish inputs and/or hiring Turkish personnel. Suspension of major infrastructure projects is what could have a relatively strong negative impact. Turkish Stream – a multi-billion dollar project that was intended to expand the natural gas pipeline connecting Russia and Turkey – has already been suspended by Russia. While no official statement has been made, Russia may also opt to suspend the construction of a US$ 20bn nuclear plant in Akkuyu (Turkey), which it planned to finance fully. However, the Russian side has already invested some capital in the project and is contractually obligated

to pay heavy penalties if it abandons the project. The medium- to long-term repercussions of the suspension of these projects would probably be felt in Turkey’s electricity market. Turkish tourism exports will take the biggest toll from the strained Turkey-Russia relations. 4.5mn (12.5% of total) Russian tourists visited Turkey in 2014 (+5.0% y/y) and, based on our calculations, spent about US$ 3.7bn. With the economic contraction in Russia, however, the number of visitors to Turkey has already fallen 20.7% y/y in 10M15 to 3.2mn (11.1% of total). Unless the problems are resolved by spring 2016, the full impact of the drop in tourist arrivals should be felt in mid-2016, as October-April is the low season in the tourism industry in Turkey (in 2014, 83.1% of Russian tourists visited Turkey from May to September). Our calculations indicate that annual losses from the standoff could amount to a maximum of 0.5% of Turkey’s GDP. However, this loss should be partially compensated by the EUR 3.0bn pledge by the EU to Turkey and a lower import bill due to sustained low oil prices, mitigating pressure on the exchange rate.

EXPECTED IMPACT ON GEORGIA Transit of goods from Turkey to Russia through Georgia seems to be the only area that will suffer directly from the strained Russia-Turkey relations. Georgia has benefitted from the transit of Turkish goods through its territory, not only to Russia but also through Russia to Central Asia. With Russia banning certain imports from Turkey and limiting transit to Central Asia, Georgia could lose some revenue due to the drop in transit. However, the volume of trade through Georgia is not significant enough to have a major impact. Moreover, Azerbaijan recently offered its territory to Turkey for transit to Central Asia. If implemented, the new route can increase transit of goods through Georgia as some Turkish exports currently go through the Black Sea and Russia to Central Asia. Now this route can be changed to Georgia-Azerbaijan-Caspian Sea-Central Asia. In some respects, Georgia could benefit from the new reality. Georgia can (i) partially substitute Turkish fruits and vegetables on the Russian market and (ii) attract some of the tourists who would normally go to Turkey. However, the benefits from these channels would only be realized in the middle of next year, as Turkey is a summer destination for Russian tourists, and redirecting vegetable and fruit exports could take a few months. Furthermore, Georgia could increase electricity exports to Turkey. As an emerging market, Turkey’s electricity consumption is increasing and demand is met mostly by natural gas-fired power plants. Failure to import more gas from Russia and possibility of suspension of the nuclear plant can pose a challenge for Turkey in meeting domestic electricity demand. In that scenario, Turkey will probably need to import electricity and Georgia could be one of the suppliers.

Georgia to Host Wine Tourism Conference in 2016 BY NINA IOSELIANI


eorgia is to host a global conference on wine tourism next year. The Ministry of Economy and Sustainable Development of Georgia, along with the National Administration of Tourism, have presented their plans for the development of wine tourism in 2016. The meeting was attended by representatives

from the Sommelier Society as well as the sector of tourism and wine and the National Administration of Tourism. The meetings will continue in future as a final plan is created. The first global conference will take place in Georgia, on September 7-9th, 2016, to be organized by United Nations’ World Tourism Organization. The head of the National Tourism Administration, Giorgi Chogovadze, and the current SecretaryGeneral of the World Tourism Organization, Taleb Rifai, launched an exhibition on the future global conference a month ago in London.



UNDP: Address Challenges and Seize Opportunities of the New World of Work Continued from page 1 The 2015 Human Development Report, released at a ceremony in Ethiopia, urges governments to act now to ensure no one is left behind in the fastchanging world of work. The report, titled ‘Work for Human Development’, calls for equitable and decent work for all. In doing so, it encourages governments to look beyond jobs to consider the many kinds of work, such as unpaid care, voluntary, or creative work that are important for human development. The report suggests that only by taking such a broad view can the benefits of work be truly harnessed for sustainable development. Speaking at the launch, Prime Minister Hailemariam Dessalegn of the Federal Democratic Republic of Ethiopia, said “Employment can be a great driver of progress, but more people need to be able to benefit from sustainable work that helps them and their families to thrive.” 830 million people are classified as working poor who live on under $2.00 a day. Over 200 million people, including 74 million youth, are unemployed, while 21 million people are currently in forced labour. “Human progress will accelerate when everyone who wants to work has the opportunity to do so under decent circumstances. Yet in many countries, people are often excluded from paid work, or are paid less than others for doing work of the same value”, said report lead author, Selim Jahan.

WOMEN DO THREE OUT OF EVERY FOUR HOURS OF UNPAID WORK The report presents a detailed new estimate of the share of all work, not just paid work, between men and women. While women carry out 52 percent of all global work, glaring inequalities in the distribution of work remain. Women are less likely to be paid for their work than men, with three out of every four hours of unpaid work carried out by women. In contrast, men account for two of every three hours of paid

work. Since women often carry the burden of providing care services for family members, the report warns that this disparity is likely to increase as populations age. When women are paid, they earn globally, on average, 24 percent less than men, and occupy less than a quarter of senior business positions worldwide. “To reduce this inequality, societies need new policies, including better access to paid care services. Ensuring equal pay, providing paid parental leave, and tackling the harassment and the social norms that exclude so many women from paid work are among the changes needed. That would enable the burden of unpaid care work to be shared more widely, and give women a genuine choice on whether to enter the labour force,” Helen Clark, United Nations Development Programme Administrator, said.

GLOBALIZATION AND DIGITAL REVOLUTION ARE DOUBLEEDGED SWORDS Globalization and technological changes are producing an increasingly polarized world of work. “There has never been a better time to be a highly skilled worker. Conversely, it is not a good time to be unskilled. This is deepening inequalities”, said report author Selim Jahan. Highly skilled workers and those with access to technology, including to the internet, have new opportunities in the types of work available and the way that work is done. Today, there are seven billion mobile phone subscriptions, 2.3 billion people with smart phones, and 3.2 billion with internet access. This has brought about many changes in the world of work - for example, the rise of e-commerce and the mass outsourcing of banking, ICTsupport, and other services. Despite new opportunities, however, more jobs are now becoming vulnerable and a wide digital divide remains, the report notes. In 2015, 81 percent of households in developed countries have internet access, but only 34 percent in developing regions and 7 percent in the least

RIBA to Give New Global Architecture Award BY MERI TALIASHVILI


he Royal Institute of British Architects (RIBA) has announced the 2016 RIBA International Prize for the world’s best new building. The RIBA International Prize will be granted to the most inspirational architectural building of the year. The winning building will have to demonstrate a visionary, innovative design which contributes to and supports society in a positive way. The jury includes world renowned architect Lord Rogers of Riverside (Richard George Rogers) who will award the winner of the first RIBA International Prize in London in December 2016. “I’m delighted to lead the jury for the inaugural RIBA International Prize, and look forward to discovering how architecture is reacting to and resolving issues posed by the changing demands of a global community,” said Richard Rogers, Chair of the Grand Jury. “We look forward to establishing the RIBA International Prize as a new standard by which to assess and promote design excellence on a global scale,” he added.

Burntwood School, a large comprehensive girls’ school in Wandsworth, London by Allford Hall Monaghan Morris won the coveted RIBA Stirling Prize 2015 for the UK’s best new building

The RIBA awards have been held since 1966 and inspires and rewards excellence across a program of regional, national and international awards, including the Royal Gold Medal, RIBA Stirling Prize and RIBA House of the Year. The RIBA International Prize is the first global award for buildings open to all architects in the organization’s history.

developed countries have that access. Many types of routine work, such as clerical jobs, are predicted to disappear or be replaced by computers, or have already disappeared, the report warns, while many more workers face other insecurities. According to the International Labour Organization, 61 percent of employed people in the world work without a contract, and only 27 percent of the world’s population is covered by comprehensive social protection.

SUSTAINABLE WORK, OPPORTUNITIES BOTH FOR PRESENT AND FUTURE GENERATIONS The report stresses the key roles that work can play in achieving the Sustainable Development Goals. “The types of work many of us do will need to change if our economies and societies are to make genuine progress towards a low emission and climate-resilient future. These changes will influence what the labour market of tomorrow looks like,” the report states. With green growth, new jobs will be created, the nature of others will be transformed, and others will end altogether. These changes ideally should be supported by systems of social protection and safety nets. The report argues that work opportunities can


be fostered by the global goals. It estimates, for example, that around 45 million additional health workers will be needed to meet the health objectives of the Sustainable Development Goals. That would see the global health workforce increase in size from 34 million in 2012 to 79 million by 2030.

SETTING THE NEW AGENDA FOR WORK While policy responses to the new world of work will differ across countries, three main clusters of policies will be critical if governments and societies are to maximize the benefits and minimize the hardships in the evolving new world of work. Strategies are needed for creating work opportunities and ensuring workers’ well-being. The report therefore proposes a three-pronged action agenda: • A New Social Contract between governments, society, and the private sector, to ensure that all members of society, especially those working outside the formal sector, have their needs taken into account in policy formulation. • A Global Deal among governments to guarantee workers’ rights and benefits around the world. • A Decent Work Agenda, encompassing all workers, that will help promote freedom of association, equity, security, and human dignity in work life.



World Presentation of Porsche Carrera 911 Held in Tbilisi BY EKA KARSAULIDZE


n September 2015, Dr. Ing. h.c. F. Porsche AG presented the new model of Porsche Carrera 911 S at the Frankfurt International Auto Show and announced its upcoming realize on the market. Today, the new updated version of the classic Porsche 911, which now has 420 horsepower, is already available in Georgia at a cost of 119,911 Euro. The official pres-

entation was held in Porsche Center Tbilisi on December 12. The innovative flat-six engines derived from four decades of turbocharging used in racing and road cars not only make this the fastest 911 Carrera ever, but also provides abundant torque for superior passing power. An advanced chassis offering an even more sophisticated combination of ride comfort and performance characterizes the handling of the new 911. For the first time, rear-axle steering is available as an option for the Carrera S, significantly enhancing its already superb agility. Many exterior features of the 911 Car-


DECEMBER 15 - 17, 2015

rera S have been visually refined, from new headlights with four-point daytime running lights to integrated door handle recesses, and a redesigned rear deck lid with vertical louvers, and new rear lights – including the characteristic four-point brake lights. The new standard Porsche Communication Management system with a multi-touch display offers an expanded range of functions and simplified usability. The representatives of Porsche like to highlight “better than a Porsche could only be the new model of Porsche”. This also applies to the engine capacity: 20 horsepower, up to 420 hp, and reduced fuel consumption and exhaust emissions by 14%.

Porsche 911 is one of the best sports cars and has long been a classic, still holding a leading position with constantly improvements in each new model. Despite the high price, the new Porsche Carrera 911 S will be in demand worldwide and no less so in Georgia. The first Georgian potential consumers already have the chance to check new

Porsche’s comfort and power. A number of high ranking guests representing the business sector, show business and public sphere attended the presentation of the new Porsche Carrera 911 S in Georgia where a raffle was held, the winners of which will have an opportunity to test all the models of Porsche, including the new Carrera 911.


The psychedelic trip is one of the practices of structuring ‘another’ reality, beyond which the ‘real’ world becomes a mirage and the border between facts and personal interpretations is blurred.

Photos from Porsche Center Tbilisi’s official Facebook page


TBILISI NODAR DUMBADZE STATE CENTRAL CHILDREN’S THEATRE Address: 99/1 Agmashenebeli Ave. Telephone: 295 39 27 December 17 NEW YEAR EVE AND ALIENS Larisa Titova, Aleksandre Storotorjsky Directed by Dimitri Gvtisiashvili Fairy Tale Start time: 18:00 Ticket price: From 6 Lari CINEMA

AMIRANI CINEMA Address: 36 Kostava Str. Telephone: 2 99 99 55 December 15-17 THE HUNGER GAMES: MOCKINGJAY – PART 2 Directed by Francis Lawrence Cast: Jennifer Lawrence, Josh Hutcherson, Liam Hemsworth Genre: Adventure, Sci-Fi Language: Russian Start time: 22:45 Ticket price: 13.50 – 14.50 Lari MACBETH Directed by Justin Kurzel Cast: Michael Fassbender, Elizabeth Debicki, Marion Cotillard Genre: Drama, War Language: Russian Start time: 13:20, 17:30, 22:00 Ticket price: 9.50 – 14.50 Lari IN THE HEART OF THE SEA Directed by Ron Howard Cast: Chris Hemsworth, Cillian Murphy, Brendan Gleeson Genre: Action, Adventure, Biography Language: English Start time: 16:15 Language: Russian Start time: 14:00, 20:00, 22:45 Ticket price: 11.50 – 14.50 Lari

RUSTAVELI CINEMA Address: 5 Rustaveli Ave. Telephone: 2 55 50 00 December 15-17 THE HUNGER GAMES: MOCKINGJAY – PART 2 (Info Above) Start time: 22:00 Ticket price: 13.50 – 14.50 Lari MACBETH (Info Above) Start time: 20:10 Ticket price: 13.50 – 14.50 Lari IN THE HEART OF THE SEA (Info Above) Start time: 12:00, 14:45, 15:00, 16:50, 22:30 Ticket price: 9.50 – 14.50 Lari CAVEA CINEMA Address: 16th km D. Agmashenebeli Alley, Tbilisi Mall December 15-17 THE HUNGER GAMES: MOCKINGJAY – PART 2 (Info Above) Language: Russian Start time: 21:40 Ticket price: 12.00 – 13.00 Lari MACBETH (Info Above) Language: Russian Start time: 16:15, 21:15 Language: English Start time: 18:30 Ticket price: 9.00 – 13.00 Lari IN THE HEART OF THE SEA (Info Above) Language: Russian Start time: 19:15, 21:50, 13:50 Language: English Start time: 16:30 Ticket price: 8.00 – 13.00 Lari SICARIO Directed by Denis Villeneuve Cast: Emily Blunt, Josh Brolin,

Benicio Del Toro Genre: Action, Crime, Drama Language: Russian Start time: 21:00, 19:10 Language: English Start time: 18:45 Ticket price: 12.00 – 13.00 Lari VICTOR FRANKENSTEIN Directed by Paul McGuigan Cast: Daniel Radcliffe, James McAvoy, Jessica Brown Findlay Genre: Drama, Horror, Sci-Fi Language: Russian Start time: 16:00 Ticket price: 9.00 – 10.00 Lari SPECTRE Directed by Sam Mendes Cast: Daniel Craig, Christoph Waltz, Léa Seydoux Genre: Action, Adventure, Thriller Language: Russian Start time: 13:00 Ticket price: 8.00 – 9.00 Lari MUSEUM

GEORGIAN NATIONAL MUSEUM SIMON JANASHIA MUSEUM Address: 4 Rustaveli Ave. Telephone: 2 99 80 22, 2 93 48 21 ARCHAEOLOGICAL TREASURE PERMANENT EXHIBITION November 17 - May 1 GEORGIAN NATIONAL MUSEUM AND ALEXANDER KARTVELI ASSOCIATION PRESENT AN EXHIBITION DEDICATED TO THE GREATEST MILITARY AIRCRAFT DESIGNER IN HISTORY. Exhibition will demonstrate life and merits of the Georgian emigrant, an innovator of American and World’s aviation - Alexander Kartveli (Kartvelishvili /1896-1974/). IOSEB GRISHASHVILI TBILISI HISTORY MUSEUM - KARVASLA Address: 8 Sioni Str. Telephone: 2 98 22 81

December 10 - January 5 PROMOTING THE CULTURAL COOPERATION BETWEEN GEORGIA AND JAPAN, THE GEORGIAN NATIONAL MUSEUM IOSEB GRISHASHVILI TBILISI HISTORY MUSEUM INVITES YOU TO THE PHOTO EXHIBITION OF HIROTAKE MAEDA. MUSEUM OF SOVIET OCCUPATION Address: 1 Rustaveli Ave. Telephone: 2 99 80 22 Here, visitors can encounter the state’s personal files of “subversive” Georgian public figures, orders to shoot or exile, and other artifacts representing Soviet-era cultural and political repression in Georgia. GALLERY

THE NATIONAL GALLERY Address: 11 Rustaveli Ave. December 9-20 Georgian National Museum Dimitri Shevardnadze National Gallery invites you to THE KETEVAN MATABELI RETROSPECTIVE EXHIBITION. BAIA GALLERY Address: 10 Chardin Str. Telephone: 2 75 45 10 December 17-24 LEVAN MARGIANI EXHIBITION THE EUROPE HOUSE Address: 1 Freedom Sq. Telephone: 2 47 03 11 December 15-January 17 PSILOCYBIN MUSHROOMS A multimedia project by Tato Akhalkatsishvili


TBILISI CONCERT HALL Address: 1 Melikishvili St. Telephone: 2 99 00 99 December 15 AUTOGRAPH Art Development Foundation presents: IRAKLI CHARKVIANI’S TRIBUTE CONCERT History Will Go On! The following Popular musicians will perform at the concert: Niaz Diasamidze, Pecho, Utsnobi, Vakis Parki, Nika Kocharov, Dato Evgenidze, Eko Deisadze, Sophie Villy, LOUDspeakers, The Window, The Mins, Kung Fu Junkie, MAO, Kakadu, The Jetbird, Jeronimo, Robi Kukhianidze, Ketato, Gela Charkviani. A hologram image of Irakli Charkviani has been created exclusively for this concert and one song will be performed by the hologram. Start time: 20:00 Ticket price: 35, 70, 90 Lari December 16 NINO MACHAIDZE Georgian Philarmonic Orchestra Conductor: Nikoloz Rachveli Start time: 20:00 Ticket price: 15-75 Lari December 17 CHARITY CONCERT Skani Guluapiro Start time: 18:00 Ticket price: 10-100 Lari




Dechert OnPoint: Beneficial Regulations for Hotel Operators in the Georgian Hospitality Sector


echert Georgia, through the contribution of partners Archil Giorgadze and Nicola Mariani, joined by senior associates Ruslan Akhalaia and Irakli Sokolovski, as well as Ana Kostava and Ana Kochiashvili, is partnering with Georgia Today on a regular section of the paper which will provide updated information regarding significant legal changes and developments in Georgia. In particular, we will highlight significant issues which may impact businesses operating in Georgia. Dechert’s Tbilisi office combines local service and full corporate, tax and finance support with the global knowledge that comes with being part of a worldwide legal practice. Dechert Georgia is the Tbilisi branch of Dechert LLP, a global specialist law firm that focuses on core transactional and litigation practices, providing worldclass services to major corporations, financial institutions and private funds worldwide. With more than 900 Lawyers in our global practice groups working in 27 offices across Europe, the CIS, Asia, the Middle East and the United States, Dechert has the resources to deliver seamless, high quality legal services to clients worldwide. For more information, please visit or contact Nicola Mariani at

OVERVIEW: The legal framework for the Georgian hospitality sector offers a wide range of regulatory incentives to entrepreneurs active in the Georgian hotel construction and operation business. Regulatory incentives are applicable in three areas of the hospitality sector, namely: (a) construction and operation of middle or high-class hotels in free tourist zones; (b) construction of hotels for the purpose of supplying hotel assets; and (c) setting-up casinos on the premises of newly-built hotels. The respective regulations are incorporated in the Tax Code of Georgia adopted on 12 October 2010 (as well as its amendments) and in the Law of Georgia on Promotion of the Development of Free Tourist Zones (the “Law on FTZ”) adopted on 2 November 2010 (as well as its amendments), as well as various related decrees and orders issued by the respective state authorities. This article focuses on the terms and subsequent benefits for the construction and operation of middle and highclass hotels in Georgian free tourist zones.

FREE TOURIST ZONES The Law on FTZ establishes a legal framework for the establishment and operation of the free tourist zones. Various zones in Georgia may be assigned the title of “free tourist zone” by decree of the Government of Georgia. Currently, seven free tourist zones, located in Kobuleti, Anaklia and Ganmukhuri (all located on the Black Sea coast), allow entrepreneurs to construct and operate middle

or high-class hotels and enjoy applicable benefits. On the basis of the Law on FTZ, entrepreneurs are selected to become owners of a specified land plot in a Georgian free tourist zone and are subject to the construction obligations of a middle or high-class hotel. The decision on the transfer of the land plot into the ownership of the entrepreneur is taken by a special governmental commission established specifically for these purposes, which is chaired by the Minister of the Economy and Sustainable Development of Georgia. In case the entrepreneur fails to construct the hotel in the agreed timeframe, the Government of Georgia retains the right to claim the return of the land plot and the premises thereon into the ownership of the state. The Law on FTZ provides the basis for related governmental decrees and ministerial orders which regulate and determine criteria for the assessment of hotel classes as well as requirements applicable to those entrepreneurs wishing to have the right to construct a hotel in the Georgian free tourist zones. Such entrepreneurs are subject to regulatory incentives as described in the following paragraphs.

CRITERIA FOR MIDDLE AND HIGH-CLASS HOTELS Specific criteria for the definition of middle and high-class hotels are provided in the order of the Minister of Economy and Sustainable Development of Georgia dated 27 December 2010 (the “MoESD Order”). The MoESD Order defines standards necessary for such assessment, including the space of hotel rooms, access roads, access to utilities, sanitary conditions, guest registration and eating facilities for each hotel class. The same order makes reference to internationallyaccepted specifications in terms of hotel equipment and service level and requires that entrepreneurs meet the standards established by international associations.

APPLICABLE BENEFITS Once the entrepreneurs comply with the above requirements they are subject to various legal and commercial benefits. Notably, the beneficial regulations continue to apply to subsequent owners of the hotel in the free tourist zone, provided that the subsequent owner maintains operation of the hotel. The applicable benefits under the Law on FTZ and related legislation may be divided into two groups: one including benefits relating to infrastructure and another group relating to tax advantages for entrepreneurs. The first group consists of the following advantages: (i) land plots necessary for construction of the hotel will be transferred to the entrepreneur for the symbolic price of one (1) Georgian Lari; (ii) the Government of Georgia will provide necessary infrastructure (natural gas, water, sewerage, electricity) and construct/repair access roads to the hotel building; (iii) the process of obtaining the construction permit and status of significant real estate project will be granted via simplified procedures; (iv) the entrepreneur will be exempted from payment of construction permit fees; and (v) the entrepreneur will be provided with a free construction plan for the hotel. In addition to the above infrastructure benefits, the free tourist zone entrepreneurs will enjoy several tax advantages,

The legal framework for the Georgian hospitality sector offers a wide range of regulatory incentives to entrepreneurs active in the Georgian hotel construction and operation business. Source: Pixabay.commish

including: (i) exemption of the value of the purchased land plot from profit taxes; (ii) exemption of profits derived from the rendering of hotel services from profit tax until 1 January 2026; and (iii) exemption of the property related to hotel services from property tax until 1 January 2026.

CONCLUSIONS The regulations established under the Law on FTZ intend to support the development of the hotel construction and operation business in Georgia. The gen-

eral approach of legislators in this regard clearly demonstrates that the Government of Georgia is keen on attracting new investors and, for these purposes, is establishing various beneficial arrangements and favorable conditions for existing and potential investors. *** Note: this article does not constitute legal advice. You are responsible for consulting with your own professional legal advisors concerning specific circumstances for your business.

ELIGIBILITY FOR REGISTRATION In order to be eligible for regulatory incentives, entrepreneurs building and operating a hotel in the free tourist zones are required to adhere to the following procedure: Firstly, entrepreneurs shall complete the registration process established by the Governmental Decree of 23 June 2015. As a result of this registration, entrepreneurs will become tourist zone entrepreneurs and will be granted special status by the Georgian authorities; Secondly, after the granting of this status entrepreneurs must be able to demonstrate that they invested at least one million (1,000,000) Georgian Laris in the construction of the hotel in the free tourist zone; and Finally, entrepreneurs shall comply with the permitted activities of the hotel. The permitted activities include renting of hotel rooms and provision of related services as well as operation of dining facilities, swimming pools or casinos in



Commercial Director: Iva Merabishvili Marketing Manager: Mako Burduli


the hotel building. Generally, all entrepreneurs registered in the free tourist zones shall ensure that their activities are in compliance with the terms and provisions of the Law on FTZ and other applicable regulations.


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Profile for Georgia Today

Issue #802 Business  

Dec. 15 - 17, 2015

Issue #802 Business  

Dec. 15 - 17, 2015