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Issue no: 818/14
• FEBRUARY 16 - 18, 2016
• PUBLISHED TWICE WEEKLY
PRICE: GEL 2.50
In this week’s issue... President of Georgia Nominates Candidate for New NBG Board Member Position PAGE 2
FOCUS
ON IRAN-GEORGIA RELATIONS
Alex Vatanka and the open ‘gate of all nations,’ Persepolis, Iran
Alex Vatanka, Senior Fellow at the Middle-East Institute in Washington, talks the future of neighborly relations
PAGE 3
Georgia May Issue Eurobonds in 2016 BY ANA AKHALAIA
G
eorgia may issue Eurobonds in 2016 and is expecting additional resources from international financial institutions to deal with economic slowdown caused by problems in neighbouring countries, Prime Minister Giorgi Kvirikashvili has stated. He says the government is planning to hold a series of roadshows in the United States and other countries to attract foreign investment. “I can’t predict whether we will need to issue Eurobonds, but if speeding up infrastructure projects requires attracting additional investments, including via Eurobonds, of course, we will do that, maybe later this year,” PM Kvirikashvili told Reuters in an interview. Continued on page 2
Bordeaux to Host Exhibition Dedicated to Georgian Wine-Making and Viticulture PAGE 2
Young Seedlings of Georgia’s Agriculture ISET PAGE 4
Turkey’s Healthcare Reform GALT & TAGGART PAGE 6
Unbelievable Payment Terms a First for the Georgian Real Estate Market PAGE 8
Medicine Costs to Be Lowered, Transparently PAGE 11 Prepared for Georgia Today Business by
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BUSINESS
GEORGIA TODAY
FEBRUARY 16 - 18, 2016
Bordeaux to Host Exhibition Dedicated to Georgian Wine-Making and Viticulture
President of Georgia Nominates Candidate for New NBG Board Member Position BY EKA KARSAULIDZE
G
eorgian President Giorgi Margvelashvili nominated former International Monetary Fund (IMF) senior economist Koba Gvenetadze to be the seventh board member of the National
BY ANA AKHALAIA
T
he Bordeaux Center for Wine and Civilizations will host a large scale Georgian exhibition dedicated to wine-making and viticulture in 2017. Georgia will be the first invited country to open the series of exhibitions of winemaking and viticulture in the Bordeaux Center. In recognition of the importance of the event, the Georgian government has set up a special commission, composed of representatives of various government agencies and headed by the Minister of Agriculture, Otar Danelia. The Commission should ensure the event is conducted successfully and at a high level. The Commission has already held a meeting to discuss preparation of information materials and
literature for the Center and the selection of wines to present at the exhibition. “Bordeaux is a world center of wine-making. Presenting Georgia at the exhibition, as a cradle of wine, will promote our country in Europe and throughout the world,” Minister Danelia said. “It is important that Georgia be presented at the exhibition not only in terms of wine-making, but also in terms of culture, ethnography and history. That is why organizers include representatives of the ministries of Agriculture, Foreign Affairs, Education and Science, Culture and Monument Protection, and Economy and Sustainable Development.” The Bordeaux Center for Wine and Civilization will open on May 31st, 2016. Building the large-scale complex was initiated by the Bordeaux City Mayor, Alain Juppe. The Center, which is 14 thousand square meters, will feature modern architecture and technology and will present the latest achievements in the field.
Bank of Georgia (NBG) on February 11. A place on the NBG Board become vacant at the end of February after the National Bank president Giorgi Kadagidze’s expiration of term of tenure. The Parliament of Georgia has yet to confirm its final decision regarding this nomination. Representatives of the Parliament are in no hurry to announce their decision, though it has been said they highly appreciate Gvenetadze’s qualifications. “The President of Georgia has an exclusive opportunity to propose a candidate for membership on the board. We will take his candidate of choice into consideration,” said Parliament Chairman, David Usupashvili. President Margvelashvili considered Gvenetadze along with Maia Melikidze and Giorgi Bakradze. Experts and non-governmental organizations chose these three candidates according to pre-agreed criteria, such as vocational education, professional qualifications, and political impartiality. The selection process included consultation with experts and the electronic process of assigning points. Gvenetadze himself currently works as an eco-
nomic adviser at Galt and Taggart, which established itself as Georgia’s leading investment banking and investment management services company. Moreover, he has an interesting professional background, having held various posts in the Georgian Government including as Deputy Finance Minister and Deputy State Minister, as well as enior economist at the IMF and the NBG. “Koba Gvenetadze is a high-level professional. He has extensive experience in the financial sector and the economy,” said Head of the Presidential Administration, Giorgi Abashishvili. “It is important that a new member of the board promptly assumed his duties, as such the President of Georgia named the candidate in good time,” he added. Current President of the NBG, Giorgi Kadagidze, will leave his post and consequently make vacant one further position on the board on February 25. The Parliament of Georgia must choose who will become its new seventh member after which, representatives of the board will choose the future NBG president themselves.
Georgia May Issue Eurobonds in 2016 Continued from page 1 The PM discussed planned tax reforms that would include abolishing corporate profit tax, a simplification of tax administration and further liberalization of the economy. He believes it is possible to make Georgia’s economy comparable to eastern European standards in terms of revenue and per capita GDP within a decade. The PM also told Reuters that, after the lifting of international sanctions, Iran could bring a new
10 Galaktion Street
dynamism to the region, and that Georgia’s location at a crossroads between Europe and Asia put it in a position to boost cooperation between Iran and Europe. “Iran is ready to discuss cooperation in different fields, including in the energy sector, which can be very interesting for Europe to diversify its energy supplies,” PM Kvirikashvili said. Georgia issued USD 500 million worth of 10-year Eurobonds in 2011 and at the same time bought back USD 417 million of its five-year USD 500 million Eurobonds, which it issued in 2008.
Tel: (995 32) 2 45 08 08 E-mail: info@peoplescafe.ge
BUSINESS
GEORGIA TODAY FEBRUARY 16 - 18, 2016
Round Two of Georgia-Iran Relations: What does the Future Hold? BY ANNA KALANDADZE, VOA
V
oice of America’s Georgian service and its chief Anna Kalandadze sat down with Alex Vatanka, Senior Fellow at the Middle-East Institute in Washington to discuss Georgia and Iran relations, proposed plans for closer economic integration and in broader terms, analyze Iranian President Hasan Rouhani’s mission after the Nuclear Agreement was reached with the West.
HOW DO YOU UNDERSTAND IRAN’S DESIRE TO START RELATIONS WITH GEORGIA? President Rouhani of Iran was elected back in 2013 on a simple pledge to overhaul Iranian foreign policy. He’s done plenty on that front. We’ve seen the agreement on the nuclear issue and we’ve seen a huge European and Asian interest in Iran in terms of political and economic relations. Now, the country of Georgia happens to be one of Iran’s closer neighbors. It’s a country that has historically been close to Iran and I think both sides, the Iranian side and the Georgian side, going back to 1991, have desired to maintain close relations. In recent years Georgia came under
pressure from the United States to cooperate with the Washington policy of isolating Iran until a nuclear agreement was reached. That Georgia did, because the fact is Georgia obviously feels that ties with the United States are more important than with Iran. But right now there’s an agreement in place and I think it allows Georgia to move closer to the
Georgia does not have the knowhow or the finances that Iran needs for its critical oil and gas sector. For that you need to go to Europe
Iranians. Whether or not there will be commercial opportunities for Georgia, and whether Iran will provide any economic opportunities for Georgia, time will show.
WHY SHOULD GEORGIA BE REVERTING BACK ON THE NO-VISA POLICY NOW, AFTER IT CANCELLED A SIMILAR POLICY BEFORE? Georgia is geographically positioned between two giants: Russia to the north and Iran to the south. At the same time, Georgia has been pursuing a mostly western-centered policy since gaining independence. It puts Georgia in an awkward position, particularly when Russia or Iran have difficulties with the West. But right now we are in a moment when the United States is not blocking Iran’s neighbors from engaging with Iran. Washington’s policy is that as long as Iran delivers on the nuclear front then it’s free to trade and invest in Iran. The risk here is that something happens and the nuclear agreement falls apart. I think that risk is very minimal for the foreseeable future, but there is always a risk. Iran is looking to build political alliances with major international actors which is why Iranians are so keen to reach out to Germany, France, Japan and
3
President Rouhani of Iran was elected back in 2013 on a simple pledge to overhaul Iranian foreign policy
China, as well as the rest of the world. Smaller countries like Georgia are also opportunities for Iranians to fix their image internationally. I think a country like Georgia was useful for Iranians for practical reasons a couple of years ago when there was a visa free regime and Iranian money, investors and businesses went to Georgia. It became a ‘Dubai of the North’ for the Iranians. But as we saw, once Washington put pressure on Georgia, Georgia had no option but to stop what it was doing with Iran. This is going to be round two and time will show if this round will last longer than round one.
WHAT CAN GEORGIA’S RELATIONS WITH TEHRAN ADD TO THE COUNTRY’S WELL-BEING? I would say Georgia is not alone in this dilemma. When all of Iran’s 15 immediate neighbors have been forced to choose between the United States or Iran, almost all of them have chosen the United States. Georgia is not a special case here. You have to choose the big power called the United States, or a closer neighbor called Iran. But now the situation has changed. Now the Iranians are saying: we are not Iran of Ahmadinejad. Now there is a different Iran. The United States is not impos-
ing penalties on countries like Georgia for trading with Iran. So the landscape has changed and as I said earlier, now the question is - can Georgia offer Iran commercial opportunities and can Iran offer Georgia economic opportunities? Because that’s the key. Now the question is what can Iran and Georgia achieve together - they’ve talked about trade and energy; they’ve talked about Iran buying Georgian water; they’ve talked about Georgia becoming a transit for Iranian goods to Europe. There’s a lot of talks about all sort of things they can do. The key question is: can it now go from just talking to something much more concrete.
WHAT DOES IRANIAN PRESIDENT HASAN ROUHANI INTEND TO DO THROUGH HIS NEW FOREIGN POLICY AGENDA IN THE REGION, AS WELL AS INTERNATIONALLY? My prediction is that while Rouhani is around, he’s going to focus on the European Union. I think the neighboring states with a few exceptions like Turkey are not that economically important. What they want is know-how and finances. Georgia does not have the know-how, or the finances, that Iran needs for its critical oil and gas sector. For that you need to go to Europe.
4
BUSINESS
GEORGIA TODAY
FEBRUARY 16 - 18, 2016
THE ISET ECONOMIST A BLOG ABOUT ECONOMICS AND THE SOUTH CAUCAUS
www.iset-pi.ge/blog
The ISET Policy Institute (ISET-PI, www.iset-pi.ge) is an independent think-tank associated with the International School of Economics at TSU (ISET). Our blog carries economic analysis of current events and policies in Georgia and the South Caucasus region ranging from agriculture, to economic growth, energy, labor markets and the nexus of economics, culture and religion. Thought-provoking and fun to read, our blog posts are written by international faculty teaching at ISET and recent graduates representing the new generation of Georgian, Azerbaijani and Armenian economists.
Young Seedlings of Georgia’s Agriculture BY LASHA LANCHAVA AND NINO ZAMBAKHIDZE
A
ncient Greeks’ fascination with Georgia was not limited to the Golden Fleece. The legend has it that ‘Georgia’ comes from the Greek γεωργός (Georgios), reflecting the advanced land plowing practices of Georgian tribes, which distinguished them from their nomadic and yet unsettled neighbors. The Georgians (Colchians and Iberians, to be more precise) must have really made a formidable impression on the Argonauts to deserve such a recognition. Fast forward to the 21st century. According to the CIA World Factbook, Georgian agriculture employs a mind-blowingly high share of the country’s labor force (55.6%) with agricultural productivity remaining virtually stagnant over the past two decades. According to The World Bank data, Georgia’s agricultural value added per worker is one of the lowest among developing countries and is way behind that of our European neighbors. There are numerous reasons for the low productivity of Georgian farmers. The usual suspects are: endemic infrastructure problems; outdated technology and equipment; lack of professional skills and knowledge; and severe liquidity constraints – a key
cause of underinvestment in the sector. While these challenges are well-documented, the root cause of the problem (and its potential cure) may be elsewhere. This view comes from an authoritative source: Nino Zambakhidze, a well-known (agri) businesswoman, and head of the Georgian Farmer Association (GFA). What is really crucial for Nino is the fact that the vast majority of Georgia’s rural youth leave their villages and move to the cities. “Most young people I meet on my trips to the countryside simply don’t see their future in agriculture”, says Nino. “They lack appropriate role models and have no idea how a successful farmer may look like. They don’t understand what benefits they might derive from agriculture, and have no incentives to invest in those skills and knowledge that would help them become successful farmers and agricultural business managers. Yet, if there is any hope for Georgia’s countryside it must be associated with those very youth. They are the ones who can breathe new life and bring the much needed efficiency to the agricultural sector.“ While heartbroken, Nino was determined to turn the tide. As a first step, she resolved to find successful young entrepreneurs who work in agriculture and have the leadership skills to ignite hope in the hearts of many more young Georgian farmers. And it did not take long until Nino had the-one-whoseeks-finds moment, when Baia Abuladze – a 22 year old winemaker who recently stormed the Geor-
Baia’s Wine can be found in Tbilisi restaurants and stores
gian cyberspace – knocked on the doors of GFA. Says Nino: “I met Baia on the GFA premises. Her eyes bristled with enthusiasm as she was telling me her story. What immediately struck me was a great sense of humor and an irresistible drive.” What followed was an incredible success story.
SHE CAME AND SHE CONQUERED Baia was born and raised on her parent’s farm in Obcha village (Baghdati region in Imereti). As a typical agricultural family, the family owns cattle, domestic animals, and cornfields. However, Baia’s family owns the largest vineyard in the village, and winemaking has been its main business for years. While being an outstanding student at the local school, Baia did not hesitate to get her hands ‘dirty’. From early spring to late autumn she helped operate the family farm. ‘My father would not fit into a kvevri. I had to jump in and help him get it washed’ – quips Baia with a radiant smile. The hard work and dedication produced what is highly valued in business and cannot be acquired at any school or university – experience! “Baia took my breath away with her knowledge of winemaking. She spoke about the subject with the precision and passion of an artist paying attention to every stroke of her brush while painting a masterpiece.” Like many kids of her generation, Baia went to study in Tbilisi, majoring in political science at Tbilisi State University and continuing to a Master’s program in public administration at Ilia State University. But she never severed ties with the village and her family farm. Although the family owns an apartment in Tbilisi, the only place Baia calls Home is her ancestral Imeretian Oda in Obcha. She remembers longing for the summer holidays when she would be able to come home and give her family a helping hand. Baia slowly came to realize that her family’s winemaking business had great potential for growth. Higher education and life in the capital helped her understand that in order to be successful in winemaking she had to create a brand and market bottled wine. She used her skills to secure a 5,000 GEL grant from the Agricultural Projects’ Management Agency (APMA). “The grant allowed us to buy everything we needed for bottling” – reflects Baia. Then came the process of label design in which Baia also played a vital role. After a while, Baia’s hard work and determination have finally paid off: Baia’s Wine was born! Having secured contracts with five stores and two restaurants in Tbilisi, Baia was already planning to distribute her wine in Batumi. “It was such a pleasure when they called and told me that my wine was selling well. An amazing feeling of accomplishment,” notes Baia with pride. However, Baia’s life was to change once again. It all started when Baia came across a Facebook post about GFA. Curious, she wrote to Nino and requested a meeting. Two days later, Nino helped Baia write a blog article telling her story. From that day on, this story was all over Georgian TV channels, online media, newspapers and magazines. “I received 1,500 Facebook friend request and 500 messages in just a few days,” recalls Baia. This was a defining moment. Baia fully appreciated the value of publicity that her acquaintance with Nino generated. As more and more people got to know about her family and village she felt proud for her accomplishments and finally came to understand that winemaking has always been the love of her life. “Without Nino’s support,” – says Baia, “I would have perhaps ended up becoming an academic. It is all different now. With so many people
watching and supporting me, I feel responsible for upholding the name of my business, my family and village. This gives me a totally different motivation. I am 100% devoted to my business now.”
FINDING STRENGTH IN UNITY Encouraged, Nino continued her quest and found many other like-minded young farmers. She recounts the story of each and every one of them as a proud and caring parent. She knows to tell about Gurami from Bodbe who practiced butchery since he was 14. “Gurami’s Meat” – a brand created by Gurami and his brother – enjoys great reputation all over Kakheti. And there are Melano, who grows mushrooms, and Nodar, who produces milk, cheese and other dairy delicacies in the Georgian highlands. There is Mindia from Samegrelo whose honey is beyond competition. And there is Giorgi from Samtskhe-Javakheti who owns vine terraces and produces traditional Meskhetian wine. ‘They are all well-educated, have charisma and are good public speakers. They understand marketing 101 and have a passion for business. They know English and can go online to find anything they need for their business,” Nino says with pride. Nino was determined to make these young farmers known to a larger audience. “With publicity one can kill two birds with one stone,” says Nino. One the one hand, public recognition is a formidable incentive for these young guys to do their best and continue to improve their products. On the other, their example would be a signal to many others that going back to one’s village and operating a successful agribusiness can be really ‘cool’”. Nino very well understands that this is just the beginning of a long journey. In order for these well motivated young professionals to have an impact on the lives of their fellow young citizens, she decided to bring them together and create an organization - the Young Farmers Association (YFA), to be led by Baia. The main objective of YFA will be to advocate for youth in agriculture, to identify motivated young farmers in need of help and guidance, and provide them with the professional advice they seek. “They speak the same language and it will be easy for them to relate to their young friends. Their voice will be heard,” Nino believes.
YOUNG AND MOTIVATED Baia and other YFA members are obviously the cream of the crop. And Baia, like Nino, does not underestimate the gravity of problems plaguing Georgia’s agricultural sector. However she remains hopeful. “Agriculture is a priority for the government and donors. I receive many messages from young farmers who need advice on possible sources of startup capital, how to write grant applications, where to look for appropriate trainings.” “All we want is nudge them in the same way in which I was nudged by the APMA grant of 5,000 GEL and Nino’s help with publicity... We provide a little push and they will do the rest. They have sufficient ability and experience,” she proudly concludes. * * * Agricultural development is indeed a high priority item on the agenda of the Georgian government and international donors. Yet, so far, neither government policies nor millions of dollars and Euro spent by the international community in agricultural subsidies and grants have failed to bring about the needed change. Perhaps, they are betting on the wrong (old) horses?
6
BUSINESS
GEORGIA TODAY
FEBRUARY 16 - 18, 2016
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.
Turkey’s Healthcare Reform FOR GEORGIA TODAY BY DAVID NINIKELASHVILI
S
ector research is one of the key directions of Galt & Taggart Research. We currently provide coverage of Energy, Tourism, Agriculture, Real Estate, and Wine sectors in Georgia. Healthcare is the latest addition with the full report recently released. In this second article of this series, we provide an overview of Turkey’s healthcare reform as the country has become a benchmark for building a universal health care (UHC) system. Turkey is Europe’s 8th and the world’s 18th largest economy (US$ 800bn as of 2014). Over the last few years, Turkey undertook major reforms and transformed its healthcare model into an effective UHC system. Turkey’s healthcare spending per capita more than tripled from US$ 180 to US$ 608 from 2002 to 2013. In 2003, only 24.0% of Turkey’s poorest 10.0% had health insurance (compared to almost 85.0% in 2011). Moreover, out-of-pocket spending accounted
for almost 2/3 of private healthcare spending in Turkey (65.7%). The situation was even worse in Georgia in 2000, as an estimated 87.0% of all health spending was out-of-pocket, the highest rate of private spending in the region. This forced many families into poverty. Turkey faced up to its challenges and started reforms in 2003 with the aim of making care universally accessible. Officials studied health sector reforms in Finland, France, Mexico, and Cuba to identify relevant takeaways for Turkey. The Health Transformation Program (HTP) was designed to address inequality and poor standards of care, as well as high out-of-pocket spending. A special focus was put on developing primary care as a preventive institution. Over 2002-06, Turkey increased the budget allocated for preventive and primary healthcare services by 58.0% in real terms. To that end, the Family Medicine Program assigned each patient to a specific doctor. Implemented in 2004, a performance-based payment system for health professionals in hospitals fostered productivity, improved technical quality, and strengthened the focus on patients. The MoH focused initial efforts on
‘emergencies’ that could be fixed quickly and yield immediate results. Only afterwards did the focus shift to systemic issues. In 2006, the 3 existing social security funds were merged into a single Social Security Institute that would provide a uniform benefit package to all beneficiaries. Hospitals owned by social security funds were transferred to the MoH to create a unified public hospital system. Investments were made into infrastructure, equipment, and staff training, while wage hikes helped address the issue of poor productivity. Similar to Georgia, Turkey’s public insurance first targeted the poorest population. The number of covered individuals was then increased gradually from 2.4mn in 2003 to 10.2mn in 2011. By 2011, the publicly financed social security system played a critical role in the provision of healthcare services in Turkey - public healthcare spending came in at 76.8% of total healthcare spending compared to the OECD’s 72.2% average. Furthermore, out-of-pocket payments accounted for 17.6%, below the OECD average of 19.0% and a fraction of Georgia’s 64.9%. Social security coverage reached 100% in 2012 (Georgia introduced 100% coverage in 2013). As a result of the reforms, Turkey’s healthcare system is in good standing, although there is still room for improvement. By 2013, Turkey significantly increased the number of healthcare professionals to 1.8 physicians and 2.5 nurses per 1,000 persons. This, however, still lags the OECD average of 3.3 physicians and 8.7 nurses per 1,000 persons. With increased access to care, life expectancy in Turkey increased from 74.7 for females and 67.6 for males in 2002 to 78.7 and 71.8 in 2013, respectively. As a result of the HTP, satisfaction with primary care services increased from 69.0% in 2004 to 90.7% in 2011 and satisfaction with health services in public hospitals increased from 41.0% in 2003 to 76.0% in 2010. As a result of the major upgrade of its healthcare system, the number of foreigners receiving healthcare services in Turkey increased from 74,000 to 270,000 over 2008-12. The attraction lies in world standard quality care, inexpensive and personalized service, short wait times, as well as the country’s nonmedical cultural attractions. Health tourists came predominantly from Germany, Azerbaijan, Bulgaria, Iraq, Romania, and Libya, as well as from Georgia. We believe, if developed properly, Georgia’s healthcare system would be able to not only retain internal patients but attract a significant number of health tourists, especially from nearby countries. Turkey’s MoH is cooperating with the Ministry of Culture and Tourism to further increase the scope of health tourism. The segment was projected to add US$ 7bn in revenue from 0.5mn foreign patients in 2015 and US$ 20bn from 2mn patients in 2023. Turkey’s lessons are useful for Georgia: a clear statement of objectives, sequencing of reforms, strong political support, a focus on visible outcomes, and monitoring of progress toward the objectives are all key to successful healthcare system reform.
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BUSINESS
GEORGIA TODAY
FEBRUARY 16 - 18, 2016
Unbelievable Payment Terms a First for the Georgian Real Estate Market
R
esidential complex Green Budapest – the project of international construction company Maqro Construction, is offering ideal and very flexible conditions to customers seeking to buy a new apartment. Purchase the home of your dream by paying just 30% of the total sum in advance and then spread out further payments over the next 100 months interest-free. The apartments will be handed over on a turnkey basis. The offer allows customers to use flexible terms of payment and avoid additional expenses related to installments with interest. The company offers a variety of payment conditions in order to meet the individual requirements of its customers. Customers can even extend payments beyond 100 month to 120 months (10 years) with just 1.32% yearly interest or even 180 months (15 years) with just 3.99% interest rate. These interest rates are unprecedentedly low for the Georgian market. For payment in full the company is sticking to its offered discount of -15%. Customers can also get -15% discounts and make payments over 100 months with just a 6.55% interest rate. Such an interest-free payment system is very rarely offered in Georgia. No other company offers such flexible terms
as 100-month domestic installment without any commission fee or interest rate. The reason for this ideal offer is that we want our Green Budapest residents to follow comfortable terms of payment and simplify their lives. The project is due for early completion- the complex will be ready four months earlier, in May, 2016, than forecast, representing another very rare event on the construction market. The number of flats in the residential complex is now limited. Those who want to live in the city center, in a green zone, in an apartment constructed according to European standards, should grab this offer while they can. Couples planning to start living in a pleasant and cozy environment should not miss out either. Nor should families, as the terms are attractive for those searching for innovation and maximum comfort combined. The offer is also interesting for families planning to purchase flats for their children in a safe and comfortable environment. The conditions are also attractive for those living abroad but wanting to invest their money in Georgia. Real estate bought in Green Budapest is the best investment for a family that can be used for personal as well as commercial goals. A landlord can rent out a flat and cover
the installments by means of the received income. The only amount that the customer needs to pay is a 30% deposit. Alternatively, a customer renting out an old apartment can pay that 30% and live in the comfort of the Green Budapest complex knowing that the rent will cover their installments. The Company’s conditions are just as attractive for organizations that have to work with foreign partners, as an apartment in Green Budapest will absolutely satisfy the requirements of foreign guests working in Georgia for the long term. The infrastructure with which the complex is equipped will create the best conditions for them to feel at ease away from home. The Green Budapest complex is the largest in scale of the international Maqro Construction Company, a USD 45 million investment that is listed in the top ten in the country in terms of implemented direct foreign investment, according to the preliminary data published by the National Statistics Service. Green Budapest is a residential complex covering 11,700 square meters and offering 351 fully renovated apartments of European standard, including: bathroom set, kitchen furniture and built-in appliances. The multi-profile infrastructure, green area, basketball court, skateboard ramp, running tracks, indoor and outdoor parking places and more are the
main advantages of the residential complex. The residential complex is located in the city center but surrounded by a recreational zone that is a guarantee for coziness and ecological health. The construction is being carried out using ecologically safe materials. The residents
are allowed to choose the color and quality of internal-renovating materials. The territory will be protected and cleaned for free for a year as well as the gardens being maintained. Hurry! All you have to do is live happily, and your construction company will take care of the rest!
BUSINESS
GEORGIA TODAY FEBRUARY 16 - 18, 2016
Hotel Management and Online Booking System to be Introduced in Georgia
BY ANA AKHALAIA
A
new hotel management, online booking and payment system is being introduced in Georgia. The new online program ‘Hotel Management and Online Booking’ is initiated by organization Pro-Service with the support of TBC bank and the Georgian National Tourism Administration. The program is a novelty on the Georgian market and aims to support small and medium tourism businesses. The main segment is hotels throughout the county. The service will make it possible for potential hotel guests to check the availability of desired hotel rooms online. They also will be able to book rooms online with credit cards and pay directly or later at the hotel. The offer is especially interesting for those hotels
which do not have a web page. Within the project, hotels will be provided with the Hotel Management and Online Booking System software, as well as a web page and 1 GB hosting. “Today, almost every hotel uses international hotel booking systems as mediator agents. However, these portals have quite high fees,” said Project Manager, Revaz Natroshvili. “Our mission is to support the development of tourism and to offer our users cost-effective prices. Customers will have to pay only a fixed monthly fee which does not involve an additional fee regardless of how many guests use the online booking service.” Founded in 2003, Pro-Service plans and implements internet projects and provides service for more than a thousand organizations and individuals. The Hotel Management and Online Booking System has already been launched for hotels and is gradually being integrated. It also provides trainings in Tbilisi and other cities for those involved in the program. Trainings are conducted free of charge by the technological experts of Pro-Service.
‘Laurus’ to Produce and Export 200 tons of Bay Leaves BY ANA AKHALAIA
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efinery enterprise Laurus, located in Senaki, western Georgia, plans to produce 200 tons of bay leaves and export them to the international market. According to founder of the enterprise, Zaza Jalaghonia, the bay leaf is one of the most in-demand products in the international market and the company’s future goal is to produce a high-quality product and expand processing to 200 tons of bay leaves which will be exported to the Russian Federation. Laurus was founded in October, 2014, financed with preferential Agro-credit by the government. According to the Minister of Agriculture, Otar Danelia, it is one of the most successful enterprises
in bay leaf production in Georgia. “The new enterprise provides a full cycle of bay leaf processing,”MinisterDaneliastated.“Theimplemented investment is USD 250,000, from which USD 150,000 is preferential Agro-credit through a government supported fund. More than 100 people are employed in the enterprise. A number of other similar enterprises are expected to open in western Georgia.” According to Samegrelo-Zemo Svaneti Governor, Levan Shonia, opening new enterprises will support the employment opportunities for locals in the regions. The Projects Management Agency of the Ministry of Agriculture began financing new enterprises and expanding existing ones in 2013. According to the Agency, more than 600 operating enterprises have been funded, 147 new enterprises have been created and about 10 thousand people have been employed through the project so far.
According to the Minister of Agriculture, Otar Danelia, Laurus is one of the most successful enterprises in bay leaf production in Georgia
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BUSINESS
GEORGIA TODAY
FEBRUARY 16 - 18, 2016
TBC Bank Signs 3 Agreements with Asian Development Bank BY KATIE RUTH DAVIES
T
BC Bank has announced the signing of three agreements with the Asian Development Bank (ADB). As a result, the Bank received a 10-year subordinated loan in the amount of USD 50 million, which is the first such agreement between TBC Bank and ADB. This transaction will further strengthen TBC Bank’s tier two capital, enabling the Bank to grow in accordance with its strategy.
With the second agreement, ADB provided a 5-year USD 50 million senior loan facility which will be dedicated to extending credit to the under-banked small and medium businesses outside the capital city. The proceeds of the senior loan will fund the investment needs of the micro and small enterprises (MSMEs) in the regions of the country. This is the second such partnership between TBC Bank and ADB to help further expand MSME lending and entrepreneurship activities in Georgia. The two loan facilities are available from TBC Bank either in Euro, Dollar
or Georgian Lari. The third agreement between the parties is a technical assistance grant of USD 500,000 provided by the ADB in support of TBC’s ongoing SME Academy, the Bank’s flagship project to provide training and advisory services to upgrade entrepreneurship skills and create business solutions for micro and small businesses across Georgia. “We are delighted to continue our successful partnership with the ADB. These two facilities and the SME technical assistance support project will help the Bank to further strengthen its position in the MSME segment by expanding its
Vakhtang Butskhrikidze, TBC Bank’s CEO and Rainer Hartel, ADB Director
portfolio in rural areas of Georgia, where credit availability is relatively limited at present. We are especially pleased to continue our very productive cooperation with the ADB. With the completion of these transactions, ADB’s total exposure to TBC Bank will amount USD 150 million,” said Vakhtang Butskhrikidze, TBC Bank’s CEO. “We are pleased to deepen our relationship with TBC Bank, boosting economic development in Georgia’s regions by providing essential advisory and
financial services to MSMEs and helping improve income and employment through private investment,” added Rainer Hartel, ADB Director. ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members - of which 48 are from within Asia and the Pacific and 19 outside. Georgia has been a member country since 2007.
Over 3 Million GEL Allocated for Tea Rehabilitation in 2016 BY ANA AKHALAIA
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ast year Georgia’s government announced plans to rehabilitate Georgian tea plantations under the program Georgian Tea which was to launch in 2016. Currently, active preparatory works are being carried out in this direction. According to Deputy Director of Agricultural Projects Management Agency, Mamuka Kvaratskhelia, the program is limited in terms of agricultural timing but the process is on-going.
“We have tea plantations in Georgia. It was about 64 thousand hectares in the Soviet era yet today the majority of the land is totally devastated and other crops are grown there,” Kvaratskhelia told Business Press News. “This program serves to utilize existing potential. The government is creating a tool which can make this sector interesting for business operators, since they will be the ones to develop it in the future.” The government will encourage those who decide to invest their own money in this field by offering 25-year lease agreements with a symbolic price of 50 GEL on state-owned lands with tea plantations.
The project is being carried out in several stages. The State Budget has allocated 3.5 million GEL for the first stage, in 2016. This budget will be sufficient to rehabilitate an expected two thousand hectares. According to Kvaratskhelia, the rehabilitation period depends on the true state of the tea plantation. The maximum time is three years, but in some cases it may take just one year to yield results. At the first stage tea plantations must be selected and their potential assessedwhether or not rehabilitation is possible. If so, the second task is to determine if the planned works in a calculated time
period can provide a high-quality product. And, as Kvaratskhelia stated, the Ministry of Agriculture research center has the potential to determine these factors. “The program doesn’t provide for naming target countries to export tea to. To bring any type of good to Europe, appropriate certification is necessary. Entering Europe is not possible without standardization and certification. [Which is why] we are working in this direction, too,” Kvaratskhelia said. Tea produced within the program will be of necessity high quality and of a standard controlled by a scientific body.
BUSINESS
GEORGIA TODAY FEBRUARY 16 - 18, 2016
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Medicine Costs to Be Lowered, Transparently ments of the company, but this is due purely to his own qualifications. “I want to highlight that the negotiations between the Partnership Found and Humanity Georgia started before my appointment
BY EKA KARSAULIDZE
A
new pharmaceutical factory is to be built in Georgia to reduce the cost of drugs in 2018. The new factory will be able to produce 900 kinds of medicines for local market and export in a USD 131 million project being implement by the Partnership Fund and Humanity Georgia, which represents Austrian Humanity Holding GmbH Consortium group. The problem of high drug prices has affected the residents of Georgia for many years. The Ministry of Health, Labor and Social Affairs and the Government of Georgia confirm that this is one of the hottest topics today, and recognize that the prices in-country are substantially high. After coming to power in 2012, the current government promised to make price-cuts a priority, but no significant steps were taken in this regard until Austrian company Humanity Holding GmbH made a proposal to establish the company ‘Humanity Georgia’ and build a factory for the production of essential drugs, as a result of which the prices will be much lower than for existing drugs. According to Head of the Partnership Fund, David Saganelidze, construction of the factory will begin in spring 2016 and after two years will be ready to operate.
Employing around 300 local and foreign specialists, the factory is expected to meet international standards. Of the approximately 1,000 registered drugs in Georgia, the factory will produce at least 900 of the most in-demand. Moreover, the drugs from the Georgian factory are to be exported. “Naturally, the drugs produced here will be generic [not original], but they will have a high quality,” said Saganelidze. “Further, they will be affordable for our population. Following the launch of the factory, we expect drug prices to be cut by half. And before that, in the near future, prices are expected to be reduced by 30 percent,” he added. According to Humanity Georgia’s web-
as the head of the Fund (October 2015) and my nephew was already working there. As such, I have no personal connection with his current position,” noted Saganelidze.
site, their main purpose is to produce medicines at affordable prices and they focus particularly on developing countries. Yet their appearance on Georgia’s pharmaceutical market has given rise to a number of questions. One of them was the incomprehensible decision of the State to sign a contract with a new company while there are already pharmaceutical companies well-established here. In addition, according to the NGO Transparency International Georgia, David Saganelidze’s nephew holds one of the head positions in Humanity Georgia. Saganelidze responded that the government is in favor of open competition. Moreover, his nephew in fact is the deputy director of one of the depart-
Georgian Wine Presented at Top Washington University BY TAMAR SVANIDZE
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op US university, Georgetown, held a wine tasting event highlighting vintages from Georgia, Azerbaijan and Turkey. The America-Georgia Business Council, United States-Azerbaijan Chamber of Commerce (USACC) and AmericanTurkish Council, with support from the Azeri, Georgian and Turkish embassies, hosted the event to promote the Caucasus region’s unique wine-making culture to the American public, the Georgian
embassy said in its statement. Highlighting the event was an introduction to the 8,000 year-old Georgian technique of Qvevri wine-making, still in use throughout Georgia. In 2013, UNESCO included Qvevri wines on its list of Intangible Cultural Heritage. Guests at the event included US government officials, members of the diplomatic corps, media as well as sommeliers and distributors in the Washington D.C. area. Azeri ambassador Elin Suleymanov emphasized that the development of the country’s non-oil sector is one of Azerbaijan’s economic priorities. “This event is significant in terms of
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stimulating and promoting the export of non-oil products. In particular, Azeri wines,” Suleymanov said. Archil Gegeshidze, Georgia’s ambassador to the US, emphasized the importance of cooperation between the three countries and praised the event as an opportunity to promote the region’s wines to the US.
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