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Issue no: 1040/125

• APRIL 17 - 19, 2018

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue... Colliers International Georgia Publishes Report of Airbnb Activity in Tbilisi for 2017 NEWS PAGE 2

FOCUS

ON SUPPORTING GEORGIA IMF gives thumbs up to Georgia's economic policy, EU gives €45 million in macro-financial aid PAGE

The Knowing of Not Knowing in Water Management (& How to Tackle the Issue) ISET PAGE 4 Prepared for Georgia Today Business by

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T

he initiative group of the miners from Tkibuli, a town in west-central Georgia, Imereti region, has addressed the coal mining company, Saknakhshiri, demanding a safe working environment and proper labor conditions. The miners’ statement came around two weeks after the tunnel collapse in Mindeli mine in Tkibuli, which left six miners dead and three injured. Continued on page 2

Photo: Tkibuli miner

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2

NEWS

GEORGIA TODAY

APRIL 17 - 19, 2018

Colliers International Georgia Publishes Report of Airbnb Activity in Tbilisi for 2017

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ccording to the overview carried out by global real estate services company, Colliers International, the number of properties listed on Airbnb grew significantly in Georgia last year- by 70%- from 5,678 in 2016 to 9,679 in 2017. The Average Daily Rate (ADR) for Tbilisi’s Airbnb amounted to USD 43. In 2017, 50% of listings were provided

by hosts with just one listing. However, 32% of listings were offered by hosts who have more than two listings on Airbnb, possibly indicating professional undertakings through Airbnb. The share of such hosts was 10% in 2017. The most popular districts with guests were Mtatsminda, Saburtalo and Chughureti. These districts accounted for 78% of all Airbnb booked nights.

“We expect the number of listed properties to grow significantly in the coming years, increasing competition in the hotel market even further,” said Nino Makasarashvili, Research Analyst at Colliers International Georgia. Airbnb boasts more than 4 million listings in 191 countries. On any given night, 2 million people stay in homes on Airbnb in 65,000 cities all over the world.

Tkibuli Miners Demand Safer Working Conditions Continued from page 1 In their April 15 address to Saknakhshiri, the workers have listed three main demands: • To temporarily suspend the operation of the Tkibuli mines. “The company and the State must improve the existing labor conditions and safety problems in the mines,” the statement reads. • Make a collective agreement between the employer and the employees, which will provide adequate employment and social guarantees for the miners. • Immediately dismiss those who were responsible for safety in the mines, or lack thereof, which resulted in the recent incident. Two days ago, one of the miners working in Tkibuli mining enterprise shot a video depicting the working conditions in the mine, which went viral on social networks. The video was released by the Non-Governmental Organization Human Rights Education and Monitoring Center (EMC). Miners often claim that the working conditions in the mine are not in line with the regulations,

adding they are risking their lives on a daily basis. Saknakhshiri claims the recent tragedy in Mindeli mine did not happen due to a breach of safety norms. “There was a mining blow that led to the ceiling collapse. A huge amount of air pressure was created, leading to deaths and injuries. I cannot call it a violation of safety norms because it is impossible to predict such things,” Director of Saknakhshiri, Jambul Jakeli, stated. Saknakhshiri is the only coal mining company in Georgia. The company comprises operations such as coal mining, coal handling, preparation of runof-mine coal and electricity generation. Trading House Saknakhshiri LLC is a subsidiary of Saknakhshiri (GIG group) LLC and is engaged in international trade. There are two coal mines in operation: Mindeli and Dzidziguri. Both are part of the Tkibuli-Shaori coal basin which is located in the mountainous areas of Imereti close to Racha. In total, 11 miners have lost their lives in Mindeli mine in Tkibuli in the last two years. However, since 2010, the total amount of deceased in Mindeli mine amounts to 25.


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BUSINESS

GEORGIA TODAY

APRIL 17 - 19, 2018

THE ISET ECONOMIST A BLOG ABOUT ECONOMICS AND THE SOUTH CAUCAUS

www.iset-pi.ge/blog

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

The Knowing of Not Knowing in Water Management (& How to Tackle the Issue) BLOG BY SELAMAWIT PETERSSON

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he Georgian government is currently facing some tremendous challenges in adjusting to the EU Association Agreement (AA). A particularly problematic area of reform concerns the implementation of Directive 2000/60/EC, aka the European Water Framework Directive (WFD). Properly managing water resources is an extremely difficult endeavor that requires a deep understanding of all the mechanisms at work. Failing to adequately manage water resources could have profound and long lasting negative consequences, both in terms of the development perspectives of the country, and the wellbeing of its population. My intent with this article is to briefly highlight, with examples from academic literature, the need to consider uncertainty in water management. This piece is an introductory presentation of the ongoing work within the EEPRC team regarding water management, leaning specifically towards the implementation of the WFD.

ADMINISTRATIVE CHANGES DUE TO HARMONIZATION OF EU LAW The government has already identified the need for an adjustment to water legislation, something which is in full process. As outlined by the government, the start of the transformation of current water legislation (from 1997) started in 2011, and is expected to become valid once the finalized steps are considered. This (often complex) process has also been affected by the re-structuring of the Ministry of Environment and Natural Resources Protection, whose competences have been split between the Ministry of Economy and Sustainable Development (MoESD) and the Ministry of Environmental Protection and Agriculture. Thus, the institutional setting which was previously up and running could be adjourned, which is likely to cause ambivalence and insecurity if not addressed properly. In my view, one major spot which could easily be overlooked is how governmental bodies, including local governments, are handling changes; in particular, how they will be interpreting the legal framing of the reform and putting it into practice. I would argue that supporting the ongoing work that lies ahead for the government is also to dare to expose where uncertainties appear. More often than not, this is tightly linked to what directions and conditions are set to rule each administrative body. Exposing uncertainties at all administrative levels would not only depict where the weak links are located regarding the implementation process, but could also serve to make governance more adaptable to unpredictability. That said, how is uncertainty in water management exemplified in academic literature?

THE EMERGENCE OF UNCERTAINTIES IN WATER MANAGEMENT The hydrological cycle has a profound

Image source: strivetosimplify.com

meaning for plant cover and soil, and hence has a vital role for the health and survival of ecosystem services on which humans highly rely. Changes in the hydrological cycle will impact the feedback loops much needed for the biogeochemical cycle, in which the hydrological cycle plays an important role. In uncertainty management, components other than economic and technological approaches have rarely been considered. However, a system change towards proper water management practices requires an increased understanding of the interaction between ecosystems and water, and the ecosystem services that life depends on. According to Smith & Smith (2001, p. 3), ecosystem management, “... considers ecological systems as functional units and stresses their long-term sustainability.” There are many ways to define ecological management; I chose to embrace the definition of Smith & Smith (2001), who state that ecological management includes perspectives such as socioeconomic, institutional and ecological parameters within one approach. In recent years, within both the scientific and policy community, an emerging awareness that strives for a holistic approach has taken place, influenced by integrated system management, in which the link between land and water has been given increased observance. This was extensively highlighted at international conventions, and even more importantly, introduced in the EU's WFD (WFD, 2000/60/EC). With this understanding, my interest lies in the institutional sphere, where I wish to reveal uncertainties that far too often appear in relation to the practical work in water management. Uncertainty within water management

is something which needs to be carefully examined, especially in relation to environmental and ecological decision-making. The existence of uncertainty, as stressed by Isendahl et al (2009, p. 3192) is due to, “... the interaction between actors and objects and may hence be framed differently according to changes in the relation between actors and objects.” In order to combat these types of uncertainties, Isendahl et al (2009) promoted the idea of investigating how different actors actually relate to uncertainty. For this reason, it is critical to investigate what types of uncertainties could be detected in implementing the WFD, as this may have profound implications not only for policy makers, but also for economic agents and for the

10 Galaktion Street

population at large. Lopés-Gamero et al (2011, p.428) describe environmental uncertainty as being due to managers perceiving their business environment as unpredictable. They define environmental uncertainty as “... the shortage of information […] and/or the impossibility of predicting external changes and their impact on organizational decisions.” In the past, as pointed out by Brugnach et al (2008), identified types of uncertainties within environmental management were categorized as arising because of lack of knowledge, whereas today it is more related to interpretation due too many agents such as civil servants on both local, regional and national administrative level. As suggested by Handmer (2001), in order to diminish the uncertainty factor, policies should be made resistant from interference. In addition, encouraging stakeholders to be better prepared could help them to take uncertainty into account when they plan their activities. One possible step for preparing stakeholders, such as civil servants, is to contribute to studies highlighting the types of uncertainties that exist within their areas of responsibility. My argument is very much in line with what Isendahl et al (2009, p. 3202) note “... uncertainty in water management can no longer be ignored or trivialized given the increasing pace and dimensions of changes and future challenges.” For Georgia, this change is, at least in my reasoning, the well-anticipated workload related to adjusting to EU-regulations.

HOW SHOULD UNCERTAINTIES BE TACKLED? We do know that it is not possible to predict a future with the absence of uncertainty. We also do not know what the future holds for the Georgian government, with an ambiguous road ahead where adjustments are needed to gravitate towards the EU Acquis (the body of common rights and obligations that is binding on all the EU member states). If possible, one could try to eliminate or at least expose the un-known uncertainties that could occur due to, for example, ambiguity that more often than not will surface when administrative changes are

to set to happen due to, for example, the introduction of new regulations. As a finishing note to this post, I would like to suggest a few steps toward at least managing (if not resolving) uncertainties as defined by Sigel et al (2010). The first points towards sources of uncertainty, described as “... the point of reference of uncertainty.” By circling the origin of uncertainties, there is a need to follow a certain structure of measurement methodology. For example, if there is uncertainty in water quality assessments, there is a need to assess water status and deficits or identify causes and set development targets. Each identified measurement structure could trace the origin of the uncertainty. It is therefore important to pay attention to what measurement structure to use or else it could lead to a false description of the uncertainty itself. The second perspective concerns the reducibility of uncertainty. The ability to reduce uncertainty within environmental decision-making is linked to how to behave with types of uncertainties that cannot for some reason be avoided or minimized. From this point of view, there is at least one direction one could gravitate towards in order to combat and reduce uncertainties. This requires knowledge and understanding, and can be addressed by adding more knowledge or obtaining specific information in order to reduce uncertainty (Sigel et al, 2010; Kundzewicz et al, 2018). If knowledge is not currently available, it can be gained by learning, possibly as Petrov (2015) suggests, by training relevant professionals in EU law. Another important step could also be to pay greater attention to how civil servants are experiencing uncertainties linked to their day-to-day work with the WFD. In conclusion, the best approach to minimize uncertainties and improve the quality of water management is to invest in research, data collection and in human capital building. This should be kept in mind by policy makers as they work to implement the EU Water Framework Directive in the Georgian context. Selamawit Petersson is an ISET-PI-SIDA Bilateral Associate Expert at the Environment and Energy Policy Research Center

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


BUSINESS

GEORGIA TODAY APRIL 17 - 19, 2018

5

Energy Efficiency in Construction Guideline Introduced

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joint event presenting the guideline ‘Energy Efficiency in Construction’ was organized by the Ministry of Economy and Sustainable Development of Georgia and German International Cooperation Society (GIZ) as part of the ‘Private Sector Development and Technical Vocation Education and Training program in the

South Caucasus’ (PSD TVET SC) in Tbilisi Tech Park on April 13. The event was opened by Irma Kavtaradze, Deputy Minister of Economy and Sustainable Development of Georgia, who discussed the importance of energy efficiency in the construction sector, planned legislative amendments, and challenges facing the Government of Georgia in this direction. Daniel Haas, Head of the Department of Economic Cooperation and Development of the Embassy of Germany in Georgia, talked about the successful cooperation of Germany and Georgia and expressed willingness and readiness for future support. The goal of the Government of Georgia is to implement such economic policies that will ensure the sustainable development of the country. This policy is carried out in accordance with the principles of green economy, considering the establishment of ecologically clean and modern technologies. The construction sector is one of the most dynamic and fastest-growing sectors in Georgia, but it is not able to fully realize the potential of its energy efficiency, a result of the absence of innovative teaching methods and relevant knowledge in the country.

Tbilisi Carpets Gallery Pekini st.36 +995555763366

To improve the energy efficiency, the GIZ ‘PSD TVET SC’ program, on behalf of the German Federal Ministry of Economic Cooperation and Development (BMZ), has been supporting the private sector since 2013, including the development of the construction sector and improvement of relevant modern professional qualifications and skills. The guideline ‘Energy Efficiency in Construction’ was developed by Georgian and German experts with close cooperation of the Union of Expert for Sustainable Energy and Environment (UESEE) within the GIZ ‘PSD TVET SC’ Program in 2017. The authors of the guideline talked about the major issues and various threats caused by the progressive climate change in the world. Energy conservation was discussed as part of the global efforts

and its role in sustainable construction. Members of the Parliament of Georgia, representatives of the Ministry of Economy and Sustainable Development, German Embassy, Development and Construction Companies and experts, participated in the event. The presentation was also attended by the new Director of GIZ Country Georgia, Roland Steurer, and Klaus Veigel, Head of the German Reconstruction and Development Bank (KFW). The event was held with the support of the GIZ ‘PSD TVET SC’ program on behalf of the German Federal Ministry of Economic Cooperation and Development (BMZ) which contributes to the development of the private sector in wine, tourism and the construction industry in Georgia, and the improvement of the professional education system.


6

BUSINESS

GEORGIA TODAY

APRIL 17 - 19, 2018

Solving the Russia, Ukraine Gas Crisis

Photo source: RFE/RL

BY DIMITRI DOLABERIDZE

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egotiations on the fate of the transit of Russian gas through Ukraine should begin this month. Gazprom will not be able to make agreements that exclude Ukrainian gas pipelines before 2020, or even longer. Given the acute conflict between the Russian Federation and Ukraine and the degradation of the dialogue with the EU, which has traditionally mediated in gas crises, the talks promise to become one of the most difficult in history. This gas transit contract signed with Naftogaz in 2009 is due to expire in 2019- a problem first realized by the Russian leadership as early as 2014, as even then it was clear that the tough conflict between the two countries would make meaningful dialogue between Moscow and Kyiv almost impossible. By early 2015, Gazprom had a plan: by building two bypass gas pipelines, Nord Stream 2 and Turkish Stream, it would reduce dependence on the Ukrainian gas transportation system (GTS) to a minimum in order to be able to not extend the contract at all. The plan was based on two key prerequisites: the level of export of Gazprom to Europe and Turkey was to remain approximately at the level of 2014, and both gas pipelines would be ready by the end of 2019. But by the end of March 2018 it became obvious that both these prerequisites were not to be realized, meaning that Gazprom would either have to extend its contract with Ukraine, or initiate the biggest violation of contracts with consumers in history. In general, considering the low level of trust between the parties, and the inevitable need for Gazprom to agree on transit for 2020, a short annual agreement looks to be the most likely scenario. The failure of the negotiations threatens losses for all: Gazprom will have to spend additional funds on the construction of gas pipelines in Europe, the EU may face rising gas prices (if it has to attract LNG to cover the import needs), and the Ukrainian GTS, having lost strategic importance, will lead to a new increase in gas prices in Ukraine.

New Kutaisi Airport Terminal to Be Completed in 2019 BY THEA MORRISON

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he New terminal of Georgia’s Kutaisi Airport will be opened in early 2019 and will be able to serve three times more passengers than

now. The information was released by the press service of the Georgian Airports Association of the Ministry of Economy and Sustainable Development of Georgia, whose statement reads that there some changes had been made to the project due to the increased inflow of passengers. “At present, the Kutaisi International

terminal construction works are in their active phase. Concrete works are almost complete and the renewed terminal will be opened at the beginning of 2019, after completion of the full rehabilitation of the airport,” the statement reads, noting that the dates of the project have not been changed. The airport is to have six exits and will be able to serve 1000 passengers an hour. The terminal design belongs to the Dutch architectural company, UN Studio. The airport development analysis was conducted by IATA Consortium. The goal of UN Studio is to maintain a user-orientated experience. “The health and comfort of every single passenger is serviced through the correct applica-

tion of architecture and spatial design,” the firm noted. After the renovation, the current airport terminal will become the Departure Hall. Like the existing terminal, the extension will boast an illuminated interior with views of the adjacent mountains. This space will lead to the roof of the building, which is to become a huge elevated plaza. The Union of Airports of Georgia announced the tender for the second terminal of the Kutaisi airport terminal on July 26, 2017. The contract with the winning construction company, Anagi, was signed in August. Active construction processes started in September 2017. The total value of the contract is 26.423.967GEL.


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BUSINESS

GEORGIA TODAY

APRIL 17 - 19, 2018

Kumsishvili on the Latest IMF Support BY KATIE RUTH DAVIES

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he successful completion of the second Extended Financing Facility (EFF) review confirms that the International Monetary Fund supports the economic policy of the Government of Georgia. “The International Monetary Fund [IMF] has evaluated as successful the implementation of economic reforms, the majority of which are defined in our action plan,” said Dimitry Kumsishvili, First Deputy Prime Minister, Minister of Economy and Sustainable Development. “The high economic growth wit-

nessed in Georgia in 2017 continues in 2018, a firm foundation upon which to execute the obligations set out in the plan. The government will maintain the successful progress of reform implementation,” he added. Kumsishvili also said that in 2017, Georgia saw 5% economic growth "which significantly exceeds the initial expectations." Speaking about the positive dynamics of FDIs, he highlighted the volume of direct foreign investments made in Georgia in 2017 which reached $1.861 million, a16.2 % increase on 2016. “For the fast economic development of the country, it is necessary that the public feel that the government is pursuing a proper and consistent economic policy,” he concluded.


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BUSINESS

GEORGIA TODAY

APRIL 17 - 19, 2018

TBC Presents “In Georgian” Project for Microsoft BY NIA PATARAIA

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BC has begun supporting the Georgian language with the help of Microsoft, Geolab and Saba. The goal of the project “Kartulad” is to create an interpreter resource, integrating this resource into Microsoft's programs and providing access to the Georgian language in international resources and information. In order to integrate into the system, the program must learn the Georgian language, for which at least 100,000 Georgian sentences need to be translated into English. Within the framework of the project, everyone will be able to use Georgian through the Microsoft system. Honorary guests at the TBC Gallery presentation noted that this project has advantages beyond the educational aspects: it will encourage ethnic minorities living in Georgia to learn the Georgian language, though the project is primarily aimed at Georgian emigrants who do not have direct access to literature.” “Within the framework of the project, the world will be able to better understand Georgia and the Georgian language,” TBC notes. On the website Kartulad.ge, each registered user will be able to engage in the project and translate Georgian into English. All sentences are selected from Saba's e-books. After a certain number of bilingual sentences are collected, the project will be transferred to the next stage where

specialists will edit the translated material. Translating 100,000 sentences is the first step for integrating Georgian into the Microsoft/Windows Operating System. “The project serves to maintain the Georgian language,” TBC notes. “Especially important for its development is

the involvement of the Georgian people.” The project "Kartulad" is supported by the Ministry of Education of Georgia, PH International and the Lexicographic Center under the guidance of Tina Margalitadze. Pupils, teachers, and students from across Georgia will be involved in the project. Participants will be awarded

for their results and receive prizes according to the number of translated sentences. “The project ‘In Georgian’ is a continuation of the previous TBC project ‘Write in Georgian,’ which was begun three years ago,” said Mamuka Khazaradze, Chairman of the Board at TBC Holding. “I’m sure many of us are wor-

ried about the condition of the Georgian language and want to preserve it. At the same time, it is necessary to develop it. This project will promote the Georgian language and give others a chance to discover it. We need to not only write in Georgian but also to read and think in Georgian, too.”


BUSINESS

GEORGIA TODAY APRIL 17 - 19, 2018

11

Finance Minister Criticizes Poor Access to Starting Capital, Extols New Gov’t Reforms BY THEA MORRISON

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he Minister of Finance of Georgia, Mamuka Bakhtadze, has openly criticized Georgian banks, saying they serve as a “brake” on the economic development of the country. The Minister stated the main problem in the banking sector is high-interest loans, adding they are hampering entrepreneurship and business development. "The banking system of Georgia should not be a brake on economic development, but its driving force, but unfortunately in our country we have a reality where banks do not perform this function," he said. In his interview with Imedi TV, the Minister stressed the interest rate for entrepreneurs is so high that they refuse to take loans from banks for implementing their business ideas and starting new businesses, which negatively affects the development of the economy. However, following negative reactions from Georgian banks, Bakhtadze softened his critical tone, noting that representatives of the Georgian banking sector are represented on the leading stock exchanges of the world, which is important for the country. “The banking sector is one of the most successful and important sectors of our economy. But I would also like to note that is important for us to have a rapid growth in other sectors as well. Today, we have the reality that projects and ideas cannot be implemented in many

€45 Million from EU to Support Georgia’s MacroFinancial Obligations BY BENJAMIN MUSIC

Photo: Georgia’s Finance Minister, Mamuka Bakhtadze

cases due to poor access to starting capital," he said. Bakhtadze talked about the new initiative of the government, the Starting Capital Reform, highlighting that the main goal of the reform is to promote implementation of competitive projects, which will boost the economy. He explained the reform will cover start-uppers, small and medium entrepreneurs and Georgian emigrants who have interesting projects and would like to come and implement them in their homeland. “Together with the banking sector, we will develop the rules of the game, finan-

cial mechanisms that will facilitate the development of small and medium businesses as well as startups. The main task of our economic policy is to defeat poverty, which can be achieved through the development of SMEs,” he added. The Minister said soon he is going to meet the representatives of the ruling Georgian Dream (GD) team and also the opposition parties in order to introduce new initiatives to them. “I will speak about new ideas and initiatives at Parliament and I will be also ready to answer questions about the new Starting Capital Reform,” said Bakhtadze.

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he European Union is to give €45 million in macrofinancial assistance to Georgia after the European Parliament approved the necessary measures on 14 March. The financial aid supports the on-going economic stabilization, alongside assistance for structural reforms. The EU identified difficulties in Georgia’s economy, which remains vulnerable to market fluctuations. The large current account deficit and high external debt weigh heavy on the country’s financial situation, as it possesses insufficient foreign reserves to resolve the situation alone. A support scheme by the IMF is requisite for receiving European funds under the macro-financial assistance umbrella. The assistance supports partner countries of the EU, which struggle to meet their financial obligations. Georgia is to receives its third financial aid package

from the EU since the war in 2008. In the aftermath, the EU supported Georgia with two €46 million financial schemes. Georgia is eligible for such aid as it is part of the Eastern Partnership established by the EU and its neighboring countries in 2009. Furthermore, Georgia and the EU signed an association agreement in 2016, spurring trade and economic relations to a record high. The close relationship between the two parties allowed the General Affairs Council to propose the aid without discussion. There is a general consensus in Brussels to support Georgia’s endeavors. Georgia has shown a strong commitment to improving democratic mechanism, the rule of law and human rights. Just this week, Protocol No. 16 of the European Court of Human Rights was ratified by enough signatories to enter into force. Georgia was one of the first countries to ratify it back in 2015. The new reforms, which accompany the assistance, will be closely monitored by the European Commission to ensure all requirements are met.


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BUSINESS

GEORGIA TODAY

APRIL 17 - 19, 2018

Average Hotel Prices in Georgia & Hotel Price Index - March

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he 3-star, 4-star and 5-star hotel price index increased by 9% in March 2018, compared to February 2018. In March 2018, the daily rates for 3-star, 4-star and 5-star standard double hotel rooms increased significantly in Tbilisi (15.5%), while the daily rates decreased the most in Mtskheta-

most popular region for domestic travelers for leisure and recreation purposes is Mtskheta-Mtianeti, after Adjara. The average cost of a room in a 5-star hotel in Georgia in March 2018 was GEL 378. In Tbilisi, the average price was GEL 580, followed by Kakheti- 416 GEL, Samtskhe-Javakheti-GEL 349, and AdjaraGEL 255.

Graph 1: In the graph, average prices for standard double rooms in 3 and 4-star hotels and guesthouses are given by region. 5-star hotel prices are provided below

Mtianeti (-10.6%). During the last five months (November 2017-March 2018), in terms of regions, the most expensive 3-star and 4-star hotels were in MtskhetaMtianeti. In March 2018, 292,017 tourists visited Georgia, which is 64% more compared to February.

AVERAGE HOTEL PRICES The average cost of a room1 in a 3-star hotel in Georgia was GEL 132 per night in March 2018. The most expensive 3-star hotels for this month in Georgia were in Mtskheta-Mtianeti region (exceeding the average price by 32%). The average cost of a room in a 4-star hotel in Georgia in March 2018 was GEL 230 per night. The most expensive 4-star hotels for this month were found in Mtskheta-Mtianeti region (exceeding the average price by 19%).

In March 2018, the average cost of a room in a guesthouse2 in Georgia was GEL 74. The highest daily rates for guesthouses were found in Kvemo Kartli and Guria for this month.

HOTEL PRICE INDEX In March 2018, the hotel price index3 increased by 6.4% compared to February 2018. The daily rates for standard double hotel rooms increased significantly in Tbilisi (11.5%), while the daily rates decreased the most in MtskhetaMtianeti (5.4%). It’s worth to be noted that the number of international travelers in March compared to February increased by 31%. Of these international travelers, the proportion who stayed in Georgia for 24 hours or more (classified as tourists) increased by 64%4.

Graph 2: Monthly Hotel Price Index

type of accommodation, the biggest percentage price decrease for standard double rooms was recorded in SamtskheJavakheti region.

After a hotel price increase of 9.3% in December 2017 (compared to November

2017), there was a decrease in both January and February before another monthly hotel price increase was recorded in March 6.4%. In the first two months of 2018, the prices of standard double hotel rooms declined compared to the previous months. According to the data for the last five months, hotel prices in Kakheti, Imereti, Kvemo Kartli and Guria regions have

been characterized by stability whereas hotel prices in Tbilisi, SamtskheJavakheti and Mtskheta-Mtianeti regions have fluctuated. In March, the prices of standard double rooms in Tbilisi increased by 11.5%, whereas in Samtskhe-Javakheti and Mtskheta-Mtianeti regions these prices decreased by 4.5% and 5.4% respectively.

The results are based on the surveying of standard double hotel room prices of 3, 4, 5-star hotels and guesthouses in 10 regions of Georgia. Hotels were chosen arbitrarily according to random sampling principle. The study contains 71% (312) of all 3, 4 and 5-star hotels and 25% (456 guesthouses) of all guesthouses registered on www.booking.com The 3, 4 and 5-star hotel price data was collected by contacting hotels individually, while the prices of guesthouses were taken from

booking.com. The average prices are arithmetic mean of standard double hotel room prices. 2 Guesthouse: a type of accommodation that is characterized by having a small number of rooms and services are usually offered by the resident family. 3 The calculation of the hotel price index is based on the recommendations given by the International Monetary Fund (IMF). The elementary aggregate price index is calculated by Jevons index (Consumer

Price Index Manual-Theory and Practice (2004), Practical Guide to Producing Consumer Price Indices (2009)). 4 According to the Georgian National Tourism Administration, in March 2018, 578,514 international travelers visited Georgia. Of these, 292,017 travelers stayed in Georgia for 24 hours or more. In February 2018, the number of international travelers was 440,806, of whom 177,845 travelers stayed in Georgia for 24 hours or more.

HOTEL PRICE DYNAMICS NOVEMBER 2017-MARCH 2018

Table 1: Percentage change of prices in March 2018 over February 2018

Looking at the regional data, during the last five months the most expensive 3-star and 4-star hotels were in MtskhetaMtianeti. According to the National Statistics Office of Georgia, the highest average monthly salary across all regions in the hotels and restaurants sector was in Mtskheta-Mtianeti- 735.5 GEL (2016). Also, according to the Georgian National Tourism Administration’s quarterly reports, during the last three years the

The 3-star, 4-star and 5-star hotel price index increased by 9% in March 2018 compared to February 2018. For these types of hotels, Tbilisi and Adjara regions experienced the highest price increases. The prices of standard double hotel rooms decreased in Mtskheta-Mtianeti compared to the previous month. In guesthouses, the price index decreased by 2.2% in March 2018 compared to the previous month. In this

1


BUSINESS

GEORGIA TODAY APRIL 17 - 19, 2018

T

Kovzanadze: We Should Not Have a OneSided View of the High Interest Rates Issue

he Start-up Finance Reform planned for implementation by the Government of Georgia is indeed a significant project to incentivize the economy notes MP Irakli Kovzanadze, Fiscal Committee Chair of the Parliament of Georgia in his interview with Commersant. “Plenty of innovative, healthy, potentially profitable and viable business projects exist in the country. Their implementation is hampered by limited access to finance and lack of equity financing,” he adds. According to the Fiscal Committee Chair, “even in highly developed countries with excess liquidity and very low interest rates, the share of commercial bank loans in start-up financing is marginal due to the high risk ratio.” “The government initiative is truly interesting. Let us wait until the idea is elaborated on paper and turns into a document; until specific mechanisms get implemented and details presented. Nevertheless, being a financier with practical experience of over 25 years, I can say one thing at the outset: there is nothing free in this world. Furthermore, there is no concept of free financial resources. Money may be readily available for an individual start-upper or individual businessman; however, somebody else undoubtedly pays the cost. In this case, the State, i.e. the taxpayer and each individual citizen of the country bears the cost. Therefore, let us wait to see the concept paper of the project before discussing it further,” the MP states. When asked by Commersant whether he shares

the position of Mamuka Bakhtadze, Minister of Finance of Georgia, on the banking system of the country hampering the development of the economy, MP Irakli Kovzanadze states the following: “Let us see the issue through the numbers. Overall, the shareholding capital of the commercial banking sector in the country is around 4.6 billion GEL, of which 90% is contribution from overseas. The domestic banking system has credited the national economy with about 21 billion GEL so far, i.e. the volume of bank financing in the construction, trade, industry, agriculture, healthcare and education sectors exceeds one half of the GDP in Georgia. Loans are drawn both by individuals and corporations. It is thanks to bank financing that hundreds of thousands of jobs are created. The banking system alone employs over 25,000 people, thus supporting this many households. This is the bare reality,” states MP Kovzanadze, going on to note that, “assessments made by the International Monetary Fund, World Bank and other international organizations indicate that the Georgian banking system is among the most solid and successful of all post-soviet countries, all the way through Eastern Europe.” “Interest rates on bank loans have been declining in recent years. They remain high, which is quite customary for emerging economies. In contrast with Europe and the USA, Georgia offers high interest rates on loans; however, risks and profit margins are also high. Costly loans are a complex issue, and we should not have a one-sided view of the problem,” he concludes.

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Rural Women in Georgia Make Strides towards Economic Empowerment

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ducation and economic activities empower and equip women to make life-determining choices and secure abrighter future for their country,- said Esabelle Dingizian, Third Vice Speaker of the Swedish Parliament, while meeting women farmers in Kachreti community college “Aisi”. Representatives of the Parliament of Sweden, Embassy of Sweden to Georgia and Armenia, United Nations and the Parliament and Government of Georgia visited Kachreti on 14 April 2018. Esabelle Dingizian, Third Vice Speaker of the Parliament of Sweden; H.E. Martina Quick, Ambassador of Sweden to Georgia and Armenia; Tamar Chugoshvili, Georgian Parliament Vice Speaker and Chairperson of the Gender Equality Council; Natia Natsvlishvili, Assistant Resident Representative of the United Nations Development Program (UNDP) in Georgia; and Ketevan Natriashvili, First Deputy Minister of Education and Science of Georgia, met college students and teachers, and members of the Women Farmers’ Association. The high-level guests visited the college premises, classrooms, workshops and training sites, as well as the small farms and agricultural cooperatives managed by women farmers. “Rural women are the backbone of the local economy and the agents of transformational change for better life and sustainable development. The assistance provided by the UNDP and the Government of Sweden aims to equip them with the knowledge and skills needed for entrepreneurship and decision-making. In 2017 alone, up to 300 rural women trained in different vocations found jobs in local businesses, 22 out of 41 women-led local projects got state funding, and 14 women started new businesses,” said Natia Natsvlishvili, UNDP Assistant Resident Representative in Georgia. The discussions in the community college focused

Image source: enpard.ge

on the challenges faced by rural women in Georgia, education and other opportunities empowering women for economic activities, and on Georgia’s progress in achieving gender equality in every area of life. “Meaningful gender equality is one of the vital preconditions for the sustainable development of Georgia. The country has made notable progress in the past years and we keep moving forward to address the remaining challenges,” said Tamar Chugoshvili, Georgian Parliament Vice Speaker and Chairperson of the Gender Equality Council. The day in Kachreti was organized by the UNDP, Government of Sweden and Parliament of Georgia under the Sweden-funded UN joint program for Gender Equality. Visiting the community college was part of Esabelle Dingizian’s official visit to Georgia at the invitation of the Georgian Parliament.


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BUSINESS

GEORGIA TODAY

APRIL 17 - 19, 2018

New Complex BATUMI VIEW the magic place which will never compensate INTERVIEW BY NIA PATARAIA

T Irma Kamadadze

he history of investment company Rekan Group Georgia started on the territory of Georgia in 2014. The company is owned by the brand network Rekan Group and Hawkary Group, their main activity being the construction of residential complexes and trade facilities. The main factors of the company's successful activities are quality control, correct strategy, effective management and protection of customer's interests. The new multifunctional complex being implemented on the New Boulevard of Batumi just 20 meters from the Black Sea Coast is expected to be complete in spring 2019. GEORGIA TODAY spoke to the company’s Head of Sales and Marketing, Irma Kamadadze, to find out more about

the new project.

WHAT KIND OF COMPLEX IS BATUMI VIEW? Batumi View is a new multifunctional complex that combines a large 5-star hotel and three residential buildings. The Batumi View complex will be surrounded by a developed infrastructure, which is the key to a comfortable life, and will include facilities such as an open swimming pool, SPA, tennis court, dining areas, gym, children’s playground, and a comfortable parking system underground and above-ground parking places. There will also be stores and markets on the ground floors of each of the residential buildings.

HOW CAN CUSTOMERS PAY? Customers can purchase their premium class apartments by paying in full or by covering the cost gradually- first with a 30% down-payment and then with interest-free installments for up to 24 months.

Batumi View has various apartment types on offer with a starting price for 1sq. meter of $1000 (with mountain view) and $1400 (with direct sea view).

WHAT BENEFITS CAN BATUMI VIEW OFFER ITS CLIENTS? The space of apartments starts from net 32/sqm. In addition, those who buy apartments at Batumi View have the chance to make a profit from their own investments, with buyers able to rent their new apartment independently or transfer them to a Management Company, which will provide 24-hour online-control of apartment rent and professional service.

HOW WOULD YOU DESCRIBE THIS NEW PROJECT? It’s a unique project. There is no other residential complex in Batumi as close to the sea. It’s the ideal place in which to enjoy the very best comforts in life. Our motto is: An Unbeatable Magical Location!


POLITICS

GEORGIA TODAY APRIL 17 - 19, 2018

15

Russia’s Response to the West’s Attack on Syria: Heading towards Self-Isolation? no longer negate the possibility of a final divorce with the West. Surkov stated in the article that all the experiments on the westernization of Russia have ended unsuccessfully – making the country a separate world, neither European nor Asian. That is logical to expect from as big a country as Russia, but the problem is that in order to be competitive in the modern world, it all comes down to having a powerful economy. And in that component, Russia lags behind and will for at least another decade, according to some estimates. As I said, at no point in history was Russia so detached. Even in the Soviet period it was still a champion of almost half the planet – the communist world. Moreover, the Soviets were also a big part of the world system which existed back then in the Cold War balance of power. From a cold-blooded perspective though, Russia being detached from the West, which is a source

Moscow is unable to forestall the growth of Ankara’s influence of technological and economic progress, means that the country would not be able to progress significantly. It has not been able to do so on its own throughout centuries when the international situation was more comfortable, nor will it be possible pull it off in the self-isolated future it seems to be heading towards.

The Kremlin. Image source: archive.almanar.com.lb

OP-ED BY EMIL AVDALIANI

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everal days ago, the US and its allies coordinated airstrikes against the Syrian state. The results were not extraordinary in terms of facilities destroyed or death toll of the Syrian state army. The Russians were warned beforehand, enabling them to withdraw all the necessary Syrian technologies and personnel from the target facilities. The Wall Street Journal even reported that Donald Trump considered striking Russian and Iranian military capabilities, but was overruled by his team for fear of the Russian response. Nevertheless, the real addressee of the attack was not so much Damascus, but Russia – Syria’s main ally. In diplomacy, that means that any further chemical attacks, like the one perpetrated on April 7, will be punished with military strikes. In addition, it was also reported that the US will introduce new sanctions against Russian companies helping the Syrian government to work on chemical elements. Russia sees this as a yet another escalation with the West. Moreover, Western intervention also undermines Moscow’s dominant position in Syria. Russian efforts to maintain such a posture on the

Russian lawmakers are now considering banning a number of US products in Russia

Syrian battlefield have been shaken. The Turkish operation in Afrin, in the north of the country, made it clear that Moscow is unable to forestall the growth of Ankara’s influence. Iranian proxy forces are now close to the Israeli border, and Russia failed to accomplish anything significant in various peace conferences on Syria. Moreover, Russian mercenaries were also killed by the hundreds, according to some reports, by US forces, diminishing Russian prestige in and around Syria.

TOWARDS SELF-ISOLATION In response to the US string of sanctions, the Russian lawmakers are now considering banning a number of US products in Russia. It is interesting how Russia is willingly closing itself off from the rest of the world. It is also worrisome how far this sanctions war between the two sides will go, but the argument on the Kremlin becoming increasingly detached from the rest of the world still stands. I know of nothing like this in Russian history. Perhaps Stalin’s Soviet Union in the late 1920-early 1930s, but disturbances in Europe forced France, Great Britain and then Germany to work with the Soviets. Russia in the past several centuries, whatever the grievances it harbored towards the West, always worked with the latter and was largely a part of the international system. Nowadays, differences between Russia and the West run across almost every major international issue, making it impossible to reach a fitting compromise. And there are tiny indications which lead us to think that Moscow will further distance itself from Europe and the US. Of concern is the fact that this mentality is widely present within Russian circles. Last week, in a piece for GT, I mentioned an article by Vladislav Surkov, Putin’s aide on domestic polices, on how Russia began detaching itself from Europe/the West following the Ukraine crisis in 2014. It is fascinating that the Russian political figures now

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Issue #1040 Business  

April 17 - 19, 2018

Issue #1040 Business  

April 17 - 19, 2018

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