Issue #844 Business

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Issue no: 844/27

• MAY 17 - 19, 2016

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue...

British Petroleum Shows Enthusiastic Support for Investment in Georgia PAGE 2

FOCUS ON PROMOTING GEORGIA ABROAD

PM Kvirikashvili tells London of the benefits of investing in Georgia

PAGE 3

Three Airlines Increase Summer Flights to Georgia

Georgia’s Revolutions and Economic Development: From Independence to Rose Revolution ISET PAGE 4

Georgia-Dutch Cooperation for Local Greenhouse Expansion PAGE 10

Chinese Companies to Support Tea Industry in Georgia

BY EKA KARSAULIDZE

B

ravo Airways and Fly Dubai have decided to increase the geography and frequency of flights to Georgia to reflect the upcoming summer season, the Ministry of Economy and Sustainable Development of Georgia stated on its website. In addition, Georgian Airways will also launch regular flights to Iraq from May 22.

Ukrainian Bravo Airways is to start operating charter flights on the route Kiev-Batumi-Kiev once a week from June 19 to September 18. The direction will be open only for the tourist season.

Continued on page 2

PAGE 10

Beauty Salon – Studio KEUNE Advises Georgian Female Politicians How to Get the Right Look PAGE 13 Prepared for Georgia Today Business by

Markets As of 13ͲMayͲ2016

STOCKS Bank of Georgia (BGEO LN) GHG (GHG LN) TBC Bank (TBCB LI)

COMMODITIES Crude Oil, Brent (US$/bbl) Gold Spot (US$/OZ)

INDICES

Price

w/w

m/m

w/w

m/m

GBP 23.32

+3,3%

+15,6%

GEOROG 05/17

102.19 (YTM 4.61%)

Ͳ

+0,1%

GBP 1.95

+0,2%

+11,6%

GEORG 04/21

BONDS

110.93 (YTM 4.37%)

Price

+0,3%

+1,5%

US$ 11.20

+6,7%

+14,9%

GRAIL 07/22

109.00 (YTM 5.98%)

+0,2%

+1,6%

GEBGG 07/17

104.38 (YTM 3.76%)

+0,1%

+0,8%

Price

w/w

m/m

47,77

+5,3%

+8,1%

CURRENCIES

Price

w/w

m/m

1 271,04

Ͳ1,4%

+2,3%

GEL / USD

2,2000

Ͳ0,2%

Ͳ1,6%

GEL / EUR

2,4837

Ͳ1,2%

Ͳ1,4%

Price

w/w

m/m

GEL / GBP

3,1603

FTSE 100

6 138,50

+0,2%

Ͳ3,5%

GEL / CHF

2,2590

Ͳ0,5%

Ͳ2,6%

FTSE 250

16 640,84

Ͳ0,0%

Ͳ2,4%

GEL / RUB

0,0338

+0,9%

+0,6%

9 952,90

+0,8%

Ͳ0,7%

GEL / TRY

0,7410

Ͳ1,6%

Ͳ5,6%

17 694,37

Ͳ0,3%

Ͳ1,2%

GEL / AZN

1,4605

+0,4%

Ͳ0,0%

4 750,90

+0,3%

Ͳ4,0%

GEL / AMD

0,0046

Ͳ

DAX DOW JONES NASDAQ

Ͳ0,7%

Ͳ0,7%

Ͳ

MSCI EM EE

126,05

+0,8%

Ͳ3,2%

GEL / UAH

0,0863

Ͳ1,5%

Ͳ1,5%

MSCI EM

806,68

+0,2%

Ͳ4,4%

EUR / USD

0,8854

+1,0%

Ͳ0,2%

SP 500

2 063,59

+0,3%

Ͳ0,9%

GBP / USD

0,6961

+0,4%

Ͳ1,1%

MICEX

1 907,19

+0,3%

Ͳ1,3%

CHF / USD

0,9761

+0,4%

+1,0%

MSCI FM

2 539,11

+2,7%

+1,7%

RUB / USD

65,1774

Ͳ1,5%

Ͳ1,7%

GT Index (GEL)

796,74

Ͳ

Ͳ0,0%

TRY / USD

2,9690

+1,4%

+4,3%

GT Index (USD)

713,05

+0,3%

+3,0%

AZN / USD

1,5015

Ͳ1,0%

Ͳ1,1%

2

BUSINESS

Three Airlines Increase Summer Flights to Georgia Continued from page 1 Fly Dubai Airlines is increasing the frequency of its flights on the route Dubai-Tbilisi-Dubai. The airline will operate flights on this route 14 times a week, instead of the current seven, from July 8. The number of flights will be reduced to ten times a week from September 30.

The Ministry of Economy believes that the increasing number of passengers carried by regular and irregular flights is directly linked with the development of tourism in Georgia. 611.3 thousand people came to Georgia by plane from January-April 2016, 19.5 percent more than in the same period in 2015.

Today the majority of Georgia’s visitors are arriving from Turkey, Azerbaijan and Armenia. Since the beginning of 2016, around 1.6 million foreigners have visited the country, 15 percent more compared to January-April last year.

GEORGIA TODAY

MAY 17 - 19, 2016

British Petroleum Shows Enthusiastic Support for Investment in Georgia

BY EKA KARSAULIDZE

T

he South Caucasus Pipeline Expansion (SCPX) project was one of the hot topics during the business breakfast between Georgia’s Prime Minister Giorgi Kvirikashvili and representatives of British Petroleum (BP) in London on May 13. It is expected that following completion, the pipeline will extend Georgia’s role in transporting oil and gas to Europe.

In particular, the parties discussed the second phase of the Shah Deniz project.

BP and its partners are now working on the SCPX project, which represents a USD 2 billion investment in Georgia over the next four years.

The SCPX works have now entered the final phase, aiming to increase the gas capacity of the pipeline to 16 billion cubic meters per year from the Shah Deniz 2 mine to Europe. The Government of Georgia announced that with this extra gas running through Georgia, the country will receive an increased supply of natural gas at preferential prices.

“We had a very fruitful meeting in which we discussed the 20 years of successful partnership between BP and

Georgia,” said Bob Dudley, the Executive Director of BP, of his meeting with the Georgian PM. “We are investing

billions of dollars in the pipeline and we discussed our history and future cooperation. We can share our experi-

ence with anyone who intends to invest in Georgia and we are very enthusiastic in this regard.”

BUSINESS

GEORGIA TODAY MAY 17 - 19, 2016

3

PM Kvirikshvili: The ‘Leicester City Dream’ of a Future Regional Hub

BY EKA KARSAULIDZE

T

he Prime Minister of Georgia, Giorgi Kvirikshvili, took part in Georgia Investor Day in London on May 13, at which he spoke about the positive aspects of doing business in Georgia and the business-friendly environment and investment opportunities here. In addition, he stressed the important achievements of the country in corruption elimination, one of the main components of successful economic development.

PM Kvirikshvili noted that Georgia is one of the most available platforms in terms of doing business in tourism and hospitality, agriculture and industry; it is involved in large global economic projects like Silk Road, and can easily be considered as a true regional hub.

The Prime Minister stated that the location and stable political situation of Georgia are the main factors for the country’s successful outlook. “While the world may be forced into choosing sides between Russia and Turkey, Europe and Asia, Shia or Sunni, or even Arab and Israeli, Georgia remains a safe haven situated in a place where companies can engage all,” he said.

He went on to highlight the existing free trade agreements with all its neighbors, including Russia, strong and present regardless of the difficulties in the region and certain territorial disputes.

The PM also noted the expected signing of a free trade agreement with China, “Which means that we have free trade agreements with 1/3 of the world. In our region, Georgia is the country with the most open economy- and a great opportunity so presents itself to establish Georgia as a trade and tourism hub,” he said.

Separately, the PM spoke about Georgia’s anti-corruption system as one of the main factors of the country’s achievements. He also had a chance to talk about this topic in a more extended manner at the Anti-Corruption Summit: London 2016. The event brought together world

While the world may be forced into choosing sides, Georgia remains a safe haven situated in a place where companies can engage all

leaders, business representatives and civil society to find solutions to corrupt practices and to combat the culture of corruption in all facets of political activity.

“We have corruption free public service,” the PM stated. “We have developed a one-stop-shop nationwide network of Public Service Halls in up to 20 cities and in community centers in more than 30 large villages across the country that provide all types of public services to our citizens.” This, he says, limits the corruption-related risks, already low in Georgia.

Speaking about the major anti-corruption reforms in Georgia, PM Kvirikashvili said the introduction of a comprehensive online state procurement system, development of E-Treasury and E-Budget

programs, and the passing of certain laws had helped pave the way for efficient prosecution of corruption-related crimes.

Georgia is internationally recognized as a country low in corruption. In particular, the Open Government Index 2015 published by the World Justice Project ranked Georgia in first place out of 13 East European and Central Asian countries in the Open Governance category.

Georgia also ranked 11 out of 197 countries according to the Business Bribery Risk Index 2014 published by Trace International. According to Transparency International's Global Corruption Barometer Survey, only 4 percent of people polled in Georgia said they had paid bribes.

“Based on this, we can say that Georgia is the least corrupted country not only

in the region, but in the world,” stated PM Kvirikashvili.

In conclusion, the PM stated that he saw a bright and successful future for Georgia. “When I look to the future, I see a united and prosperous Georgia fully integrated into Western institutions.

I see a future where we resolve difficulties and enjoy good relations with all our neighbors, including Russia. I see Georgia as a critical nexus safeguarding European energy security. I see a flourishing regional hub for trade, transportation, and logistics. Some can consider it an impossible dream, but when we have the case of Leicester City FC before us [which surprisingly won the English Premier League this year], we see that even seemingly impossible dreams can come true.”

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BUSINESS

GEORGIA TODAY

MAY 17 - 19, 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.

Georgia’s Revolutions and Economic Development: From Independence to Rose Revolution

BY ERIC LIVNY

A

bout to celebrate its 25th anniversary as an independent state, Georgia remains in a state of revolutionary flux. Just like a box of chocolates, this beautiful country is full of contrasting flavors, never losing the ability to surprise and fascinate at every twist and turn of its history.

Most paradoxically, while Georgia’s unprecedented reforms have become an export commodity, many Georgian reformers and revolutionaries are wanted at home for abusing the power of their office. Georgia’s laws and institutions continue to be constantly remodeled: new regulations are quickly and decisively introduced only to be patched or altogether reversed; having vanished in the recent past, many government agencies and regulations are resurrected under new names.

A major issue is strategic direction. Having signed the so-called Deep and Comprehensive Free Trade Area (DCFTA) agreement with the EU, Georgian policymakers are struggling to understand and deal with the “deep” and “comprehensive” impact this agreement will have on domestic producers and consumers. Moreover, while being firmly committed to the European path, Georgia is having a hard time adopting certain European values, sticking instead to centuries-

Georgia’s modern day revolutions started on 9 April, 1989, when a peaceful pro-independence demonstration was forcefully broken by the Soviet army

old traditions, including nepotism and homophobia. Another concern is, of course, not to lose Russia and the vast Eurasian market in the course of “Euro-Atlantic integration”. * * * Georgia’s modern day revolutions started on 9 April, 1989, when a peaceful pro-independence demonstration was forcefully broken by the Soviet army. What followed was utter chaos: civil conflict and ethnic strife, mafia wars, crime, corruption and an almost complete collapse of public infrastructure and services. Once the wealthiest and most privileged of USSR republics, a kind of Soviet Riviera, Georgia went into an economic and political freefall even before its declaration of independence on 9 April, 1991. In economic terms, Georgia dropped behind most

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other newly independent states (except, perhaps, war-torn and chronically poor Tajikistan). Moreover, given its initially favorable position, the depth of Georgia’s “transformational recession” involved a larger-than-elsewhere decline in wealth, income, health and quality of life for the vast majority of its population.

Georgian people reacted to the crisis with their feet: through mass emigration (mostly to Russia, but not only) and secession, threatening Georgia’s future as an independent state. As a result of ethnic clashes in Abkhazia and South Ossetia, Georgia has effectively lost control of about 20% of its territory. Until 2004, it had only limited control over Adjara. While no precise data are available for the early independence period due to the informal nature of Georgia’s criminalized economy, Georgia’s GDP is estimated to have shrunk to less than a 1/3 of its 1989 level. According to an IMF memorandum, “three years after independence, the country had suffered a severe decline in recorded output, totaling 35 percent in 1994 alone”.

The first signs of stability came with the end of the civil war in late 1993, after a series of agreements cemented Georgia’s relations with the West. By then, Georgia had acquired a new significance as a potential transit corridor – bypassing Russia and Iran – for the vast Caspian oil and gas resources. Consequently, Georgia received a warm embrace from the then new Clinton administration, paving the way for the signing of a Bilateral Investment Treaty in July 1995, and, ultimately, the construction of extensive oil and gas pipeline infrastructure across Georgia’s territories. Simultaneously, Georgia started ascending the list of US foreign aid recipients, with the World Bank and IMF providing additional support to ensure macroeconomic stability and facilitate structural reforms. Internal stability was greatly helped by the government’s success in accommodating or restraining organized crime after the second failed attempt at Eduard Shevardnadze’s life in August 1995, and his election as Georgian president in November of that year.

Georgia continued on a path of gradual economic recovery between 1995 and 2003. Real GDP per capita grew at rather impressive rates (from very low base) in 1996 and 1997: by 14.0% and 12.6% respectively (see World Bank Development Indicators). Georgia was hurt by Russia’s 1998 financial crisis, as reflected in lackluster economic growth performance in 1998-2000. However, economic growth picked up again in 2001-2003, with real GDP per capita increasing by a healthy 12.5% in 2003, the last year of Shevardnadze’s rule.

While these growth figures are evidence of Shevardnadze administration’s early successes in implementing economic consolidation and statebuilding measures, they only tell a part of the story.

Though no longer at war with itself, Georgia has by and large remained a dysfunctional, failed state. In 2002, it ranked 85th in the Transparency International Corruption Perceptions Index for 102 countries. EBRD’s Business Environment and Enterprise Performance Survey, conducted in the same year, indicated that “although the business climate has been improving in some respects over time, bribery indicators are deteriorating and firms in Georgia perceive corruption as a bigger obstacle than elsewhere in the CIS.” Among factors inhibiting the business climate, the IMF lists “political fragmentation, a tradition of clan and

family based loyalties, weaknesses in the legal and judicial systems, and a culture of non-payment that is considered as socially acceptable.”

Very importantly, whatever economic growth was achieved in Shevardnadze’s times, it failed to trickle down. Adjusted for purchasing power parity, Georgia’s gross national income per capita in 2003 stood at $3,470. In comparison with other non-oil CIS, Georgia did better than Kyrgyzstan, Uzbekistan and Moldova ($1,840, 2,230, and 2,690, respectively), but worse than its immediate neighbor Armenia ($3,630), and much worse than Ukraine and Belarus ($5,160 and 7,380).

Moreover, the “median” Georgian, as opposed to the “average” Georgian, was much poorer in 2003 than suggested by the per capita income figures.

Like any average indicator, the income per capita measure masks inequality in the distribution of income, and in 2003 Georgia was much less equal compared to all ex-Soviet peers (with the exception of Russia). In 2003, Georgia’s income inequality, as measured by the so-called GINI coefficient, stood at 39.5 points, well above its levels in all other CIS countries where GINI values ranged between 35.5 (Uzbekistan) and 28.7 (Ukraine).

With close to a half of Georgia’s population locked into subsistence agriculture, and another half operating largely in the shadow, the Shevardnadze government was barely able to cover its own operational costs, let alone offer an effective policy response to Georgia’s mounting poverty and inequality challenges. Assessing Georgia’s poverty situation in 2003, the IMF noted that “widespread poverty has been brought on by the dramatic drop in incomes … and the subsequent collapse in social services… the Government has not provided an effective income redistribution mechanism and has failed to provide adequate social safety nets. This largely stems from low tax collections, which have led to accumulation of regressive wage, pension and social insurance arrears. Although public spending on health and education grew during the late 1990s, it remains 90% lower than in the pre-transition period (1% of GDP for health, and 2.2% for education in 2001).

Also, demands for high informal payments further limit access to quality healthcare and education, while poor targeting of social spending and energy subsidy have compounded the problem.”

With hindsight, it appears that until 2003 Georgia was trapped in a vicious circle of pretense that encompassed all aspects of citizenstate relations. Existing in name only, the “state” pretended to provide law & order, public infrastructure and utilities, insurance for health and old-age disability. Georgian “citizens” paid in kind – by pretending to contribute to health and social insurance, evading taxes and bribing off “public servants”.

The reality was that anyone living and trying to do business in Georgia had nobody to rely on other than themselves, informal social networks and the mafia. People did not pay taxes and did not expect to receive any government services in return. They learned to provide for all their needs, including security of own life and property, contract enforcement, health and education, heating and electricity.

Breaking out of this vicious circle required no less than another revolution in state affairs and in people’s minds (to be discussed next week).

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BUSINESS

GEORGIA TODAY

MAY 17 - 19, 2016

$1.5 Scanner to Prevent Smuggling on Georgia – Armenia Border

BY TAMAR SVANIDZE

A

USD 1.5 million scanner will be installed at the Sadakhlo Border Crossing to promote secure and easy traffic between Georgia and

Armenia.

The scanner will inspect cargo and ensure the authenticity of manifests, tariff collection and identification of illegal goods.

The European Union and United Nations Development Programme (UNDP) donated the equipment as part of a wider EU-supported initiative to

introduce Integrated Border Management in the South Caucasus.

The project, supported by the EU delegation in Georgia and UNDP, helps the governments of the two countries tackle smuggling and trafficking issues, ease people’s movement at the border crossing point, equip and train border guards and promote professional cooperation between the border management agencies of Georgia and Armenia.

The European Union and UNDP is also assisting the Georgian government to prepare and endorse the Border Management Strategy of Georgia from 2014-2018.

A similar project is being implemented at the land border between Azerbaijan and Georgia.

Tbilisi New Wine Festival Once Again Promotes Viticulture and Tourism

BY TAMAR SVANIDZE

A

dizzying array of Georgian wines saw daylight as part of Tbilisi’s annual New Wine Festival in the city’s Mtatsminda Park on Saturday. The park, located 800 meters above the city, hosted dozens of wine producers from around the country accompanied by Georgian folk and jazz musicians, including the Rezo Kiknadze Jazz Band and Tango Vagabundo group, Nali Band and Didgori Folk Ensemble.

Aside from amazing views of the city,

visitors had a chance to taste a diversity of Georgian wines from the featured 102 family wineries and 78 wine companies presenting varietals from their 2015 harvest.

The festival kicked off with the traditional opening of a clay wine vessel buried in the ground, known in Georgian as a Qvevri. Guests also had an opportunity to win barrels full of the best Saperavi wine by taking part in a lottery. Throughout the afternoon visitors were also able to enjoy barbequed meat (Mtsvadi) with their wine.

The annual Tbilisi New Wine Festival is an ideal event to boost tourism in Georgia’s capital city. The warm spring

weather, local hospitality and unique chance to taste the national wine this year once again succeeded in attracting numerous tourists and gastronomy and travel writers from around the world to the wine festival.

This year the Georgian Ministry of Economy and Sustainable Development and the National Tourism Administration hosted a group of Israeli journalists and bloggers who will promote the event through various local media outlets.

The New Wine Festival is organized by the Georgian Wine Club to promote small producers, wine producing companies and entrepreneurs involved in the viticulture industry.

BUSINESS

GEORGIA TODAY MAY 17 - 19, 2016

7

French Bakery-Pâtisserie Paul Opens in Tbilisi

BY MERI TALISHVILI

T

bilisians this Saturday welcomed the opening of the first branch of French bakery chain Paul to Georgia, on Abashidze Str. 36.

The famous brand bakery-pâtisserie will add a second supplier of top quality bread and pastry products to the market, joining its rival Entrée (here since 2008). With a capacity of up to 120 guests, the new Paul café is spread across two floors with separate sections for smokers and non-smokers. As well as tasty food and drink typical of a bakery-pâtisserie, Paul will also be offering a restaurant menu. Doors are open from 8am till 11pm.

Pascal Meunier, the French Ambassador to Georgia, was present at the opening. “I’d like to congratulate Georgia on this day,” he said. “Thanks to Paul you will get acquainted not only with a true world brand but with real French pastry!”

Agricultural worker Charlemagne Mayot became responsible for the beginnings of the now world-famous Paul brand when he established a bakery back in 1889 in the northern French city of Croix. Julien Holder married the granddaughter of Charlemagne Mayot and in 1935 the couple opened their own bakery in Lille. The Holders and their son Francis then acquired a better known bakerypâtisserie owned by the Paul family, and kept the name.

Francis Holder took over the family bakery upon his father’s death and

Photo: Irina Lekishvili

with his mother expanded the business, eventually supplying bread to the Nouvelles Galeries (opened in 1965), Auchan and Monoprix, from his bakery in Lambersart. In 1970 he purchased an abandoned industrial site in the suburbs of Lille and transformed it into a giant bakery.

The 1972 installation of a wood stove at the original Lille bakery proved so popular that, as the Paul chain expanded into French malls in Paris and other major French cities, wood stoves were incorporated into the general layout. Aside from a re-design in 1993 (to the nowsignature black), the layout and visual

aesthetic of Paul stores has not changed.

While it started out as a pure breadbaker, Paul now offers its customers a variety of breads, cakes, sandwiches, macaroons, crêpes, soups, pastries, wine, coffee and beer. It operates over 436 cafes in more than 30 countries, now including Georgia.

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BUSINESS

GEORGIA TODAY

MAY 17 - 19, 2016

Responsible Banking: ProCredit Bank Encourages its Clients to Join Forces

BY KATIE RUTH DAVIES

O

n May 10th, ProCredit Bank organized a conference and round of aided B2B meetings in the exsquisite Met hotel in Thessaloniki, Greece, titled: “Realizing the Potential of the Region- SMEs Join Forces” As part of the event, the 500 plus attendees from Greece, Georgia, Ukraine, Moldova, Serbia, Albania, Kosovo, Romania, Bulgaria, and Bosnia & Herzegovina witnessed the signing of the first European Fund for Strategic Investments InnovFin Guarantee between EIF and ProCredit Group, marked by the prescence of the Greek European Commissioner, Dimitris Avramopoulos.

“We at ProCredit are convinced that there is huge potential for business synergies across the region, and we are committed to creating opportunities to build and strengthen international business relationships,” said Borislav Kostadinov, Member of the Management Board, ProCredit Holding.

ProCredit boasts 11 banks in Europe, three in Latin America, and headquarters in Frankfurt. It has a thorough, fair and demanding training program for its staff and is supported by core shareholders IPC GmbH, ProCredit Staff Invest, KfW, the International Finance Corporation (IFC) and the DOEN foundation.

In terms of business, the Bank focuses on the layer of the economy that is key to achieving economic sustainability, social responsibility and political stability. “The layer that possesses the skills, passion and entrepreneurial drive to create jobs and generate the strong competitiveness that can bolster the underlying political economy of our countries:

We are committed to creating opportunities to build and strengthen international business relationships

Throughout the one-day B2B and conference event in Thessaloniki, 18 Georgian companies represented by 27 businesspersons had the opportunity to meet with their Balkan counterparts to discuss new partnership potential

the small and medium enterprises,” said Mr. Kostadinov, adding that the Bank has been working with small and mediumsized businesses (SMEs) in the Balkans for 20 years now. “Our unparalleled level of connectedness gives us the stability we need in these days of economic fragility and political uncertainty,” he said.

Mr. Kostadinov went on to name some of the many benefits available to its clients: the German ProCredit Bank operates as a clearing hub for the whole group, keeping down costs for international money transfers for business; for business clients the undivided attention of a personal Business Client Adviser- there are currently 1,000 Business Client Advisers serving more than 95,000 SME clients; and 24/7 state-of-the-art automated banking centers where clients can not only deposit and withdraw cash, but also perform all other types of transaction at whatever time suits them best, without the need to wait in line.

ProCredit claims to have maintained its profitability even throughout the crisis years, earning an average return on equity of just under 10%. “Not only is our SME loan portfolio growing faster than ever, but we are also increasingly successful in mobilizing deposits from business clients. This is a sure sign of confidence in us as a strong and stable institution,” said Mr. Kostadinov.

To find out more about this confidence, GEORGIA TODAY spoke to one of ProCredit’s many clients, Gela Gogishvili, Head of the Supervisory Board of GMS

GROUP, a group of medical distribution and hospital care companies. “We have been in the business of medical supply and equipment sales since 2004 and in hospital operation since 2007, later launching our own hospital in Tbilisi center (St. John the Merciful Private Clinic) with the help of ProCredit Bank,“ he said.

Throughout the one-day B2B and conference event in Thessaloniki, 18 Georgian companies represented by 27 businesspersons had the opportunity to meet with their Balkan counterparts to discuss new partnership potential.

Aiming to gradually develop the Georgian hospital sector by acquiring a referral hospital with strong ER, Emergency and Oncology profiles, Mr. Gogishvili’s company had nine meetings with various companies related to the medical business and in particular with medical furniture, equipment and pharmaceutical producers. “We set up future cooperation with those we met and since the meetings have already had follow up information exchange with most. Being customers of the same banking institution will certainly aid us in our future cooperation.“ I asked him what he considered as the greatest weakness in the development of the Georgian SME sector. “Lack of operational experience and management- especially financial- competence of Start-Ups, labor development... these are the biggest issues. But the sector is developing: business is growing and professionals and quality of operations

10 Galaktion Street

is improving. Competition is a key developer and it can be seen increasingly in Georgia. Still, many more Start-Up SMEs should be launched and financed by financial institutions for better results.“ ProCredit is, of course, one such financial institution willing to bolster the development of the SME sector in Georgia. But the Bank makes it clear that it doesn’t give out loans without careful thought and strict adherance to its basic principles.

“We expect our clients to have a sound business model and to share or at least to appreciate our vision of sustainable development, both environmentally and socially, as one of the keys to the country’s growth and competitiveness,” said Mr. Kostadinov. “That implies that they should act responsibly towards their own neighborhood, their operating environment and society at large –pay their taxes, treat their employees with the necessary care and respect, and reinvest to replenish the natural resources that they inevitably use.”

GEORGIA TODAY asked what level of success ProCredit Bank demands from the clients it invests in. Mr Kostadinov was ready to reply: “We don’t expect constant success in business terms – we will attempt to structure our facilities in a way that will help them weather a storm or two if needed. Our close cooperation with European institutions such as the EIB and the EIF helps us to bring our clients’ businesses forward; it helps us to finance the further modern-

ization of their companies. But although we’re committed to meeting their needs, we are conservative and pragmatic when it comes to lending, and when we put together a tailored credit and collateral offer, it’s the one best suited to clients’ long-term plans. Our low arrears rates are typically the envy of the industry in our markets. Over-indebtedness is one of the worst evils a bank can bring about, especially if a potentially successful business is deliberately bankrupted by the bank’s unrealistic target-setting or irresponsible bonus scheme. We are neither looking to constantly expand our client base, nor do we believe in growth for growth’s sake – we focus on quality, and on remaining true to ourselves and our principles.”

Following the daylong program of B2B meetings and fascinating presentations from a variety of speakers, including European Commissioner Dimitris Avramopoulos (“The Investment Plan for Europe comes to Greece”); Pier Luigi Gilibert, Chief Executive, EIF (“Fuelling innovation, competitiveness and economic growth – EIF’s role”); Christoph Freytag, Spokesman of the Management Board of ProCredit Bank Germany (“Fair and attractive banking services - how ProCredit Bank Germany adds value for ProCredit’s business clients”); and Dr Claus-Peter Zeitinger, Chairman of the Supervisory Board, ProCredit Bank (“’How to bake non-stereotype bankers?’

The ProCredit group’s training and staff development system”), the organizers treated the attendees to an evening of outdoor wining and dining at the Thessaloniki Nautical Club where guests were able to watch the sun set over the bay while enjoying numerous Greek specialties. After dark, all were excited to watch a bonanza 20-minute timed fireworks display accompanied by Beatles’ hits, a prelude to a similar event to be held by ProCredit Bank in Batumi on June 25th.

The Georgian delegation left Thessaloniki in high spirits, returning to their homeland with further motivation and determination to excel in their new business partnerships. We asked Mr. Gogishvili what message he would give to entrepreneurs wishing to start up an SME in Georgia. “Georgia is the right country to invest in, and now is right time to start a business here. The Georgian Government is actively pro- business development, assuring the proper business legislation and taxation, and minimizing bureaucracy,“ he said. “This is a very positive message for local and foreigner investors. Georgia is developing and becoming a very important hub for the connection of the Caucasus, Middle East and Asian markets to Europe.“ Between the Georgian Government and ProCredit Bank, I’d say Georgia’s on to a good thing!

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

BUSINESS

GEORGIA TODAY MAY 17 - 19, 2016

9

New Vision for Business YOU IN THIS?

We’re currently working on further development of our medical school environment.

Thus, we approached ProCredit Bank (for the 7th time) to support our new project.

It’s likely that we’ll have also some equipment from other ProCredit Bank clients on the campus.

BY KATIE RUTH DAVIES

A

t the recent ProCredit Bank conference and round of aided Business to Business (B2B) meetings “Realizing the Potential of the RegionSMEs Join Forces,” in which 18 Georgian companies represented by 27 businesspersons had the opportunity to meet with their Balkan counterparts to discuss new partnership potential, GEORGIA TODAY spoke to David Kereselidze, Head of the Academic Board at New Vision University and Head of the Supervisory Committee at the New Vision University Hospital.

TELL US ABOUT YOUR BUSINESS New Vision University implements undergraduate and post graduate programs in Medicine, Law, Politics, International Relations, Business and Information Technologies. It is the fastest growing international university in the region with 75% of students coming from more than 20 countries around the globe.

New Vision University Hospital is dedicated to high quality medical treatment, supported by University Research. It is vital for the implementation of medical degree programs.

HOW MANY MEETINGS DID YOU HAVE DURING THE MAY 9TH CONFERENCE? I had six meetings in Thessaloniki with potential suppliers of medical equipment for New Vision University Hospital, as well as with companies providing their services to support the development of the university’s sports facilities and other educational infrastructure.

WHAT DID YOU ACHIEVE THERE? This was a unique opportunity to meet potential business partners from diverse areas relevant for development of our university. In particular in one day we had the chance to get information about various medical equipment produced in several Eastern European countries, enabling us to compare those with alternatives available on the market.

We also had a chance to see different options of putting together sports

facilities. At one meeting we discussed the opportunity of introducing university campus equipment for environmentally friendly waste management.

All these offers are currently under discussion and may well result in the signing of respective agreements.

WHAT IS YOUR EXPERIENCE OF WORKING WITH PROCREDIT BANK? ProCredit is a reliable and comfortable partner which has supported our business from the very beginning. We have many things in common; we share a vision to promote innovation, have new approaches and technologies in our businesses and to simultaneously be environmental friendly. ProCredit experts have also been good advisors in prioritizing areas of university development. In several cases we used bank expertise in the selection of appropriate investment opportunities.

WHAT ARE YOUR FUTURE PLANS FOR YOUR BUSINESS? HOW WILL THE CONTACTS YOU MADE AT THE B2B EVENT ASSIST

WHAT WOULD YOU SAY IS ONE OF THE MAIN WEAKNESSES IN THE WAY GEORGIA OPERATES IN TERMS OF SME DEVELOPMENT?

David Kereselidze, Head of the Academic Board at New Vision University and Head of the Supervisory Committee at the New Vision University Hospital

One of the obstacles for sustainable SME development is high loan interest rates.

Despite some reduction during the last months, they remain significantly higher than in other European countries.

CAN YOU FORESEE THIS IMPROVING? The new initiative of ProCredit to deliver services comparable to European standards, including European interest rates, may significantly support access to affordable loans. This requires that Georgian SMEs make important steps forward to shaping their business according to internationally accepted management and accounting standards.

IF YOU COULD CHANGE ONE THING ABOUT GEORGIA, WHAT WOULD YOU CHANGE? I would try to support environmentally

friendly local production, aiming at reduction of the discrepancy between export and import ratio in Georgia and simultaneously raising awareness of society on environmental issues.

WHAT MESSAGE DO YOU HAVE FOR YOUNG GEORGIAN ENTREPRENEURS THINKING OF STARTING UP THEIR OWN BUSINESSES IN GEORGIA? Think of your competitive advantage based on education or already gained experience; make a relevant market study, look for similar international solutions elsewhere and think whether they might work in Georgia; select a reliable bank which will screen your idea and provide appropriate support in developing it – find next-door ProCredit Business Client Advisers!

10

BUSINESS

GEORGIA TODAY

MAY 17 - 19, 2016

Chinese Companies to Support Tea Industry in Georgia

BY EKA KARSAULIDZE

C

Contact: www.edelbrand.ge Phone: 599 461908

hinese companies together with the Partnership Fund and the Ministry of Agriculture of Georgia are to revive the tea industry in the country. The project includes the restoration of tea plantations, the creation of new tea processing points, the development of the tea industry and the creation of conditions for active development of eco-tourism in Georgia.

Two Chinese companies – Beijing Jinfenghengye Agricultural Development Co Ltd and Xinjiang Hualing & Trade (Group) Co Ltd, together with the Georgian side, signed a Memorandum of Understanding on May 12.

The Memorandum includes the development of tea production, improving the quality of tea produced in Georgia, employing more people in the

regions and raising the skillset and experience of people who could in the future plan and grow tea plantations.

“Georgia and China have 100 years of history of tea producing, friendship and cooperation,” said Davit Saganelidze, the Head of the Partnership Fund. “Our country has the best conditions for developing tea production- we now have a great opportunity to position Georgia in Asian and European markets.”

He also added that the project would facilitate cooperation between Georgia and China in the tea industry, as well as support implementation of the New Silk Road project.

Beijing Jinfenghengye Agricultural Development Co Ltd is a large Chinese firm that specializes in developing agriculture and selling agricultural products. Xinjiang Hualing & Trade (Group) Co Ltd it is a multi-profile company that owns wholesale trade centers and also works to develop China’s agricultural sector.

Georgia-Dutch Cooperation for Local Greenhouse Expansion

BY EKA KARSAULIDZE

G

eorgia’s State Partnership Fund and Dutch firm Georgian Fresh Holding B.V have invested EUR 4.2 million in the expansion of the Imereti Greenery greenhouse, located in Georgia’s Imereti region. The project aims to add an additional 1.6 hectares of space to the greenhouse and increase the quantity and quality of vegetables available on the Georgian market.

The facility was built in 2014 on 10,000 square meters. Since its establishment, Imereti Greenery has produced up to 160 tons of lettuce and herbs per year, with produce being sold daily. The greenhouse expansion started in January 2016 and will be completed in the next month. The company’s

representatives claim that vegetable production will increase to 1,000 tons per year.

“At the moment, we are engaged in the production of cucumbers, lettuce and herbs. But we want to do even more and add tomatoes, eggplants and many others to that list,” said Dirk Aleven, coordinator of the project. “We see great potential for import substitution in Georgia and want to develop it and offer consumers a really good quality product.”

The Partnership Fund noted that its investment in the project is only EUR 1.4 million and said that the produced vegetables will be sold both locally and abroad- being exported to foreign markets, including Georgia’s neighboring countries.

23 people are currently employed in the greenhouse, a number which is expected to rise to 40 following completion of the expansion project.

BUSINESS

GEORGIA TODAY MAY 17 - 19, 2016

11

Georgia’s Q1 EBRD Predicts 3.4 GDP Wine Exports Growth for Georgia Up 45% Year-on-Year T

BY EKA KARSAULIDZE

heEuropeanBankforReconstruction and Development changed its 2016 forecast for Georgia and now predicts a 3.4 percent growth

of GDP. The EBRD’s previous forecast from November 2015 said that Georgia’s GDP growth would amount to 2.6 percent this year. January – May statistics yielded a higher growth of 0.8 percent.

The bank also suggests that the GDP growth in 2017 will be 3.9 percent.

The EBRD’s acting chief correspondent, Hans Peter Lankes, said regional growth has shown modest signs of an upward trend after five consecutive years of a slowdown.

“The EBRD’s latest Regional Economic

Prospect report showed average growth of 1.4 percent in 2016 across the bank’s 36 countries of operations. The total is slightly below the 1.6 percent seen in November 2015, but above the 0.5 percent result for 2015. A further strengthening of 2.5 percent is expected in 2017,” he said.

Lankes said the Eastern part of the region has been affected heavily by what is happening in Russia and Ukraine over the past two years. He said he sees some positive signs in the future and predicted that the Bank’s prospects will look better later this year, including in Ukraine.

6 Companies Interested in Anaklia Free Industrial Zone

BY EKA KARSAULIDZE

BY EKA KARSAULIDZE

G

eorgia’s wine exports in the first quarter of 2016 grew 45 percent year-onyear, according to the Georgian National Wine Agency.

More than 11.5 million bottles valued at USD 27 million of Georgian wine were exported to 30 countries during the period.

The overall value of the wine exported increased 15 percent from the previous year.

Russia has been the largest importer

of Georgian wine so far in 2016, with the total number of imports registering an 85 percent year-on-year growth (5,925,933 bottles) for the first quarter of the year.

Ukraine, a traditional top consumer of Georgian wine, ranked second with 1.5 million bottles imported since January, a 70 percent increase. China imported 779,425 bottles in the first four months of 2016, a 58 percent increase.

Poland (682,522 bottles) and Lithuania (183,636 bottles) were the top EU importers of Georgian wine in the period.

Nearly 2.7 million bottles (USD 6.4 million worth) of brandy was also exported to 11 countries, up 86 percent from the same period in 2015.

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T

he Anaklia Development Consortium (ADC) has announced a competition to select operators in the Anaklia Free Industrial Zone (FIZ), where six companies have expressed interest in investing in future projects.

The ADC’s management, which is in charge of the zone's development, believes that the project will attract companies from countries that do not have a freetrade agreement with the EU. “Georgia is small, but due to its geopolitical location it has great potential,” said Levan Akhvlediani, Chief Executive Officer of the ADC. According to Akhvlediani, the proposed project has the potential to capitalize on Georgia’s strategic location within the Europe-Asia trade route. The concept

behind Anaklia’s FIZ is an excellent opportunity to address a variety of objectives simultaneously, especially around the creation of industrial specialization and new jobs.

The Anaklia Free Industrial Zone will be situated on 600 hectares of land. In

addition to the FIZ, ADC is also developing the Anaklia Port Project - the shortest route from China to Europe.

The overall cost of the project will amount to USD 3.7 billion, with construction set to begin at by the end of the year.

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BUSINESS

GEORGIA TODAY

MAY 17 - 19, 2016

Heineken, Amstel and Krusovice Beers to be Produced in Georgia

BY EKA KARSAULIDZE

T

he Teliani Valley’s subsidiary company Global Beer Georgia has begun construction of a beer factory with the aim of producing world famous brand beers – Heineken, Amstel and Krusovice.

The official representatives of Heineken, Amstel and Heineken Ceska Republika have already signed the contract and the factory’s construction should start in May this year.

The first batch of locally produced world brand beer is expected to be on the supermarket shelves in December 2016.

The company claims that their prices will be lower than the currently imported Heineken, Amstel and Krusovice, creating new opportunities for the company and making it more competitive.

Global Beer Georgia will

be the exclusive producer of these three beer brands in Georgia. Moreover, it will also sell the brands in Azerbaijan and Armenia.

The company’s factory is also scheduled to begin production of lemonade.

According to preliminary calculations, the total cost of the project without VAT is USD 37 million.

BUSINESS

GEORGIA TODAY MAY 17 - 19, 2016

13

EBRD and EU Supporting Free Trade Areas The decision is the first phase of the EBRD and the EU joint program aiming to invest EUR 1.2 billion to help businesses in product quality improvements and to make service standards better. This will also prepare said businesses for the DCFTA and create an environment conducive to cross-border trade, job creation and economic growth in the three countries.

“Small and medium size companies are the engine of the local economy. This facility will help them

BY EKA KARSAULIDZE

A

new support program has been designed for Georgia, Moldova and Ukraine to facilitate relationships, as well as to get maximum benefit from Deep and Comprehensive Free

Trade Area (DCFTA) cooperation between the three countries and the EU. The European Bank for Reconstruction and Development (EBRD) announced it will provide EUR 380 million in loans and trade guarantees to local partner banks and other financial institutions for on-lending to businesses. The EU will make available EUR 19 million for technical assistance, investment incentives and risk-sharing.

Amendments to Georgia’s Tax Code

BY EKA KARSAULIDZE

T

he Georgian Parliament has adopted amendments to the country’s corporate income tax reform that will come into force in January 2017.

The new corporate income tax (at a regular rate of 15 percent) will only apply to distributed profit. Undistributed profits that have been reinvested or retained will not be subject to income taxation.

The new system will also affect all commercial banks, credit unions, insurance companies, microfinance institutions and pawnshops from 2019.

According to preliminary government estimates, the state budget will receive about 600 million GEL less in corporate tax revenues in 2017 as a result of the tax reform. A further drop of 300,000 to 400,000 GEL is expected in 2018.

The government, however, says the losses will be fully compensated as a result of economic growth in the following years.

According to the new bill, the fiscal tax period will be one month long instead of the current one calendar year.

The parliament also adopted other amendments to the tax code, including a provision that states the Finance Ministry’s Internal Revenue Service will remain the sole authorized body tasked with carrying out tax audits.

The current legislation allows the relevant authorities to order a freeze of all bank accounts of a business involved in a tax dispute. Under the new law, a court must authorize the freeze of a bank account within 48 hours. If the request is declined or if the court fails to consider the request in the allotted time, the account will be released.

take full advantage of the opportunities offered by the establishment of a free trade area with the EU, thus contributing to the overall economic growth in the partner countries,” said Katarina Mathernova, the European Commission’s Deputy Director General, Neighborhood and Enlargement Negotiations.

The establishment of a free trade area is part of the EU’s Association Agreements with Georgia, Moldova and Ukraine signed in 2014.

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BUSINESS

GEORGIA TODAY

MAY 17 - 19, 2016

Beauty Salon – Studio KEUNE Advises Georgian Female Politicians How to Get the Right Look

BY EKA KARSAULIDZE

T

he right look can mean not only a favorable impression on society, but also says a lot about the character, values and aspirations of the individual. Getting the right look is especially important for public figures and politicians. Within the ‘Women Can Run the Country: Support for Gender Sensitive Local Governance’ project, implemented by Georgian Municipal Service Providers’ Association (MSPA) supported by the UN Joint Program for Gender Equality in Georgia and funded by the Swedish Government, Beauty Salon – Studio KEUNE held a workshop for 20 female representatives of the Municipal Council (Sakrebulo) to inform them of self-care rules and correct representation in public.

In an interview with GEORGIA TODAY, marketing manager of Keune, Mariam Kipshidze, said that in Georgia, as well as throughout the world, there are no generally accepted rules on how a female politician women should look, meaning that they have to be guided by international practice and experience.

Beauty Salon – Studio KEUNE offered hair, hand and nail care advice to the workshop attendees. “Hair should not be too long; it is better to have a short or medium-size classic cut. If possible,

it should always be tied back,” said Kipshidze regarding hairs styles for female politicians.

During official speeches, the main emphasis must always be on what the politician says, so no details, especially on the face, should distract the audience from the words of the speaker. This is especially important while shooting for television, when the cameras always focus more on the face.

However, Kipshidze said that during the informal meetings, female politicians can afford to be more relaxed and let their hair down, for example. “It is important not to make their image too monotonous,” she added.

Representatives of Beauty Salon – Studio KEUNE also advised the attendees to pay attention to their hands, as they are an important element of body language. “Hands are among the first things an audience notices, so female politicians should always look after them. Our salon advises not to have too long or too pointy nails, on the contrary, they should be short with a French manicure or painted with simple colorless varnish to demonstrate discretion- most suitable for a politician’s image,” Kipshidze noted.

In the framework of the workshop that took place in Beauty Salon – Studio KEUNE on May 6-7, women were not only acquainted with useful tips and trends from the leading professional cosmetic brands KEUNE Haircosmetics (Holland), LCN (Germany) and SOSKIN

(France) in 2016, but were also able to try new images created for them by the salon’s professionals. Beauty Salon – Studio KEUNE claims that the workshop will help to support the new daily images

of the women who attended.

“Since there are no generally accepted standards about a politician’s image, we gave our women only recommendations.

However, if they decide to follow them,

then we’re sure it will have a positive impact on their political lives. After all, the right image emphasizes the political, social and aesthetic values of a person,” said Kipshidze.

BUSINESS

GEORGIA TODAY MAY 17 - 19, 2016

15

POLITICS: Will New Russian Force Be 'Putin’s Personal Army'?

BY IA MEURMISHVILI FOR VOICE OF AMERICA GEORGIAN SERVICE

W

hile Russian lawmakers are busy changing the country’s election laws in preparation for parliamentary elections this year, the lower house of parliament is due this month to consider whether President Vladimir Putin’s new National Guard should be allowed to shoot Russian citizens without warning.

According to a draft law that Putin submitted to the State Duma, the National Guard would be prohibited from using firearms “at largely crowded places, if their use may casually hurt people.”

In addition, National Guard personnel would be prohibited from firing at “women with visible signs of pregnancy, people with apparent signs of disability, and underage persons.”

However, members of the force would be allowed to shoot, without warning, anybody determined to be “threatening the life and health of citizens.”

Taking this one step further, the Duma's Committee on Defense has proposed that National Guard members be granted immunity from any legal liability for actions they take that result in casualties.

Russia's RBC News quoted the Committee as saying, “We believe that in these cases, the risk of harming random individuals will be justified,” and that members of the force "should not be held liable” if they need to open fire.

COMMUNICATIONS CONTROL According to other provisions of the draft law, the National Guard would be authorized to quarantine an area to control riots, and to commandeer private citizens’ vehicles to get to a crime scene or chase criminals. The proposed legislation would also give the National Guard the right to take full control of any communication networks, if deemed necessary. Service members would be allowed to search homes, vehicles and individuals, “if there are sufficient grounds to suspect them of committing a crime or an administrative offense."

Putin wants to make sure that any and all domestic dissent will be suppressed rapidly. Simakovsky

The Bill also says the National Guard would be staffed by conscripts as well as contract personnel.

The National Guard would also have a mandate to take part in peacekeeping missions abroad, as well as having an intelligence-gathering function in order to fight terrorism, extremism and organized crime.

Some experts in Russia and the West claim the creation of the National Guard is timed with the country's parliamentary elections, set for September 18.

When asked, Kremlin spokesman Dmitri Peskov said he could not explain the timing.

Putin’s supporters have praised the move. Chechen President Ramzan Kadyrov said the creation of the force would "strengthen the combat readiness of units," while Irina Yarovaya, Chairwoman of the Duma's Committee on Defense and Anti-Corruption, called it “an absolutely timely, adequate and systemic answer to modern challenges and threats.”

AN EYE ON DISSENT Mark Simakovsky, non-resident senior fellow at the Atlantic Council, and former country director for Russia at the Pentagon, said Kremlin authorities were taking precautions in the run-up to the September parliamentary elections and the 2018 presidential elections.

“Although Putin remains very popular, the regime has concerns with economic decline in the country, as well as issues related to sanctions,” Simakovsky said. He added that the Russian president "wants to make sure that any and all domestic dissent will be suppressed rapidly."

Tens of thousands of Russians participated in protests in late 2011 after parliamentary elections were marred by allegations of unfairness and fraud.

Many people, including some opposition leaders, were jailed.

As recently as February, Putin said “enemies abroad” were trying to interfere with the parliamentary elections and tasked his security services to prevent any such actions.

With a nearly unlimited mandate, the National Guard may not simply discourage large-scale demonstrations but may also send a clear message to the West.

“The Russian president has always been paranoid about Western interference in Russia. This decision sends a signal to Western powers that there will be no 'Maidans' in Russia,” Simakovsky told VOA, referring to the protests in Ukraine that led to the ouster of that country's Moscow-backed president, Viktor Yanukovych, in 2014.

At the moment, the size of the National Guard force has not been confirmed.

Unconfirmed estimates range from 250,000 to 400,000. With a wide mandate and armed with tanks, heavy artillery and attack aircraft, an entity of this size would be a very powerful force, indeed.

“This looks to be Putin’s personal army. Basically, you have a person who can declare his own wars on countries with small armies,” Anna Borchshevs-

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Putin says the National Guard was created to fight terrorism. The new bills coming up in the Duma expand the definition of terrorism. So all this is quite vague. Borchshevskaya

Journalists: Tony Hanmer, Tamar Svanidze, Zviad Adzinbaia, Beqa Kirtava, Meri Taliashvili, Eka Karsaulidze, Zaza Jgharkava, Maka Bibilashvili, Karen Tovmasyan, Dimitri Dolaberidze, Maka Lomadze, Tim Ogden, Ana Akhalaia, Robert Isaf, Joseph Larsen, Will Cathcart, Vazha Tavberidze, Nugzar B. Ruhadze

kaya, Russia Expert at the Washington Institute for Near East Policy, said in an interview with VOA. Other European national guards are “dwarfed compared to Putin’s National Guard in sheer numbers,” she said.

The contrast is especially stark in the cases of the Lithuanian Armed Forces, which consists of around 16,000 soldiers, and the Latvian National Guard with some 11,000 personnel.

WHAT CONSTITUTES 'TERRORISM'?

Given its proposed “peacekeeping” function, Borchshevskaya said, the Kremlin will be able to use the National Guard to intervene in neighboring countries. “Officially, Putin said that the National Guard was created to fight terrorism. The new bills that are coming up in the Duma at the moment expand the definition of terrorism. So all this is quite vague,” she said. “When it comes to peacekeeping … we should be watching Ukraine, Georgia, Russia’s 'near abroad' and to some extent Syria.”

Photographer: Zviad Nikolaishvili Layout: Misha Mchedlishvili Webmaster: Sergey Gevenov Circulation Managers: David Kerdikashvili, David Djandjgava

General Viktor Zolotov is to lead Russia’s National Guard, which will absorb the Russian Interior Ministry's “shock forces,” including the Special Purpose Mobile Units that have been used to break up opposition rallies and that were used in Russia's two military campaigns against insurgents in Chechnya.

Zolotov, 62, headed Russia's Presidential Security Service from 2000 to 2013, after which he became commander of the Interior Ministry's Internal Troops.

He has known Vladimir Putin since the early 1990s, when he (Zolotov) served as a bodyguard for then-St. Petersburg Mayor Anatoly Sobchak, whose adviser was Putin.

As head of the National Guard, Zolotov will have a cabinet-level seat in the Security Council, the powerful Kremlin advisory body, and will report directly to the President, bypassing the Interior Minister.

For the article in Georgian, go to: http:// www.amerikiskhma.com/a/russiannational-guard/3311683.html

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