Issue no: 938/74
• APRIL 18 - 20, 2017
• PUBLISHED TWICE WEEKLY
PRICE: GEL 2.50
In this week’s issue...
From mobilizing funding to project building guidance, the EU Transport Commission is PAGE 6-10 ready to help
Energy Minister: Azerbaijan Nearly Satisfies Georgia’s Entire Gas Demand NEWS PAGE 2
How Businessmen Grow Wings ISET PAGE 4
Facilitating CrossBorder Investments: Examples of Cooperation in the Implementation of Rail Baltica
International Monetary Fund Approves New Three Year Program for Georgia
The European Investment Advisory Hub: Facilitating Project Promoters PAGE 10
BY NINO GUGUNISHVILI
Georgia Presents Its Educational Opportunities at Dubai Exhibition
he International Monetary Fund has approved a new three year $ 285 million program for Georgia and, according to Georgian Prime Minister Giorgi Kvirikashvili, the program is essential for the successful realization of all the reforms previously announced by the Georgian government and its Four Point Plan. The International Monetary Fund’s Executive Board approved the $ 285 million to support the economic reforms in the country on April 12. Continued on page 2
Kumsishvili and Kvirikashvili talking about the IMF program
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APRIL 18 - 20, 2017
German KFW Development Bank to Support Energo Safety in Georgia BY NINO GUGUNISHVILI
n agreement was signed on April 13 by Georgia’s First Vice Premier and Minister of Finance, Dimitry Kumsishvili; the German Ambassador to Georgia, Heike Peitsch; Chairman of the Management Board of the Georgian State Electrosystem, Sulkhan Zumburidze; and Klaus Viegel, Head of
the KFW Caucasus Office, according to which KFW Development Bank is to give a EUR 125 million loan to Georgia to expand its electro transmission network. The Georgian Ministry of Finance announces the program is to ensure infrastructure development in order to link hydro power plants to the electro transmission network, with the expectation of increasing its strength and energo safety overall. Kumsishvili expressed his gratitude to
the German government and the German governmental organizations working in Georgia- to GIZ and to the KFW Development Bank, which has been supporting important projects in Georgia for the last 25 years. “The EUR 125 million financial resource is crucial for the strengthening of Georgia’s energo safety and for the increase of electro transmission in the country,” Kumsishvili said. “The project will enable the building of power plants to not only sell produced electric power
locally, but also to export it”. He went on to emphasize the importance of assistance from Germany in Georgia’s development. “To date, EUR 700 million in concessive credits and grants have been made accessible, a vital help from Germany. These relations and support will continue in future,” he said. German Ambassador Peitsch in turn emphasized the importance of energo safety to Georgia and noted that Georgia and Germany are marking the 25th anniversary of cooperation in the sphere of development within the celebration of
the Georgian-German year. The Ambassador noted that Germany had provided almost half a billion Euro in financing for projects in the energo sphere since 1993. Under the framework of Phase Two of Georgia’s Electro Transmission Network Expansion program, the new stage of the multi-year support project is to begin, with a plan to develop the infrastructure of the transmission network in Guria region in the direction of Turkey, and the integration of the hydro power plants located in the north-south part of Georgia into the energo network.
International Monetary Fund Energy Minister: Azerbaijan Nearly Satisfies Georgia’s Entire Gas Demand Approves New Three Year Program for Georgia BY THEA MORRISON
Continued from page 1 “The approval of the program means that for the coming three years we have a green light from international monetary organizations to realize all the plans we announced. It also means that the country’s fiscal discipline and financial management must be at the highest level,” Kvirikashvili said, going on to note that the International Monetary Fund’s program approval is a positive signal to investors working in Georgia. Within the three year arrangement
under the extended fund facility (EFF), the program aims to help Georgia promote economic growth. “Structural reforms are critical for the success of the program, enabling higher inclusive growth and economic diversification,” said Tao Zhang, IMF Deputy Managing Director and Acting Chair. “The reform effort will focus on capital market development, pension reform, a PPP framework, public financial management, private sector governance and competition, and education reforms”.
eorgia’s Vice-Premier and Energy Minister has claimed that neighboring Azerbaijan is the main gas supplier of Georgia and nearly satisfies the country’s entire gas demand. Kaladze told Azerbaijani news agency Trend that Azerbaijan’s state oil company SOCAR ensures a guaranteed, continuous and reliable gas supply to the social sector – households and power generation facilities – based on the memorandum signed with Georgia and the agreements with Georgia’s Oil and Gas Corporation. Kaladze added that this factor signifi-
cantly contributes to increasing the energy security of Georgia. "The average daily volume of gas supply is about 10.5-11.5 million cubic meters from Azerbaijani sources, which is expected to be increased even further with the ongoing development of the second phase of the Shah Deniz field," he said. The minister said the Georgian side welcomes the participation of SOCAR in the energy sector of Georgia. "SOCAR Georgia Gas Ltd. performs the largest gasification project across the country. The works are provided under the contract between the Government of Georgia and SOCAR signed in 2009, within the framework of which the rehabilitation and construction of a natural gas distribution network is carried out,"
he added. Kaladze said that in 2009-2016, more than 200,000 consumers in about 600 settlements got access to natural gas in Georgia. “By the end of this year, 75 percent of the population will have access to natural gas," he added. As for the joint Azerbaijan-GeorgiaTurkey Power Bridge, Kaladze said it is operating successfully. "Georgia and Azerbaijan are connected by two high-voltage lines (500 kV and 33 kV), which increased the reliability of connection and cross-border capacity," he said. In 2016, around 1 billion kWh (300 MW) of electricity was transited from Azerbaijan to Turkey via Georgia.
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APRIL 18 - 20, 2017
THE ISET ECONOMIST A BLOG ABOUT ECONOMICS AND THE SOUTH CAUCAUS
The ISET Policy Institute (ISET-PI, www.iset-pi.ge) is an independent think-tank associated with the International School of Economics at TSU (ISET). Our blog carries economic analysis of current events and policies in Georgia and the South Caucasus region ranging from agriculture, to economic growth, energy, labor markets and the nexus of economics, culture and religion. Thought-provoking and fun to read, our blog posts are written by international faculty teaching at ISET and recent graduates representing the new generation of Georgian, Azerbaijani and Armenian economists.
How Businessmen Grow Wings BY OLGA AZHGIBETSEVA
verybody knows Bakar and Tengo (BATE Generals), two businessmen from a very popular Georgian TV series, 'My wife's best friends,' who became incredibly rich from a start-up with a seemingly 'nonsense' idea to export the 'tails' of khinkali (tradition Georgian dumplings) to Bulgaria. Later on, the BATE Generals created a special office for ideas, where their relatives and unemployed friends of friends were solicited to generate promising business ideas. BATE Generals pay a fixed amount to the idea generator and a small share of the profit from the operation of the idea, which is how BATE Generals came up with successful business projects, such as a website for husbands of pregnant wives and a taxi with a bed.
SEED AND EARLY STAGE FINANCING The tradition, and, in most cases, the only way, for Georgian entrepreneurs to finance their businesses and ideas is bank lending, so-called debt financing.
However, this source of financing is very limited for start-ups and early-stage businesses due to the high level of risk involved, the unavailability of collateral assets, and high loan interest rates which are almost unaffordable for companies that are unable to generate sufficient returns in the early stages. Alternative ways of business financing are less popular and underdeveloped in Georgia. Here, we will discuss equity financing- when a company offers a portion of ownership to investors in exchange for cash and the ability to materialize and prototype the idea. This type of financing exists in Georgia to some extent, but still doesn’t have any organized or formal framework. The most popular equity financing methods around the world are illustrated in Table 1 (the first two being very crucial for seed and early stage ventures). The first form of equity financing is quite developed in the country. Georgians, as with other people of the Caucasus, have a very 'tied' social infrastructure, which refers to close relationships with their family and other relatives; making such people the usual main source of financing business ideas on seed or early stages. However, not everyone with a great business idea has rich relatives or the significant amount of money required, therefore, in many cases, entrepreneurs have to find other ways to make their dreams come true. The second form of equity financing, angel investors, is almost non-existent in Georgia or, if it does exist, it is rare and entirely informal, which makes
it hard to find a true example. An 'Angel Investor' or 'Business Angel' is an experienced entrepreneur, mostly with a high net worth, who directly invests part of his or her personal wealth in a new, growing company at the seed or early stage. Most importantly, besides capital, the business angel provides business management experience, skills and contacts for the entrepreneur. The European Trade Association for Business Angels, Seed Funds and other Early Stage market players (EBAN) provides the key characteristics of a business angel. (See Table 2: What is a Business Angel?)
which should stimulate building of the market. • Address the problem of information asymmetry, to make it easy for entrepreneurs and investors to find each other. • Provide training and coaching for both entrepreneurs and investors. Even if Angel Investors are considered to be experienced entrepreneurs and businesspeople, investing in start-ups differs from other types of investment and requires specific skills and knowledge. Thus, training and mentoring conducted by experienced business angels for new Angel Investors is important for developing a healthy industry. Start-ups in their turn should
Source: Financing High-Growth Firms, OECD, 2011
Clearly, not every wealthy person satisfies these characteristics. Angel Investors do not only invest capital, but share their experience with new entrepreneurs and help them to build new companies. Thus, some investors can be considered financial investors but not angel investors. In addition, in some countries, investors need accreditation to show that they satisfy all the requirements and regulations defined by securities laws, which vary between countries. The main purpose of the status designation is to protect potential investors from risk. The assumption underlying accreditation is that individuals who qualify will have sufficient financial knowledge and experience to understand and take on the risks associated with investing in a start-up business. Business angels can invest individually or in a group, known as a syndicate. The creation of syndicates demands less capital from each individual investor, and gives opportunities to diversify investment portfolios, as well as increases the likelihood of start-ups surviving by providing versatile managerial expertise, skills and networks. Usually, a syndicate is led by one of the business angels or managed externally. As discussed in the OECD report “Financing High-Growth Firms”, based on 32 countries' overview of equity financing markets, business angels are the largest source of outside equity funding, after family and friends, in newly established ventures. They play a significant role in providing risk capital and increasingly contribute to economic growth and technological advances. Business angels fill a financial gap in the seed and early-stage financing market.
BUSINESS ANGELS IN GEORGIA The business angels market is partially informal in many countries and there are probably cases in Georgia when wealthy people have invested in the ideas of others and acted as business mentors, using their experience, skills and contacts in the business sphere. However, these cases are rare, and mostly happen through relatives and private networks, and in a completely unorganized way. With the idea of developing the business angels market in the country and making it more formalized and organized, in March, the Georgian Business Angels Association was founded, the main objectives of which are the following: • Raising public awareness about the business angel market and the success stories of investments,
be prepared to meet Angels, as the way in which business ideas are presented and advocated for may play a crucial role in decisions over financing the idea.
GOVERNMENT ROLE IN PROMOTING THE BUSINESS ANGELS MARKET Public policies can include both supply and demand side measures. Two popular and successful government policies to address the seed/early stage equity financing gap and encourage business angels, are proving tax incentives and launching co-investment funds, which matches public funds with angel investments. In many countries, governments also support (financially and legally) business angel associations and network groups, as they consider they play a very significant role in coordinating, promoting and developing the market. In the case of a small country such as Georgia, the government could enlarge the market of investors, with experiences in various industries by the establishment of links with the Georgian diaspora. Demand side promotion policies should include the development of an entrepreneurial culture and ecosystem in the country, as well as the provision of programs to increase entrepreneur investment readiness. Over the last couple of years, the Georgian government introduced programs and concepts, such as the “Business Incubator Fab Lab”, ”Start-up Georgia” and “Technopark”, which address the abovementioned factors to promote the demand side of the business angel market. Some of these government programs have the aim of popularizing the idea of “Angel Investment” and creating precedents for the commercialization of ideas. For example, ten Georgian start-ups were chosen to be presented in Silicon Valley (in the US state of California) and to try and find financing there. The scale is tiny, and the process was mostly oriented on foreign investors, and totally subsidized by the government, which will not be a sustainable practice in the long run. While much work is being done by the government to promote and support start-ups, further policies are needed to popularize an entrepreneurship culture and to arouse the interest of local investors to participate in the business angel market. The establishment of the Georgian Business Angels Association is the first step forward, and government support of this association, as well as the introduction of a legal framework and infrastructure, will further support the business angels market development.
GEORGIA TODAY APRIL 18 - 20, 2017
National Bank to Issue 5-Lari Collector Coins BY THEA MORRISON
he National Bank of Georgia (NBG) reports that it is to issue 5-Lari denomination silver collector coins on the theme of the Georgian vine, in order to promote the country’s rich culture and its history of ancient winemaking traditions. This summer, in the Wine Civilization Museum of the French city of Bordeaux, the International Wine Exhibition will be held, at which Georgia will be the
Guest of Honor, presenting itself not only in terms of winemaking, but also in terms of culture, ethnography and history. The decision to issue special collector coins was made by the National Bank in respect of this important event. The winning design, by Nino Gongadze, was selected through an open competition. The coin is minted in Japan Mint and will be available from July. The new coin will picture the Georgian vine and the UNESCO heritage-listed large, ancient Georgian winemaking vessel Qvevri, with red wine within. “The main composition is represented by a graphical illustration of the Wine Civilization Museum located in the city of Bordeaux, France, where Georgia will be this year’s Guest of Honor. On the top right side of the coin is depicted the denomination and the symbol of Lari, while on the arc circularly are placed French inscriptions-"L’EXPOSITION ‘VIGNOBLE INVITE’ DE LA CITE DU VIN DE BORDEAUX", "LA GEORGIE - PREMIER INVITE," the statement of the National Bank reads. The NBG says the coins will be sold at the Cash Center of the National Bank of Georgia and Money Museum in Kvareli, as well as through an online store accessible on the website of the National Bank of Georgia. The price has yet to be announced.
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APRIL 18 - 20, 2017
Tea Plantations to be Restored in Imereti Region
Georgian Tea Plantations. Source: APMA
BY NINO GUGUNISHVILI
ver 15 Hectares of Tea plantations are to be restored in the Imereti region of Georgia within the three year state initiated program “Georgian Tea”. The budget for rehabilitation works amounts to 37,000 GEL, with 80 percent of the costs expected to be covered by the Agricultural Projects Management Agency (APMA) of the Ministry of Agriculture of Georgia. The Georgian Tea Program was launched by the Georgian ministries of Economic and Sustainable Development and of Agriculture in 2015, with 500 hectares of tea plantations already restored in the last two years through an invest-
ment of GEL 1.2 million. The main objective of the Georgian Tea program is to maximize the use of Georgian tea potential and promote high quality tea production, with organic tea also included. Both privately and stateowned tea plantations are to be rehabilitated and modern tea processing enterprises established. “Technical assistance will be provided to program participants in learning tea processing technologies, certification, marketing, and in the creation of sales channels,” the APMA states, adding that the works to be done for tea plantation rehabilitation include the clearing of plantations, drainage channel arrangements, heavy and regeneratory pruning and inter-row tillage. The Georgian Tea program is expected to introduce the standards necessary for the export of Georgian tea to EU countries.
RETAIL FPI | Are Major Food Commodities Becoming More Expensive?
y the end of March, food prices increased by 4.4% y/y (that is, compared to March 2016) and by 1.6% m/m (that is, compared to February 2017). On a biweekly basis, the biggest price increases happened for coriander (40.3%), cucumber (30.0%) and eggplant (14.9%). Carrots, onions and tomatoes, on the contrary, became cheaper and cost 22.1%, 24.4% and 15.0% less, respectively.
LOOKING AT A PARTICULAR BUNDLE OF PRODUCTS According to the Retail FPI, prices of major commodities increased in March this year compared to the same period
the previous year. Sugar prices increased the most, rising by almost 30%, whereas rice, buckwheat, and wheat flour prices increased by 23.8%, 16.3% and 7.1%, respectively. While m/m changes are usually driven by seasonality or holidays, such as Easter, y/y changes are mostly driven by the variations in production and international prices. Commodities in the diagram are basic foods that are actively traded on international food markets, and, due to their importance for food security in developing countries, the FAO closely follows their prices. FAO’s latest data on their Sugar Price Index shows a huge 55% increase in sugar prices y/y (Feb 2017
compared to Feb 2016). The most recent prices for cereal are also higher, as shown by the Cereals Price Index. Given that Georgia is a net importer of these commodities, one might expect further price hikes if international trends are continued into the future, unless Georgian supermarkets offer some discounts to consumers due to the Easter holidays.
Czech Embassy Presents Czech Railway Industry Companies BY DIMITRI DOLABERIDZE
n April 12, the Embassy of the Czech Republic in Georgia organized a presentation of Czech Railway Industry Companies. The aim was to allow the Georgian side to learn practical ways to integrate into the global network, together with Czech companies. The high technical level of Škoda Electric’s long-standing experience with manufacture, the excellent quality of its technologies, and high employee productivity, have earned it the Certificate of Quality Management Systems (QMS, ISO 9001) and the Certificate of Environmental Management Systems (EMS, ISO 14001). The company was presented by Viktor Vachata, Project Manager. “This conference was extremely worth
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the time coming. The information gained was extremely valuable for representatives from Batumi and Tbilisi municipalities. I felt Georgian Railway and Tbilisi Metro participants learned a lot and were able to take back many new ideas and strategies to use and present to their departments and committees,” Vachata told GEORGIA TODAY. VZU Plzen was then presented by Jan Chvojan, Head of the Dynamic Testing and Force Laboratory. "This conference addresses many topics that are of interest, with presenters being experienced educators who have practical knowledge and are willing to share their successes with attendees,” Chvojan told us prior to his talk. Involved in research, development and accredited testing, the key activities of VZU Plzen include: • Research and testing focused on improving in-service reliability and service life of power engineering devices:
vibration diagnostics, noise reducing, material tests, residual service life assessment, etc.; • Complex solving of the problems related to operational loading, reliability and service life of road and rail vehicles:
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computer simulations, testing room tests, operational measurements; • Accredited testing and measurements for a wide range of customers; • Computing in the field of strength, dynamics, fatigue damage, crashworthi-
ness, aerodynamics and thermomechanics; • Research and development of thermal spraying for both primary production and renovation including their industrial applications. GHH-Bonatrans Group provides its clients with complete services in development and delivery of wheelsets and their parts. “There is a high demand for efficient noise reduction in all frequencies on wheelsets for metro systems,” said Pavel Kufa, Senior Sales Manager. “I have attended a lot of conferences, and I must say that this presentation of Czech Railway Industry Companies is by far one of the most honest and direct I have ever participated in,” Kufa added. “The Georgian side was truly privileged and thankful to Deputy Head of Missions of the Czech Embassy to Georgia, Mr. Jirí Preclík, for creating such an important event. Truly an opportunity to learn, reflect, and be encouraged!”
GEORGIA TODAY APRIL 18 - 20, 2017
PASHA Bank Plants 1000 Oak Trees
his year again PASHA Bank congratulated its partners and clients on Easter in a special way: on behalf of its associates, the Bank planted 1,000 Georgian Oak (Quercus Iberica) and Imeretian Oak (Quercus Imeretina) trees, the latter currently on the Red List of threatened plant species. The seedlings were planted in Imereti region and fully covered one of the areas in the Ajameti Managed Reserve in which rehabilitation processes are being carried out. Together with Treepex and PASHA Bank, the representatives of the Agency of Protected Areas of Georgia and local schoolchildren also joined the planting process. “At PASHA Bank we pay considerable attention to corporate social responsibility and we have carried out a number of charity and social activities in Georgia,” said Anano Korkia, Head of PR and Marketing at PASHA Bank. “This year we decided
to mostly focus on environmental-friendly projects and get our clients and partners involved as well. Together with Treepex, we are happy to have another opportunity to contribute to the rehabilitation program and do a good deed”. “We highly appreciate PASHA Bank’s initiative to participate in the rehabilitation of the Ajameti Managed Reserve,” said Toma Dekanoidze, acting Head of Planning and Development Service at the Agency of Protected Areas. “It is a part of 10-year plan according to which Imeretian Oak and Zelkova trees will be re-planted here. We hope that the Bank will continue its ‘green activities’ and set a good example to other companies in doing so”. In terms of its “green projects,” PASHA Bank recently planted 2017 Georgian Pine Trees near Borjomi, where 260 hectares of forest got burnt down in August 2008. The Bank plans to fulfill even more eco projects in future.
APRIL 18 - 20, 2017
Facilitating Cross-Border Investments: Examples of Co-operation in the Implementation of Rail Baltica BY KATIE RUTH DAVIES
ail Baltica is known to many as the project of the century. A global greenfield project that will build new Europeangauge railways from Tallinnthrough Parnu, Riga, Panevezys and Kaunas with a link to Vilnius then on to Bialystok and Warsaw -it is seen as the overarching project for the three Baltic countries: Latvia, Estonia and Lithuania. Rail Baltica is a EUR 5 bln expected investment with no current Public-PrivatePartnership (PPP) financing; instead, it is 85% financed by ‘Connecting Europe Facility’ (CEF) grants, with co-financing from the three Baltic countries themselves. GEORGIA TODAY attended the Regional Transport Investment Conference held in Sofia in March, and heard from Ms. Baiba Rubesa, CEO of ‘Rail Baltica Joint Venture’.
GOVERNANCE “At the heart of the project, we have three shareholders: three relevant ministries from each of the Baltic countries, which created special purpose vehicles- investors in a company that has its headquarters in Latvia, Riga, and works under Latvian commercial law. ‘Rail Baltica Joint Venture’ is the central project coordinator working alongside national implementing bodies.” What is unique is that the ‘Joint Venture’ between the Baltic countries was intended to be not only the project coordinator but also the implementing body for the entire project. “We now have many national implementing bodies, some of whom are also shareholders in the company,” Rubesa says. The three Baltic countries are the beneficiaries of the project and current shareholders. In the shareholders’ agreement is the option to have two observers; in this case, one from Finland, the other
from Poland. “There is no other cross-border project in Europe that has so many stakeholders involved,” Rubesa says. “When you take into account that the EU is the key investor with 85%, it presents a lot of complexity.” Not least when you take into account potential political interests and adjustments. But she is fairly optimistic in this regard: between now and end of the project, Rubesa expects approximately 35 more elections in all three Baltic countries and the EU itself; “In the course of the last year, we’ve already had three political changes and I can tell you, each political change brings a new wind to the project”.
STRUCTURE Rail Baltica is a European commitment to deliver a future-driven economic corridor to north-eastern Europe by building European gauge infrastructure. It connects north-eastern Europe, from Finland to Poland, with the rest of Europe, and aims to enhance economic development more than ever before. “The three Baltic countries together have a territory that is larger than the Belgalux countries, but of course the population is significantly smaller. So, this is all about resource efficiency and effectivity: resources in terms of time, money invested and potential for delivery. Here, we see that there are a lot of economies of scale possible with a very collaborative environment for such a project in terms of finance management, procurement, the expertise needed for such a project, and deployment of project personnel. The joint venture and structure of this project was created to ensure inter-operability, which in previous projects has been a challenge”.
RECOGNITION Specific to Rail Baltica, building the railway and developing the economic corridor, it is important for the Baltic countries to be recognized at the regional level. “It is very hard for small countries. We are seen as stronger if we perform and
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Ms. Baiba Rubesa, CEO of ‘Rail Baltica Joint Venture’
present ourselves regionally. To our neighbor to the south in Poland, and to the many other stakeholders that might have an interest in the business this [project] will generate”.
CHALLENGES One of many questions that need to be addressed from the outset include: is this a global project- are we looking at it in its totality or is it a jigsaw puzzle that comes together from its individual national parts? “It’s extremely difficult for any country anywhere in the world to move beyond national interests; to look a bit higher and see where collaboration; genuine collaboration, not negotiation, between different countries brings benefit,” Rubesa says. “It is difficult to agree on genuine alignment and enforcement of project goals, processes, organization, even business assumptions. It is difficult to align permits and studies in the region; to deliver effective and economic technical design and optimized construction costif it’s done together, it is more optimal; if it’s done in each nation alone, it will be more expensive and it will take longer to do and there will likely be interoperability challenges”. Another question: How do you deal with project governance that has inherent conflicts of interest with national bodies? “What I’m learning from other projects is that there is actually a lack of experience and understanding of cross-border project management and matrix organizations,” Rubesa says. “I come from the oil, gas, and retail business where there is a very strong and good understanding and framework for collaboration, even if you are fierce competitors. In transportation, however, there is still a long way to go to that end”. She also points to the latent competition between nations and/or existing large infrastructure companies. “The Baltic countries are seeking to attract Chinese investment. I say to others: Get your acts together and talk to the Chinese! Such collaboration will ultimately bring greater benefit! But I do understand that each individual country wants to have its own approach; to have a smaller slice of the pie, but its own slice of the pie”. Rubesa went on to invite the EU Commission to establish a corporate governance mandate that “is very clear up front: a two-tier management, with profession-
als on the management board, independent supervisory board members which should include at least one neutral observer from the European Commission, and common strict guidelines to eliminate conflicts of interest”.
RECOMMENDATIONS There are a lot of areas of value to the European tax payer in cross-border projects of this nature, Rubesa believes. But the legislative framework needs to change. “There should be a move toward one common legislative framework for crossborder projects, one that could be crosssectoral, beyond transportation: essentially a one-stop cross-border standard service unit where there is clarity on financing commitments; one tax regime which dif-
fers from national regimes; and common procurement regulations. We have a new EU procurement directive and, boy, does it take a lot of discussion in the detail when you’re doing procurement with each of the national entities, each of which has own tiny little regulations!” It’s challenging in time, resources and understanding, particularly when it comes to the application of language. “If you are into very technical issues, mistakes can be made in translating backand-forth. We need to find a better way to move forward with this in light of procurement regulation”. Rubesa also believes that it is important to create common templates for reporting, benchmarking, and best practice from previous projects, and that legal agreements need to be standardized. “There are always legal differences between countries, but the basic standards should be agreed on in policies,” she says. She adds that there needs to be better regulation of corporate governance for project coordinators; a clarity of roles, particularly in cross-border projects, with the special purpose vehicles of shareholders and joint ventures laid out in detail. Clear, too, should be who is going to invest and how, and what the financial modalities will be for the entire duration of the project. For Estonia, Latvia and Lithuania, co-financing a project like Rail Baltica has a huge impact on their national budgets. Clarity, for them, is essential. “Right now, though we’re not far into the project, we’re in the process of renegotiating a renegotiation of the negotiation,” Rubesa laughs. “It just delays the project”. The World Economic Forum recently published a study of the most innovative countries in entrepreneurship. Number 1 is Estonia, number 2 is Sweden and number 3 is Latvia. “So, I think we’ll do pretty well to deliver on the project expectations,” she concludes.
APRIL 18 - 20, 2017
The European Investment Advisory Hub: Facilitating Project Promoters BY DIMITRI DOLABERIDZE
ransport provides vital connections for millions of Europe’s citizens and businesses on a daily basis, allowing for the flow of both people and goods. Safe, reliable and high quality transport links are the backbone of the internal market and economy in Europe. The transport industry directly employs more than 10 million people, accounts for 4.5% of total employment, and represents 4.6% of the EU’s GDP. By attracting additional private and public investments, the Investment Plan for Europe is pivotal to ensuring transport as the key driver for socio-economic growth and jobs. Transport faces a wide range of financing challenges across the EU: underinvestment, lack of suitable financing solutions, ageing infrastructure, an insufficiently developed and non-transparent pipeline of transport projects, continuous growth of urban populations, and regulatory and administrative barriers. The economic crisis has further limited the availability of resources and access to finance. It is often the case that transport projects need up-front preparation and structuring before they are ready for financing. As a one-stop shop for technical advice, the European Investment Advisory Hub (EIAH) aims to help kickstart transport projects and make them
more robust. GEORGIA TODAY attended the Regional Transport Investment Conference held in Sofia, Bulgaria, in March, and heard from Mark Mawhinney, Head of Division, EIAH. There are three pillars to the European Commission’s Investment Plan for Europe: the mobilizing of additional financing, a key element of the European Fund for Strategic Investment (EFSI)with blending as a route in; supporting investment in the economy; and creating an investment-friendly environment- for many people this is about cutting back on regulation and also about capacitybuilding. The EIAH will serve as part of Pillar Two: investment in the real economy. “When we first set up, we were given a number of key work-stream activities,” Mawhinney says. “The development of an open forum, or website, through which anybody and everybody can come forward with potentially investable projects. The second, which has become more and more apparent and critical to the development of the Investment Plan for Europe: dealing with investable projects that appear with something missing- having not quite hit the point where they are financeable or investable”. The third EIHA mission is to help member states develop the capacity to deal with financial instruments, EFSIs and Public-Private Partnerships in greater volume. “We live in a global society- it is impor-
tant for Europe to be competitive,” Mawhinney insists. “But we need to do more with fewer resources and it’s important that we take this on board. The EIHA and European Bank of Reconstruction and Development (EBRD), with DigiMove and the Innovation and Executive Agency (INEA), have worked to established a set blending call that makes sense from both a policy and practical point of view- one that can attract bidders to move forward and participate in the program”. “This is a bold move; exciting,” he says. “But it is new and it is complicated- we’re moving into a new era that necessitates collaboration across a number of organizations”.
The Hub offers advice on existing project augmentation, identification of major gaps, advice on terms of reference, financial structure, and, post-call, providing advice on high-level project implementation. “In the last months, requests have been coming in for a range of activities from various subsectors within the transport sector. The EIHA aims to promote the idea of a single Point of Contact. There will be a range of experts and consultants on hand and further support will be provided when necessary to successful applicants,” Mawhinney says. “But collaboration is necessary across a number of organizations in order to help potential projects. We’re working on a
timescale here, and the projects that come through need to be reasonably mature, although those that are not mature will be helped to develop”. Barriers to investment and challenges faced by the EU market persist in the transport sector, with direct impact on investments. Creating a stable and predictable regulatory environment in a coordinated manner is a key element in increasing investor confidence in the EU transport industry. Within the Investment Plan, the EU Commission has set the objective to achieve at least an overall doubling in the use of financial instruments under ESI funds. This objective (approximately EUR 23 billion) is within reach.
GEORGIA TODAY APRIL 18 - 20, 2017
Georgia Presents Its Educational Opportunities at Dubai Exhibition BY THEA MORRISON
eorgia’s eight leading state and private universities participated in a three-day international educational exhibition in Dubai, United Arab Emirates. Georgia’s Ministry of Education and Science presented the program Study in Georgia, which aims at making Georgia an international hub of education. The project envisages launching an international educational project in Georgia’s universities which will make Georgia more attractive for foreign students. Georgia’s Minister, Alexander Jejelava, also attended the opening ceremony. “Georgia offers a wide range of educational programs to foreigners, which
makes the country very competitive on the market,” he told guests. The Education Ministry says that the programs presented at the exhibition by
Georgian universities generated a lot of interest. In total, around 130 universities from 20 countries took part in the exhibition.
Lithuanian University to Open Ilia Chavchavadze Auditorium BY THEA MORRISON
he Embassy of Georgia to Vilnius, Lithuania, says that an Ilia Chavchavadze Auditorium is soon to be opened in the Lithuanian University of Educational Sciences. Opened in 1935, the Lithuanian University of Educational Sciences, the biggest teacher training institution in Lithuania, offers undergraduate, graduate and postgraduate studies in humanities, social sciences, physical sciences, biomedicine and technologies. The news of the newly named Auditorium was announced while Georgian Language Day was being celebrated at the university on April 14. Three exhibitions about the Georgian alphabet and its development, Georgian literature and Georgia-Lithuania rela-
tions were also arranged during the celebration. Georgian Ambassador to Lithuania, Khatuna Salukvadze, spoke at the event attended by Lithuanian and Georgian professors and students. Ilia Chavchavadze (1837–1907) was one of Georgia’s most prominent 19th century writers, public figures and a journalist who lead a number of public movements and institutions. Chavchavadze is thought to have been
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one of the first people to introduce European ideas into Georgian society. Inspired by the contemporary liberal movements in Europe, he directed much of his efforts toward awakening national ideals in Georgians and to the creation of a stable society in his homeland. As a point of interest, The Society for the Spreading of Literacy among Georgians, founded by Ilia Chavchavadze in 1879, discarded five letters from the Georgian alphabet that had become redundant:
In 1907, Chavchavadze was brutally killed in Tsitsamuri, a village of Mtskheta. His legacy earned him the broad admiration of the Georgian people. In 1987 he was canonized as Saint Ilia the Righteous by the Georgian Orthodox Church.
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