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Issue no: 888/49

• OCTOBER 18 - 20, 2016

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue...

Dimitry Kumsishvili visiting reconstruction works in Gudauri

Tbilisi - Ashkhabad Direct Flights to Be Launched as Part of Growing Cooperation PAGE 2

Khachapuri Index, Exchange Rate Dynamics and International Tourism

FOCUS ON BUILDING BETTER

Gudauri gets longed for water system amid infrastructure development works

PAGE 1-2

Bakradze Appointed as Georgian Ambassador to USA BY THEA MORRISON

T

he President of Georgia, Giorgi Margvelashvili, appointed David Bakradze, State Minister for European and Euro-Atlantic Integration, as the Georgia’s new Ambassador Extraordinary and Plenipotentiary to the United States of America (USA) on Wednesday. Bakradze, 41, replaced former ambassador to the USA, Archil Gegeshidze, and will begin his new duties on December 5, 2016. The President hosted the newly appointed Ambassador at the Presidential Palace. At the meeting, the officials discussed the

existing relationships and the perspectives of strengthening cooperation between Georgia and its strategic partner, the United States. Gegeshidze’s replacement was announced by Prime Minister of Georgia, Giorgi Kvirikashvili, in early September. The PM said that Bakradze had “excellent working experience as an ambassador among NATO member states, has huge experience regarding Georgia’s Euro-Atlantic integration and his personal characteristics will also allow him to establish important relations.” Gegeshidze occupied the ambassador’s post in March, 2013. This July he was summoned to the Foreign Ministry of Georgia to provide an explanation over his statement that pro-Russian forces are “present in the ruling team but do

ISET PAGE 4

Tbilisi Fashion Week is Back PAGE 7

Electricity Market Watch GALT & TAGGART PAGE 8

Former Diplomat Hopes Era of Messiahs Soon to End in Georgia POLITICS PAGE 11

Davit Bakradze was hosted by President Margvelashvili

Batumi International Beach Rugby Festival Short-listed for Rhino Grassroots Award

not influence the decision-making process.” The President assessed his comments as “an incompetent statement from an unqualified ambassador.” Gegeshidze first received formal criticism during the October 2015 visit of the Georgian President to New York and Washington where he accused the Head of the Georgian diplomatic mission in the USA of failing to attend meetings and forgetting correct diplomatic etiquette.

SPORTS PAGE 12 Prepared for Georgia Today Business by

Markets Asof14ͲOctͲ2016

STOCKS BankofGeorgia(BGEOLN) GHG(GHGLN) TBCBankGroup(TBCGLN)

COMMODITIES CrudeOil,Brent(US$/bbl) GoldSpot(US$/OZ)

INDICES

w/w

m/m

Price

w/w

m/m

GBP30.03

Ͳ1,3%

+2,6%

GEOROG04/21

105.38(YTM5.39%)

Ͳ0,1%

Ͳ0,1%

GBP3.28

Price

+3,1%

+9,3%

GEORG04/21

BONDS

111.98(YTM3.93%)

Ͳ0,1%

Ͳ0,2%

GBP12.58

Ͳ0,6%

+9,3%

GRAIL07/22

112.50(YTM5.20%)

Ͳ0,2%

Ͳ0,3%

BGEOLN07/23

103.25(YTM5.42%)

Ͳ0,4%

+0,1%

Price

w/w

m/m

51,95

+0,0%

+13,3%

1251,03

Ͳ0,5%

Ͳ5,4%

CURRENCIES

Price

w/w

m/m

GEL/USD

2,3763

+1,8%

+2,9%

GEL/EUR

2,6050

+0,7%

+1,1%

Price

w/w

m/m

GEL/GBP

2,8963

Ͳ0,5%

FTSE100

7013,55

Ͳ0,4%

+5,1%

GEL/CHF

2,3995

+0,5%

+1,1%

FTSE250

17980,18

Ͳ0,1%

+2,0%

GEL/RUB

0,0377

+0,5%

+6,5%

DAX

10580,38

+0,9%

+1,9%

GEL/TRY

0,7685

+0,4%

Ͳ0,9%

DOWJONES

18138,38

Ͳ0,6%

+0,6%

GEL/AZN

1,4887

+1,6%

+6,3%

5214,16

Ͳ1,5%

+0,8%

GEL/AMD

0,0050

+2,0%

+2,0%

NASDAQ

Ͳ5,3%

129,20

Ͳ2,3%

+1,1%

GEL/UAH

0,0921

+1,9%

+5,0%

897,03

Ͳ1,9%

+1,3%

EUR/USD

0,9113

+2,1%

+2,5%

SP500

2132,98

Ͳ1,0%

+0,3%

GBP/USD

0,8205

+2,0%

+8,6%

MICEX

1966,39

Ͳ0,7%

+1,7%

MSCIFM

MSCIEMEE MSCIEM

Ͳ1,9%

CHF/USD

0,9903

+1,3%

2506,88

Ͳ0,9%

Ͳ0,2%

RUB/USD

62,9573

+1,0%

Ͳ3,4%

GTIndex(GEL)

908,54

Ͳ

+8,0%

TRY/USD

3,0903

+1,3%

+3,7%

GTIndex(USD)

768,04

Ͳ

+6,9%

AZN/USD

1,6090

+0,4%

Ͳ1,9%


2

BUSINESS

GEORGIA TODAY

OCTOBER 18 - 20, 2016

New Water Supply System & Infrastructure Transformations for Gudauri BY NINO GUGUNISHVILI

T

he Georgian Ministry for Regional and Infrastructural Development is working on a water supply system rehabilitation for Gudauri Ski Resort and, for the first time in Gudauri history, it is said the place will now have enough water to satisfy both locals and visitors. Lack of water was a problem that remained unsolved for the many years of the resort’s existence, yet which never affected the resort’s popularity. The first phase of the project, being handled by the United Water Supply Company of Georgia, entails the construction of drinking water reservoirs, with an allocated government grant of over GEL 4 million.

Reconstruction works are expected to reach completion in November. As Dimitry Kumsishvili, First Vice Premier of Georgia, noted during his trip to Gudauri, the overall investment assigned for the development of the popular mountain resort is GEL 170 -180 million. Further to the water system rehabilitaton, infrastructural changes are also in line for Gudauri, to be realized according to the recommendations and Master Plan implemented by the Ecosign Mountain Resort Planners Company (Canada), which highlights the areas that need to be improved for the better functionality of the resort in order to boost its touristic potential. The new development plan is seen as a basis for a long-term strategy according to which Gudauri will develop with new ski tracks, ski lifts, hotels and residential areas.

Tbilisi - Ashkhabad Direct Flights to Be Launched as Part of Growing Cooperation BY NINO GUGUNISHVILI

T

wice weekly flights from Tbilisi to Ashkhabad are to be launched from the beginning of November. The Boeing-737 and Boeing-757 aircrafts will fly every Wednes-

day and Sunday following an agreement reached between the two countries in June, when a memorandum of cooperation between the aviation authorities of Georgia and Turkmenistan was signed. The agreement enables the two parties to have direct flights not only to the capitals of Georgia and Turkmenistan, but to any other direct destinations within the territories of both countries.

The first steps towards mutual cooperation were made during the official visit of Giorgi Margvelashvili, President of Georgia, to Ashkhabad in 2014. Today, the two countries cooperate in principle in petroleum trade areas, while this year, Georgia offered Turkmenistan the use of Georgian sea ports for the transportation of goods to Europe.


BUSINESS

GEORGIA TODAY OCTOBER 18 - 20, 2016

Honorary Tbilisi Citizens Awarded BY NINO GUGUNISHVILI

T

he first day of the city festival Tbilisoba was rounded off with a gala dinner and concert at the Ilia Garden on Agmashenebli Avenue, where representatives from the fields of art, sports and science gathered alongside state officials at the annual Honorable Citizen of Tbilisi award ceremony. The ceremony dates back to 1979 when it was organized for the first time, ever after a traditional event held during the Tbilisoba festival. "This year Tbilisoba gained in size considerably, with new venues and locations added, especially the new Tiflis

project and Agmashenebli Avenue playing an integral part in the festival, together with an older part of the city, Legvtakhevi, where the 19th century was brought back to life through showing the old professions that were once popular and existed in Tbilisi," Davit Narmania, the Mayor of Tbilisi, said in his opening speech. Tbilisi in Georgian Cinema was chosen as a leitmotif of the Honorable Citizen of Tbilisi award ceremony and the guests had an opportunity to see footage from Georgian films on a huge screen on stage. As per tradition, this year many famous Georgian actors and actresses, doctors, sportsmen, singers, and scientists received an award. Tamar Skhirtladze, Georgian actress; Pridon Sulaberidze, famous Georgian

3

‘Winter in Georgia’ Promo Wins at International Tourism Festivals

dancer; Robert Gogolashvili, folklore specialist; Lali Badurashvili, actress; Alexander Chivadze, Georgian football player; former Tbilisi Dinamo captain, Giorgi Kvesitadze - Biologist; Guela Mukhashavria, Doctor; Nodar Mgaloblishvili, actor; Levan Tchachiashvili, doctor; Dimitri Eristavi, painter; Liana Isakadze,violinist; Djemal Chkuaseli, singer and head of Erisioni folklore ensemble; and Revaz Gabriadze, Puppet Theatre director, writer and painter, were all awarded as Honorary Citizens of Tbilisi. A special award for the highest artistic achievement was given to the Georgian ensemble “Kartuli Khmebi” (Georgian Voices) by Micheil Giorgadze, the Minister of Culture and Monument Protection of Georgia.

BY NINO GUGUNISHVILI

P

romotional footage ‘Winter in Georgia,’ produced by the Georgian National Tourism Administration (GNTA) of Georgia won prestigious awards at a variety of International Tourism Festivals in Riga, Latvia (Main prize of RIGA TOURFILM Festival), Zagreb, Croatia (Special Prize of Zagreb TOURFILM Festival) and a Silver Prize at Baku International Tourism Film Festival in Azerbaijan.

“There are ongoing internet marketing campaigns promoting the winter season in Georgia in 12 countries worldwide, with TV advertising campaigns in Ukraine, Kazakhstan and Russia,” Giorgi Chogovadze, Head of National Tourism Administration as he introduced the GNTA’s winter marketing strategies. He added that spring and summer tourist seasons are also promoted in 16 countries, with a massive campaign on TripAdvisor. See the promo here: https://www.youtube.com/ watch?v=5imZlN0EllU\


4

BUSINESS

GEORGIA TODAY

OCTOBER 18 - 20, 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.

Khachapuri Index, Exchange Rate Dynamics and International Tourism due to external developments in the global currency markets. As a result, the $Kh-Index did not increase as much as its Georgian (Lari) equivalent. Similarly, the Lari started appreciating in spring 2016 (reaching a local maximum of 2.19 (Lari)/$ in June), at exactly the time when seasonal factors normally bring (Lari) Kh-Index to its annual minimum. Overall, peak-to-trough, the $Khindex fell only 21%, as compared with 30% in local currency.

BY IA KATSIA AND ERIC LIVNY

O

ne glance at the (Lari) Khachapuri Index chart (for locals) tells the whole story of Georgian agriculture. Left to fend for themselves during the cold winter months, Georgian cows produce very little milk, sending dairy prices through the roof. Conversely, milk production peaks with the arrival of sunny weather and green fodders in early spring, leading to a collapse of milk prices. In the absence of large-scale industrial milk production (that does not depend as much on climate and weather conditions), the roller coaster image repeats itself, year in, year out. A somewhat different picture emerges if we recalculate the Khachapuri Index in US$. The roller coaster image is very easy to discern in 2014-15 (dashed blue line). Peak-to-trough (December 2014 to May 2015), the $Kh-Index fell a solid 36% as compared to 28% for its Georgian (Lari) equivalent. The fall in $Kh-Index was so precipitous because in the first half of 2015 the (Lari)/$ exchange rate dynamics reinforced the seasonal fluctuations in the price of Imeretian cheese and other seasonal ingredients. In other words, not only did the Khachapuri ingredients become cheaper after January 2015, but also the Georgian currency lost in value, falling from about 1.80 to 2.30 (Lari)/$ in a matter of 6-7 months. Thus, by April 2015, Georgia had become an extremely cheap destination for foreign tourists; in May 2015, the $Khachapuri Index hit an all-time low of $1.24! Interestingly enough, the roller coaster image disappeared almost completely in the second half of 2015 and in 2016 (solid red line) since Lari and dairy prices happened to move in the opposite direction, cancelling each other’s influence and producing a line that is much flatter than the norm. Thus, when demand for traditional Georgian delicacies went up with the start of the high tourism season (in June-July 2015), the Lari went down

ROUTING

TBILISI - ISTANBUL ATATURK AIRPORT

ISTANBUL ATATURK AIRPORT - TBILISI TBILISI - ISTANBUL SABIHA GOKCEN AIRPORT ISTANBUL SABIHA GOKCEN AIRPORT - TBILISI BATUMI - ISTANBUL ISTANBUL - BATUMI

FLIGHT NUMBER

TK 379 TK 387 TK 383 TK 386 TK 382 TK 378 TK 381 TK 381 TK 380 TK 391 TK 393 TK 390 TK 392

* * * The most important takeaway from the $Kh-Index story is that, in the absence of significant price inflation, a devaluated national currency strengthened Georgia’s position as a competitive destination for international tourism (at least as far as prices are concerned). The prices of Georgian goods may go up and down due to seasonal factors (in both Lari and US$), but on average we have become much cheaper for foreign consumers of our tourism services and goods. This might have been an important factor behind the spectacular increase in the number of international arrivals that Georgia has seen in 2016.

KH-INDEX METHODOLOGY Inspired by the Big Mac Index of the Economist magazine, the ISET Khachapuri index tracks inflation by using the most popular Georgian food, the Khachapuri. As opposed to other inflation indices relying on a complex basket of consumer goods the ISET Khachapuri index uses a basket for calculating inflation that includes only those ingredients that are needed to cook one Imeretian khachapuri - flour, cheese, yeast, milk, eggs, and butter. It also includes energy costs - gas and electricity.

WEEK DAYS

EVERYDAY

EVERYDAY 1/2/4/5/6/7 3 EVERYDAY 1/2/4/6/7 1/3/4/5/7 1/2/4/6/7 1/3/4/5/7

DEPARTURE

ARRIVAL

02:35 06:35 22:55 01:40 18:10 21:15 04:25 05:05 19:40 10:35 20:15 06:25 16:20

04:05 08:05 00:30+1 04:55 21:30 00:30+1 05:50 06:30 22:55 11:40 21:20 09:20 19:20

10 Galaktion Street

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


6

BUSINESS

GEORGIA TODAY

OCTOBER 18 - 20, 2016

Georgian Cooking Meets Georgian Cooking in Bold New Old Tbilisi Restaurant BY ROBERT ISAF

I

t’s one of the odd overlooked things about Tbilisi, another one of the details, the kind of thing you’d miss amidst the snow-capped mountains in the distance on a clear day or the mist-draped mountain looming above the rooftops under autumn rain. It is exactly the sort of thing that you could count on a chef to notice, though. There’s rosemary; everywhere. It’s wild throughout the Caucasus, at home on bare slopes and dry, rocky cliffs waiting for hikers. Rosemary in Tbilisi comes native and planted both, the seagreen needles and lilac flowers climbing up to Narikhala and spraying out beside the white roses politicking on Rose Revolution Square. Grant Freeman used to run his hand through those bushes, on Rose Revolution, as he’d pass, rubbing the leaves to carry a bit of the scent with him. It’s one of his favorite herbs, he says. “People seem to use rosemary as decoration, but never cook with it,” he explains. “It’s something you can find very easily – my cooks have even told me that you can find dried rosemary – but nobody sells fresh rosemary. So I just thought, yeah, this is something that I want to use in my cooking – and it’s a beautiful sounding name as well, and it has an amazing flavor.” Unlike rosemary, Freeman isn’t native to Georgia – at least not the Caucasian one. He was born in Savannah, Georgia, in the US, and raised between Atlanta and Chattanooga, at the southern end of the low, rolling Appalachian Mountains. After nearly a decade living as a professional chef, he decided he wanted a change, and came to Baghdati to teach English for six months. That was four years ago. That the food here piqued the young chef’s imagination shouldn’t come as much of a surprise. “From a culinary perspective,” Freeman says, “I just decided I should do something, I want to do something, but I didn’t know what.” That “what” turned out to be Rosemary, one of the most quietly exciting new restaurants in Tbilisi. Freeman approaches the classics of Georgian cuisine like an

Fried Green Tomatoes- Green achika Svan arajani (chili and herb sour cream)

eager student discovering a new language; studying it, exploring its rules and quirks, and toying with it all gleefully, unrestrained by native familiarity. The result is a mix of Kartvelian classics with a Dixie accent, and Southern fare with a Caucasian twist. His hallmark is creative simplicity, though; a down-home rusticism that runs through everything from ingredients to décor to prices; there’s no sense that he’s overplayed his hand. It is a great hand, though, and the food as arrives is exactly what’s prom-

ised; Georgian food meets Georgian food, curated by a master chef. Perhaps as surprising as the food is just how easy it was to get the business off the ground. The idea of opening a restaurant hadn’t even been Freeman’s, originally; one of his students had a cousin who knew Freeman was a chef, and decided he wanted to be an investor in whatever restaurant Freeman wanted to open. “It took me a couple of days to think about it, because it’s a big commitment,”

Freeman said, “and when I said yes, we started getting the ball rolling – and you know, it’s Georgia. When Georgians decide to do something it starts happening right then and there and you’re kind of just along for the ride sometimes.” And it was certainly a fast ride. Freeman and his partner started discussing the restaurant only a year ago, things didn’t really start moving until nearly this summer, and the bulk of the actual work, including the significant renovations needed for their new space, was all crammed in to August and September. “That was probably the biggest hurdle,” he said. “We had a very tight timeframe because we didn’t have the biggest budget to begin with – so we needed to get our workers in here and doing the work, frankly, if possible 24/7.” He means that near-literally: building codes proved less trouble for the renovation than afterhours noise ordinances did. Indeed, though South and Sakartvelo might complement each other gastronomically, one does seem to have an advantage over the other for entrepreneurs, and Messrs. Trump and Obama alike will doubtless be disappointed to learn which one. Georgia’s efforts to streamline its bureaucracy and keep its regulatory framework business-friendly have clearly paid off. “We went through the Justice House and I’d say an hour and half later we were a business. It’s that fast. They come in, they have people who speak English and can help walk you through it, they show you what you’re setting up, they talk to you about it and get all of your information and as long as you’ve got your ducks in a row it’s – bing-bang-boom! – you’re done and now you own a business.” Freeman’s started a business before, in Chattanooga – the city’s first food truck (sadly, not choo-choo themed) – and to hear him talk, even that was a much longer and more involved process than setting up a full brick-and-mortar establishment here. “There’s a lot more codes in place in the US,” he says, “a lot more bureaucracy.” That over-regulation doesn’t stop with the filing papers. A certain western “squeamishness”, as Grant puts it, has helped set Georgia’s culinary landscape

far apart and above its cousins. Unhampered by either excessive regulations or a cultural mistrust of what comes out of the earth, Georgia produces fresher, tastier, more local ingredients, and a wealth of handmade, “artisanal” food products for its chefs, for a fraction of the price they’d fetch in Europe or America. “And I’ve got to say it, that’s one thing about this part of the world,” Freeman admits, breaking into a smile – “people aren’t so afraid about a homemade sausage.” He’s extra excited about those sausages. The menu’s only about 15 items long; he’s already had to cut down from around 40, and is still developing more. Those spicy, homemade kupati sausages, for instance, have designs towards forming the base of a genuine Kartuli biscuits and gravy. Fried Green Tomatoes – as Southern a dish as it gets – are already on the menu, served with achika and Svan arajani, but since Freeman only wants to use local and fresh ingredients, they’ll have to come off the menu as fresh tomatoes go out of season. Once they do, though, he plans on replacing them with Fried Pickled Green Tomatoes, combining the uniquely Black Sea-Georgian pickled green tomatoes with the distinctly Golden Isles-Georgian tradition of fried pickles. Other menu items already exemplify that same sort of playfulness, mixing and matching in simple ways to create brilliant new tastes. Freeman’s Badrijani Nigvzit is, sure and steady, eggplant with walnut – only the eggplant is cut into long sticks, battered in mchvadi cornmeal and deep fried, served with a walnut dipping sauce. Forget Tbilisi; you half expect to be seeing that pop up at pit bbqs across Appalachia in no time. Sometimes the boyish punning is obvious; Freeman calls his take on Satsivi, made with braised chicken and served hot, “Satskheli” (“We’re committing a bit of a sin playing with that,” he sheepishly admits, with a sort of 12-year-old’s devil grin). Other times innovation is simply in using local ingredients that don’t normally end up on the local table. Crawfish is found all over the country, but doesn’t play much of a role in Georgian cuisine; at Rosemary, you’ll find them melting buttery out of the Crawfish and Sulguni Polenta Fritters. Freeman jokes that one of the most important rationales behind Rosemary’s name is the fact that it already ends in an “I” sound (“Maybe 95% of Georgians change my name to Granti, and to be honest I really don’t like that…”), but of course there is something wildly appropriate about having this restaurant named after an ingredient so ubiquitous in the Georgian landscape yet so absent from the Georgian kitchen. Freeman’s far from the only chef pushing the boundaries of what Kartvelian cooking means these days – he ticks off a list of chefs he’s following while we talk, people messing with everything from wild truffles to centuries-old cookbooks – but it’s hard not to get a little bit extra excited by the novelty of a Georgia boy giggling his way towards a Georgian-Georgian fusion cuisine, in a tiny little old town restaurant looking all the world like it was picked up and plopped down here from somewhere off some Peachtree Street. Anyways, it’s exciting to me, and I tell him so – it seems like something new. He just shrugs. “To be honest, at this point in my life? Tbilisi, Georgia is more my home than Atlanta, Georgia,” he says. “It’s hard to think about whether you’re breaking new ground when you’re just trying to make good food.”


BUSINESS

GEORGIA TODAY OCTOBER 18 - 20, 2016

7

Tbilisi Fashion Week is Back BY NINO GUGUNISHVILI

P

ledging to introduce a new concept and promising names in the Georgian fashion industry, Tbilisi Fashion Week starts on October 19 with a particular focus on showcasing newcomers. “Carefully selected and assisted through their work, the new and emerging Georgian designers to be displayed will have a unique platform during the Tbilisi Fashion Week to show their potential and talent,” the organizers say. On October 18, the official showroom will open at Tbilisi Mall, general sponsor of Tbilisi Fashion Week, with seasonal collections to be presented until October 30. With the official opening on October 19, Tbilisi Fashion Week will kick off on the newly renovated Agmashenebeli Avenue, with an exhibition of Nino Ramishvili’s off-stage costumes and a performance from her Sukhishvili National Ballet. The same evening guests will be invited to CHUBIKA’s Secret Garden, where Georgian designer Nino Chubinishvili will present her collection with installations and performances.

Over the next four days, from October 20 to October 23, Rooms Hotel Tbilisi will be the major venue for the Tbilisi Fashion Week with MACH &MACH, Mariam Gvasalia, LTFR, Ani Datukishvili, ETHERE ACCESOIRE, Salome Tkabladze, ANASTASIA, Tamta, Lasha Jokhadze, Kate’s Cool, and many more collections to be seen on the catwalk. Ukrainian designer Lara Quint will also present her new works during the Week. As in prevoius years, this year, too, Tbilisi Fashion Week will be attended by the top fashion magazines VOGUE ITALIA, BRITISH VOGUE, Vogue Russia, ELLE Russia, Barneys NEW YORK, Fabulous Muses Blog, Harper’s BAZAAR Kazakhstan, British GQ , END magazine, ACHTUNG MODE, Lufthansa Magazine, Planet Fashion, Nargis Azerbaijan, Fashion To Max, and Vogue Japan, together with fashion buyers from Saks Fifth Avenue – Almaty, Portrait Store, PODIUM MARKET, KUZNETSKY MOST, and Al Duca d’Aosta VENECIA. Famous stylist and blogger Oksana On will also be on hand to give a masterclass on the influence of cinema and art on the fashion industry. Tbilisi Fashion Week will close on October 23 in Skyline Residence, a new project from real estate development company M2.


8

BUSINESS

GEORGIA TODAY

OCTOBER 18 - 20, 2016

The Galt & Taggart Research team comprises Georgian and Azerbaijani finance and economic experts who have broad experience of covering the macro and corporate sectors of the two countries. Our current product offering includes Georgian and Azerbaijan macroeconomic research, Georgian sector research, and fixed income corporate research. For free access to Galt & Taggart Research, please visit gtresearch.ge or contact us at gt@gt.ge.

Electricity Market Watch FOR GEORGIA TODAY BY TAMARA KURDADZE

on bank financing still ongoing, according to GOGC. The debt will be issued to the Gardabani Thermal Power Plant-2 SPV (fully owned by GOGC). The plant is expected to be commissioned in 2020.

S

ADDITIONAL 320.1 MW OF INSTALLED CAPACITY EXPECTED TO COME ONLINE BY EARLY 2017

ector research is one of the key directions of Galt & Taggart Research. We currently provide coverage of Energy, Healthcare, Tourism, Agriculture, Wine, and Real Estate sectors in Georgia. As part of our energy sector coverage, we produce a monthly Electricity Market Watch, adapted here for Georgia Today’s readers. Previous reports on the sector can be found on Galt & Taggart’s website - gtresearch.ge.

MINISTRY OF ENERGY’S PRELIMINARY 2017 BUDGET SET AT GEL 121MN The Ministry of Energy will be allocated GEL 121mn (-10.4% y/y) according to the 2017 draft budget. 74.4% of total, GEL 90mn (~US$ 40mn), will go to the construction and rehabilitation of strategically important transmission infrastructure. According to the draft budget, transmission infrastructure development is to be financed through debt from IFIs. One of the largest projects planned for 2017 in terms of project cost is the 220 kV AkhaltsikheBatumi transmission line, with an estimated cost of GEL 45.6mn (~US$ 20mn), financed by the World Bank. Notably, the budget is preliminary and subject to revision.

MINISTER OF ENERGY RESIGNS, LEAVING HIS DEPUTY AS THE SUCCESSOR Mr. Kakha Kaladze resigned from his post as the Minister of Energy, leaving Mr. Ilia Eloshvili as his successor. Georgian law requires all state ministers, except the Prime Minister, to step down from active duty if they are running for parliament in the elections. Campaigning with the Georgian Dream, Mr. Kaladze could no longer hold his ministerial post. Mr. Eloshvili has been with the Ministry since 2012, serving as the Deputy Minister of Energy.

NEW SERVICE QUALITY RULES AIM TO INCENTIVIZE HIGHER QUALITY SERVICE PROVISION BY UTILITIES The regulator aims to incentivize service quality improvement by gas, electricity, and water utilities. The newly adopted Service Quality Rules (“the Rules”) provide quality standards for utilities and will go into force on January 1, 2017. The Rules dictate standard response times to customer complaints and requests. They also require notifying subscribers about planned service interruptions and the outlining of a clear timeframe for handling unplanned outages. When a utility company cannot resolve an unplanned outage in less than 12 hours, it must submit a detailed explanation to the commission. If customer complaints/requests are not satisfied within a specified timeframe, the customers are automatically reimbursed according to common standards. The Rules reward utilities that deliver superior performance across three pillars – out-of-service notifications, handling unplanned outages, and timely response at the utility call center – by increasing their regulatory cost base, which translates into increased revenue for the utilities.

GARDABANI-2 CCPP CONTRACTED TO COMMENCE OPERATIONS IN 2020 Agreements were signed at the end of September for the development of the 230 MW Gardabani-2 CCTP. An implementation agreement was signed by Gardabani Thermal Power Plant-2, GOGC, and ESCO. An EPC agreement was signed by Gardabani Thermal Power Plant-2 and China Tianchen Engineering Corporation (TCC). Construction of the CCTP will be funded by equity from GOGC and debt from Chinese banks, with negotiations

A total of 320.1 MW of installed capacity is expected to come online by early 2017. The 4.4 MW Saguramo HPP hit the grid mid-September. Next in line is the 20.7 MW Qartli WPP, expected to commence operations in test regime by the end of October. Total project cost amounted to US$ 30mn, with US$ 24mn financed through a loan from EBRD. Qartli WPP has a 10-year, 12-month guaranteed PPA with ESCO at a purchase price of USc 6.89/ kWh. 108 MW Dariali and 187 MW Shuakhevi HPPs are expected to be commissioned shortly thereafter. Dariali HPP has a guaranteed off-take tariff of USc 6.5/kWh November through April for a period of 10 years. The terms of the Shuakhevi PPA remain confidential. While all newly built HPPs have priority access to cross-border transmission lines, the current summer capacity is already allocated to Paravani. If the 320 MW of new installed capacity hits the grid as expected in 2017 and generators decide to export to Turkey, the capped export capacity will become a constraint, unless the cap is removed by the Turkish side.

KSANI SUBSTATION REHABILITATION COMPLETED BY SIEMENS AUSTRIA The rehabilitation of one of Georgia’s strategically important substations, the Ksani SS, has been completed by Siemens Austria. The project cost EUR 9.9mn and was debt-financed by ADB. Ksani SS is key to strengthening the national grid, as it is one of the main 500/220 kV substations servicing high and medium voltage lines, including Kartli-1 (KsaniGardabani), Kartli-2 (Zestaponi-Ksani), and Mukhrani (Ksani-Marneuli) 500 kV overhead lines.

AGREEMENT TO INCENTIVIZE TRANS-BORDER ELECTRICITY TRADE BETWEEN TURKEY AND GEORGIA GOES INTO EFFECT A 20-year intergovernmental agreement between Turkey and Georgia in the energy sector went into effect in September 2016. The agreement envisages collaboration towards advancing the regional electricity market, including enhanced trans-border infrastructure (400 kV Akhaltsikhe-Tortum and 150 kV Batumi-Muratli), sharing of experience, and promotion of green energy. The working group that was created under the charter is supposed to develop an action plan by the end of 2016. The action plan will include a detailed roadmap on how Turkey and Georgia will develop the necessary trans-border infrastructure to enhance trade potential and facilitate development of longer term international off-take agreements that would be in compliance with ENTSO-E standards. Georgia and Turkey also plan to coordinate efforts on synchronizing Georgia’s export capacity auctions.

TBILISI CONSUMPTION REMAINS THE LEADING DRIVER OF DOMESTIC ELECTRICITY CONSUMPTION GROWTH Domestic consumption increased 8.1% y/y in August 2016, with DNOs being the major growth drivers. DNO consumption increased 7.2% y/y, with the greater Tbilisi area (Telasi subscribers) posting an outsized 22.3% y/y growth rate. Usage of EnergoPro subscribers was flat (+0.3% y/y), while Kakheti Energy Distribution usage was up 6.4% y/y. Consumption of eligible consumers was up 11.3% y/y, albeit from a very low base in August 2015 (-53.6% y/y). Consumption of Georgian Manganese drove the growth, with consumption up 25.3% y/y. Notably, GM’s consumption is still 41.9% lower than the

August 2014 level. Consumption of the Abkhazian region was up 12.9% y/y. Electricity exports increased 13.3% y/y in August 2016, with Turkey the only importer. According to the data from GCAT (GSE capacity auction), the entire export capacity was allocated to Georgia Urban Energy (Paravani HPP). In addition to exports, a significant amount of electricity transit (138.7 GWh) took place from Azerbaijan to Turkey. Transit fees go to GSE, the transmission system operator.

DOMESTIC ELECTRICITY DEMAND MET ALMOST ENTIRELY WITH HYDROGENERATION Domestic consumption needs were met almost entirely by domestic hydrogeneration in August 2016. Total generation was up 11.0% y/y, with generation by Enguri and Vardnili up 16.3% y/y and other regulated HPPs up 19.9% y/y. Generation by deregulated HPPs increased 5.6% y/y. TPP generation in July 2016 was down 33.9% y/y, as hydrogeneration was enough to meet the increased demand

in the grid. 76.0% of TPP-generated electricity was provided by Gardabani CCPP (USc 2.8/kWh) and the rest by G-Power (USc 3.7/kWh). Gardabani CCPP also provided guaranteed capacity for all of August (31 days), along with Unit 3 (31 days) and Unit 4 (2 days). Unit 9 and G-Power, on the other hand, had no stand-by days in August. The guaranteed capacity fee increased 361.3% y/y to USc 0.71/kWh.

TURKISH ELECTRICITY PRICES FLAT COMPARED TO AUGUST 2015 Market clearing prices in Turkey were flat compared to August 2015. The weighted average wholesale price in Georgia was at USc 4.3/kWh (-26.7% y/y), while the Turkish market clearing price was at USc 5.7/kWh. 3.2% of total electricity supplied to the grid was traded through the market operator, with the rest was traded through bilateral contracts. Import prices decreased 18.2% y/y to USc 5.2/kWh, with 100% of imports (10.5 GWh) coming from Azerbaijan.


BUSINESS

GEORGIA TODAY OCTOBER 18 - 20, 2016

9

ANTARECO Accounting and Financial Advisory Company Enters Georgian Market

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ew accounting services and financial advisory company ANTARECO presented itself in Radisson Blu Iveria Tbilisi

recently. ARENA TAX Group is one of the biggest teams of tax advisors and accounting specialists in the CEE working mostly for financial service companies, equipped to provide comprehensive tax, legal, business and accounting solutions. The company has a tax advisory, accounting and accounting advisory competence and a considerable experience in advising international companies. ANTARECO, together with the licensed tax advisory ARENA TAX, are entities which belong to Arena Tax Group. Antareco Georgia’s main scope of services is financial advisory, accounting services, payroll and financial reporting. Together with Arena Tax Group, ANTARECO provides its services from its Warsaw headquarter in 15 countries

in Europe and beyond. The company operates in the Czech Republic, Cyprus, Estonia, Gibraltar, Lithuania, Latvia, Malta, Mexico, New Zealand, Poland, Romania, South Africa, Slovakia, Spain, the United States and the United Kingdom. This year it has opened two branches: one in Madrid and is now adding the ANTARECO Georgia branch to their portfolio. “We provide services tailored to our partner’s needs, we provide accounting services, management reporting, supervision and accounting consultancy,” Teona Makasarashvili, Head of ANTARECO Georgia told GEORGIA TODAY. “Financial institutions and international businesses, are seen as a major segment for ANTARECO operations.” Makasarashvili also noted the flexibility and ease of communication within the company’s head office and the newly opened Georgian branch. The companies that are already on ANTARECO Georgia’s client list are mostly international, with an established history of cooperation with ARENA TAX GROUP, which in turn gave a dynamic start to the company, providing its services to

the Georgian market. During the opening event the representatives of ARENA TAX and ANTARECO gave presentations of their services and discussed with representatives of Georgian businesses. Journalists, the representatives of the Polish embassy in Georgia and the representatives of the International Chamber of Commerce “The company is working very actively with international clientele, some of them present in Georgia, and that was the main reason for the company’s decision to strengthen its presence in the country through opening its branch in Tbilisi,” said Michał Musielak, “Arena Tax Group CEO. “Our goal is to have a strong presence in Georgia, to be a regional hub for Georgia, Armenia and Azerbaijan, and to provide accounting and tax support to the multiple financial industries that are very fast developing in this country,” he added. The company positions itself as proactive, experienced and innovative, with the expertise to provide services internationally, while implementing complex projects locally.


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BUSINESS

GEORGIA TODAY

OCTOBER 18 - 20, 2016

Russian Ministry International Community's of Transport to Set Assessment of October 8 New Border Taxes Parliamentary Elections

O BY NATIA LIPARTELIANI

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he Russian Ministry of Transport plans to establish new taxes on border crossings, reports Russian ‘Kommersant.’ The money received from the taxes will be used for developing and improving border infrastructure and will go towards partial compensation of maintenance costs. At the first stage, taxes will be paid at road and rail checkpoints. The ministry has set measurements for the determination of taxes for vehicles by

category (passenger or cargo), while for rail transport according to cargo volume. The exact mechanism for tax administration is yet to be announced. The Russian media reported that the new tax rules are expected to be launched in the second half of 2017. Shipping companies say that the additional border taxes will cause a tariff increase, which will, in turn, increase the market for products. This might negatively influence Georgian export to Russia as Russia is among it most important trading partners. In JanuaryAugust 2016, Russia's share in total exports for Georgia was 9 percent.

n October 9, Georgian Foreign Minister Mikheil Janelidze held a meeting with representatives of the OSCE Office for Democratic Institutions and Human Rights, OSCE Parliamentary Assembly, NATO Parliamentary Assembly, and heads of the European Parliament Election Observation Delegation, who had come to Georgia on the invitation of the Georgian Foreign Ministry. The sides spoke about the pre-election environment and the election process. Representatives of the international organizations emphasized that the elections were conducted in a peaceful and competitive environment and that the fundamental rights of Georgian citizens were fully observed. They added that these elections can be seen as a tremendous step towards consolidation of democracy. Mikheil Janelidze thanked the representatives of the international community for their interest in Georgia and for their active monitoring of the processes. He added that their involvement ensured the transparency of the elections. More than 1400 international observers from 55 organizations and institutions monitored the October 8 parliamentary elections. The observers unanimously note that, in general, the elections were held in a peaceful and competitive environment and expressed the will of the Georgian people. According to the assessment of observers, the existing legislative framework of Georgia provides a means for the conduct of democratic elections. The joint statement of the OSCE/ ODIHR, NATO Parliamentary Assembly, Parliamentary Assembly of the Council of Europe, European Parliament and the OSCE Parliamentary Assembly emphasized that the elections were well admin-

The elections have proved that democracy is stronger in Georgia

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istered and, in general, the fundamental rights of citizens were respected. They positively assessed the accuracy of voter lists and commended the increased confidence of electoral stakeholders in this regard. They further noted the pluralistic media environment in the country and engagement of national minorities in both proportional and majoritarian lists. The work of the Central Election Commission at all levels was assessed as professional and timely. It was also noted that the Central Election Commission enjoyed high confidence among electoral stakeholders. The International Republican Institute (IRI) made a special note of the growing role of women in the electoral process, including through participation in the election commissions. Overall, the elections were evaluated as a great step forward in the process of consolidation of democracy in the country. According to the assessment of the delegation of GUAM, the elections were free and fair and held in accordance with the OSCE and the Council of Europe standards. Despite several incidents, the international observers, including the delegation of the National Democratic Institute (NDI), underlined that overall, these facts did not interfere with the national outcome. According to the statement of the Head of the NATO Parliamentary Assembly, with these elections Georgia has reaffirmed its status as a leader of democratic transformation in the region. He also stressed that the elections had encouraged those people who support Georgia’s Euro-Atlantic integration. High Representative of the European Union for Foreign Affairs and Security Policy, Federica Mogherini, and Commissioner for the European Neighborhood Policy and Enlargement, Johannes Hahn, made a joint statement regarding the parliamentary elections held in Georgia. The statement confirms the support of the European Union towards Georgia’s stable, successful and democratic future. The representatives of European Union reaffirmed their commitment to a stable, democratic and prosperous future of Georgia. “Once the electoral process has been completed, the European Union looks forward to working with the democratically elected new Parliament and Government to deepen the political and economic relations based on the joint

commitments of the EU-Georgia Association Agreement,” they said. Meanwhile, the United States congratulated the people of Georgia on a competitive and well-administered October 8 elections which confirmed Georgia as a leader of democratic reform in the region. “The United States looks forward to continuing our close cooperation with Georgia on a common agenda that advances Georgia’s political and economic development and its aspirations to integrate into Euro-Atlantic institutions,” US representatives said. Minister of the Federal Republic of Germany, Frank-Walter Steinmeier, noted that, with these elections, Georgia has once again demonstrated the maturity and functionality of its young democracy. “The elections were well organized and met European standards; Georgian voters clearly showed that they continue to endorse a determined policy of rapprochement with Europe and the associated reforms in a large majority,” he said. Foreign Office Minister of United Kingdom on Europe and Americas, Alan Duncan, congratulated the Georgian people on conducting the first round of parliamentary elections. He agreed with the assessment of the OSCE Office for Democratic Institutions and Human Rights and urged all political leaders to respect the will of the people of Georgia and demonstrate their commitment to the democratic process. The Ministry of Foreign Affairs of Latvia noted that the elections ensured a democratic process, were well-administered, and that political competition was present, and fundamental rights and freedoms were observed. Along with Latvia, the government of Spain also congratulated Georgia on the holding of successful elections. They affirmed their strong will to deepen cooperation between the two countries and their support in strengthening Georgia-EU relations with the full implementation of the EU-Georgia Association Agreement. Minister of Foreign Affairs of the Republic of Lithuania, Linas Linkevicius, also reacted to the parliamentary elections, welcoming the determination of Georgian people and the government to walk the path of a stable and functioning democracy. A large number of the international observers are to remain in Georgia to monitor the second round of the majoritarian elections.


POLITICS

GEORGIA TODAY OCTOBER 18 - 20, 2016

11

Former Diplomat Hopes Era of Messiahs Soon to End in Georgia Kenneth Yalowitz, former US Ambassador to Georgia

BY IA MEURMISHVILI, VOICE OF AMERICA, GEORGIAN SERVICE

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ost of the international observers claim that the October 8, 2016 Georgian parliamentary elections were free and fair. Because none of the parties managed to get 51 percent of the votes, there will be a run-up election in coming weeks. Director of the Allison Center for Foreign Policy Studies at The Heritage Foundation, Luke Coffey, says that all parties involved in the elections should realize that the election is a process, not a single event. “It is really important that all parties involved in the electoral process remain committed to a free, fair, safe and open process which allows all sides to contest these run-up elections freely and fairly,” he told VOA Georgia. “By all accounts, it was a success, but it is not over yet,” said Coffey, adding, “There is potential that there could be some local tensions rising that could put in jeopardy the upcoming run-up elections.” While successful and peaceful elections were a

step forward for Georgian democracy, Coffey believes it would also position Georgia more advantageously with NATO. “For so long NATO has been divided internally about how to approach Georgia and how to integrate Georgia into the Alliance. Part of this compromise in my opinion has been to insert language in every NATO Summit declaration saying that progress towards NATO would depend on an upcoming election,” said Coffey. By conducting the October 8 elections in a free and fair manner, Georgia demonstrated to the West that its democracy is advancing. “After a country has so many free and fair elections, at what point does it seem odd - if not unnecessary - to keep mentioning it in the summit declarations. If anything, I think it is disrespectful to the Georgian people, who have participated and voted in the selections.” Two of the most western-oriented parties in Georgia - Free Democrats and the Republican Party - could not overcome the five percent threshold necessary to gain seats in the parliament. Some in Georgia, as well as in the West, think that this would be a setback for Georgia’s western orientation. Coffey disagrees. “It is unfortunate because they are such strong supporters of the West, but there

are also many others. It is not only about the Geor- respect a great deal. I would like to see us move gian government wanting to be westward looking. past what I call ‘messiahs;’ two larger-than-life figThe Georgian people, country’s institutions, non- ures who are off stage, but whose presence is still very much felt,” said Yalowitz. governmental organizations, the business commuHe went on to express hope that one day nity, civil society – the country as a whole - wants Georgia will “move to a system of orderly, to look fowards, and I think this will continue,” transparent, regular governance, in which Coffey said. people who are elected do their jobs, Kenneth Yalowitz, former US Ambassador and are not looking over their shoulder to Georgia, agrees that Georgia will stay for guidance from somewhere else. I committed to its western aspirations regardthink it is very important that people less of the parties in parliament. “I do not who were leaders in the past move think it is a setback, but I regret it. I to the side. We do this in the would have liked to have seen these United States all the time. We two parties explicitly in parliament, have elections, those who lose but I think te trajectory of Geormove on and go off into the sungia is clear and this election set and do something else. That confirmed it,” stated Ambassador is what I would like to see in Yalowitz. Georgia. I would like to see the While praising the elections as Georgian Dream government democratic, the former diplomat and its leadership really take spoke about a challenge which full responsibility and impleseems to be identical for two of ment the economic and politthe major parties in the country. ical reforms that are necessary “Georgia has a very effective Luke Coffey, Director of the Allison Prime Minister and a good Pres- Center for Foreign Policy Studies at and move forward,” Ambassador Yalowitz concluded. ident - both of whom I know and The Heritage Foundation

Second Round of Elections Scheduled for October 30 in Georgia BY THEA MORRISON

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eorgia’s Central Election Commission (CEC) announced that the second round of parliamentary elections will be held on October 30 in 50 singlemandate constituencies, 18 of which are located in the capital Tbilisi. Voting will be re-run at one polling station in Marneuli, south of Tbilisi, and in three precincts in Zugdidi in western Georgia. The initial election results in each were invalidated by the CEC after violent clashes marred the voting process on October 8. A group of people attempted to raid a polling station in the Marneuli region village of Kizilajlo. In Zugdidi, two precincts were attacked during the first round in the village of Jikhashkari. In both locations, the attackers attempted to seize the ballot boxes while the polls were still open. Three political parties crossed the 5 percent threshold to gain seats in the next parliament, including the ruling Georgian Dream with 48.668 percent, the main opposition United National

Movement – 27.111 percent and the ultranationalist, pro-Russian Alliance of Patriots – 5.006 percent. Georgian Dream and United National Movement candidates are expected to face each other in runoffs in 44 districts. Georgia has a 150-seat parliament, with 73 MPs elected in majoritarian, single-mandate constituencies. The remaining 77 seats are awarded to MPs elected in proportional voting based on party lists.

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12

SPORTS

GEORGIA TODAY

OCTOBER 18 - 20, 2016

Batumi International Beach Rugby Festival Short-listed for Rhino Grassroots Award BY KATIE RUTH DAVIES

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he Batumi International Beach Rugby Festival has been short-listed for the Rhino Grassroots Rugby Award which is to be presented at the World Rugby Conference and Exhibition in London in November. The list features a variety of events and organizations with a wide geographical spread – social rugby events in Georgia, the USA, Poland and the UK, and a

remarkable youth development program in Cambodia. The full list is: 1. The Batumi International Beach Rugby Festival (Georgia). 2. The Cronk-Cunis National Under 21 Festival (England). 3. Kampuchea Balopp (Cambodia). 4. The Los Vegas Invitational Tournament (USA). 5. The Piotrowice Nyskie International Rugby Festival (Poland). Rhino is exhibiting at World Rugby’s ConfEx for the third time on November 14th and 15th at the Hilton London Metropole Hotel, and is an Official Supporter

With Berkan Aras, Zura Dugi, Emil Aliev, Tamir Alievand Izzettin Çavus.

Beach Rugby Champions — with Bagashvili Odisei-giorgi, Nikoloz Aptsiauri, Gaga Maisuradze, Rati Urushadze, Zura Dugi, Gio Meladze, Giorgi Kheladze, Giorgi Iliaevi and Maxo Qushashvili.

of this year’s event. The Rhino Grassroots Rugby Award will be presented to the winning organization following a Rhino sponsored panel session on ‘Supporting Grassroots Rugby’ which starts at 12.30pm on Monday 14th November. “It’s a great honor to receive the nomination and I have a lot of gratitude to everyone who helped along the way- it's a great honor for Georgian rugby,” Zura Dugladze, Vice President of the Georgian

Beach Rugby Union (GBRU), told GEORGIA TODAY. Due to celebrate its 10th anniversary next year, the Georgian Beach Rugby Association was set up in 2007 on the initiative of a number of veterans of Georgian rugby teams- older players who couldn't play anymore but who still wanted to be involved with rugby. The enthusiasm and passion for the game was shared in particular by old

rugby friends Kakha Mkheidze, President of GBRU and Zura Dugladze “Dugi.” They were later joined in their endeavors to spread the sport more widely by Anthony Lynn in 2010 who has been back and forth to Georgia since and who is responsible for starting the Bulldogs UK and bringing them to play in Georgia. Although the Union is active all year round and hopes to be more so in future as beach sports gain more support internationally, the main event of the year is the annual Batumi Beach Rugby Festival which is held in a purpose-built stadium on the beach in Batumi. The tournament has a growing international following with the Bulldogs from the UK this year having made their third consecutive visit, and teams from Russia and Turkey giving the competition some added interest. The 2017 Festival will be held to coincide with the 20th Anniversary of TBC Bank and the Jazz Festival which they sponsor annually. The Jazz Festival hosts stars of the international jazz scene for a ten day extravaganza of seaside music. The Batumi Beach Rugby Festival is sponsored by the Georgian Rugby Federation, Batumi City Hall, the Georgian Ministry of Sports, TBC Bank with Rhino Rugby as a proud supplier of match balls and kit for the organizers and referees. “In terms of players, in the first year media representatives took part, and it is still predominantly for amateurs. However, we have also had years when finances allowed professionals to play,” Dugladze told GEORGIA TODAY. “Next year we expect to have at least 10 men’s teams and 4 women’s teams.”


Issue #888 Business