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facebook.com/ georgiatoday

Issue no: 862/36

• JULY 19 - 21, 2016

• PUBLISHED TWICE WEEKLY

FOCUS ON REBELLION

An attempted coup in Turkey and a hostage situation in Yerevan shock PAGE 3&5 the region and the world

PRICE: GEL 2.50

In this week’s issue... Government to Subsidize Grape Harvest 2016 PAGE 2

Georgia Should Be Urging Turkey to Pursue a Policy of Unity PAGE 4

Georgian Delegation Discuss Investment Projects from UAE

Photo: Emrah Gurel / AP

Three Measuring Stations to Control Air Pollution

PAGE 6

Wizz Air to Add Low-Cost Flights from Kutaisi to Seven European Cities

BY EKA KARSAULIDZE

T

he Japanese Government has gifted Georgia three automatic air measuring stations worth USD 1.2 million dollars which will be installed on Tbilisi’s Tsereteli Avenue, Kazgebi Avenue and in Varketili suburb. Thanks to these stations, the monitoring of substances that pollute the air will be carried out continuously in an online mode. Continued on page 2

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Diversification of Georgia’s Tourism Offer GALT & TAGGART PAGE 11 Prepared for Georgia Today Business by

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BUSINESS

GEORGIA TODAY

JULY 19 - 21, 2016

Government to Subsidize Grape Harvest 2016 for local grape implementation, we need to finance the development of export markets,” he added. Last year the Government paid USD 0.15 (0.35 GEL) to farmers per kilogram of Rkatsiteli and Kakhuri Mtsvane (white grape varieties sold to factories) and USD 0.064 (0.15 GEL) for Saperavi (red grape variety). This year the Government plans to pay USD 0.19 (0.45 GEL) per kilogram of Rkatsiteli and USD 0.085 (0.20 GEL) for Saperavi. The subsidy program in 2015 cost at least USD 12.8 million (30 million GEL). The PM stressed that after comprehensive support of the field, there would be no need to budget money for farmers and concluded by highlighting that in the first six months of the year Georgia's wine exports increased by 44 percent.

BY EKA KARSAULIDZE

G

eorgia’s Prime Minister G i o rg i Kv i r i ka s hv i l i announced the Georgian Government is to subsidize the 2016 grape harvest and support farmers in selling their produce in full. The amount of subsidy will depend on the grape variety. “We have made this decision after long discussions. We are focusing on two directions; on one hand we want to develop the local wine industrry and on the other hand we will develop and explore new markets,” said the PM. “We are spending resources on both fronts. Naturally, during the transitional period, until we find as many markets as needed

Sairme Mineral Water Gains International Award BY EKA KARSAULIDZE

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airme Mineral Water won three golden medals in the Brussels Superior Taste Award for the second time. The company presented its production in 2013 and this year the jury tasted and again highly appreciated what Sairme had to offer. The Superior Taste Award is one of the

most important awards worldwide in the field of beverages and food products. The award is the only international certificate of taste and product quality which is guaranteed by food and drink testers and experts. “We are proud of the top quality of our products,” said Yanina Mashkova, Director General of Sairme Mineral Water. “First of all we want to thank all our consumers in various countries who choose our product for the best taste and quality.

Today, Sairme Mineral Waters produces the famous Georgian water brand of Sairme, and spring water Nakaduli. The products are sold in Georgia’s market and exported to 17 countries. The International Taste & Quality Institute (ITQI) is one of the world’s leading organizations that carries out appraisal of top quality food products and beverages. The international certificate organization for taste quality unites 125 expert sommeliers from different countries.

Three Measuring Stations to Control Air Pollution Continued from page 1 The stations will measure the degree of air pollution and transmit data to the National Agency of the Environment automatically, whereby specialists will process the data. The research results will be periodically published in recognition of the fact that the issue of air pollution is one of the heaviest for Georgia’s city-dwelling citizens. According to a study by the International Energy Agency (IEA), Georgia leads the list of countries in which the level of air pollution is a danger to life. The Georgian Government does not agree with the results of that study and is now negotiating with the World Health Organization to clarify and update the data used in the IEA. The new Japanesefunded air pollution control stations are expected to be able to help in this regard.


BUSINESS

GEORGIA TODAY JULY 19 - 21, 2016

Coup in Turkey as Military Faction Attempts to Topple Erdogan BY NICOLAS WALLER

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lements of the Turkish military late Friday announced that they had taken control of Turkey in a coup against the government of President Recep Tayyip Erdogan. In an announcement made on the staterun TRT television channel at just after 11:15 PM local time, the coup plotters informed civilians that martial law had been imposed and that all civilians should return to their homes. Calling itself a “peace council”, the military group’s statement on TRT claimed that the democratic and secular rule of law had been eroded by the current government and that a new constitution would be immediately drafted for the strategic Muslim nation of 80 million people. It still remains unclear which military units participated in the coup attempt and which responded to it. The state-run Turkish news outlet Anadolu Agency – widely regarded as an unofficial mouthpiece for the Erdogan regime – reported early Saturday that the coup plotters included Colonel Muharrem Kos, Colonel Mehmet Oguz Akkus and Lieutenant Colonel Agin Ercan Dogan Uysa. Military units took control of Ataturk international airport in Istanbul, and

communication channels including Twitter, Facebook and most state television channels were blocked. Explosions were heard in both the capital Ankara and Istanbul, tanks loyal to the coup plotters also appeared on the streets of both cities and an unknown number of fighter jets and helicopter gunships appeared in the skies over Turkey’s main cities. Speaking to CNN Turk via a FaceTime app on his iPhone, Erdogan said that a "parallel structure" was responsible for the coup. He and other members of his government have used this term in the past to refer to Fethullah Gulen, a US-based moderate Muslim cleric that was once a close ally of Erdogan. Prior to Friday’s coup attempt, Erdogan has frequently accused Gulen and his religiously-based Hizmet Movement of fomenting unrest in Turkey. The coup comes only weeks after Erdogan announced that any residual elements of Gulen’s Hizmet Movement would be “fundamentally cleansed” from all government bodies. Coup plotter Kos had served as a legal advisor of the Turkish armed forces until before he was recently sacked. While speaking via FaceTime, Erdogan urged his legions of mostly conservative, religious supporters to take to the streets and put down the coup. "I urge the Turkish people to convene

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TBILISI-BATUMI BATUMI-TBILISI

KUTAISI AIRPORT TBILISI CENTRAL

BATUMI CENTRAL

09:00, 12:00, 20:00, 01:00 09:00, 12:00, 19:00, 01:00 2 Station Square

TAMAR MEPE AVE.

595 99 00 00

www.eurobus.ge

Thousands of soldiers have been rounded up and judges arrested following the failed coup. Source: AFP

at public squares and airports. I never believed in a power higher than the power of the people," Erdogan said via FaceTime. Erdogan’s exact location was unclear at the time of the start of the coup. Unconfirmed reports said he was on holiday in the Mediterranean resort city of Marmaris, but he later reappeared in Istanbul at just after 3:30 AM local time on Saturday. Supporters of Erdogan and his Islamist Freedom and Justice Party (AKP) gath-

ered on Istanbul's central Taksim Square as reports of the attempted coup emerged. Troops loyal to the plotters blocked traffic across the Bosphorus and Fatih Sultan Mehmet bridges in Istanbul, and blocked ferries from crossing the famed waterway that separates the European and Asian halves of the city. Military factions who supported the coup also halted all incoming and outgoing air traffic at Istanbul’s airports. Within hours of the start of the coup, Reuters news agency reported that sev-

eral soldiers that had sided with the plotters had begun surrendering to police and army special forces units, while other groups barricaded near Taksim Square were being surrounded by pro-Erdogan security units. According to reports by the BBC, clashes between pro- and anti-government supporters broke out near Taksim before the anti-Erdogan groups were dispersed by security personnel and low-flying F-16 fighter jets. Continued on page 5


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BUSINESS

GEORGIA TODAY

JULY 19 - 21, 2016

Georgia Should Be Urging Turkey to Pursue a Policy of Unity BY ANNA KALANDADZE, VOICE OF AMERICA GEORGIAN SERVICE

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o analyze developments in Turkey, their importance for the region, NATO and Georgia, Voice of America's Anna Kalandadze spoke to William Courtney, former Ambassador to Georgia and Kazakhstan, also a member of the influential Council for Foreign Affairs and now an analyst with the Rand Corporation in Washington.

WHAT HAPPENED IN TURKEY? William Courtney: Apparently part of the military mounted a coup against President Erdoghan and the elected government of Turkey. It failed. The coup attempt was reminiscent of the 1991 attempt of a ‘putch’ in Moscow. For example, the coup plotters did not arrest or detain President Erdoghan, so he was

able to rally his people the same way Boris Yeltsin in August 1991, also not arrested, was able to rally Russians against coup plotters. Secondly, it seems only part of the military supported the coup. Again, what we saw in Moscow where some of the military was supporting the coup, some of them were not. The larger lesson in some respect is that in educated societies hard line coup attempts and military rule are ideas that have fallen into disrepute.

HOW WILL IT AFFECT THE REGION, THE MIDDLE EAST AND SPECIFICALLY GEORGIA? The United States and Europe are probably going to have to recalibrate and revise their policies with regard to the Syria question. It is the critical interest of the West that Turkey be a stable democracy. My guess is that now Western policy is going to have to give more emphasis to stabilizing Turkey and relatively less interest to stabilizing Syria.

Erdoghan should learn from Boris Yeltsin. In 1991, after the ‘putch,’ the coup leaders were treated with leniency and that stabilized Russia. Source: Wikipedia

Syria is not as important to the West, as Turkey is. For Western interests and for Georgian interests in the region, a strong, stable, prosperous, democratic Turkey is very much in everyone’s interest.

WHAT COULD THIS MEAN FOR NATO-TURKEY RELATIONS? NATO and the West in general will have a strong interest in stabilizing Turkey. So, for example, Erdoghan has said that

Georgia as part of the West has an interest in a stable, democratic Turkey

this will be an opportunity to, quote, “cleanse the military.” That’s not the kind of policy that Erdoghan should pursue. He needs to pursue a policy that unites the country, rather than further divides it. This coup has come about in great part because Erdoghan has been a divisive and vindictive ruler. And divisive and vindictive politics do not work anywhere. They certainly did not work in Egypt under the Muslim Brotherhood and they are not working for Erdoghan. So, the big question is will Erdoghan learn lessons from this and try to be less polarizing in his politics, or on the other hand will he think he has won a victory and then pursue vindictive politics arresting large numbers of people, putting some of them to death? Erdoghan should learn from Boris Yeltsin. In 1991, after the ‘putch’ the coup leaders were treated with leniency and that stabilized Russia.

WHAT SHOULD GEORGIA BE DOING IN HOW IT HANDLES ITS RELATIONS WITH TURKEY?

Georgia has good relations with Turkey and should maintain those relations, but this is also a time when Georgia as part of the West has an interest in a stable, democratic Turkey. Georgia is a small country, but at the same time as part of the West, Georgia should be urging Turkey to pursue a policy of uniting the country, bringing people together, rather than a policy of divisiveness and vindictiveness toward the coup plotters.

WHAT ABOUT TURKEY’S FIGHT AGAINST ISIS? Most likely, Turkey is going to have to turn inward now to a greater extent and the fight against ISIS is going to take second priority. Turkey really needs to focus now on bringing its own people together, strengthening itself, rather than engaging to the same extent in Syria. Link to the Georgian story: http://www.amerikiskhma.com/a/ambwilliam-courtney-interview-on-turkey-developments/3421639.html

#Sunny Tusheti - Solar Panels Bring Electricity to Georgia’s Mountainous Region BY KRISTINE GAMTENADZE FOR GEORGIAN JOURNAL ROUTING

TBILISI - ISTANBUL ATATURK AIRPORT

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

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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

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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

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n Tusheti you won’t see overhead electric lines anywhere and it has been that way since the break-up of the Soviet Union. Maligned as the Soviet legacy may be, it managed to achieve infrastructural heights that modern Georgian authorities struggle to cope with, mostly due to insufficient funds. And despite literally every Georgian government praising Tusheti’s touristic prospects, lack of road access and electrical infrastructure have been preventing the region from reaching even a fragment of its aforesaid potential. This is also the main reason why this beautiful mountainous Georgian region, popular among locals and tourists and famous for its amazing landscapes and architecture, was completely

cut off from the outer world during winters. Fortunately enough, in the last several years a little change has been observed in this direction as in Tushetian villages solar panels are being brought and installed by the Czech Development Agency, an international non-governmental organization operating, among other countries, in Georgia. Today, in Tusheti, 200 families receive electricity via solar panels. The new system is also installed in six public and administrative institutions. As a testament to how needed and welcomed a change it was, after installing solar panels and batteries for hot water, a multitude of Tushetian families began to open family hotel businesses - hostels and guesthouses- crucial for the development of tourism, as oftentimes it was this lack of very basic infrastructure that made tourists think twice about venturing into Tusheti.

“After the Soviet Union collapsed, the lack of electricity has been one of the main challenges here, and installing solar panels is arguably one of the most important and needed projects carried out in Tusheti. This system provides electricity and hot water to the locals and contributes to the development of tourism in this beautiful region,” said Albert Sido, the attaché of Czech Development Agency. And least somebody sees solar Tusheti, or #SunnyTusheti, as the project was dubbed in an online campaign, as a means of solving immediate problems. It stands to reason that, in the grand scheme of things, it will play a crucial role in ensuring that Tusheti doesn’t become deserted and the population isn’t hesitant to come back here at least during summertime as it is their chance to generate substantial (to their standards) income by offering their services to tourists whose numbers have been on the rise during recent years.


BUSINESS

GEORGIA TODAY JULY 19 - 21, 2016

Coup in Turkey as Military Faction Attempts to Topple Erdogan Continued from page 3 As the night dragged into early Saturday, there were strong indications that the coup leaders had failed to garner widespread support in the military and security services and the uprising was beginning to fizzle out in Istanbul. State-run media reports said rebel soldiers in some areas of the city have been surrendering their weapons to police loyal to Erdogan. The surrender of one unit of 60 soldiers, who had taken control of one of the Bosphorus bridges, was shown live on TV late Saturday morning. More importantly, Ataturk airport was recaptured by pro-government special forces units, and flights - which had been interrupted for hours - resumed. The situation in Ankara appeared far more volatile as multiple reports said the Turkish parliament had been hit by several large explosions. Conflicting reports by Turkey’s deeply fractious media outlets claimed that various ministry buildings and the Head of the Turkish Armed Forces Hulusi Akar had been taken hostage by the coup plotters. Turkey’s state-run Anadolu News Agency said 17 police officers had been killed in a military helicopter attack by coup plotters on a police special forces headquarters outside the city. There were also reports that fighter jets had shot down a military helicopter used by supporters of the coup. Other reports said soldiers were inside buildings of the TRT and CNN Turk in Ankara where heavy gunfire had been heard near the studios. At least 261 people, including 161 civilians and 100 rebel troops, had been killed and over 1,000 wounded in the fighting, Reuters reported Saturday. The BBC reported on Monday after-

Standoff with Gunmen Continues as Armenian Police Crack Down on Activists BY KAREN TOVMASYAN

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Funerals have been held for those killed during the coup. Source: EPA

noon that nearly 8,000 police officers had been suspended, reportedly on suspicion of having links to the failed coup attempt at the weekend, and around 6,000 members of the judiciary and military, including generals, had been detained in connection with the coup. International reaction to the events in Turkey was swift and fluid. While on a visit to Moscow, US Secretary of State John Kerry said he hoped for peace and "continuity" in Turkey. Newly appointed British Foreign Secretary Boris Johnson said he was "very concerned" by events. Russian Foreign Ministry Sergey Lavrov said Moscow was watching the events closely and hoped “bloodshed could be avoided at all costs.” German Chancellor Angela Merkel’s spokesman said, "democratic order must be respected" in Turkey and everything must be done to protect human lives." "Stability, democracy and the safety of the Turkish people are paramount. Unity and prudence are imperative," Iran’s

Foreign Minister Mohammad Javad Zarif said on his Twitter account. NATO Secretary-General Jens Stoltenberg said Turkey was "a valued member", and called for "calm and restraint, and full respect for Turkey's democratic institutions". Neighboring countries Greece, Cyprus and Georgia, all of which share porous land and sea borders with Turkey, called emergency council meetings of defense and foreign ministries and placed their border guards on high alert. Since being founded from the ashes of the Ottoman Empire in 1923 by former military leader Mustafa Kemal Ataturk, the Turkish Republic – a member of the NATO military alliance – has been repeatedly rocked by coups- in 1960, 1971, 1980 and 1997. The military had long seen itself as the guardian of the secular system, which it claims has been destroyed by Erdogan’s brand of political Islam and his own autocratic governing style, which includes a growing personality cult.

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he situation in the Armenian capital Yerevan remains tense as negotiations between the police and a radical armed opposition group that attacked and seized a police station in a daring raid Sunday. The group remains barricaded inside the Erebuni District police station with four hostages that include Armenia’s Deputy Police Chief Vardan Yeghiazaryan and Yerevan’s Deputy Chief Valery Osipyan. Armenia’s First Deputy Police Chief General Hunan Poghosyan said one police colonel was killed and two other officers were wounded during the attack. The militants – a radical splinter group of the Himnadir Khorhrdaran (Founding Parliament) party – have demanded the resignation of President Serzh Sargsyan and the release of prominent opposition leader and noted commander during the 1988-1994 Nagorno-Karabakh War, Jirayir Sefilyan. Sefilyan was arrested in late June after being accused of planning an armed coup with the gunmen's leader Varujan Avetisyan. In a video released via social media, the gunmen – most of whom, including Avetisyan, are Karabakh war veterans – called on the

Armenian population to organize antigovernment protests and demand Sargsyan’s ouster. National Security Service (NSS) officials – Armenia’s intelligence agency – briefly blocked access to Facebook on Sunday and police officials quickly started limiting journalists’ access to the location of the standoff. Unconfirmed reports by independent news sources in Yerevan claim that NSS officers have arrested dozens of opposition activists without explanation. The reports also claim that several homes of civic and opposition activists in the capital were raided by members of the NSS. Yerevan’s police broke up a small gathering of opposition members on the city’s central Freedom Square and detained up to 400 people, according to a report by Armenia’s human rights ombudsman. According to a Facebook post by 17-yearold activist Shahen Harutyunyan, he and others were arrested by riot police and accused of "supporting an armed group" while demonstrating on Freedom Square. Police sharpshooters, special-forces units and armored personnel carriers have been dispatched to the scene. NSS officials have warned the group that it must immediately turn over the heavy weaponry seized during the original attack on the station and surrender to security services, or face the possibility of a raid.

Policemen block a street after a group of armed men seized a police station along with an unknown number of hostages in Yerevan. Source: MELIK BAGHDASARYAN/REUTERS/PHOTOLURE


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BUSINESS

GEORGIA TODAY

JULY 19 - 21, 2016

Georgian Delegation Discuss Investment Projects from UAE PASHA Bank Sponsors Poti International Chess Tournament for Third Year

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BY EKA KARSAULIDZE

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inister of Economy and Sustainable Development of Georgia, Dimitry Kumsishvili, and the United Arab Emirates Sheikh Nahyan bin Mubarak Al Nahyan discussed last week current and future investment projects. According

to the Ministry’s data, the United Arab Emirates has already invested about USD 700 million (1638 million GEL) in Georgia. The Sheikh has personally invested USD 250 million (585 million GEL) in Georgia's economy. He owns the largest Arab investment company, Dhabi Group, which supervises Terabank and the Millenium Hotel, which is set to open in the near future. During the Ministry of Economy’s

meeting in the UAE, special emphasis was placed on the real estate sector, logistics and tourism infrastructure of Georgia. Kumsishvili also noted that the country had created a favorable environment for business and investment. The parties highlighted that the UAE is one of the largest investors in Georgia. The trade turnover between Georgia and the United Arab Emirates in 2015 exceeded USD 240 million (561 million GEL), which is 6 percent more than in 2014.

or three years in a row PASHA Bank has been sponsoring the Poti International Chess Tournament. This year’s Tournament began July 13th. It has been annually organized since 2006 by the Poti Local Municipality and until 2016 the tournament was held under the auspices of Ms. Nana Aleksandria, a world chess legend, two times world vice-champion, 12 times winner of the World Chess Olympics. The Poti International Chess Tournament consists of tournaments in 10 different categories, between juniors as well as adult professional chess players. The Poti Tournament is the biggest in the Caucasus and the most important considering the calibre of participants with many top-rated male and female chess players taking part. The festival is listed in the annual calendar of the World

chess Federation FIDE. The chess games are transmitted live via internet, enabling chess aficionados worldwide to watch in real time. “One of the main characteristics of our business approach is the fact that we are oriented on long-term partnerships. PASHA Bank has been operating in Georgia since 2013 and it is the third year in a row that we are the General Sponsor of the chess festival. This sport has always been popular in Georgia and there are world-class Georgian chess players who have achieved international recognition and ultimate success. We hope that this tradition will continue and festivals like this will encourage and motivate young people to develop their skills in chess and beyond,” said Head of PR and Marketing Department at PASHA Bank, Anano Korkia. ADVERTISING


BUSINESS

GEORGIA TODAY JULY 19 - 21, 2016

7

RETAIL FPI | Food Prices Reach Lowest Mark. At Least in Tbilisi

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WHO IS WINNING AND WHO IS LOSING FROM LOW FOOD PRICES?

etail food prices decreased by 7.6% m/m (compared to the last week of May) and 10.1% y/y (compared to June 2015). The biggest drops were observed for tomatoes (-65.5%), cucumbers (-63.3%) and eggplant (-33.7%). Only a few products gained in value. The highest increases were recorded for cabbage (12.8%), tea (7.3%) and rice (7.2%).

TBILISI FOOD PRICES REACH MINIMUM?! Retail FPI reached its lowest mark at the end of June with the main drivers being fresh fruits and vegetables. On the one hand, price declines in the fresh produce cat egory are always expected at this time of the year, however, the 10.1% y/y decline in prices comes as a nice surprise for those poor consumers who could not escape 30+ temperatures and stayed in Tbilisi. Such a sharp annual change in prices requires an explanation other than seasonality. One place to look for an explanation is Turkey. Ever since downing the Russian Su-24 over Syria, Turkish fruit and veggies were banned from the Russian market. Come high season, Turkish agricultural producers and traders started aggressively looking for alternative markets. Official data currently available to us does not allow us to disaggregate Georgia’s fruit and vegetable imports by

source country. However, we do observe very strong y/y growth in the overall fruit and vegetable imports during the first 5 months of 2016 (up 7.7% in value). Turkey is likely to be behind this increase in imports. Moreover, given that Turkey is dumping its fresh agriculture products on the international markets, the increase in the physical volume of fruit and vegetable imports is certainly larger than 7.7%, resulting in a glut.

Turkish Rey Airlines to Establish Company in Georgia

BY KATIE RUTH DAVIES

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urkish Rey Airlines is to establish a local air company in Georgia which will conduct a variety of flights and is to be based in Batumi International Airport. Rey Airlines are currently conducting negotiations with Tbilisi and Batumi

international airport operator TAV Georgia and TAV Holding, as well as with the Civil Aviation Agency, Georgian Airports Association and the National Tourism Administration. Representatives of Rey Airlines visited Adjara region this May. After meeting with the Chairman of the region’s Tourism Department, Mamuka Berdzenishvili, they clarified the necessary information about the tourism potential, number of flights and the state policy regarding this issue.

The FPI survey is only targeting Tbilisi-based supermarket chains, which may somewhat bias the results. With the summer heatwave hitting the capital, many families have moved to their summer cottages and villages. As a result of this seasonal migration, demand for food is likely to have increased in rural Georgia at the expense of Tbilisi. This suggests that food prices may not have declined by as much outside the capital.

To the extent that food prices decline as a result of increased supply, low prices benefit consumers but are bad news for Georgian producers. How about the retail sector? Well, even though food demand is relatively inelastic, if at all, food consumption is likely to increase as a result of lower prices. Regardless, however, supermarkets may still be able to charge reasonable markups. If, on the other hand, food prices decline as a result of weaker demand, supermarkets stand to lose, big time. The latter effect appears to be dominating in Tbilisi, at least according to ISET PI’s Business Confidence Index (BCI) data. Our BCI survey suggests that retail (in general) was the only sector that experienced a setback in actual performance and expectation in the second quarter of 2016. BCI for the food retail sector has taken a hit of 8 index points (on a scale of -100; +100). The situation for Georgian producers may get better in light of Erdogan’s apology letter and the expected rapprochement between Turkey and Russia. If Russia lifts its ban on Turkish products, we may see fewer agricultural products inundating the Georgian market, restoring the status quo in the food retail market.


8

BUSINESS

GEORGIA TODAY

JULY 19 - 21, 2016

Wizz Air to Add Low-Cost Flights from Kutaisi to Seven European Cities PREPARED BY TAMAR SVANIDZE

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rom September, seven new international cities will be added to flight routes from Kutaisi airport. Hungarian airline company Wizz Air will add new low-cost flights to a number of European cities including Berlin, Munich, Milan, Dortmund, Thessaloniki, Sofia and Larnaca. Flights to Berlin will begin on September 23rd and will be conducted twice a week. The minimum price for the tickets will be EUR 39.99. Kutaisi-Munich flights will also kick off on the same day. Kutaisi-Milan flights will be implemented from September 25th and also run twice a week. Tickets for all of these will start from EUR 39.99. Flights from Kutaisi to Thessaloniki will take off three times a week, on Tuesday, Thursday and Sat-

urday with ticket prices from as little as EUR 29.99. From September 24th Kutaisi-Larnaka flights and Kutaisi-Sofia flights will continue to operate twice a week. On February 4th, Wizz Air announced that it intends to open a base in Kutaisi David the Builder International Airport in 2016. Wizz Air is the largest low-cost airline in Central and Eastern Europe and owns 23 bases worldwide. Kutaisi Airport will be the 24th base, in which the company will permanently base one aircraft. Wizz Air has flown to Kutaisi Airport since 2012. Kutaisi Airport will be the first in the region to be the base for a low-cost airline. This will increase the number of passengers travelling and is also expected, in future, to add more directions for travel. Wizz Air owns 63 aircraft of the Airbus A320 and A321 type, performs flights to 400 locations and connects 188 airports in 38 countries. Last year they transported 19.2 million passengers. They currently employ 2600 staff.

Import in Georgia Increases by 30% BY EKA KARSAULIDZE

G

eorgia's External Merchandise Trade (excluding non-organized trade) in January-June 2016 amounted to more than USD 5.7 billion (13.3 billion GEL), which is 20 percent more than in the same period last year. Export for the first six months amounted to USD 948 million (2219 million GEL), while import was USD 4.8 billion (11.2 billion GEL), reported the National Statistics Office of Geor-

gia (Geostat). According to the Geostat data, export decreased by 12 percent, compared with January-June 2015. The main exported products were ferroalloys, cars, breakage of ferrous metal, processed or semi-processed gold, nuts and others. However, import in the first six months of this year increased by 30 percent and the top imported products were oil and oil products, cars and petroleum, gases and gaseous hydrocarbons, grain, power transformers and medicines. The trade deficit equaled USD 3.8 billion (8,8 billion GEL) and its share in trade turnover constituted 67 percent.


BUSINESS

GEORGIA TODAY JULY 19 - 21, 2016

9

Georgia 9th on the List of Countries with the Lowest Taxes

BY EKA KARSAULIDZE

P

rime Minister of Georgia, Giorgi Kvirikashvili, during his recent public lecture at Humboldt University stated that the country ranked ninth place among the countries with the lowest taxes in the world. The Prime Minister has repeatedly made similar statements during other official meetings and public appearances. The research done by FactCheck project evaluated Kvirikashvili’s statement as mostly true. The World Economic Forum assesses the tax burden of countries through its Global Competitiveness Study. The competitiveness of a country is evaluated based upon 130 indicators, one of which is the ratio of tax burden to profit. “According to the 2015-2016 Global Competitiveness Report, Georgia held the ninth place (with 16.4 percent) among the 140 countries included in the study according to the ratio of tax burden to profit. Similar reports of 2013-2014 and 2014-2015 indicated Georgia’s ratios of 16.5 percent and 16.4 percent, respectively, where the country occupied the tenth position,” stated FactCheck. The World Bank also published data of the ratio of tax burden to profit, where Georgia occupies 13th place. The difference in the ratings was due to the fact that the Global Competitiveness Study includes 140 countries whilst the World

Bank published its data for 220 territorial entities. Therefore, the positions of Georgia in the ratings are more accurately depicted by the data of the World Bank. PM Kvirikashvili also presented Georgia as an Ease of Doing Business country, though in the corresponding study by the World Bank, Georgia’s ratings for 2016 do not show an improvement, with the country remaining in the 40th position as in 2015. However, according to the Tax Misery & Reform Index published by Forbes in 2009, which is a summary of the percentages of marginal taxes in a country, Georgia held fourth place after Qatar, the United Arab Emirates and Hong Kong. FactCheck claimed that the most important change since 2009 will be the new rules for collecting corporate tax which will be enacted on 1 January 2017, thereby making profit reinvested in business entirely tax-free. “This reform will positively influence Georgia’s positions in the aforementioned ratings,” it noted. FactCheck is an innovative political news-and-information project established by Georgia’s Reforms Associates (GRASS). Modelled on established successful international political news-andinformation watchdog services, such as PolitiFact.Com and FactCheck.org, it aims to rate the factual accuracy of statements made by Members of Parliament, the Prime Minister, the President and the Government economic team.

11 Kilometer Section of East-West Highway Opens in Georgia

BY EKA KARSAULIDZE

A

new section of Georgia’s main East-West highway that connects Bashi to Dapnari and detours Samtredia was officially opened on

July 15. The highway carries more than 60 percent of goods in transit. Improving this highway is vital for Georgia’s becoming a transport and logistics hub that will

10 Galaktion Street

facilitate the development of trade relations on the one hand with Central Asia and the Far East and on the other hand with Turkey and Europe. “Developing quality infrastructure is very important, and developing transit roads will benefit the population. Everyone will be free to use this road – the local population, businessmen, and representatives from our partner and neighboring countries. This will bring more income to our people,” said Prime Minister of Georgia, Giorgi Kvirikashvili.

The Japan International Cooperation Agency (JICA) and the European Investment Bank financed construction of the eleventh section of the East-West Highway. European transit road E-60 is the second largest European transit corridor, which begins in Brest, France and ends in Irkeshtam, Kyrgyzstan. In Georgia, the E-60 (the East-West highway) starts at the border with Azerbaijan and ends at the Black Sea coast port of Poti. The corridor length is 392 km on the territory of Georgia.

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


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BUSINESS

GEORGIA TODAY

JULY 19 - 21, 2016

ISET: Khachapuri Index Increases to 1.5%

BY EKA KARSAULIDZE

B

ased on the International School of Economics (ISET) of Ivane Javakhishvili Tbilisi State University’s (TSU) data, in June 2016 USD 1.3 (3.12 GEL) is required to cook one standard Imeruli Khachapuri, 1.5 percent more than in May. Moreover, according to this index, the capital Tbilisi became the cheapest city in Georgia in which to buy the necessary products. The Institution runs a monthly investigation regarding the changing prices for products needed for the baking of an average Imeruli Khachapuri. Khachapuri is considered a traditional Georgian dish of cheese-filled bread. The bread is leavened and allowed to rise, and is shaped in various ways which is then filled with cheese (most commonly Sulguni), eggs and other basic ingredients. ISET developed the Khachapuri Index as a measure of inflation in different Georgian cities. It also assesses the dynamics of food prices. The prices for products needed for baking Khachapuri rose most dramatically in Kutaisi, West Georgia – by 9.2 percent this June. In Batumi, which

retains the title of the most expensive places for Khachapuri lovers at this time of year, prices have not changed in the past month, with USD 1.5 (3.51 GEL) needed to cook one standard Khachapuri. The Index fell after May by 0.3 percent and reached USD 1.3 (2.99 GEL) in Telavi, East Georgia, while the lowest rate was recorded in the capital of Georgia, where the prices for cooking one standard Khachapuri decreased by 2.4 percent, amounting to USD 0.90 (2.09 GEL), making Tbilisi the cheapest city in Georgia to bake it. “The most likely explanation for such a lackluster performance of the Index in Tbilisi is concerned with a seasonal weakness in demand. Indeed, the capital appears to be quite empty these days as many city dwellers left it for seaside vacations or quality time in the mountains,” stated the ISET report. ISET also claimed that prices for Khachapuri products has increased by 9.6 percent compared to June 2015, amounting to USD 1.2 (2.85 GEL). The Khachapuri Index is an analog of the Big Mac index, which in its turn was create to measure the purchasing power parity (PPP) between two currencies and provides a test of the extent to which market exchange rates result in goods costing the same in different countries.

MagtiCom to Improve Broadband Access in Regions Photo: Caucasus Online

BY EKA KARSAULIDZE

F

Contact: www.edelbrand.ge Phone: 599 461908

ollowing the merger of mobile operator MagtiCom and Internet provider Caucasus Online, the company will improve and expand its broadband networks in Georgia’s regions with the support of a USD 100 million (235 million GEL) loan from the European Bank for Reconstruction and Development (EBRD). EBRD’s representatives believe that MagtiCom, which is now the only operator in Georgia offering a full quadruple play service of wireless and cable phone lines, Internet mobile and cable Internet, as well as satellite and IPTV television, will be able to offer better and higher-speed Internet services to its customers across the country. The expansion of higher quality internet con-

nectivity will also increase competition in the telecommunications market of Georgia and encourage other operators to follow by improving the quality of their networks and services. “This investment will support the development of higher quality mobile networks, internet connectivity and TV platforms in the country’s more remote regions,” said Bruno Balvanera, the EBRD Director for the Caucasus, Moldova and Belarus. “This will help boost the local economies and Georgia’s telecom sector as a whole. We are happy to work with a partner as strong as MagtiCom, who has extensive expertise in the telecoms sector and high corporate governance standards.” The EBRD is a leading institutional investor in Georgia. Since the start of its operations in the country, the Bank has invested over EUR 2.73 billion (7 billion GEL) in 195 projects in the financial, corporate, infrastructure and energy sectors, with 91 percent of those investments in the private sector.


BUSINESS

GEORGIA TODAY JULY 19 - 21, 2016

11

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.

Diversification of Georgia’s Tourism Offer BY NINO PAPAVA

S

ector research is one of the key directions of Galt & Taggart Research. We currently provide coverage of Energy, Healthcare, Tourism, Agriculture, Real Estate, and Wine sectors in Georgia. Below we provide an excerpt from our latest report on tourism, adapted for Georgia Today’s readers. The full report can be found on Galt & Taggart’s website - gt.ge. As the Georgian tourism industry has shifted into high gear in 2016, it is important to take a step back and evaluate the strategic direction of the sector in the medium to long term. The focus of Georgia’s tourism strategy moving forward should be on the quality and diversity of visitor arrivals, not the number, as Georgia’s Tourism Strategy 2015-2025 rightly points out. The strategy targets a 7.1% CAGR in arrivals, but a 13.2% CAGR in tourism inflows over 2014-2025, as opposed to the trend in the past five years, for which the two growth rates were almost equal. These targets translate into 11.0mn international arrivals and US$ 5.5bn in international tourism receipts by 2025. In order to attract more high-yielding visitors, the industry needs to focus on several niche areas, in which Georgia has great potential – winter tourism, wine tourism, medical and wellness tourism, and gaming. Winter tourism in Georgia has expanded at a respectable pace over the last five years. The country boasts four distinct ski regions – Gudauri and Tetnuldi/Hatsvali in the north and Bakuriani and Goderdzi in the south. Gudauri has been the leading ski destination in Georgia since its construction in the 1980’s. The number of visitors to Gudauri has increased 2.3x over the last five years to over 200,000, while Bakuriani hosted over 86,000 visitors in the 2015/2016 season. Goderdzi mountain resort in the Adjara Region opened in December 2015 and hosted almost 7,000 visitors during the season. Tetnuldi resort in the Svaneti region opened in February 2016. Significant advances, from artificial snowmaking to new and rehabilitated lifts and equipment, have been made by the Mountain Resorts Development Company (MRDC), a state enterprise tasked with managing and developing ski resorts in Georgia. There is greater potential for winter tourism in Georgia that remains to be realized. Additional infrastructural enhancements will be crucial in this regard. The government announced in

December 2015 that US$ 150mn will be invested in the New Gudauri development project, created by Ecosign, a world leader in mountain resort planning. In 2016, MRDC plans to expand the snowmaking capability in Gudauri by constructing an artificial lake, which will also serve as an additional recreation area off-season. Three new gondola lifts will be constructed to support the creation of a new Kobi-Gudauri ski zone. A toboggan run, which will operate year-round, is to be constructed in Bakuriani, to expand the entertainment options on offer at the resort. The completed and expected improvements have prompted branded hotel entry in Georgian winter resorts. Best Western Plus hotels are slated to open in Gudauri and Bakuriani in 20162017, while a Radisson Blu hotel is expected to open in Gudauri in 2017. Food and entertainment variety on offer is still lacking. We expect the expanded infrastructure and a growing visitor base to prompt the private sector to fill the gap. An 8,000-year history of winemaking and 525 indigenous grape varieties make Georgia a natural destination for wine enthusiasts. Wine tourists in Georgia primarily come from the USA, Canada, Japan, China, the Baltic countries, and the EU. The Georgian wine tourism market is still in its infancy. The uniqueness of Georgian wine, made in clay pots and not in oak barrels, with little or no additives, has grown organically over the years. However, coordinated effort from wine makers, tour operators, and Georgian National Tourism Administration (GNTA), along with the development of infrastructure, will be necessary to monetize Georgia’s rich endowment into a product that can compete on the global wine tourism market. There are a handful of ‘chateau’-type wineries that cater to wine tourists, but collaboration among them in designing integrated wine tours will be crucial. GNTA’s promotional efforts in this regard have had some results: the inaugural UNWTO Global Conference on Wine Tourism will be held in the Kakheti wine region in September 2016. Furthermore, Lonely Planet included Georgia on its list of ‘Ten of the World’s Most Intriguing Wine Regions’ in 2015. Medical tourism is another niche product with great potential for Georgia in the medium term. Visitors from CIS countries, who dominate the arrival mix, have a level of comfort with Georgia and for the most part, do not have very high-quality healthcare in their home countries. Georgia’s healthcare is very price-competitive vs Turkey, which is currently the regional center for medical tourism. As a result of major upgrades in its healthcare system, the number of

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medical tourists in Turkey increased from 74,000 to 0.5mn over 2008-14 (with a sizable number of Georgian patients, among them) and generated an estimated US$ 2.5bn in revenue in 2014. The state of medical infrastructure in Georgia (mostly in secondary and tertiary care, which are the main attraction for medical tourists) has improved significantly over the last few years and key private sector players are investing heavily in further improvements in facilities, technology and service. Notably, in November 2015, Georgia Healthcare Group PLC became the first healthcare company in the region to be listed on the premium segment of the London Stock Exchange – an important catalyst for elevating the image of the Georgian healthcare system. The key challenges for Georgia to become a medical tourism destination are the quality of healthcare, attracting foreigneducated medical professionals, and international accreditation of Georgian hospitals. Development of medical tourism brings far-reaching benefits to a country. First and foremost, medical tourism is a source of foreign currency inflows in the form of payments for medical care and tourism services. Notably, medical tourists typically spend significantly more on non-medical tourism services than regular tourists do. As the segment

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

develops, there is a spillover effect resulting in an improved healthcare offering not only for visitors, but for the local population as well. A developed medical tourism industry also facilitates the return of highly qualified, foreign-educated medical professionals to the country. Furthermore, political ties between the countries are typically strengthened in the process. If Georgia can follow the example of Turkey, it stands to reap these benefits by retaining its domestic patients and attracting medical tourists from the region in the medium term. Wellness and spa tourism is another high-potential target for Georgia. Tskaltubo, a well-known resort area in the Imereti region that promoted healthy living, relaxation, and medical tourism in the Soviet era, is a case in point. The Partnership Fund enlisted the help of international consultancies to devise a master plan for the privatization of the 18 state-owned buildings in the resort town, three of which have already been sold to local and foreign investors. Furthermore, the government has attracted support from the World Bank and an estimated US$ 28mn will go toward overhauling water and sanitation systems and renovating public buildings and a 70 hectare public park in Tskaltubo. The Partnership Fund is also partnering with Redix Group on the development of a

Photographer: Giorgi Pridonishvili Layout: Misha Mchedlishvili Webmaster: Sergey Gevenov Circulation Managers: David Kerdikashvili, David Djandjgava

high-class hotel in Abastumani, another strategically important resort area. The gaming industry in Georgia has large potential as most countries in the region restrict gambling. Strong development has taken place in Batumi, which is now home to 11 casinos. The estimated number of visits to Batumi casinos has increased 2.1x over 2013-2015 to 614,000, while the amount collected by the local government in gaming business fees has expanded 2.7x to US$ 8.9mn over the same period. We expect even faster growth next year, as five of the existing casinos opened at the end of 2015 and their full contribution will be seen in 2016. Incentives are in place for the development of gaming tourism in resort areas. The annual license fee for operating a casino in the country ranges from GEL 100,000 to GEL 5.0mn, depending on the region. Casinos commencing operations in Kazbegi, Tskaltubo, Sighnaghi, Bakuriani, and Gudauri are exempted from the annual license fee, as the government targets those areas for tourism development. In addition, newly built hotels in Georgia’s seaside resort towns with more than 100 rooms (80 in some cases) are exempt for 10 years. Other regions have highly discounted license fees ranging from GEL 100,000 to GEL 250,000.

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Issue #862 Business  

July 19 - 21, 2016

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