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Issue no: 1094/152

• OCTOBER 23 - 25, 2018

• PUBLISHED TWICE WEEKLY

FOCUS

ON A WELCOME CHALLENGE

The world's best hospitality startups descend on Georgia to share experiences

PAGE 2

PRICE: GEL 2.50

In this week’s issue... Weekly Entrepreneurial News @entrepreneur.ge NEWS PAGE 2

One Step Forward on a Long Journey ISET PAGE 4

European Gudauri during the Soviet Union: History of the Marco Polo Resort & Hotel BUSINESS PAGE 8

Georgia is Open for Business

A Musical Celebration of the 100th Anniversary of the Foundation of Czechoslovakia CULTURE PAGE 15

Whose Side Are We on?

BY STEPHEN FEAR, FOUNDER AND CHAIRMAN OF THE FEAR GROUP

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uring my last visit to Georgia, I was asked to appear on national television, channel one, which is similar to the BBC in the United Kingdom. The programme I appeared on is a bit like Good Morning Britain, so is watched by many Georgians and visitors alike. Georgia has become much better known throughout the world over the last few years and when you get to know this wonderful democratic country and its people in the way that I have, you will understand why. It is possibly the most hospitable nation on earth. Georgians have a saying which, translated into English, means that visitors are considered a gift from God. Rest assured that's just how it feels. Continued on page 7

POLITICS PAGE 15 Prepared for Georgia Today Business by

Markets Asof19ͲOctͲ2018

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GBP11.46

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104.94(YTM4.73%)

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GRAIL07/22

106.19(YTM5.87%)

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GBP15.18

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GEBGG07/23

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MSCIEM


2

NEWS

GEORGIA TODAY

OCTOBER 23 - 25, 2018

@entrepreneur.ge Gamarjoba! I’m the Editor-in-Chief of the Georgian edition of Entrepreneur magazine and I’m here to share the top weekly Entrepreneurial news with you:

The Georgian Prime Minister Mamuka Bakhtadze announced ambitious plans as part of government’s “Green Policy – Eco Transport” to replace 90% of vehicles with electric cars within the next ten years. The PM has not specified the brands yet but has said two world class car manufacturers will construct their factories in Georgia.

PM Opens Welcome Challenge Global Forum

Kakhetian Traditional Winemaking (KTW) is expanding its hospitality business, having recently opened the 41-room “Akhasheni Wine Resorts” in the Kakheti region. According to Zurab Chkhaidze, KTW Group will open a brand-new 30-room boutique hotel in January next year. The hotel will be perfectly located in the heart of Tbilisi on Orbeliani Square. The Georgian Prime Minister opened the Welcome Challenge forum for Hospitality and Travel Industry Innovations being held in Georgia on October 22-23. It offers a space for start-up creators to interact with senior industry executives and venture capitalists from the United States, Estonia, Denmark and Japan. Follow the Entrepreneur Georgia Instagram page to get the latest updates from Georgian Entrepreneurs. For doing business with Georgian Entrepreneurs, write us on business@entrepreneur.ge

BY THE GT TEAM

O

n October 22, the Prime Minister of Georgia Mamuka Bakhtadze opened Welcome Challenge, an annual Global Forum for Hospitality and Travel Industry Innova-

tions being held in Georgia on October 22-23 at The Biltmore hotel in Tbilisi. The PM briefly spoke of the achievements Georgia has had in the hospitality industry and his optimism that Georgia is on the right path of development. He highlighted the increased interest from international audiences in the country, as well as foreign investors. "Georgia is an ideal hub for tourism

and economic development," he said. "The government has many plans in this direction and a positive outlook, not least in the booming startup sector." The event is hosting up to 25 of the world’s best startups in the hospitality industry and includes the most interesting innovative initiatives in this sector. The forum is a Georgian initiative and will include a start-up competition that allows real, live feedback on product and business ideas and offers ambitious business people the opportunity to pitch their ideas to serious investors. Forum speakers will include venture capitalists and senior industry executives from the United States, Estonia, Denmark and Japan: Richard McAniff (former Microsoft Executive Vice President), Yrjo Ojasaar (Change Ventures), Jan Rosenbom (Keystones) and Kei Hareyama (Rock Climbing Partners), Dawn Drew (former Executive VP of National Geographic). The motto of the forum is “We Are Looking for the Disrupters of Tomorrow.” It creates a space for start-up creators to interact with speakers and venture capitalists, promoting informal networking opportunities and the formation of more formal mentorship connections. Creators will benefit from professional, high-level feedback on their ideas. For the latest news and results of this forum, go to georgiatoday.ge


BUSINESS

GEORGIA TODAY OCTOBER 23 - 25, 2018

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Politician & Supporters Arrested at Cannabis Festival BY AMY JONES

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n October 20, Zurab Japaridze, the founder of an opposition party and presidential candidate for the elections to be held on October 28, was detained during a cannabis legalization festival organized by his political party Girchi at Dedaena Park, along with ten others. Georgian media reported that Japaridze distributed ‘joints’ and told attendees that he was waiting for the police to react as his actions were illegal. The police, already present in large numbers at the park, arrested him a few minutes later. Although the Interior Ministry stated that Japaridze voluntarily followed police officers, bystanders witnessed others being forcibly carried away by as many as six police officers. The festival, organized by the opposition party Girchi, was already deemed illegal under Georgian legislation. The Interior Ministry saw the festival's organization as an ‘intention to commit organized crime’ and warned party leaders that encouraging the use of narcotics is against the law. Undeterred by the warning, Girchi held the festival regardless. Despite Georgia’s reputation for strict recreational drug laws, marijuana has become a hotly contested focal point of the upcoming presidential elections. The rise of the debate surrounding marijuana follows a draft law that would allow governmentlicensed companies to grow cannabis for export abroad as well as establishing rules for recreational cannabis consumption in Georgia. This controversial proposal could enable Georgia to benefit from the billion-dollar medical cannabis market. Akaki Zoidze, the Chairman of Parliament’s Healthcare Committee told the online news site Netgazti that

Image source: Reuters

“if we tap 10 % of that market, we could be looking at a billion dollars of [annual] income for the economy.” However, the controversial proposal has seen heated debates. Grigol Vashadze, running on behalf of the United National Movement, uses the slogan “Don’t Let Them Turn Georgia into a Cannabis Republic.” He accuses Georgian Dream, the governing party, of planning to turn Georgia into a “drug-dealing” economy and a nation of “stoners,” while others warn that cannabis could replace grapes as Georgia’s national crop and turn the

Tbilisi to Have Hourly Parking System from 2019

Image source: Wikipedia

BY THEA MORRISON

M

amuka Mumladze, Head of the Transport Department of Tbilisi, says that a new hourly parking system will be launched in the capital from January 2019. The new system envisages dividing the city into zones and introducing new parking fees. At the first stage, the new parking system will be launched in two districts of Tbilisi: Old Tbilisi and Saburtalo. Mumladze explained that hourly parking in Old Tbilisi will be effective from the City Assembly (Sakrebulo) building and include all the nearby streets to Zaarbruken Square and Amagleba Street. In the Saburtalo district, hourly parking will be arranged on Shartava, Kostava, Pekini, VazhaPshavela, Kazbegi and Mitskevich streets. The Head of Transport Department says the minimum price for parking per hour will be 0.20 GEL. He noted that the division of the city into zones and the introduction of a new tariff system do not envisage the cancellation of the existing 50 GEL annual parking fee.

"The price for residents will remain the same as now - 50 GEL per annum and 25 GEL for six months, but visitors will have to pay extra,” he stated. Mumladze says there will be a special mobile application through which drivers will pay the hourly parking fee. “The hourly parking fee will be paid by mobile. The fee will be calculated and cut from the mobile balance of the drivers. There are also places for hourly parking lots, where more than 200 additional Pay Boxes are needed, and we will announce a tender for them,” he said, noting that the distance from parking zones to pay boxes will not be more than 25 meters. In mid-September, Vice-Mayor Irakli Khmaladze stated that the cost of parking will vary from district to district; however, he underlined that parking outside residential flats will be free for the people who live there. He also added that the aim of the initiative is to promote public transport popularization, with public transport maintenance to be financed from income from the new parking scheme. Mayor Kakha Kaladze stated last month that a new model of parking was being developed within the new transport policy.

country into a drug haven. Japaridze, on the other hand, claims that consuming cannabis is a constitutional right. In July, he won a landmark case in the Constitutional Court, decriminalizing the personal use of marijuana. However, the ambiguous law is unclear to many Georgians. Some activists and lawyers have been asking the government to also decriminalize the possession of marijuana to make the law clearer. Much of the controversy surrounding the law is fuelled by fear that the founder and chairman of Georgian Dream, Bidzina Ivanishvili, wishes to ben-

efit personally from the monetary potential of the cannabis export industry. He already holds shares in Goldman Sachs, who have started funding the production of medicinal cannabis in the United States. Mikheil Saakashvili, the exiled former president, voiced these concerns from abroad. Speaking from Amsterdam, he said, “Ivanishvili wants to turn Georgia into a drug hub, a nation of cartels.” The son of Ivanishvili, rapper Bera, released a song calling for the legalization of cannabis, named “Legalize it,” during the drug-policy protests this spring. The Georgian Orthodox Church, known for their conservative grip on Georgia, is one of the loudest opposers to the potential legalization of cannabis. Father Andria Jamghaidze warned “next we will see similarly liberal approaches to cocaine and heroin.” The Church’s criticism is thought to be the reason for the decision to halt discussions around the marijuana law for two months. Georgian Dream has said that they will use this time to explain the law to the Church, although the Church has already stated they will not compromise on their stance. A lack of education surrounding the recreational use of cannabis could lead to problems, especially among Georgian youth. Accused by the Church as being a “Cannabis Queen” due to her support for the law, Salome Zurabishvili, an independent MP supported by Georgian Dream, has instead stated, “I will be the Queen of an awareness campaign that must be held in Georgia to inform the youth of the damage that drugs do to their health.” Although well-intended, some fear that such a campaign will be unsuccessful. Zurab Japaridze was released by police after questioning the following day. The outcome of the elections and the debate surrounding cannabis remains open.


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BUSINESS

GEORGIA TODAY

OCTOBER 23 - 25, 2018

THE ISET ECONOMIST A BLOG ABOUT ECONOMICS AND THE SOUTH CAUCAUS

www.iset-pi.ge/blog

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

One Step Forward on a Long Journey BY IRAKLI BARBAKADZE & LIKA GODERDZISHVILI

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ith the Fourth Industrial Revolution (4IR), humanity has entered a new phase. The 4IR has become the lived reality for millions of people around the world, and is creating new opportunities for business, government and individuals - Klaus Schwab, Founder and Executive Chairman, World Economic Forum. The 4IR, as envisioned by Professor Schwab, is about breakthroughs in the fields of artificial intelligence, genetics, computing, etc. that are changing the world in which we live at breathtaking speed. With this vision in mind, the World Economic Forum is introducing the new Global Competitiveness Index 4.0 (GCI 4.0) – a modified and enhanced version that has been designed to better respond to modern competitive challenges in the global environment. GCI 4.0 emphasizes the role of human capital, innovation, resilience and agility as defining features of economic success in the 4IR. Compared to other international indices, such as the Ease of Doing Business Index, Human Development Index, Corruption Perception Index and many others, GCI 4.0 covers all factors critical for attaining competitiveness on a global scale. Those factors are divided into 12 different pillars that span all aspects of the economic architecture of a country: institutions, infrastructure, ICT adoption, macroeconomic stability, health, skills, the product market, the labor market, the financial system, market size, business dynamism, and innovation capability. Such inclusivity makes GCI 4.0 a unique source of information – not only for outsiders, such as investors, international organizations and the donor community, but also to policy makers and the general public. The latest GCI report, which was released on 16 October, ranks Georgia in 66th place among the 140 countries assessed. The country has advanced a mere one place compared to last year’s results. Ranked slightly higher than Azerbaijan and Armenia, but significantly below Russia and Kazakhstan, Georgia is placed 3rd in the Eurasian region. However, the preferred benchmark countries for Georgia, such as Estonia, Slovenia, and Poland, are leading the global charts and are ranked just behind the

Graph #1. An overview of Georgia’s performance, 2018 Source: The Global Competitiveness Report 2018

usual suspects of the United States, Singapore, Germany and other well-established developed markets. Graph #1, below, provides a brief overview of the country’s performance over last year. Even if we do not see significant developments in the overall rankings, interesting dynamics can be observed in the performance of number of pillars. ICT adoption rose by 8.4% and a key driver of this change was the increased number of internet users. Meanwhile, business dynamism rose by 7.4%, benefitting from developments made in the Insolvency Regulatory Framework last year. On the other hand, financial system performance worsened (by -2.5%), which was mostly due to the poor performance of venture capital availability in the country. As for the absolute standings, Georgia’s scores and rankings for market size and innovation capability are the lowest among all the pillars. While being ranked so low on the market size dimension should not be that surprising given the size of the country, being ranked 85th on innovation capability should be regarded as both unexpected and alarming. The role of innovation and research and development on economic growth are considered critical (Verspagen, 2005; Rosenberg, 2004; Cameron, 1996). Alongside its direct effect on enhancing growth, innovation has a number of positive spillovers on other economic sectors. The gaps that exist in innovation capability are thus important to explore. Even though the data provided by GCI 4.0 show that in most innovation indicators Georgia’s scores increased compared to the previous year, the overall ranking remains far from impressive. What we can extract from the data is that Georgia’s competitiveness is very low in terms of the diversity of workforce (ranked at 116th place) and the state of cluster devel-

opment (ranked at 117th place). Although this does not mean that Georgia is not improving in these categories, it indicates that other countries are improving even further and faster. Although the overall weak performance in market size and innovation capability performance is significant, Georgia’s position is relatively more competitive in the cases of its labor market (31st place) and institutions (40th place). The labor market pillar covers all important aspects of hiring and firing practices, wages, labor policies, etc. Thanks to the zero-labor tax rate (1st place), ease of hiring foreign labour (6th place), low redundancy cost (18th place) and ease of hiring and firing practices (21st place), Georgia is performing better than many other countries in this regard. Institutional development is another important factor for the country’s competitiveness. Institutional frameworks have large and significant effects on the efficiency and growth rate of economies (Scully, 1988). Acemoglu and Robinson (2010) argue that the main determinant of differences in prosperity across countries are differences in economic institutions; therefore, one should invest significant resources in understanding the key bottlenecks and complexities facing the institutional development of a country. GCI 4.0 provides assessments for a wide range of factors (a total of 20) affecting institutional quality. The factor that provides Georgia its highest ranking (3rd place) is shareholder governance, which measures shareholders’ rights in corporate governance. Surprisingly, Kazakhstan is the global leader in that category. Other positive developments can be observed in the category burden of government regulation (with Georgia ranked at 10th place). For the first time in its long history of

country evaluations, with GCI 4.0 the World Economic Forum has introduced a new measure of institutional development – social capital. According to the rankings, this area is one of the key weaknesses of Georgia, which is currently ranked in 126th place. There are a number of different definitions of the concept of social capital, but Putnam (2000) defines it as the “connections among individuals – social networks and the norms of reciprocity and trustworthiness that arise from them”. Social capital is significant as it has a “catalizator” function, accelerating the effectiveness of other production factors. Thus, the word “capital” in “social capital” highlights the contribution of social networks as assets that produce economic returns and improve wellbeing. The score on the social capital pillar in GCI 4.0 is retrieved from the Legatum Prosperity Index™, which, based on the data from the Gallop World Poll, measures countries’ performance in three areas: • Social cohesion and engagement (bridging social capital). • Community and family networks (bonding social capital). • Political participation and institutional trust (linking social capital). While there is noticeable variation between the different sub-categories of social capital, the first two indicators seem relevant for Georgia. When asked “Do you have confidence in the local police force?” and “Are you satisfied with opportunities to meet people and make friends?” Georgians seemed to provide positive answers more frequently than in other countries. Voters in Georgia are also more likely to turn out in elections; however, in all remaining social capital

indicators, Georgia’s ranking is worryingly low (below 100th place). Particularly worrisome are the indicators that evaluate bridging and linking social capital in the country. Out of the 149 countries included in the Prosperity Index, Georgia ranks 146th on the indicator that assesses whether people have donated money to a charity in the past month. Georgians also do not seem to help strangers in need, voice their opinions to public officials, or volunteer their time to organizations. Surprisingly, Georgians rely much less than others on relatives or friends if they are in trouble, which also shows the weakness of social bonding capital. Although this seems to contradict a study conducted by USAID (2011), which claimed that between friends and family, Georgian social bonds are incredibly strong, the rankings are very much in line with other findings of the same report that “across such groups and in more institutionalized ways, Georgian society continues to exhibit the signs of poorly developed social capital. This can be seen in every corner of Georgian society, from the failure of farmers to act collectively in buying and selling, to the crumbling stairwells in apartment blocks.” To summarize, as Professor Schwab has argued, the Fourth Industrial Evolution is upon us. It calls for more sophisticated human capital, more advanced infrastructure, cutting-edge technologies and, above all, sound institutions – including better protected property rights, more transparent and accountable government, and more inclusive social capital. To keep up with the changing competitive global environment, we need to accelerate our speed of advancement.

Graph #2. Scores for Social Capital sub-categories Source: The Legatum Prosperity Index, 2017

PM: 90% of Vehicles to Be Replaced by Electric Cars BY THEA MORRISON

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he Georgian Prime Minister says that in the next 10 years, 90% of vehicles in the country will be replaced by electric cars. The PM made the statement at the presentation of the Green Policy – EcoFriendly Transport on October 22. Bakhtadze claims Georgia will be the first country to replace the vehicle fleet with electric cars in such a short period of time.

Photo: 1TV

“This is a very ambitious plan, but this plan will bring a great benefit to Georgia,” the PM said. He added that the green economy is a milestone of the reforms and that a plant for the production of electric vehicles is planned to be launched in Georgia. "We will provide encouragement for launching new leasing schemes in Georgia, according to which a consumer will buy an electric car and pay it off within 5 years with the savings made on the fuel costs. Naturally, it creates very important advantages. This means that we will

have quite a large market in Georgia. We are already negotiating with two largest brands to build an electric car plant here," Bakhtadze said. In addition, Bakhtadze announced that a new subway extension will be built from Samgori district to Lilo in Tbilisi. “Today, we are announcing a very important project. We will use the infrastructure of the bypass railway to build a new metro station at Lilo. At the same time, Tbilisi agglomeration is being developed and this new line will help us to extend in the direction of Rustavi town. This is a historic project,” he said.


6

BUSINESS

GEORGIA TODAY

OCTOBER 23 - 25, 2018

Industrial Policy as a Driver of Homecoming BY ERIC LIVNY, TBILINOMICS POLICY ADVISORS

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uilt in 2009-10, the car exchange platform in Rustavi is an excellent example of an effective industrial policy that helps Georgia make good on its promise as a gateway to Central Asian markets. Having weathered the storm of regional economic crises and trade policy reversals in 2013-2016, it is at the core of a thriving industrial cluster, adding significant value and contributing to Georgia’s export earnings.

CHAPTER I: BRAIN DRAIN Levan Surguladze’s illustrious career could serve as a case study in reinventing oneself. A theoretical physicist by education, Levan moved from Soviet Georgia to Russia and from Russia (which had by then become “independent”) to the US, studying, researching and teaching nuclear physics. Everything went according to plan, except that in the late 1990s, Levan did the unthinkable. While still a physics professor in the US, he decided to get a finance degree from his own university. The physical distance to the business school was less than a hundred meters, but traveling to it required a radical mental adjustment and even a quick change of Levan’s professorial attire to something more appropriate for an MBA student. In 1999, Professor Levan Surguladze embarked on a completely new path, that of a Wall Street trader and risk manager. Quickly progressing through the ranks, Levan reached senior VP and risk director positions with the Deutsche Bank in London, and Barclays Capital and UBS Investment Bank in New York. Levan had never had to look back, and, by 2007, could have declared his mission accomplished. Except that his two sons

had entered their teenage years, and the idea of bringing his family back home and starting his own business in Georgia gradually started taking shape in his head. There was only one problem: Georgia’s finance industry was still in its infancy, not offering many opportunities to people of Levan’s caliber. Oleg Mzhavanadze grew up in a tiny Imeretian village in Vani. In 1989, the year Oleg returned home after two years of Soviet military service, Georgia began asserting its national sovereignty. But, rather than going to the barricades, Oleg’s first instinct was to establish a family. In early 1991, in the midst of Georgia’s struggle for independence, he “stole” and consequently married his wife, Marina Ketsadze. Their first child, Gio, was born soon after, in October 1991. To fend for his small family, Oleg apprenticed in a local car repair shop, specializing in bodywork repair (“zhestianka”). Soon after, he and his friend opened their own shop. Yet, Georgia was not a good place to do business in the chaos of the early 1990s. The civil war created a lot of demand for Oleg’s services, but most people could only promise to pay… In June 1994, after 3 years of chasing his impoverished clients, Oleg received an offer he could not refuse: to move to Moscow and start working in a large allGeorgian car repair business. Oleg’s family quickly settled in one of Moscow’s suburbs, Krasnogorsk. The local Georgian community, some 80 families, provided a support network. The Georgian mafia provided protection (“krysha”). The Russian mafia appreciated Oleg’s professionalism, trusting him with the repair of their black SUVs. Oleg and Marina stayed connected to their homeland, supporting their families in return for a regular supply of traditional Georgian goodies: wine, soft Imeretian cheese, churchkhelas, corn flour, and even a roasted piglet (“gochi”). They also vis-

ited Georgia every other summer, making sure that Gio and his younger sister Tatia did not forget Georgian and stayed in touch with their cousins and other relatives. Life was too good to seriously consider the option of coming back. Yes, there had always been the idea that the kids should eventually get a Georgian education, but Oleg could not give up on his Moscow business without a decent alternative in sight.

CHAPTER II. INDUSTRIAL POLICY Georgia is perfectly located to function as a trade hub serving its land-locked neighbors to the east. Yet, it is not uncommon to see well-endowed but poorly organized countries (and individuals) wasting their potential. The Georgian auto restoration and trade industry is an example of how one can get it right with a relatively simple government intervention. When I was shopping for my first Georgian car back in 2007, most auto trades happened in Dighomi, Tbilisi’s western-most neighborhood. Hundreds of new and second-hand cars were on display on a multitude of parking lots strewn across a very large area. No banking or technical inspection services. No government offices to register trade transactions. An oriental bazaar at its worst. Despite the mess of Dighomi, car trades happened because Georgia had a sea port serving Azerbaijani, Armenian and Kazakh buyers. With the basic law & order conditions restored after the Rose Revolution of 2004, Georgia quickly saw the emergence of a large contingent of small-time importers/traders, and a network of auto repair shops that could cheaply restore damaged cars. As a result, Georgia’s car re-export industry grew from close to 0 in 2004 to about $100 mln in export volume in 2007. Things changed quite dramatically in 2009. Vano Merabishvili, the all-powerful Minister of Interior in Misha Saakash-

vili’s government, pushed for a coordinated effort to relocate the car market from Dighomi to a newly built compound in Rustavi, in convenient proximity to Armenia and Azerbaijan. Vano’s initiative took the shape of an informal public-private partnership. The Ministry of Interior arranged for the existing marketplace in Dighomi to be shut down and provided the land in Rustavi. It also built a brand-new service center right in the middle of the new compound: a one-stop shop for any services related to car trade transactions, from banking to notary, to licensing and issuance of new number plates. The government also amended the national legislation, extending the period during which cars could be kept in Georgia without customs clearance. The initial private investment in the new car market (“autobazroba”) came from Ukraine’s PrivatBank. But other companies, including Bank of Georgia and Iberia, quickly followed suit, creating a competitive environment. Rustavi’s car exchange platform is currently the largest of its kind in the Caucasus. According to some estimates, it serves close to 20,000 traders. Many more Georgians are working in the related car repair industry and other services. At its peak in 2013, Georgia’s car re-exports reached 700mln USD. Not a small amount. In 2014-2016, Georgia’s auto re-export industry went into a sharp recession, triggered by a regional economic crisis and unfavorable trade policy changes in Azerbaijan, Armenia and a number of Central Asian countries that joined the Russia-led Eurasian Economic Union. In 2015, Georgian and international media outlets were running headlines such as Eurasianet’s “Georgia: Once an Economic Driver, Used Car Market Turning Into a Lemon”. It took three difficult years for the industry to recover but it is now back with a vengeance, nearly doubling in size compared

to the low point of 2015 and 2016. By coordinating the actions of independent market actors and the state, smart industrial policy can do wonders. It can be used to create new, and enhance the competitiveness of, existing industries, helping them expand and become more resilient to a crisis. Relying on private sector investment, it is also relatively inexpensive.

CHAPTER III. BRAIN GAIN Levan Surguladze and Oleg Mzhavanadze are now back to Georgia. Professor Surguladze returned in 2007 in order to found the Caucasus Business Group (CBG), a set of vertically integrated companies handling every element of the car trade value chain, the largest player in the Georgian market. Oleg Mzhavanadze came back in 2009. His business is part of an auto repair cluster, TLS Motors. Every company in the cluster is a small shop (a “box” in the Georgian lingo), but taken together they can solve any problem – from small dents to serious frame damage. “Nothing is impossible in our business,” says Oleg, and I have every reason to believe him. * * * I got to know Levan and Oleg because their talented sons, Revaz and Gio, graduated from the International School of Economics at TSU, which I helped establish in 2006/7. Which brings me to a traditional Tbilinomics Tamada Toast – let Georgia become a place that nobody would ever want to leave!

ABOUT THE AUTHOR: Eric Livny is Founder and President at Tbilinomics Policy Advisors. In 20072018, he served as President with the International School of Economics at Tbilisi State University (ISET) and ISET Policy Institute. His current advisees include the Caucasus University and the Finnish International School project.

Fraud Revealed at 10 Vehicle Inspection Stations BY SAMANTHA GUTHRIE

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he Investigation Service of the Ministry of Finance has released information on fraud that was discovered in relation to the vehicle technical inspection process, which evaluates vehicle emissions and safety standards. A statement from the Investigative Service said that, as a result of investigative activities, 10 centers for vehicle technical inspection have been identified in the regions of Tbilisi, Samegrelo-Zemo Svaneti, Imereti, Kakheti and MtskhetaMtianeti, whose employees have been falsifying passing inspection reports for municipal and privately-owned vehicles. An investigation is underway under Article 362 and Article 221 (2) of the Criminal Code of Georgia, which could carry a punishment of four to six years in prison. The third phase of Georgia’s new technical vehicle inspection requirements began on October 1, 2018. Inspection is now mandatory for all vehicles with an engine of 3,000 cubic centimeters or more. The first phase, launched January 1, 2018, mandated inspections for trucks larger than 3.5 tons and passenger vehicles with more than eight seats. The

Image source: Auto Repair Concord NH. NOTE: This is meant as a generic photo. The identities of the service centers accused of fraud have not been released

second phase, which began on July 1, 2018, included all government-owned vehicles. Starting January 1, 2019, all remaining vehicles will be required to undergo an inspection, with the exception of cars four years old or newer. Vehicles five or six years old will be inspected once every two years, and vehicles older than six years will require annual inspections. The cost of an inspection is 60 GEL ($23). If a car fails the test

the first time, its owner is given a 30-day period to fix the identified problems. Re-inspection is free. The inspections were designed to meet EU standards, as required by the 2014 Georgia-EU Association Agreement. There are 32 auto service centers throughout Georgia that are certified to provide technical inspections. More information on inspections can be found at www.pti.ge. There is also an informa-

tion hotline that can be reached by calling 1484. Last week, the Transport Department of Tbilisi City Hall announced that approximately 200 public marshrutkas (minibuses) and 100 public buses had failed their inspections and were subsequently banned from driving on Georgian roads. On October 11, Vazha Iordanishvili, Head of the Association of Automobile Inspection, said that since January, 90,000 vehicles have undergone compulsory periodic technical inspections and 24,000 failed the initial inspection. "The existence of up to 27% of cars with malfunctions is quite a high figure. We are talking about the first inspection attempt: every fourth car does not pass inspection the first time," Iordanishvili said. Many drivers who fail the initial inspection refuse to make the necessary upgrades or repairs and submit their vehicle for a re-check. Iordanishvili blames this on the fact that the country does not strictly monitor the serviceability of cars on the roads, and patrol police officers, who are responsible for enforcing the vehicle inspection requirements, do not penalize drivers found without inspection certificates. Some drivers also claim that 30 days is not enough time to fix the vehicle’s problems. Iordanishvili proposes several possible solutions, including equipping the exist-

ing network of smart cameras with functionality to detect cars that have not passed inspection and automatically fine drivers without inspection certificates. He also warns of reports of drivers tampering with their engines by adding a certain chemical mixture to the fuel to improve emissions readings, among other manipulative practices. Iordanishvili also urges the Georgian Committee for Environmental Protection to adopt a practice that has proven effective in the United States – installing special indicators on roads which automatically measure the quantity and composition of vehicle exhaust, and use license plate cameras to fine violators. Deputy Minister of Economy and Sustainable Development Akaki Sagirashvili responded to the accusations of fraud and corruption at the 10 inspection centers. “It is very important for us to carry out the periodic technical inspection reform transparently and in accordance with public interests. We are grateful to the Investigative Service of the Ministry of Finance for their timely and immediate reaction to our appeal which revealed and identified these violations. At this stage, we are planning to suspend the 10 centers, and the results of the investigation do not exclude the use of more severe sanctions, including abolishing accreditation for some of the centers.”


BUSINESS

GEORGIA TODAY OCTOBER 23 - 25, 2018

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Tbilisi Fashion Week Spring/ Summer 2019 Opens BY SHIRIN MAHDAVI

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fter much anticipation, Tbilisi Fashion Week Spring/Summer 2019 has finally begun. October 18 was the opening day of the week at the Funicular restaurant on Mtatsminda. The evening's ceremonies were dedicated to the Georgian actress and fashion icon Bela Mirianashvili, with the models participating acting out scenes from one of her films: Last Day, First Day. Georgian actresses Irinka Kavsadze and Gogola Kalandadze opened the event. The actresses provided an indroduction

Jokhadze is the Georgian designer present, and Georgian brands include MakMari, Lasha Devdariani, Keti Chkhikvadze, and more. The foreign designers that will exhibit pieces are Miro (Russia), Sayya (Ukraine), and Rosella May (UK). The blend of Georgian and foreign designers is essential as Tbilisi Fashion Week is covered internationally and seen in the likes of Vogue, Harper’s Bazaar, W Magazine, Elle, Marie Claire, and others. With the theme of eco-friendly fashion and a wide array of designers from around the globe, the Tbilisi Fashion Week Spring/Summer 2019 is another stepping stone in the growth of Georgia’s fashion industry and of Georgia’s presence in the international market.

to Bela Mirianashvili and otherwise commenced the night’s festivities. Tbilisi Fashion Week will run until October 21. The week's programs will mostly be held at Ghvinis Ubani (Vera District). And per usual, a winner of the competition will be determined at the end of the events. The slogan of the Tbilisi Fashion Week Spring/Summer 2019 is “We Must Take Care of Nature.” Organizers of Tbilisi Fashion Week are only permitting designers who create clothing from natural textiles and materials in an attempt to spread the importance of environmental preservation through fashion. The week’s featured brands and designers are both Georgian and foreign. Lasha

Georgia is Open for Business Continued from page 1 I was very fortunate during my visit this time because my son and business partner Leon travelled with me. We always prefer travelling together as we find that two heads are better than one when it comes to getting the most out of business trips such as this. Georgian Ambassador to The United Kingdom, Her Excellency Mrs Tamar Beruchashvili, certainly made sure we were kept busy! It is little wonder why she is held in such high regard, not only by Georgia and the United Kingdom, but by ambassadorial colleagues, government ministers and other senior political and business leaders around the world.

I appeared on two separate television channels and gave several other media interviews and made a visit to a mining operation before I gave a public lecture in the capital Tbilisi. Importantly, our visit also included a private one hour meeting with the Prime Minister, Mamuka Bakhtadze, who is clearly fully focused on creating a progressive broad-based democracy founded on an enterprise culture. We also met with the Minister of The Economy, Giorgi Kobuli, who was very positive about Georgia’s future as an open market, free enterprise focused economy, and the possibility of working together to deliver some major infrastructure projects in Georgia over the next few years. It is good to see so many young people

in top jobs across Georgia. Even the Prime Minister is not yet 40. I would encourage more international business people to consider investing in Georgia. It has access to over 2.3 billion people through its free trade agreements with countries across the world, including the European Union. There are an increasing number of excellent hotels to stay in such as The Marriott, Hilton, Radisson, and of course Rooms, where we stayed. Many viewers will have seen Joanna Lumley on her UK-based television program, Silk Road Adventure, where an episode called Discovering Georgia was featured. Joanna also stayed at Rooms Hotel, which is very stylish with an upbeat atmosphere, great food and excellent staff. It is located close to the center of the

capital Tbilisi, which has a population of around 1.3 mln, making it about the size of Birmingham and Cardiff combined. Georgia is the oldest winemaking nation in the world, older than both France and Italy, with its viticulture history going back 8,500 years. With the forthcoming development of The Anaklia Deep Sea Port located on the Black Sea and of course the Silk Road initiative, which will see a new road being built from China to many destinations in Asia and Europe and which will importantly run through the middle of Georgia, makes the country uniquely well-placed at the crossroads of both continents: it is without doubt destined to become one of the most important small countries in the world. Safe, stable and with a government

that understands the importance of business and trade, Georgia’s future looks bright. Georgia is definitely open for business and could be an excellent place to locate major manufacturing plants and even Head Offices for companies wanting tariff-free access to over 2.3 billion people. According to The World Bank, Georgia is the 9th easiest place to do business in the world and has a sophisticated and safe banking system administered through its National Bank, The Bank of Georgia. The very highly respected entrepreneurial banking group, TBC Bank, which besides being Georgia’s biggest bank is also listed on the London Stock Exchange is often the first port of call for investors seeking advice and banking facilities in the region.


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BUSINESS

GEORGIA TODAY

OCTOBER 23 - 25, 2018

On the Georgian Labor Safety Law

Source: http://oukas.info/?u=Trends+in+personal+protective+equipment++July+2016

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G Law Office, through the contribution of partners Archil Giorgadze and Nicola Mariani, joined by senior associates Irakli Sokolovski, Ana Kochiashvili, Tamar Jikia and associates Ana Chikovani, Elene Samadbegishvili, and Mariam Kalandadze is partnering with Georgia Today on a regular section of the paper which will provide updated information regarding significant legal changes and developments in Georgia. In particular, we will highlight significant issues which may impact businesses operating in Georgia. Labor safety regulations in Georgia have become a topic of active discussion leading to adoption of the new Law of Georgia on Labor Safety (the “Law on Labor Safety”). Part of the requirements under the Law on Labor Safety entered into force upon publication on 21 March 2018, while others entered into force from 1 August 2018. The Law on Labor Safety will become fully binding from 1 January 2019. The Law on Labor Safety complements the Labor Code of Georgia (the “Labor Code”) and together with several Governmental decrees, orders and regulations establishes general safety requirements applicable to the specific activities performed by employees. The Law on Labor Safety applies to jobs considered to be of increased danger, hard, harmful and hazardous. The employer’s compliance with the labor safety regulations in Georgia will be overseen by the Ministry of Health, Labor and Social Affairs of Georgia through its

Source: Commersant; Photo: Netgazeti

respective departments. In addition to the labor safety requirements established under the Law on Labor Safety certain employers have the obligation under the order of the Minister of Health, Labor and Social Affairs of Georgia to undertake mandatory medical inspection of their employees. Obligations of the employers towards employees under the new regulations The Labor Code establishes a general obligation of the employer to provide its employees with a working environment that is safe for their life and health. This includes an obligation of the employer to provide employees with full, objective, and comprehensive information regarding all factors affecting employees’ life and health or safety in the natural environment. The Law on Labor Safety further elaborates on the responsibility of employers for guaranteeing the safety of their employees in the workplace, since the jobs performed by these employees are considered to be dangerous, hard, harmful and hazardous. The main obligation of the employers in this case is to ensure that they have taken all measures to avoid any damage to the health and safety of employees and third parties. Such measures include, but are not limited to training and information campaigns as well as adoption of relevant preventive measures by the employers. The employers are required under the Law on Labor Safety to provide trainings and instructions to the employees about the principles of safe labor, to provide information to the employees about

working procedures, the terms of use of various machines, technology and work equipment and to inform the employees about the applicable evacuation and emergency procedures. In addition, under the Law on Labor Safety the employers are obliged to introduce a preventive system ensuring labor safety at the workplace and to timely provide employees with relevant information about the measures of prevention of any safety risks, accidents and professional diseases. As noted, the requirements of the Law on Labor Safety will apply to employers if it is determined that the jobs performed for the employer by the employees are dangerous, hard, harmful and hazardous.

LABOR SAFETY SPECIALIST AND LABOR SAFETY DEPARTMENT The employers are required under the Law on Labor Safety to take steps for organization and management of labor safety in the workplace. In this respect starting from 1 January 2019 the employers are required to appoint at least one of its employees as a labor safety specialist or to create a labor safety department with two or more labor safety specialists. Labor safety specialists will be required to undergo an accredited training program.

EMERGENCY SERVICES AND EVACUATION The Law on Labor Safety obliges the employers to take appropriate measures for guaranteeing the availability of emergency medical services, fire safety and evacuation protocols. The employees

have to be permitted to leave the premises in case of emergencies under the direction of the relevant supervisors responsible for emergency situations and evacuation.

EMPLOYEE REPRESENTATIVE FOR LABOR SAFETY MATTERS For effective cooperation and communication between the employer and the employees with respect to labor safety matters the employees shall be entitled to elect a representative for labor safety matters. According to the Law on Labor Safety, the introduction of the employee representative will guarantee the employee participation in the decision-making on labor safety matters by the employer.

ments with respect to recording, investigation and reporting of work related accidents. *** The labor safety regulations in Georgia are still in the stage of development and further legislative and administrative actions are likely to be taken by the relevant authorities. The employers shall be vigilant and shall keep themselves updated about subsequent developments to ensure their compliance with the legal requirements. *** Note: this article does not constitute legal advice. You are responsible for consulting with your own professional legal advisors concerning specific circumstances for your business.

WORK RELATED ACCIDENTS The Law on Labor Safety provides that the employer shall immediately, after the occurrence of any accident in the workplace, take proper measures to avoid danger to the health and safety of its employees and the third parties involved in the accident. Moreover, the employer shall, as much as reasonably practicable, safeguard the integrity of the scene of the accident for further inspection by the relevant investigative authorities without endangering the health and safety of its employees or causing itself significant economic loss. If the integrity of the scene of the accident cannot be maintained, the employer shall draw up a report describing the situation in order to facilitate the subsequent investigation of the causes of the accident. The employers shall follow the respective require-

MG Law is the first full-service law firm in Georgia to be founded by international partners. The firm advises a diverse group of Georgian and foreign companies, financial institutions, investment funds, governments and public enterprises. Among many other areas, the firm primarily focus on the following sectors: Banking & Finance, Capital Markets, Arbitration & Litigation, Labor & Employment, Infrastructure and Project Finance, Energy Law, Real Estate, Tax and Customs, Investment Law, Corporate Law, and Cryptocurrency & Blockchain. For more information, please visit www.mglaw. ge or contact Archil Giorgadze at archil. giorgadze@mglaw.ge and Nicola Mariani at Nicola.mariani@mglaw.ge

Increase in the Number of Visitors to Georgia’s Protected Areas BY ANNA ZHVANIA

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here has been an increased interest in visiting Georgia’s protected areas among visitors and locals in the past nine months. As the data shows, 974,827 people visited the Areas in the first 9 months of 2018, a 14% increase compared to the same period

of last year. In September 2018, the amount was equal to 153,783, a 23% increase compared to September 2017. Among the visitors, 52% were Georgian, while 48% were foreigners. Most tourists visiting the Protected Areas were originally from Germany, Poland, Israel, Ukraine and Russia The most visited Protected Aeas included the Prometheus Cave, Martvili Canyon, Kazbegi National Park, Okatse Canyon and Tbilisi National Park.


BUSINESS

GEORGIA TODAY OCTOBER 23 - 25, 2018

Image source: RFE/RL

Head of Charity Fund Demands Suspension of Investigation BY THEA MORRISON

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amous operatic bass of Georgia, Paata Burcguladze, founder of the charity foundation Iavnana, has demanded the Prosecutor’s Office of Georgia (POG) suspend investigation into the alleged misappropriation and embezzlement of the foundation’s money. Burchuladze also asks for an apology from the POG, saying the investigation against the Heads of the foundation have no real grounds and only serve for his political persecution, as he was once an opponent of the ruling Georgian Dream (GD). “I call on the Prosecutor’s Office to stop this shameless persecution…Their actions are just a performance which damage the interests of the people who were beneficiaries of the fund,” he stated at a special press-conference. The head of the PR Department of Iavnana, Teona Jorbenadze, says all documents of incomes and expenditures are in the office and no embezzlement of foundation money has taken place. “The POG is investigating the money spent on plane tickets…It is obvious that we needed to bring artists to the concerts: they cannot hold performances by Skype!” she noted. The Chief Prosecutor's Office of Georgia launched an investigation into the possible misappropriation and embezzlement of large amounts of money by heads of the Iavnana foundation on September 20, 2017.

On October 8, the POG released a statement regarding the investigation, saying in 2004-2017 only 30% of funds attracted by the organization were spent on charitable purposes. According to the Prosecutor's Office, the purpose of the investigation is to determine what funds were received by the organization in 2004-2017 and whether or not these funds were used for charity. POG says the first phase of the investigation looks at money spent by the foundation for the coverage of the travel costs of Burchuladze and his wife. According to the agency, the fund spent 700,000 GEL on that travel. The second phase, according to the statement, applies to Paata Burchuladze's expenses for hotel services in Georgia, which amounted to 40,000 GEL according to the Prosecutor's Office. The third part of the investigation refers to the lease of real estate in the ownership of the Fund. According to the Prosecutor's Office, the property was transferred to the Fund from the state for a symbolic price for the purposes of charity. The fund rented out the building to an enterprise running a restaurant and the income received from the lease was meant for Iavnana charitable purposes. “The enterprise was not paying rent to the fund properly or on time, as a result of which the fund did not get GEL 0.5 million,” the agency added. The POG stressed that in 2004-2017, the cost of airline tickets of and the salary of Burchuladze’s wife Angela Vasilenko, whose role in the fund was undetermined, amounted to GEL 254,000, of which the salary is 25,000 GEL and other costs amounted to GEL 337,000.

Min of Health to Address Nurse Shortage BY SHAWN WAYNE

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he Georgian Ministry of Health presented a new concept for the development of human resources in the medical field. According to the ministry, despite the implementation of a number of systemic reforms in this area, there are still important challenges - an excess of doctors and a shortage of nurses. The main goal of the Ministry of Health by 2025 is to provide qualified personnel in the right quantity, harmonization of medical education with EU standards and the World Federation of Medical Education (WFME). This is important for the qualification of Georgian doctors to be recognized internationally, the ministry noted. The plans of the Ministry of Health in the next seven years also include the use of a system of continuous medical education, the formation of a sustainable system of professional regulation and training of nurses. To achieve these goals, the Ministry of Health will carry out important reforms. In particular, the

country will prepare a multi-year plan for the development of human resources. The format of state certification and qualification examinations will be improved. In addition, the state certificate of doctors will no longer be indefinite. The Ministry of Health of Georgia also intends to prepare legislative changes to form a system of professional regulation of the human resource of nurses. With the help of these legislative changes, anursing regulatory authority will be created, appropriate educational programs will be prepared, and registration will be issued and licensed to nurses. Registration and licensing of nurses will begin in 2020-2025. The country will do its utmost to promote the implementation of master's programs for nurses. This will increase financial access to these programs.

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BUSINESS

GEORGIA TODAY

OCTOBER 23 - 25, 2018

September 2018: Average Hotel Prices in Georgia & Hotel Price Index Kartli – 56 GEL and Imereti – 58 GEL.

HOTEL PRICE INDEX

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

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n Georgia, the average cost of a room1 in a 3-star hotel was 135 GEL per night in September 2018. The most expensive 3-star hotels in September in Georgia were in Tbilisi – 153 GEL and in SamtskheJavakheti – 151 GEL. The cheapest 3-star hotels in September in Georgia were found in Guria – 74 GEL and in Kvemo Kartli- 85 GEL. The average cost of a room in a 4-star hotel in Georgia in September 2018 was 244 GEL per night. The most expensive 4-star hotels in September were found in Kakheti – 336 GEL and SamtskheJavakheti – 269 GEL. The cheapest 4-star

hotels in September in Georgia were found in Samegrelo-Zemo Svaneti – 153 GEL and Guria – 180 GEL. The average cost of a room in a 5-star hotel in Georgia in September 2018 was 521 GEL per night. In Tbilisi, the average price was 619 GEL, followed by Adjara – 527 GEL, Kakheti – 400 GEL, and Samtskhe-Javakheti - 383 GEL. In September 2018, the average cost of a room in a guesthouse2 in Georgia was 70 GEL per night. The highest daily rates for guesthouses were found in Guria – 122 GEL and Kvemo Kartli -104 GEL. The cheapest guesthouses in September in Georgia were found in Shida

Table 1: Percentage change of prices in September 2018 over August 2018

In September 2018, in Georgia the hotel price index3 decreased by 5.9% compared to August 2018. The daily rates for standard double hotel rooms decreased the most in Guria (-22.5%) and Adjara (-21.5%). Among ten regions of Georgia and Tbilisi, in September 2018, compared to August 2018, hotel prices increased only in Racha. In Tbilisi, in September compared to August, the overall price level of hotels did not change. The 3-star, 4-star and 5-star hotel price index decreased by 6.4% in September 2018 compared to August 2018. In these types of hotels, the prices decreased in all regions of Georgia. The highest price decreases were recorded in Guria (-38.7%) and Adjara (-20.4%). In Tbilisi, prices only decreased by 0.2%. For guesthouses, the price index decreased by 5.7% in September 2018 compared to August 2018. In this type of accommodation, the biggest percentage price decreases for standard double rooms were recorded in Adjara and Guria. In September, compared to August, the prices of guesthouses increased only in Racha and Tbilisi.

Graph 3: Average prices in 3*, 4* hotels and guesthouses

HOTEL PRICES IN TBILISI During October 2017 – September 2018 period, the highest average hotel prices in a 3* hotel in Tbilisi was recorded in December 2017 – 165 GEL, the lowest average price was recorded in February 2018 – 124 GEL. In a given period, like 3* hotels, the highest average price in 4* hotel in Tbilisi was recorded in December 2017 – 293 GEL, the lowest – in February 2018 – 214 GEL. For guesthouses, in Tbilisi, the highest average price was recorded in September 2018 – 79 GEL, the lowest in March 2018 – 68 GEL.

1 The results are based on the surveying of standard double hotel room prices of 3, 4, 5-star hotels and guesthouses in 10 regions of Georgia. Hotels were chosen arbitrarily according to random sampling principle. The study contains 71% (312) of all 3, 4 and 5-star hotels and 25% (456 guesthouses) of all guesthouses registered on www. booking.com The 3, 4 and 5-star hotel price data was collected by contacting hotels individually, while the prices of guesthouses were taken from booking.com. The average prices are arithmetic mean of standard double hotel room prices. 2 Guesthouse: a type of accommodation that is characterized by having a small number of rooms and services are usually offered by the resident family. 3 The calculation of the hotel price index is based on the recommendations given by the International Monetary Fund (IMF). The elementary aggregate price index is calculated by Jevons index (Consumer Price Index Manual-Theory and Practice (2004), Practical Guide to Producing Consumer Price Indices (2009)). 4 * Preliminary results

IMF Mission Head: Georgian Economy Has Good Indicators BY THEA MORRISON

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he International Monetary Fund (IMF) Mission Head, Mercedes Vera-Martin, told journalists that Georgia has good economic indicators in terms of growth in tourism, export and money transfers, noting that this year, a 5.5% economic growth is expected in Georgia. "In 2018, we expect a 5.5% growth in Georgia, and the same indicator is expected in the following years. Regarding the external factors and their impact on the economy of Georgia, it should be noted that global uncertainty exists. The global growth rate has decreased by 0.2 in 2018-2019," she said. The Head of the IMF Mission stated the Georgian government should continue maintaining macroeconomic stability, with a monetary policy focused on price stability. "The Georgian authorities should con-

Photo source: 1TV

tinue to maintain macroeconomic stability, to carry out a responsible and reasonable policy and to increase economic stability towards external shocks. The monetary policy should be focused on price stability. We support the flexibility of exchange rates and creation of resources to deal with foreign shocks in the future,” she added. The IMF delegation visited Tbilisi in late August to discuss recent economic and financial developments and progress with structural reforms. The mission stated that the 2018 growth projection had been revised upward to 5.5 % as a result of strongerthan-expected economic activity. According to the IMF assessment, the sustained implementation of the authorities’ reform agenda will support higher and long-lasting growth and increase the resilience of the economy. In addition, the team welcomed the progress made by the authorities in implementing structural reforms and ongoing initiatives, and stressed the need for continued efforts to support higher and more inclusive growth.


BUSINESS

GEORGIA TODAY OCTOBER 23 - 25, 2018

HUAWEI Presents the Mate 20 Series with Improved Artificial Intelligence ADVERTORIAL

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ondon hosted the most important event of the year on October 16, where HUAWEI introduced the new Mate 20 Series, its flagship smartphones, to the world. Created by the most sophisticated and flexible technologies in the industry, the HUAWEI Mate 20 and the HUAWEI Mate 20 Pro are the highest achievement in innovative technologies. “Smartphones are an important entrance to the digital world. The HUAWEI Mate 20 Series is designed to be the best ‘mate’ of consumers, accompanying and empowering them to enjoy a richer, more fulfilled life with their higher intelligence, unparalleled battery lives and powerful camera performance,” said Richard Yu, CEO of Huawei Consumer BG. The HUAWEI Mate 20 Series is equipped with the worlds’ most innovative and smallest 7nm processor, the Kirin 980, which offers customers an increased bandwidth with less power consumption. The HUAWEI Mate 20 Series unites four devices: the HUAWEI Mate 20, Huawei Mate 20 Pro, HUAWEI Mate 20 X and Porsche Design HUAWEI Mate 20 R. The new smartphone is maintained by well-

known tradition and all three major cameras are designed in cooperation with Leica, the new camera system supports macro distance, which produces crisp images of objects that are placed as close as 2.5cm from the lens. In comparison with its predecessors, the new model has a powerful addition—16mm Leica Ultra Wide Angle Lens. In addition to functional capabilities, the new models of Huawei are refined and enhanced by their battery endurance. With the 4200 mAh battery and 40W's fastest charging technology, it is now possible to charge up to 70% of the battery in 30 minutes. The handset fingerprint, the more sophisticated design, the Kirin 980 processor, 3X optical zoom, fast charging function and supports 40W HUAWEI SuperCharge, which gives the device 70 percent charge in 30 minutes. HUAWEI products and services are available in more than 170 countries and are used by a third of the world's population. There are 16 research and development centers operating worldwide in the USA, Germany, Sweden, Russia, India and China. HUAWEI Consumer BG is one of HUAWEI’s three business units, mainly focusing on smartphones, personal computers, tablets and smart services. HUAWEI Global Network is based on 20 years’ experience in the telecommunications business and serves to provide innovative technologies to customers around the world.

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BUSINESS

GEORGIA TODAY

OCTOBER 23 - 25, 2018

Gov't Boasts a Record Harvest in 2018 BY SAMANTHA GUTHRIE

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he 2018 grape harvest in Georgia has broken national records with over 230,000 tons of grapes processed, and the estimated income of 22,000 grape growers who participated in this year’s harvest exceeding 300 million GEL. The information was announced on October 19 by Levan Davitashvili, Minister of Environmental Protection and Agriculture of Georgia. This year’s harvest involved approximately 280 private companies, ranging from large commercial wineries to small family-run productions. “This quantity of harvested grapes has not been processed in Georgia since independence [from the Soviet Union in 1991]. Georgian wine exports are also at a record high. We anticipate an export volume of 100 million bottles of Georgian wine in 2018,” said Davitashvili. From 2013-2018 in Kakheti and Racha-Lechkhumi, Georgia’s primary grape-growing regions, grape growers took in a collective income of 950 million GEL during the harvest periods. “Thanks to positive growth in this field, the 2018 grape harvest was not subsidized,” explained Davitashvili. For the past 10 years, grape growing has been subsidized in Georgia. In a June visit to the Botanical Garden of Zugdidi, in the Samegrelo region of central Georgia, Prime Minister Mamuka Bakhtadze noted that while, overall, Georgia’s agricultural sector has consistently low growth or declines, one crop does consistently well – wine grapes. In 2017, $170 million

Image source: Ministry of Environmental Protection and Agriculture of Georgia

worth of wine was exported from Georgia, surpassing hazelnuts as Georgia’s most valuable agricultural export. As The Financial reports, “2017 was the year when the government started [moving away] from direct subsidies for grape prices; only 19 million GEL [$7.7 mln] was expended, compared to 36 million [$14.6 mln] in 2016.” In 2017, growing Rkatsiteli, Saperavi and Kakhuri Mtsvane grapes was subsidized. To encourage the sector’s inde-

pendent growth and sustainability, no subsidy was offered to grape growers in 2018. In July, the Ministry of Environmental Protection and Agriculture explained the decision by predicting that the “2018 harvest will be successful and organized and grape growers will not face problems regarding grape sales.” Davitashvili highlighted a few particularly significant developments in the grape growing and

winemaking sectors over the past six years, noting that wine exports are up, export markets are diversifying, and new wine companies and enterprises are being established. In 2012, there were 50 winemaking enterprises of all sizes officially registered in Georgia, while today there are more than 800. “This is the completion of a certain phase in Georgian winemaking. From 2019, we will implement a new five-year strategy, and we have fulfilled all the preconditions required to attain our goals,” Davitashvili promised. The harvest began in early September and was supported by the National Wine Agency, the Ministry of Environmental Protection and Agriculture, the Ministry of Economy and Sustainable Development, the Ministry of Internal Affairs, the Agricultural Projects Management Agency, and regional governments in the Kakheti and Racha-Lechkhumi – Kvemo Svaneti regions, who annually establish coordination centers to help farmers process their grapes. The coordination centers also ensure accountability and traceability. “The Government of Georgia is keeping its promise not to subsidize the grape harvest this year. Viticulture has become one of the most successful and developed sectors in the country as a result of the effective policy implemented by Georgian government in recent years, evidenced in increased exports and growing number of wine producing companies, the success of Georgian wine in exhibitions and competitions held in different countries around the world,” said Levan Davitashvili at the end of the government meeting in July. The promotion of the viticulture and wine industries remains one of the main priorities of the Georgian government.

Tbilisi City Hall Plants 10,000 Plants for Greening Efforts in the Capital

Photo: Tbilisi City Hall

BY SAMANTHA GUTHRIE

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s part of an autumn planting campaign, 10,000 trees of different species, both coniferous and deciduous, will be planted in Tbilisi. Seasonal greening measures began today and will continue through the end of November. Seedlings waiting to be planted are temporarily being stored in Vake Park. Deputy Mayor of Tbilisi Maia Bitadze and Head of the Environmental Protection Department of City Hall Giga Gigashvili visited the sapling storage point. Deputy Mayor Bitadze said, "It will be the kind of trees and plants that have been approved by the Sakrebulo [City Assembly], as well as the bushes, decorative shrubs and trees that are prescribed for making Tbilisi green. From October 1 – December 1, more than 97,000 square meters of land will be planted. This is the first step towards fulfilling the promise made to Tbilisi residents, which will con-

tinue for years. Such large-scale projects are important for air pollution prevention. Also, to make our city nice, orderly and with as much green spaces as possible.” The list of species approved by the Sakrebulo was selected by specialists, considering the local landscape of Tbilisi. The list includes potinia, cuisine, acacia, juniper, buzz, ufani, himalaya cedar, Japanese sofora, Japanese cuisine, maple, ordinary yew, decorative trammel (red chilies) and olive trees. Seedlings will be planted in pre-selected locations across the city. These places are: Medians on Saakadze Square, medians on Balanchini Street, Chavchavadze Avenue, Tskneti Highway, Cholokashvili street, railings on and around Heroes Square, Javakheti Street, the median and surrounding areas of Agladze Street, medians at the crossroads of Tsabadze and Akaki Tsereteli Streets (adjacent to Dinamo stadium), the crossroads of Brothers Asatiani and Bakhtrioni Streets, the median on Tamarashvili Street, and on Pekini Avenue near the National Archives building.


BUSINESS

GEORGIA TODAY OCTOBER 23 - 25, 2018

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The Iconic INF Treaty is in Danger BY EMIL AVDALIANI

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n October 22, the US President Donald Trump’s national security adviser, John Bolton began his travel across the former Soviet space first by visiting Russia, with plans to visit all three South Caucasus countries thereafter. The visit comes amid tensions between Washington and Moscow. Although mutual distrust is nothing new, and we know that tensions have already been existent for several years, Bolton’s visit is still notable of how deep Russia-US relations have plunged. Before the visit, the US media reported that Bolton will travel to Moscow specifically to warn the Russian President, Vladimir Putin, that the US intends to leave the treaty. Concern about the INF (The Intermediate-Range Nuclear Forces) Treaty’s future has existed for some time. In 2014, the Obama administration accused Moscow of violating the treaty by carrying out intensive works on a prohibited ground-launched cruise missile of intermediate range. Ever since, the US officials have insisted that the Russians have developed a new medium-range missile called the Novator 9M729 (commonly known in the West as SSC-8). In a lengthy nuclear strategy document published early this year, the administration detailed the Russian violations and concluded that the country’s “decision to violate the INF Treaty and other commitments all clearly indicate that Russia has rebuffed repeated US efforts

The signing of the INF Treaty by then-US President Ronald Reagan and Soviet leader Mikhail Gorbachev in Washington, 1987. Image source: nato.int

to reduce the salience, role and number of nuclear weapons.” Washington contended that Moscow has deployed prohibited tactical nuclear weapons to intimidate European nations and former Soviet states that have aligned with the West. Still, Obama decided not to leave the agreement because of major concerns from the Europeans and out of general fear that it would serve as a renewal of a Cold-War era arms race.

Defense Secretary Jim Mattis has publicly discussed alleged Russian violations several times in recent weeks, saying the Trump administration is currently reviewing its options. The destruction of the INF Treaty will be an important development with farreaching consequences on the world. The treaty was signed in 1987 between the two great Cold War period powers to ban all land-based missiles with ranges

of 500 to 5,500 km. Such missiles are known as short- and intermediate-range. The treaty covers land-based missiles carrying both nuclear and conventional warheads. One of the geopolitical reasons behind the US leaving the INF Treaty is that the document has constrained Washington from deploying new weapons to respond to rising threats to US interests around the globe. The Americans specifically

have their eyes on China and its efforts to cement a dominant position in the Pacific and to keep American naval forces at bay. Since the INF Treaty is only between the two states, China, a nonsignatory to the treaty, has had no limits on developing intermediate-range nuclear missiles. In other words, the question is how the decision to leave the treaty will accelerate the Cold War-style military contest among the US, Russia and China. If the US pulls out of the agreement, the decision will likely prove problematic with its European allies and others elsewhere. Many an analyst thinks that the withdrawal from the treaty will create problems for Washington too, as the country currently has no missile that can be promptly deployed to counter the Russians’ military successes. Also, even if the US military successfully manages to produce such a missile, it is not yet clear where the US would station it. The intermediate-range missile class cannot reach Russia from the US, and as such it would need to be placed in Eurasia, near the Russian borders. It is likely that Washington will have troubles persuading its close allies to allow a deployment of this kind of arms on their territories. Bolton’s visit will clarify the issues related to the INF Treaty, but it is nevertheless clear the demise of the document is highly likely. Mikhail Gorbachev, the Soviet leader who signed the treaty together with his US counterpart, has already come out with harsh criticism against efforts to dismantle the regulations. On a higher geopolitical level, it seems that the US withdrawal from the treaty is a side-effect of China’s rise and the US efforts to curb it.

TasteAtlas Puts Georgian Cuisine Firmly on the Map BY AMY JONES

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he World Food Atlas, TasteAtlas, has included Georgia on its online food map with an outline of Georgia’s national and regional cuisines, as well as ingredients. TasteAtlas informs readers of tastes and flavors from countries around the world. From the spicy red pepper sauce, Ajika of Abkhazia to meat juice-filled khinkali of Kakheti, each historical Georgian province has its own culinary traditions. Dishes are often rich with meat although

many vegetarian dishes are also offered. Georgia has many different climates due to its geographical location next to the Black Sea. A wide variety of produce can be grown on Georgian soil such as tropical fruits and grapes. The food in Georgia is also linked closely to its history. Positioned on the Silk Road, ingredients flowing through Georgia from the East and West, were incorporated into dishes. Flavors from ancient Greece and the Romans, middle eastern Turkey, central Asia, Mongolia, Russia, and India can be found in Georgia’s eclectic dishes. The inclusion of Georgia on the TasteAtlas is another positive step for Georgian culture and tourism.

Image source: Khinkali House

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14

CULTURE

GEORGIA TODAY

OCTOBER 23 - 25, 2018

Georgian Chants at the Frankfurt Book Fair BY ANA DUMBADZE

T Ensemble Rustavi Begins Japanese Tour BY ANA DUMBADZE

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he Georgian State Folk Song and Dance Academic Ensemble "Rustavi" is holding a 50-year anniversary tour in Japan. The tour, which started in from Ichikawa (Chiba), includes 21 cities of Japan and involves 33 concerts. On October 12, the first concert was a success that saw the Georgian folk group leave the 2400 spectators of the country of the rising sun surprised and excited. The final concert will be held on November 21 in the city of Osaka. The Georgian State Folk Song and Dance Academic Ensemble was founded

in 1968 by Anzor Erkomaishvili and his friends. At first the ensemble consisted only of singers. That same year, they were joined by a group of dancers and they have been working together ever since. Since its establishment, the ensemble has held more than 7000 concerts in over 80 countries around the world. The repertory of the ensemble includes dances and songs originating from almost every corner of Georgia. The style of the singers as well as the dancers is traditional and preserves a historical color. Ensemble "Rustavi" was awarded the Zakaria Paliashvili (1980), Albert Schweitzer (1986) and Georgian State (1999) prizes for special contribution to the popularization of Georgian folk songs.

he Georgian Folklore State Center, together with Tbilisi State Conservatoire and fund “Georgian Chant”, prepared two collections of Georgian traditional chants especially for the Frankfurt Book Fair: "Collection of Georgian Chants" and "You are the Vineyard." The Collection of Georgian Chants includes samples and musical notation of chants from each regions of Georgia. You are the Vineyard offers 21 variants of musical notations of this hymn, 14 of which are recorded in the audio album featuring, amongst others, Rustavi and Basiani. With these unique editions, Georgian professional music was appropriately presented at one of the most prestigious international events of the year, the Frankfurt Book Fair. “Georgia's participation as Guest of HonorattheFrankfurterBuchmesseproved a great opportunity for our culture and literature,” said Giorgi Donadze, Director of the Georgian Folklore State Center. “Europe and the wider world discovered them and it was yet another opportunity for our country to present its cultural resources. It was a great honor that our books together with other important publications were printed by such a prestigious international publishing house that allows the books to be spread and available throughout the world. The Festival was opened by German Chancellor Angela Merkel and French President Emmanuel Macron. Georgia was presented with its national stand at the Festival, which was decorated with our publications too.” The Collection of Georgian Chants contains samples of medieval professional music developed in the Georgian

Christian culture - polyphonic chants, composed by professional melodisthymnographers and written with the old musical script, using neumes, the unified Georgian system. Georgian chants have for years captivated Georgian and foreign scientists due to their artistic value and polyphonic and harmonious thinking. They are performed not only during Liturgy, but on stage, in Georgia and abroad.

You are the Vineyard was dedicated to the Virgin Mary and written by King Demetrius I Bagrationi. This work, full of the spirit of the renaissance, introduces the most valuable pearls of Georgian music to the world. The Frankfurt Book Fair (Frankfurter Buchmesse) has a 500-year history. It is celebrated in Frankfurt mid-October every year, hosts up to 300,000 visitors and exhibits up to 400,000 books.

Tbilisi will host Charles Landry, British author, speaker and international adviser on the future of creative cities On October 23, within the International Art Festival GIFT, Tbilisi will host Charles Landry, British author, speaker and international adviser on the future of creative cities. He is well known for popularizing the Creative City concept. His book "Creative City" is considered a reference and guideline for urban innovators and has become the inspiration for a new approach to city planning, management and development. Let's use this foreign experience to make Tbilisi a modern and creative city!

Language of masterclass: English Event organizer: Entrepreneur Georgia Main supporters: Ministry of Education, Science, Culture and Sport of Georgia, Tbilisi City Hall, National Administration of Tourism. When: 23 October, 16:00 - 18:00 Where: Amirani Cinema, 36 Kostava, str. Tickets:


CULTURE

GEORGIA TODAY OCTOBER 23 - 25, 2018

15

A Musical Celebration of the 100th Anniversary of the Foundation of Czechoslovakia Jimmie Lunceford. Singing into an authentic 30s style microphone, Jana Dekanakova and Matus Uhlirarik gave exemplary vocals throughout the night. The concert ended with an enthusiastic encore before guests enjoyed refreshments in the foyer. Members of the band are professional musicians and singers active in leading Slovak orchestras and big bands such as the Slovak Philharmonic, Gustav Brom Big Band, and the Orchestra of Slovak National Theater. Fanzowitz transcribes contemporary tunes by ear to music scores, creating a unique opportunity to listen to the original arrangements as they were played at the time. The Fats Jazz Band perform regularly in Slovakia, Czech Republic, Austria, Hungary, Germany, Croatia, and Italy. Czechoslovakia was formed in October 1918 after declaring independence from the Austro-Hungarian Empire. It was dissolved peacefully into the Czech Republic and Slovakia on 1 January 1993. The two countries still enjoy a close relationship and share many parts of the Slovak culture. The musical performance was a fitting reflection of the togetherness of the two countries.

BY AMY JONES

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he 100th Anniversary of the foundationofCzechoslovakia wascelebratedbytheEmbassy of the Slovak Republic and the Embassy of the Czech Republic of Tbilisi on October 19 with a performance by the Fats Jazz Band. The concert was held at the Tbilisi State Conservatory Grand Hall, a grand three-tier venue in the center of the city. The evening was a celebration of cultural relations between Slovakia and the Czech Republic. Guests enjoyed lively hot-jazz and swing music from the late 1920s until 1940s era. The nine-member orchestra, formed by Slovak pianist Ladislav Fanzowitz, performed songs from American jazz legends as well as the best tangos and foxtrots from Slovakia and the Czech Republic. Dressed in clothes from the era, the band enthusiastically wooed the crowd with numbers such as ‘Jazz Me Blues’ by Tom Delaney, ‘Bugatti Step’ by Jaroslav Jezek and ‘Rhythm Is Our Business’ by Sammy Cahn, Saul Chaplin and

POLITICS

Whose Side Are We on? OP-ED BY ZAZA JGARKAVA

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ill Ukraine be punished for restoring the historical justice? This is the most crucial question for the Orthodox community today. After Bartholomew I, the current Archbishop of Constantinople and Ecumenical Patriarch, granted autocephaly to the Ukrainian Orthodox Church, Moscow terminated relations with the Ecumenical Patriarchate of Constantinople, by doing so the religious confrontation turned into a political one and if the situation continues to escalate, there is a possibility that the world will witness a new war. Everything now depends on the Kremlin and the decision of President Putin: will he start a war against Kyiv in the name of God? The Kremlin Press Secretary, Dmitry Peskov, declared that Russia has always protected the interests of Russians and the Russian-speaking community and will continue to do so even in Ukraine. After losing Ukraine politically, Putin is now losing it in the religious sense too. This could be translated as a threat to Russian Imperialism and the myth of Putin’s almightiness. A crucial thing in this whole story is that Putin is being defeated not by the US and its economic and military power, but by one elderly Church leader who resides in Istanbul, and whose single signature proved enough to separate 605 sq.m. and a parish of 40 million people from the canonical borders of the Moscow Patriarchate. Russia did not see a loss of this size even when it declared itself defeated in WWI and signed the capitulation in

Ecumenical Patriarch Bartholomew I of Constantinople in 2008. CreditMykhailo Markiv/Reuters

Brest-Litovsk. The Russian Church’s answer to this “catastrophe” thus far is terminating relations with the Ecumenical Patriarchate and hoping that other Orthodox countries, including Georgia, will show their support. Quite recently, the Press Division of the Georgian Orthodox Church published a statement from the Patriarch of all Georgia Ilia II, saying that he is waiting for the conclusion of the canonical process about the recognition of

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Ukraine’s autocephaly and will voice his position only afterwards: “It is necessary to refrain from preliminary assessments until the final positions are announced by Archbishop of Constantinople and the Russian Church, which should be based on the norms of canonical legislation.” The Patriarch of Georgia was never distinguished for making harsh statements and this statement suggests that the Georgian Church hasn’t decided on

Journalists: Tony Hanmer, Zaza Jgarkava, Maka Bibilashvili, Dimitri Dolaberidze, Maka Lomadze, Joseph Larsen, Vazha Tavberidze, Nugzar B. Ruhadze, Nino Gugunishvili, Thea Morrison Photographer: Irakli Dolidze

its position yet, especially with regards to the issue of the property of the Ukrainian Church, which in fact is the most crucial issue in this unprecedented historical controversy. There are 14 Orthodox autocephalous churches and the majority of theologists believe that of these, Antioch, Bulgaria, Romania and Georgia are in the so-called “team Russia.” In the recent issues with Ukraine, however, none of the latter, apart from Antioch, have

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The influence of the Russian Church on Georgian religious leaders is strong; however, Georgia is not showing its open support to Russia shown their support for Russia, which came as a great surprise. What is happening in the other churches, and why they refrain from supporting Russia openly, is not known, but what we do know is that the situation in the Georgian Church is quite fragile. The influence of the Russian Church on Georgian religious leaders is rather strong; however, the situation is varied at the level of hierarchies and episcopacies. Many bishops view the current situation quite pragmatically, and their varied positions could be the reason Georgia is not showing its open support to Russia. The attitude of the Georgian Patriarchate is balanced by the position of these religious leaders and nobody knows which wing will win, especially taking into account the fact that earlier this year, Georgia at first confirmed its attendance at the Historic Orthodox Christian summit, then two days before the actual event declared it wouldn’t go, thus finding itself on the side of those who supported Russia and joining the protest of the Russian Patriarchate.

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Profile for Georgia Today

Issue #1094 Business  

October 23 - 25, 2018

Issue #1094 Business  

October 23 - 25, 2018

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