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Issue no: 882/46

• SEPTEMBER 27 - 29, 2016

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue... Qvevri Making School Opens in Ikhalto, Kakheti PAGE 3

Jobs for Life in Georgian Universities? ISET PAGE 4

Innovation! Promising Exhibition for Georgian Businesses in Milan

FOCUS ON THE PREMIUM SEGMENT TBC Bank CEO, Vakhtang Butskhrikidze, speaks to GEORGIA TODAY about the opportunities being on the London Stock Exchange Premium Listing offers PAGE

PAGE 5

7

Ski Resort Goderdzi to Become Year-Round Recreation Center

Grant Thornton Holds Regional Conference in Georgia

BY THEA MORRISON

PAGE 8

T

he Government of the Autonomous Republic (AR) of Adjara announced on Saturday that the well-known Goderdzi ski resort will be developed to become a year-round recreation center of international standards. Goderdzi is located in a unique climate zone in Adjara, on the Goderdzi Pass - just 100 kilometers from the Black Sea coast and 2000 meters above sea level. Goderdzi ski-resort was opened in 2015 and is three times larger than Georgia’s other mountain resorts Gudauri and Bakuriani. Continued on page 2

INTERVIEW: Winners of Startup Georgia PAGE 11

Photo: Adjara Government Chair Zurab Pataradze at Goderdzi Resort

Retail FPI | Supermarkets Slash Food Prices To Gain Market Share

PAGE 12

Prepared for Georgia Today Business by

Markets Asof23ͲSepͲ2016

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

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

INDICES

Price

w/w

m/m

GBP29.49

Ͳ0,4%

+5,7%

GEOROG04/21

106.19(YTM5.21%)

+0,5%

+0,8%

GBP3.18

Price

+3,5%

w/w

+15,5%

m/m

GEORG04/21

BONDS

112.24(YTM3.91%)

+0,1%

+0,2%

GBP11.75

+4,4%

+5,6%

GRAIL07/22

113.75(YTM4.98%)

+0,7%

+1,6%

BGEOLN07/23

103.94(YTM5.30%)

+0,7%

+1,2%

Price

w/w

m/m

45,89

+0,3%

Ͳ8,1%

1337,56

+2,1%

Ͳ

CURRENCIES

Price

w/w

m/m

GEL/USD

2,3200

+0,4%

+1,6%

GEL/EUR

2,6045

+1,7%

+0,9%

Price

w/w

m/m

GEL/GBP

3,0050

+0,1%

FTSE100

6909,43

+3,0%

+0,6%

GEL/CHF

2,3835

+1,2%

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FTSE250

17923,08

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Ͳ0,3%

GEL/RUB

0,0361

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+2,0%

DAX

10626,97

+3,4%

+0,3%

GEL/TRY

0,7818

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18261,45

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Ͳ1,5%

GEL/AZN

1,4074

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+0,7%

5305,75

+1,2%

+0,9%

GEL/AMD

0,0049

Ͳ

+2,1%

NASDAQ

Ͳ0,3%

+1,0%

130,89

+4,1%

+1,1%

GEL/UAH

Ͳ0,1%

Ͳ1,0%

917,50

+3,6%

+1,2%

EUR/USD

0,8908

Ͳ0,6%

+0,7%

SP500

2164,69

+1,2%

Ͳ1,0%

GBP/USD

0,7711

+0,3%

+1,8%

MICEX

2011,83

+0,7%

MSCIFM

MSCIEMEE MSCIEM

0,0893

+1,5%

+1,1%

CHF/USD

0,9704

Ͳ1,0%

2535,32

+1,5%

Ͳ2,3%

RUB/USD

64,0796

Ͳ1,8%

Ͳ0,8%

GTIndex(GEL)

841,46

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Ͳ0,1%

TRY/USD

2,9689

Ͳ0,4%

+0,5%

GTIndex(USD)

720,40

Ͳ

+1,1%

AZN/USD

1,6495

Ͳ0,5%

+0,8%


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BUSINESS

GEORGIA TODAY

SEPTEMBER 27 - 29, 2016

Ski Resort Goderdzi Aghmashenebeli Avenue to Become YearRenovation Finished Round Recreation Center Continued from page 1 The resort development strategy, elaborated by Georgian and foreign specialists, will be launched from 2017. According to the strategy, the resort development area will cover 633.45 hectares and will be able to receive 7,000 visitors at any one time. Moreover, the Adjaran government is to allocate 4 million GEL for infrastructural projects in the area. The new regulation plan of the resort envisages the addition of two new cable ways and a number of new ski slopes.

The new infrastructure projects will promote economic development of the region and create employment opportunities for the people living in the mountains

“This is a very important project leading to the ultimate aim of an international standard resort. The new infrastructure projects will promote economic development of the region and create employment opportunities for the people living in the mountains,” Adjara government chair Zurab Pataradze said. Pataradze also visited the construction process of two new hotels at Goderdzi resort. 5 mln GEL was invested in the construction of 4-star international standard hotel ‘Alliance Resort’, which will have 100 rooms and accommodate up to 250 guests. The hotel will open in 2018, creating around 100 jobs for locals. The complex will boast a swimming pool, tennis courts, children's entertainment center, a bar, restaurant, fitness complex, casino, conference hall and other facilities. A second 4-star hotel to be built at the resort is ‘Euphoria Sky Towers’ with a total investment of 15 mln GEL. The hotel will have 150 rooms and create 100 jobs. Pataradze said that a new ‘Goderdzi Subalpine Garden’ will also be built near the Goderdzi Pass, spread over 10 hectares of land and containing a natural lake, spring and waters. According to him, creation of subalpine botanic garden will create new perspectives of tourism development in highland of Adjara Region.

Photo: Opening of the renovated Avenue

BY NINO GUGUNISHVILI

S

even months of massive reconstruction works have finished and the new pedestrian part of Aghmashenebeli Avenue in Tbilisi was officially opened this weekend, with crowds out to enjoy a brilliant festive atmosphere. 47 buildings, of which 38 are assigned to National Cultural Heritage Site status, were renovated in the last seven months,

the opening of which marks the end of the first stage of the New Tiflis project. Roofs, facades with historical ornaments, old balconies, doors, entrances, gates, and courtyards were all renovated, and drainage, sanitation, gas and electricity systems were changed along the avenue. Prime Minister of Georgia, Giorgi Kvirikashvili, who attended the official opening of the new pedestrian part of the city alongside Tbilisi Mayor Davit Narmania, said that more reconstruction works are ahead. “We intend to restore the upper streets

and the complex of 19th century gardens.” He also mentioned the significant boost in the real estate prices for that part of the city due to the recent renovations. The Aghmashenebeli Avenue reconstruction is seen as a chance to redirect tourist flow, with Maidan, Chardin and Erekle II streets still in the top places for tourists to hang out in, in Tbilisi. The New Tiflis rehabilitation plan had a 30 mln GEL budget for its first stage. The second stage will see the rehabilitation of the Dry Bridge and Orbeliani Square area and is set to begin in 2017.


BUSINESS

GEORGIA TODAY SEPTEMBER 27 - 29, 2016

3

Qvevri Making School Opens Leuville Estate Returned to Georgia in Ikhalto, Kakheti BY THEA MORRISON

BY NINO GUGUNISHVILI

A

G

eorgian Wine Week kicked off with the opening of the Ikhalto Qvevri School. Qvevris are clay wine vessels traditionally used to ferment and store wine, listed by UNESCO as part of the world’s Intangible Cultural Heritage in 2013. The school aims to revive and preserve the ancient tradition of Qvevri-making techniques in Georgia, while at the same time promoting and developing the cultural, hitorical, educational and touristic potential of the village of Ikhalto, located in the Kakheti region in eastern Georgia. The Ikhalto School of Qvevri-making is seen as a possibility to learn about the oldest methods of vessel production. It is equipped with the latest technological advances such as modern clay stoves, cisterns for clay washing, and clay-mills. The project is cofinanced by the Government of Georgia and World Bank, with a budget of 5 mln GEL. Minister of Agriculture of Georgia Levan Davitashvili stressed the importance of the event and underscored the significance of cooperation between the State and private sectors that resulted in the opening of the School. He expressed hope that

the project will increase awareness of the Georgian Qvevri internationally and help it to gain a distinctive place on the world markets. “It is essential to preserve this exceptional tradition we have, through creating an infrastructure that will assist the development of its production,” the Minister said. The Ikhalto School of Qvevrimaking will be a multifunctional venue with workshops, museum, library and an internet cafe. The school will also have clay and Georgian porcelain-making, and enamel and goldsmith workshops.

fter 12 years of active negotiations and 25 years of expectations, the historical Leuville Chateau Estate, located around 27 kilometers from Paris, France, was officially returned to Georgia on September 23. The signing ceremony of the transfer act was held in Leuville and from the Georgian side was signed by Gela Dumbadze, the State Minister of Georgia for Diaspora Issues and from the French side by the representatives of the families of the government of the first Democratic Republic of Georgia. Also attending the ceremony were Tea Tsulukiani, the Minister of Justine of Georgia; Ekaterine Siradze-Delone, Ambassador of Georgia to the Republic of France; Gocha Javakhishvili, Envoy Extraordinary and Plenipotentiary of Georgia to France; the representatives of the Leuville City Hall, and members of the Georgian Diaspora. Dumbadze explained that as a result of a resolution adopted in May, the Gov-

Photo: The Signing Ceremony at Leuville

ernment of Georgia had made a decision to spend EUR 5,600,000 over 10 years on the Chateau estate for further development of the property. “After 25 years, the estate is returned to its legal owners - the people of Georgia. This place will remain as the center of Georgian-French culture,” he noted. The five hectare Leuville Estate is important for Georgians as it is the place where the first government of Georgia settled in exile after fleeing their home in 1921, when the Russian Red Army entered Georgia and the first Georgian government officials, chaired by Noe Zhordania and their families, boarded the Ernest Renan ship and sailed to Paris, where they acquired the chateau using Georgian state finances and founded the Georgian Association. The 30 emigrant families lived in 15 flats inside the castle and never lost hope of returning to their homeland. The negotiations about the transfer of Leuville estate were first initiated in 1991 by academician Guram Sharadze. Georgia’s first president, Zviad Gamsakhurdia, was also involved in the process. The negotiations were intensified in 2004 and officially ended on September 23, 2016.


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BUSINESS

GEORGIA TODAY

SEPTEMBER 27 - 29, 2016

THE ISET ECONOMIST A BLOG ABOUT ECONOMICS AND THE SOUTH CAUCAUS

www.iset-pi.ge/blog

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

Jobs for Life in Georgian Universities? ERIC LIVNY AND TAMTA MARIDASVHILI

F

ew may have noticed an amendment to the Georgian Law on Higher Education, passed in December 2015, which potentially ushers in a new era for Georgia’s higher education system. As of January 2017, (some) Georgian professors and senior research staff will be appointed for an indefinite term. Offered decent compensation and protected from political pressures and job insecurity, they will be able to indulge in academic endeavors, nurturing a new generation of Georgian academics and promoting Georgian science onto the global scene. This is, of course, the dream scenario. Unfortunately, there are also many options for this reform to go awry, with the good intentions behind it paving yet another road to hell. The devil is in the detail on which the recent amendment to the Law on Higher Education is lacking. The most important detail is the “who” and “how” of granting “tenure” (or indefinite term) contracts. If these are to be granted by Georgian universities subject to their individual statutes and, furthermore, voted (for or against) by existing university staff, instead of progress, this reform might lead to a further entrenchment of incumbent academics in the comfort of protections afforded by the “tenure” institution. Not exactly the Georgian lawmakers’ intent. This article is but an attempt to start a process of broad public discussion of the pros and cons of the proposed reform, its key principles and practicalities. We begin by providing a brief overview of two relevant concepts – academic freedom and tenure – and how they have evolved over time.

The massive exodus of Georgian educated elites over the span of 15-20 postIndependence years has turned Georgian academia into an intellectual desert

TENURE AND ACADEMIC FREEDOM: FROM SOCRATES TO PRESENT DAY Tenure is a twentieth-century invention, yet it has long historical roots in the Western world, often seen as a means of protecting academic freedom: freedom of inquiry, as well as freedom “to teach or communicate ideas or facts (including those that are inconvenient to external political groups or to authorities) without being targeted for repression, job loss, or imprisonment.” The trial of Socrates at the hands of Athenian democracy (of which he was highly critical) probably represents the first major instance of political repression used against a scholar. However, it was not until the Middle Ages that a systematic conflict emerged between academic freedom and politics, with Roman Catholic Church (and, later, secular rulers) trying to force their religious dogma and political ideology on the first European universities (of which they happened to be the founders and sponsors). While the Church’s influence weakened in the Age of Enlightenment, it took until the 19th century for the modern concept of academic freedom to be first formulated in Germany. This concept was further developed in the US, culminating in the "1940 Statement of Principles on Academic Freedom and Tenure". As discussed in J. Peter Byrne’s “Academic Freedom: A Special Concern of the First Amendment" and elsewhere, the institution of academic tenure sought to protect academic freedom by ensuring that teachers may only be fired for causes such as gross professional incompetence or behavior condemned by the academic community itself. While the initial function of tenure had been to protect academic freedom, its role started changing in the age of capitalism and globalization. For example, selective lifetime appointments have become an instrument for competing universities to attract and retain top talent. Moreover, the economic security provided by the tenure system gave academia a competitive edge over the private sector, which could afford much higher salaries. However, the benefits associated with the tenure system are achieved at a cost. For instance, a decision (essentially a gamble) to grant tenure to “an exceptionally productive scholar” may turn out to have been wrong or biased towards yesterday’s scientific truths (espoused by tenure committee members). Moreover, given the limited number of academic appointments at any department, a talented newcomer may be denied a job simply because all positions are filled with no-longer-productive-but-tenured veterans and the only way to create new positions is to wait for their retirement. Finally, there is the grave risk of (lazy) academics losing the motivation to perform (in either teaching or research) once granted a lifetime employment contract

(that comes with little monitoring). The fact that most tenured American academics do not spend most of their time on the golf course (some do, though!) is because for a vast majority teaching and research is a way of life, not a 9-to-5 job. The difficulty of getting tenured in the extremely competitive US university environment is what reduces the risk of mistakes, such as granting life employment to lazy or mediocre academic, to a tolerable minimum. But how would the same rules of the game perform in a different setting, such as Georgia’s post-Soviet universities?

ACADEMIC TENURE SYSTEM IN GEORGIA? The massive exodus of Georgian educated elites over the span of 15-20 postIndependence years has turned Georgian academia into an intellectual desert, with only a few tiny oases in fields such as bacteriophages. Even these oases, however, are to be found in specialized research institutes, not universities. Brain drain remains the most acute challenge faced by the Georgian public education system. Wave after wave of talented young individuals leave the country to pursue better education and academic careers abroad, and only a fraction are coming back as the “new Argonauts”. Thus, Georgian universities see very little generational change, particularly in fundamental sciences and engineering, which faced very little demand in the post-Soviet de-industrialization period. One argument in favor of instituting a proper tenure system in Georgian universities is to make them more attractive for aspiring scholars, particularly those who have left the country in previous

Selective lifetime appointments have become an instrument for competing universities to attract and retain top talent decades. Indeed, the tenure system, if accompanied with a fundamental way in which universities are financed, managed and governed, could help turn brain drain into brain circulation or brain gain. Specifically, assurances of academic freedom, economic security and appropriate funding could help attract back to Georgia distinguished scientists who have made a career abroad. Some Georgian scholars, as pointed out by Zaal Kokaia (Lund Stem Center director at Lund University, Sweden and a proponent of the Georgian tenure system), may not be in a position to receive tenure at say Harvard and Oxford, but are still brilliant “material” for lowerrated Georgian universities. The best way to get them engaged would be to offer part-time contracts with Georgian universities allowing these scholars to stay in touch with the scientific “main-

land” abroad. Another (perhaps surprising) argument for the introduction of a tenure system in Georgia is to circumvent the current practice of political “clientelism” that is quite prevalent at the country’s public universities. Lacking in professional qualifications and, therefore, in job security, Georgian academics tend to nurture mediocre PhD students whom they consider loyal and on whom they count for future protection (when hired as full time academic staff in the same department). Those not demonstrating loyalty, and/or daring to challenge their masters’ knowledge and skills, are perceived as dangerous and are not retained even if granted a PhD degree. If properly implemented, so the argument goes, the tenure system has the potential to bring the practice of political clientelism to an end by reducing the importance of personal loyalty as a factor in the process of academic hiring. Yet, what matters at this stage is to make sure that only truly distinguished scholars (at least by Georgian standards) are appointed for an indefinite term. At least initially, this would require almost exclusive reliance on an external referral system, independent not of the Georgian government or Patriarch but of present day small time politics and academic politicians ruling Georgia’s public university system. In practice, it means that, if at all, initial tenure appointments would have to be made by independent panels of globally recognized scholars in each relevant field. If the selection process is unbiased and transparent, the tenure system has the potential to put Georgia’s education system and Georgia on the global map. If not, this reform will produce a lot of hot air. Not much else.


BUSINESS

GEORGIA TODAY SEPTEMBER 27 - 29, 2016

5

Innovation! Promising Exhibition for Georgian Businesses in Milan National Geographic Russia to Run Feature Story on Georgia BY NINO GUGUNISHVILI

BY DIMITRI DOLABERIDZE

T

he 60th edition of the Italian innovation consortium, 30.BI-MU, one of the most qualified international events dedicated to machine tools, robots, production systems and the auxiliary technologies industry, will be held from Tuesday 4th to Saturday 8th October in the Italian city of Milan. With over 1,000 companies expected to attend, the exhibition will offer not only spaces for companies to show off their products, but also for B2B meetings and special focus areas, such as ‘Fluid Power’ which is dedicated to components for oilhydraulic and pneumatic systems. GEORGIA TODAY spoke to Eugenio Novarios, Executive Vice-President of the International Energy Agency (IEA) Consortium Export, who enthusiastically supports Italian businessmen in the creation of joint ventures and in export growth in the Caucasus, the Caspian region and Central Asia.

WHY IS BI-MU THE MOST IMPORTANT MACHINE TOOL EXHIBITION IN EUROPE? Only BI-MU guarantees 60,000 visitors (85 percent of whom are involved in the purchasing decisions of their respective companies) and informs you who they are and what they are looking for at the exhibition with the opportunity to fix appointments online through the MATCH MAKING service. Offering free admission to visitors, BI-MU is ideally located to be accessible from around the world, whether you are arriving by plane, car, high speed train, bus or subway (with a stop at the fair). BI-MU updates information on the exhibitors in real time thanks to the SMART CATALOG. BI-MU puts the spotlight on tomorrow’s technologies and keeps you updated on technical and production issues of the moment with the best

conference sessions. And finally, BI-MU offers the widest co m m u n i c a t i o n campaign in the main sector’s magazines, social networks and new media at an interEugenio Novarios, Executive national level.

WHAT IS THE ROLE OF UCIMU?

Vice-President of International Energy Agency (IEA) Consortium Export

The promotor is UCIMU-Sistemi per Produrre, the association of Italian manufacturers of machine tools, robots and automation system. It plays a key role in developing all aspects of the fair and organizing the visits of international delegations, supporting them in matchmaking with Italian producers.

WHAT IS THE IAE CONSORTIUM EXPORT AGENDA FOR GEORGIAN VISITORS? IEA Consortium Export cooperates with UCIMU for the Caucasus, Caspian and Central Asia regions, and will happily assist Georgian visitors with any logistics problems, offer information on Italian products, customs issues and contracts, and support entrepreneurs as they visit the stands and meet with Italian producers.

HOW DO YOU SEE THE ECONOMIC RELATIONS BETWEEN ITALY AND GEORGIA? IEA Consortium Export works to strengthen economic relations between Italian and Georgian entrepreneurs. We believe that Georgia and Italy could become very important partners. This cooperation could help Georgia to develop its economy and increase the level of knowledge of Georgia in Italy.

G

eorgia’s National Tourism Administration (GNTA) and Ministry of Economy have continued with their aggressive effort to promote the small South Caucasus nation of 3.5 million by organizing a one-week press tour for journalists from National Geographic’s Russian language edition and US food and wine magazine, Zester Daily. The articles will focus on Tbilisi, Kazbegi, Sighnaghi, Telavi, Kvareli and Kutaisi, and will dis-

cuss each destination’s tourist potential, as well as their culinary and viticulture traditions. After years of acrimonious relations during the administration of staunchly pro-Western former President Mikheil Saakashvili, Russia has once again taken a keen interest in Georgia. Travel and culture reports have become regular features in the Russian media as direct investment into Georgia from its former imperial master has grown exponentially over the last four years. Russia’s business holdings and tourism numbers have far outpaced those from the West since regular transportation links were re-established between the two countries.

THE FAMILY HOTEL 'The Family', a brand new conceptual hotel focusing on high quality decor details and personalized customer services, welcomes guests from around the world! Located in the ecologically clean and cozy district of Svanetisubani (Svaneti district) just two kilometers from Rustaveli Avenue, ‘The Family’ features three fully equipped modern rooms – Standard Double Room, Studio Room and Family Suite. 'The Family' has its own restaurant and garden with an open kitchen available for guests to learn more about Georgian traditional cuisine and taste the delicious local food. Owners of 'The Family' welcome guests with a high sense of responsibility, believing in the Georgian tradition of hospitality, and aiming to offer their guests something extra special. www.facebook.com/thefamilyhoteltbilisi www.hotelthefamily.ge +995 32 2910009; +995 599 588202; +995 574 501407

THE FAMILY HOTEL 'The Family', a brand new conceptual hotel focusing on high quality decor details and personalized customer services, welcomes guests from around the world! Located in the ecologically clean and cozy district of Svanetisubani (Svaneti district) just two kilometers from Rustaveli Avenue, ‘The Family’ features three fully equipped modern rooms – Standard Double Room, Studio Room and Family Suite. 'The Family' has its own restaurant and garden with an open kitchen available for guests to learn more about Georgian traditional cuisine and taste the delicious local food. Owners of 'The Family' welcome guests with a high sense of responsibility, believing in the Georgian tradition of hospitality, and aiming to offer their guests something extra special. www.facebook.com/thefamilyhoteltbilisi www.hotelthefamily.ge +995 32 2910009; +995 599 588202; +995 574 501407


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BUSINESS

GEORGIA TODAY

SEPTEMBER 27 - 29, 2016

Tbilisi Mall Offers New Fixed-Rate Taxi Service BY NINO GUGUNISHVILI

O

ne of Georgia’s largest shopping centers, Tbilisi Mall, had introduced a new taxi service from any location in the Georgian capital for a fixed fare of 5 GEL. According to Tbilisi Mall’s administration, the 15-vehicle fleet of Fiat-made taxis are new and fully equipped with and sensors to monitor both the driver and the safety of the passengers. “I am very happy that Tbilisi Mall has finally provided a comfortable and reasonably priced option for getting to and from the city. I often come to the Mall. This makes the trip much more convenient,” said Tariel, a visitor to the Mall.

After Tbilisi’s far larger East Point opened in late 2015, the two retail centers have competed for customers, with both offering an increasing number of services to their potential clients.

Both malls have struggled to attract regular customers due to their locations on the outer reaches of Tbilisi’s city limits, where public transportation is limited to small minibuses and private taxis.

Business Georgia to Host ‘Tourism Industry’ Forum

FOR SALE: BMW – 321 model Date of issue 1936

PRICE 10.000 USD

PREPARED BY KATIE RUTH DAVIES

T

CONTACT PERSON 557 12 38 90

he Business Forum “Tourism Industry 2016” will be organized by the JSC Business Georgia, on 29-30 September in Castello Mare Hotel & Wellness Resort in Tsikhisdziri. Under the theme ‘Past, Present and the Future of Tourism in Georgia’, the event will be a high-level meeting to address how tourism can contribute to the development of the private sector in Georgia. The event is expected to bring together around 300 local and international business leaders in tourism, high-level policy makers, specialists and experts from the public and private sectors, academicians and media representatives to exchange ideas and knowledge as well as share experiences to enhance tourism development further. "Tourism Industry 2016’ promises to be an exciting and engaging tourism forum for Georgian and international guests to learn of success stories of Georgian Tourism, current issues, solutions and best practice case studies," said Ana Gogishvili, General Director of

Business Georgia. "This is the first time that Business Georgia is organizing the Tourism Forum and we are bringing participants to a beautiful touristic region Adjara. It will provide the perfect backdrop for participants to learn from and network with each other in a vibrant and culturally as well as historically rich atmosphere." The theme and topics are specially designed to provide insights that are practical and to share experiences on how to capture the hearts and minds of tourists in the challenging and competitive landscape of Georgia. The Forum is to be moderated by Sandro Vepkhvadze, Editor-in-Chief of Business Georgia, and will include two sessions of individual speeches and presentations by main players in the sector. The first session will provide an overview of the Georgian Tourism Industry, presented by the Georgian National Tourism Administration (GNTA) followed by Ramaz Bolkvadze, Minister of Economy and Finance of Adjara, who will share with the audience the success story of the Adjara region. The Business Forum will touch almost all types of tourism, including: Eco-

tourism, Historical and Cultural tourism, Leisure tourism, Adventure & Sport tourism, Winter tourism, Gambling, Hospitality and Health tourism. The last part of the Forum will include a discussion panel with the facilitators who are involved in implementing various programs for promoting tourism industry in Georgia. The representatives of the GNTA, International Investors Association, Partnership Fund, Ministry of Culture and Monument Protection of Georgia, and Agency of Protected Areas of Georgia will be discussing tourism advantages of Georgia, target markets, barriers and problems, and at the close, they will introduce future plans for the sector. Forum participants will have great networking opportunities during the coffee-break and non-official part of the forum, which includes a lottery and After-Party. On September 30, the event will be followed by Business Visits organized by Business Georgia. Forum participants will have the opportunity to visit a number of companies, learn about their projects in the tourism direction and find out about investment opportunities in Batumi.


BUSINESS

GEORGIA TODAY SEPTEMBER 27 - 29, 2016

7

TBC Bank Moves to London Stock Exchange’s Premium Segment BY NINO GUGUNISHVILI

A

s if the recent acquisition of Bank Republic was not impressive enough, smoothly making TBC Bank leader on the Georgian market, the countdown on the London Stock Exchange on 23rd of September, Friday, turned out to be yet another landmark moment in the bank’s history as it made its way up to the London Stock Exchange Premium Listing. Its impacts, benefits and outcomes are not limited to the strengthening of Georgia’s image as a stable, dynamically developing country with the lowest rate of corruption and a flexible taxation system. The reforms undertaken over the years, social and economic stability, all make Georgia truly unique in the region, while its banking sector turns out to be one of the healthiest, since it managed to avoid the risks of devaluation. All of these factors naturally led to the general boost of interest towards Georgia’s growing investment potential. At the same time, TBC Bank being listed on the London Stock Exchange Premium segment opens enormous possibilities for other companies in Georgia, particularly those planning to take the same route. TBC Bank CEO, Vakhtang Butskhrikidze, spoke to GEORGIA TODAY about the opportunities being on the London Stock Exchange (LSE) Premium Listing offers, and summed up the process of the group’s hard work in achieving this stunning result.

TBC BANK’S SHARES HAVE BEEN TRADED ON LSE SINCE 2014. AT THE END OF THE SECOND YEAR, COULD YOU SUMMARIZE HOW THE BANK HAS BENEFITED FROM LISTING ON THE LSE? The Initial Public Offering of TBC Bank’s shares was carried out in June 2014. In just two years, the bank has demonstrated the standards of corporate governance and transparency that were necessary to qualify for the LSE’s premium segment. Premium listed companies are regulated by the highest standards of corporate governance and transparency. This implies that we have raised our standards of performance even higher and now offer our customers the world’s best practices in customer service. The move to LSE premium segment creates unlimited opportunities for the bank’s development –now TBC Bank shares are available to the world’s largest and most influential investors, which will eventually increase the liquidity of our shares. In addition, we believe that our presence in the LSE premium segment will contribute to raising awareness about

We have raised our standards of performance even higher and now offer our customers the world’s best practices in customer service

Georgia and will create the necessary preconditions for businesses that operate in Georgia to enter the international arena.

IN PARTICULAR, HOW WILL THE COUNTRY AND CUSTOMERS BENEFIT FROM THIS? It has an indirect impact on the market and customers. Today, we have a large number of foreign companies among our investors. These are the foundations that demonstrate trust in our country, which of course means they are interested in it. Secondly, their decision to invest depends on the conditions of the financial industry and the country’s banking sector, as well as on perspectives of its development. And, the third factor is TBC Bank itself. In other words, country risks are already assessed and made by investors, which bring potential investments to other industries. Of course, investors have to see the perspective of growth, but the actual decision to invest will be much easier. Premium Listing gives us a chance to expand our investor portfolio. If before going to the premium segment, the majority of our investors were the ones who financed emerging markets, now, we have the chance to attract British financial foundations. This raises awareness for Georgia while simultaneously assisting the liquidity of our shares.

HOW DO YOU PLAN TO ATTRACT BRITISH FUNDS? IS THE SITUATION IN THE REGION ATTRACTIVE ENOUGH FOR THEM TO INVEST? Georgia goes to the category of “mostly free” economies according to the World’s Index of Economic Freedom and the number of taxes and tax rates are low in our country. In addition, reforms have been implemented here over the last 12 years. These are all factors that trigger investor interest. Georgia’s banking sector is unique in terms of stability. If we look at the impact

that currency depreciation has had on the economies and banking sectors in our neighboring countries, it can be said that the Georgian economy and banking sector had the healthiest and the most effective recovery. This year we are focused on growth, unlike our neighbors, which still face unsolved problems.

WILL THE BANK BECOME A CANDIDATE FOR THE FTSE 250 LIST? WHEN? This is our goal and I believe we will manage to enter the FTSE 250 Index within the next two years.

IT WAS RECENTLY ANNOUNCED THAT TBC BANK

SIGNED AN AGREEMENT ON THE PURCHASE OF BANK REPUBLIC. IS THIS MERGER RELATED TO THE MOVE TO PREMIUM SEGMENT AND WHAT IS THE NEXT STEP IN YOUR STRATEGY? Yes, I hope we will finalize this transaction by the end of the year. As a result of this purchase, TBC Bank will be the number one bank on the market in terms of deposits and loans. Consequently, we can achieve more effectiveness. All this makes us anticipate an increased interest from investors. During the last four years, TBC Bank has followed a strategy to become the strongest bank in Georgia in the retail and SME sectors. The strategy has been

successful. Each year we are experiencing significant growth. We plan to continue this strategy. As we have promised our investors, we expanded the scope of our services over the course of one year - we currently operate as a financial group, i.e. previously we were present on the market only through a bank and a leasing company. Now, we have made significant investment in the investment services. I think these investments will become tangible for our group in 2017-2018. We have established an asset management company, which will start offering asset management products to local and foreign customers in 2018. We have even more plans and ideas; but you’ll have to wait and see!


8

BUSINESS

GEORGIA TODAY

SEPTEMBER 27 - 29, 2016

Grant Thornton Holds Regional Conference in Georgia

M

ember firms of Grant Thornton network across the CIS region held their annual conference in Tbilisi, Georgia, on 26-27 September, 2016. The annual conference is the largest regional annual event, which brings together over 60 partners from 13 postsoviet republics and representatives of Grant Thornton International. Discussion on Grant Thornton’s global strategy 2020 set the scene along with sharing the best practices and planning actions to enhance the depth of collaboration in the region. “Collaboration” and “growth” were the two bedrocks of the conference, highlighting the success of Grant Thornton firms on their local markets and on the regional level, as well as calling to life new initiatives during the next twelve months.

Another key aspect of discussion was cooperation of the public and private sectors, and the guest speakers of the conference, Sarah Williamson from AmCham Georgia, and Bruno Balvanera from EBRD, talked about the investment climate in Georgia and highlighted the prospects of public / private sector cooperation for delivering economic growth. Commenting on the conference, Gernot Hebestreit, Grant Thornton Global leader for business development and markets, said: “We are gladly hosting our annual regional conference in Georgia, a country well-known for its hospitality and generosity. Moreover, the Georgian economy has great potential for growth in a number of areas, and we are happy to state that Grant Thornton in Georgia is delivering an exceptional client experience on this market, supporting our dynamic clients in achieving their growth targets.” “Grant Thornton annual regional conference is one of the highlights of the year,” said Nelson Petrosyan, Managing Partner of Grant Thornton Georgia. “We come together to discuss strategic development, set targets for greater growth, share best practices and build on the successes we recorded. There is a high level of cooperation between Grant Thornton firms in the region, ranging from providing complex services and delivering value to our international clients with operations in this region, to internal initiatives aimed at growing our people and communities.”


BUSINESS

GEORGIA TODAY SEPTEMBER 27 - 29, 2016

9

Cheated Investor: Dispute over Krtsanisi Residence

B

asel LLC is the Georgian company which owns the real estate and infrastructure of the former Krtsanisi Presidential Residence. Joel Golovensky, a citizen of the USA and of Israel came to Georgia almost 12 years ago together with a real estate developer and financial investor to negotiate the purchase of the Presidential residence from the government. The financial investor, Barry Septimus, also a USA citizen, is part of a prominent family of real estate developers all over the US and particularly in the greater New York City area. Both Joel and Barry fell in love with Tbilisi, with Georgia and its people, and with this incredible pearl of real estate up for sale. They negotiated with the government and outbid all others interested in the property. Barry wanted to build a mini city on the property to include residences for all income levels, recreational facilities and public use parks and buildings. They brought in international architects and told them to build a fantastic facility to serve the people of Tbilisi. Barry and Joel engaged local professionals and staff members and were most enthusiastic. Barry also brought Mr. Ron Waldmann along and this Waldmann, a citizen of Switzerland, wanted to be a full partner. He claimed to be a venture banker with extensive experience in Europe and Wall Street. This is where the nightmare began. A few months after Barry and Joel started the venture, they discovered that Waldmann had illegally and fraudulently transferred the entire property out of Georgia to Waldmann's personal British Virgin Islands, offshore corporation. He did this by lying to the Company lawyer and by fabricating a phony protocol of a shareholder meeting that never took place. Under threat of the courts and of criminal charges, Waldmann was forced to return the property ownership to Georgia (to the jointly held Georgian company, Basel LLC). But when Barry disclosed what had happened to his group of fellow investors which had committed to invest the necessary funds, they all fled the project, declaring that they would not do business with "a thief". Joel and Barry were stymied. Realizing it would be impos-

sible to recruit their half of the needed investment from new investors because of the ethical need to disclose what Waldmann had done, Joel and Barry signed over management to Waldmann, invested no more time and funds beyond those already committed, and moved on to other projects. The agreement provided for full and frequent disclosure of all Waldmann’s activities, so they hoped for the best. But they got the worst. Waldmann gave no information to Golovensky or any other investor. On the contrary, Mr. Golovensky's insistent requests for financial information about the Company, its income, and its operations were repeatedly refused. To make matters worse, it has been difficult to get hold of Mr. Waldmann since, for reasons known best to him, he has constantly changed his residence. In the past ten years, he seems to have resided s in Basel, Switzerland; Tbilisi, Georgia; New York City, USA; Miami, Florida, USA; Ventura, Florida, USA; London, UK; and apparently elsewhere in Europe. He seems to constantly change locations. We now know that parts of the property was sold off piecemeal and some were leased. Mr. Golovensky became aware of disreputable actions on the part of the Company such as entering into legal commitments regarding the same property with two different entities and soliciting investments from unsuspecting foreigners for projects never undertaken. Some led to law suits against the Company in the US and in Georgia for fraud; others were settled out of court in "confidential" agreements where duped investors were happy to get part of their money back and run as far away as possible from Waldmann and his Georgian schemes. Waldmann himself took huge cash kickbacks under the table, secretly contracted for a personal share of investor profits (which would siphon even more money away from legitimate Company income), used Company assets for his luxurious lifestyle, and generally treated Company assets as his own private property. Waldmann looked for foreign purchasers and tenants so that he could divert as much money as possible to secret, sheltered bank accounts outside Georgia and far from its legal authorities. Golovensky demanded full disclosure of the tens of millions of dollars of income and the disposition of the many off-shore bank accounts opened by Mr. Waldmann

to which Company assets were transferred. Some of these bank accounts were owned by Mr. Waldmann personally through off-shore dummy companies. When Mr. Waldmann continued to refuse to disclose the financial information, a law suit was instituted in Georgia with the result that the courts required full disclosure by Waldmann to Golovensky. To date, Mr. Waldmann, as the sole director, has done everything possible to obstruct enforcement of the Georgian court decisions, and the Enforcement Bureau, following a number of feeble and failed attempts at enforcement, has turned the matter over to the police. As an oppressed minority partner of Basel LLC, Mr. Golovensky called a partners’ meeting to discuss and clarify issues connected to the sole and willful decisions of Mr. Waldmann acting without the consent or even knowledge of Mr. Golovensky. Mr. Golovensky demanded his own withdrawal from Basel LLC, an accounting, and just compensation for his interest since it is impossible to continue being even a passive partner without sharing in any of the income, without being repaid for initial capital loans made to Basel LLC, without any disclosure of any financial transactions, and without being able to argue as a partner against unlawful actions perpetrated by the Company. At the partner’s meeting, Mr. Ronald Waldmann refused to compensate Mr. Golovensky for any of the income, for his loan, or for his ownership interest in the Company. The director of Basel LLC, Mr. Waldmann, has tried every method in order to deny the exercise by minority partner Joel Golovensky of his rights as a shareholder. He claims that he saved their investment and was skillful in selling the prime real estate to European customers. But he hides all financial and bank records He has appealed the court decisions to ever higher courts only to obstruct and evade the courts' orders, including those of the Supreme Court. In a bizarre scene which could have been part of the "Godfather" movie, Mr. Waldmann and his agents physically prevented the National Bureau of Enforcement from collecting the court-ordered evidence by using guards to keep them locked out of the fortified Krtsanisi presidential compound. The Enforcement Bureau Bailiff, turned away, simply went back to her office and continued to do nothing effective. This occurred more than

Azerbaijan to Sell 26 SOE’s on October 25 BY NICHOLAS WALLER

A

zerbaijan’s State Committee for Property Affairs announced Monday that 26 stateowned enterprises (SOEs) would put up for sale at a public auction on October 25. According to the Committee, the opening bidding price for each company will be set at USD 914,000, a 50 percent discount from their estimated nominal value of USD 1.83 million. Local Azeri news agencies have reported that the largest companies

are to be auctioned off at a public offering, including poultry factory Salyan Broyler, grain supplier Qax Taxil, agricultural producer Zardab Aqrotexservis and nut processor Zaqatala Findiq. The upcoming auction comes in the wake of the Azeri government’s August announcement that 65 SOEs would be privatized by early 2017. That number was later revised on September 11 when Baku announced that 85 SOEs would be put up for sale a month later. The latest round of auctions will sharply contrast with Azerbaijan’s previous privatization programs. According to Azeri President Ilham Aliyev’s point man on economic issues, Natig Amirov, the new owners will be required to include investment projects to the government once they’ve acquired a controlling stake in each enterprise.

a year ago. Another Waldmann device for obstructing enforcement of the Supreme Court order was to provide the bailiff with a few innocuous documents (out of the hundreds required) instead of handing them all over. No financial records or accounting or audit were revealed and not one of the many foreign bank records, through which tens of millions of US Dollars have passed, was turned over. Since all these documents are required to be kept at the Company's Krtsanisi office, and since the police officers of the Ministry of Internal Affairs of Georgia have now assumed responsibility to enforce the law, one would have expected that the Georgian court orders would finally be enforced. But, as of the date of this writing, the police, like the Enforcement Bureau before it, has still done nothing. The police department has shuffled the case from one desk to another and the 7th Division of the Old Tbilisi district police, where it now rests, seems to have done nothing. We filed this law suit in October of 2013. It was appealed at every stage, and the Supreme Court finally ruled and ordered disclosure almost 17 months ago (19/4/2015). Because of this flagrant failure to enforce justice by enforcing its own court decisions, Mr. Golovensky wrote a letter directly to the Honorable Ms. Tea Tsulukiani, the Minister of Justice, setting forth the history of failure and asking to remedy the non-enforcement of the court decision and to enforce court orders. We have been waiting for a response from the Minister for more than four months and still have not received it. Now we have initiated a formal administrative action with the Inspector General of the Ministry of Justice, and we still hope to learn that the Ministry of Justice cares about justice. There are other law suits by Mr. Golovensky pending in Georgia-which Mr. Waldmann attempted to avoid by obstructing legal service. Mr. Golovensky brought a legal action before the Georgian courts and at present the court is considering the case on withdrawal of Mr. Golovensky from the partnership of the company and the payment to him of the proper value of his interest. Mr. Waldmann, as mentioned, has sold land to various foreign embassies (Switzerland, UK, France, Iraq) and other entities, so that central parts of the Krtsanisi Residence property have been

carved out and used for construction and renovation of isolated structures. But there has been no development whatsoever for housing and space for public use for the people of Tbilisi. This is a "crime" committed against the people of Tbilisi. The bulk of the money received from selling the real estate was transferred out of Georgia to foreign accounts, many millions of US Dollars to accounts not belonging to Basel LLC, the owner of the property, but instead belonging to Mr. Waldmann's private companies. Lease payments were similarly sent abroad and substantial amounts of these funds, too, were diverted to personal accounts. All these illegal acts should matter to Georgian legal authorities and should have been reviewed by the Georgian legal and tax authorities. But this still has not happened and Golovensky and Septimus have now filed a formal request for Criminal Investigation with the Prosecutor General. It is up to the Ministry of Justice, the police, and the Prosecutor General to see that Georgian court orders are enforced and respected. The purpose of this article is to inform the Georgian and international public about serious problems foreign investors face when doing business in Georgia. A basic requirement of a healthy business climate which will attract foreign capital must be confidence that the judicial process in Georgia will be effective impartial and swift. When an investor concludes that he must take legal action, he invests much time and resources to achieve a meaningful remedy. If the court orders here - orders of the Supreme Court- are not enforced, justice is denied and the reliability of the entire system is shaken and called into serious question. Until now, the system has not worked. Although the courts consider the cases brought before them and render judgement, its orders are ignored by the executive branch. The Georgian system of enforcement seems to be asleep or not to care. It is our intention to keep the public informed on the court proceedings, the police enforcement of the Supreme Court order and the criminal investigation. PUBLICITY

China’s Southern Airlines Opens Beijing-Urumqi-Tbilisi Route

BY NINO GUGUNISHVILI

F

rom 23rd of September a twice weekly flight will serve the Urumqi-Beijing-Tbilisi route, with a Boeing 737-800 landing at Tbilisi International Airport at 21:45 every Tuesday and Friday. Southern Airlines are also offering flights from Tbilisi to Seoul, TbilisiGuangzhou-New York, Tbilisi-Urumqi-

Guangzhou-Toronto, and TbilisiUrumqi-Guangzhou-Los Angeles. In recognition of the growing tourism potential for Chinese tourists, the Georgian National Tourism Administration (GNTA) held a specially organized informational tour for major Chinese tourist agencies and representatives of Chinese media, who had an opportunity to visit the main travel destinations within the country: Tbilisi, Mtskheta, Sighnaghi, Kvareli, Batumi, Kutaisi and Mestia.


10

BUSINESS

GEORGIA TODAY

SEPTEMBER 27 - 29, 2016

Delving into London’s Georgian Restaurants MIMINO

MIMINO

of Tbilvino, Marani and Bagrationi, and sales are growing.

BY SANDRA BUCHANAN

IBERIA

G

eorgian restaurants began to appear in London about ten years ago. I went to meet three Georgians who came to the UK in the early 2000s and decided to make a home, and ultimately a restaurant, in London. So far, there are only six Georgian restaurants in London and the population of the city is 8.6 million – that’s only one for every 1.4 million people, which is definitely not enough. Of those 8.6 million not many are Georgians – maybe 15,000 or 20,000 and while they are the natural customers for these restaurants, native Londoners are finding out that they love Georgian food, too. Each restaurant has a different style and is located in a different part of London – but whether it’s a cosy café or a smart dining room, the same traditional dishes and wines are served. National dishes are not always as good outside their native country, but Georgians living in London are enthusiastic about the flavors produced in London restaurants – just like home. Georgian spices are so distinguished they have to be imported from Georgia, but the herbs are common to Europe; sulguni cheese is not made in the UK, but it can be imported; a combination of soft Italian cheeses is subtle enough to make a very good khachapuri. British taste buds love Georgian wine, too. The Georgian Wine Society has established itself in the last few years, importing directly from the wineries

ROUTING

TBILISI - ISTANBUL ATATURK AIRPORT

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

The name of this restaurant seems entirely out of place to a Londoner – it makes Europeans think of Spain. But a quick look at Wikipedia tells us that in the 9th century there was a region in Georgia named the "Curopalatinate of Iberia”. Inside, the restaurant’s décor reflects a traditional Georgian style with simple white walls, dark furniture and wine bottles decorating the walls. Lasha opened Iberia in 2009. Soon after completing his law studies in Tbilisi he came to London and enrolled on a course of UK law, but found the fees too expensive to continue. He wanted very much to have his own business, but why a restaurant? Because, he says, he couldn’t get the food he liked. Longing for some real Georgian cooking, he found a property in an ordinary street in north London and Iberia was born. Soon the young, the knowledgeable and the curious from two blocks away in fashionable Islington came to eat at Iberia. A Georgian on holiday would not be disappointed with the menu: four kinds of khachapuri, badrijani, kombosto and cicaka, followed by (for example) sacivi, kalmakhi or khinkali. Everything is delicious, but what people in Georgia will want to know is – how authentic is the cooking? Lasha says that he imports sulguni cheese, all the spices and some of the herbs from Georgia to achieve the true flavours. Other specialities like dried barberries and pomegranate seeds are available in the UK.

FLIGHT NUMBER

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

WEEK DAYS

EVERYDAY

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

DEPARTURE

ARRIVAL

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

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

This smart dining room was opened in 2006 by a native of Adjara. George lived in London for six years before he hit on the idea of starting a restaurant. Soaking in a west-London sauna with Russian friends was a treasured weekly event but – where to eat afterwards? The only Georgian restaurant was on the other side of the city. So, with a course of UK business education behind him, George found a suitable property in up-market Kensington and created Mimino. In the early days, Mimino was a magnet for Russians, who more or less filled the place. But as more Russian restaurants opened in London, their number dwindled, and now Londoners and London’s cosmopolitan population, including Georgians, fill around half the tables. The house specialities are dumplings and shashlik. The meat is marinated in Svanuri salt, imported from Georgia, before it is cooked over charcoal. Spices are imported from Georgia, too, but not the essential ingredient for khachapuri – sulguni cheese is imported from a specialist company in Germany. George makes a special feature of the wine table: at the front of the restaurant is a table with sample bottles, uncorked so customers can taste as many as they like before choosing from the wineries of Marani or Tbilvino. And at the back of the restaurant, lending another kind of emphasis to the spirit of Georgia, are some gorgeous paintings by Georgian artist Mamuka Mikeladze.

IBERIA

favourite. For the interior, Nino has reproduced a feature familiar to a lot of Georgian households – a clutter of pretty china that she brought with her from home.

Around the walls hang photographs from the early 20th century depicting uniformed soldiers and officials, street vendors and mountain villagers in old Georgia.

THE GEORGIAN Nino is an artist who loves cooking. She graduated art school in Tbilisi in 2000, but after a couple of years with poor employment prospects, left for London to study English, and in 2009 she opened The Georgian café-restaurant. She loved London from the beginning, especially the art galleries, and says she felt so comfortable and so little like a guest, that staying was an easy decision. Besides which, she met and married an Englishman. Driven by the desire to introduce the art of Georgian cuisine to Londoners, Nino hunted down a small property, previously a sandwich bar, close to Clapham Common in south London. The café opens at 8am to serve Georgian breakfasts with aladzki and khachoiani proving very popular on the English palette, lunches that include Georgian salads, blinis and pelmenis, and stays open till 11pm for chakhokhpili, chaqapuli, kotnis lobio and other familiar main courses. Nino does all the cooking herself, including cakes, which she makes fresh every day. While no cake is exclusively Georgian (cake is not bound by national borders), traditional honey cake with walnuts is a big

10 Galaktion Street

THE GEORGIAN

Photo © Sandra Buchanan

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


BUSINESS

GEORGIA TODAY SEPTEMBER 27 - 29, 2016

11

INTERVIEW: Winners of Startup Georgia BY NATIA LIPARTELIANI

S

tartup Georgia is a government-initiated competition aiming to find and support the best new business ideas. In August, 20 participants were chosen from the 150 applications by experts from the US’ Silicon Valley. GEORGIA TODAY spoke to the founders of one of the winning companies, Bubblestack, a startup focused on developing a high-tech platform to automate the agricultural hydroponics process. CEO of the company, Nika Ckhikvishvili, and CTO, Dato Gokadze, enthusiastically shared their success story and their views on the current startup ecosystem in Georgia for young entrepreneurs.

HOW DID YOU FIND OUT ABOUT STARTUP GEORGIA? Dato: We found out about it one week before the deadline. There were two types of project- one for

high-tech products and one solely focusing on innovative ideas. In terms of the latter, the sponsor would get 50 percent of the company’s shares, while the high-tech program implied giving up only 5 percent of your shares. But as we did not want 50 percent external involvement in our company, we decided not to apply and to continue developing the startup on our own. Then our friend told us about the high-tech program and as our idea involved the usage of high technologies, we decided the project was a good fit for us.

WHAT IS YOUR COMPANY’S MISSION? Nika: Hydroponics is an agricultural method that involves growing plants in water without soil. With this method, 90% less water and 50% less soil is needed and you get a larger yield as plants do not have to compete for nutrients. Additionally, there is no need for pesticides, thus fresher healthier products are grown. The technology itself has existed since ancient times, however, it is very difficult to control this process and it is not fully automatized anywhere. You also need experience

Bubblestack: Hydroponics is an agricultural method that involves growing plants in water without soil. With this method, 90% less water and 50% less soil is needed and you get a larger yield as plants do not have to compete for nutrients

and a great deal of scientific knowledge in order to be able to control this process. Existing automatized solutions are expensive, often over USD 100 000, thus only big businesses can afford to integrate this technology. We wanted to make this process more personalized and accessible. An analogy can be drawn to Steve Job’s mission to make computers personal and cheap. We want this technology to be available to SMEs.

on competition and have self-sufficient business models. But we as a company need a grant, not for just our budget but also to launch our product in the market to make it available to farmers. Dato: The main problem with grants is that you play by the rules given by the program that is funding you, but in our case, it is only 5 percent involvement and we are not limited according to any particular business model.

THIS PROJECT CAN HAVE AN IMPORTANT INFLUENCE ON GEORGIA’S AGRICULTURE

ON GEORGIA’S INNOVATION AND TECHNOLOGY AGENCY’S LIST OF STARTUP COMPETITION WINNERS, YOU SCORED LOWEST IN THE ‘MARKETING’ CRITERION AND THE HIGHEST IN ‘IDEA.’ WHY?

Nika: Yes, it can, as almost 50 percent of the country’s population is in the agricultural sector. And only 20 percent of the Georgian market is satisfied with agro-products. This means 80 percent of products are imported.

THIS PROJECT REQUIRES NOT ONLY IT KNOWLEDGE BUT ALSO A GOOD UNDERSTANDING OF BIOLOGY, CHEMISTRY AND PHYSICS. WHAT’S YOUR EDUCATIONAL BACKGROUND? Dato: I have an educational background in Economics, but I’ve been working in the IT sphere for years. Nika: I have a background in Chemistry and Biology, but I also worked in IT after I graduated. However, my educational background helped me a lot while developing this idea.

GIVE US A SWOT ANALYSIS OF YOUR STARTUP Dato: to start with strength, this technology makes the process of cultivation 50 percent more efficient and productive, as less soil, water, nutrients are required. It saves energy. A weakness might be that the capital investment might be relatively high. But the benefits that it brings in the long term are more than worth it. Another weakness is that we need the government to be involved in the successful launch of this product as we develop it, but it should be available to farmers.

DO YOU THINK THE BUSINESS ENVIRONMENT IS FRIENDLY FOR STARTUPS IN GEORGIA? Dato: We are very content with this the Startup Georgia program- it’s clear innovations are welcomed and there is minimal bureaucracy. Though, I think specific laws could be introduced for startups, in the form of tax deduction, for example, at the initial stage.

Nika: Because we’re still new in the business field. Initially, we were overexcited about the idea itself, but we soon discovered we had issues delivering our idea to potential sponsors and customers. Our product requires awareness-raising, so we need to design a social campaign about the cultivation process, ecologically clean products, etc. We’ve just created a website and we post live videos explaining the whole process. We also aim to publish an online book about hydroponics.

IS YOUR TARGET ONLY GEORGIAN FARMERS? Nika: Not only them, as this product can also be utilized by large supermarket chains, in order to grow fresh products in an energy efficient way. Additionally, we see the potential in the larger, international market.

WHAT WILL YOU DO IF ANOTHER COMPANY INTRODUCES A SIMILAR IDEA OF AUTOMATIZED HYDROPONIC SYSTEM? Nika: This is no unique project in these days of overpopulation and scarcity of resources in the world today. The aim of our project and the brand identity itself is that we are an open source. We actually aim to involve many people, even our competitors (if there are any) in order to have some kind of modular system, de-facto standard that will be used by lots of companies in future. Our system is not closed- we want development and that’s why our written code is openly available to anyone wanting to add on something or be somehow involved.

YOU ATTENDED THE INNO4 FORUM IN TECH PARK WHERE HUNGARIAN STARTUP FOUNDER GERGELY BOSZORMENYI STATED THAT EU FUNDS ARE ACTUALLY HARMFUL TO STARTUPS. DO YOU AGREE? Nika: If we take Silicon Valley as an example, they do not receive grants there, as businesses are based

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BUSINESS

GEORGIA TODAY

SEPTEMBER 27 - 29, 2016

Retail FPI | Supermarkets Slash Food Prices To Gain Market Share

H

aving experienced a temporary 1% spike in August, food prices are going down again. In the second week of September, ISET’s Retail Food Price Index dropped 0.7% m/m (compared to August 2016) and 2% y/y (compared to September 2015).

IN THE SPOTLIGHT Compared to the end of August, the biggest prices declines were observed for coffee (-17%), apple (-15.5%), and rice (-14.3%). Prices moved up the most for the following food items: peach (35%), cucumber (17.2%), and eggplant (14.3%). It can be noticed that 4 out of the 6 largest price changes were recorded for seasonal food products such as fresh fruit and vegetables. Rice and coffee are interesting exceptions.

IT’S COMPETITION, STUPID! The primary cause of the movements in the prices of rice and coffee appears to be related to the competitive strategies employed by Georgian supermarket chains, three of which (Carrefour, Goodwill, and Spar) are included in our survey. As discussed in one of our previous publications, supermarkets compete by using some of the staple goods as socalled “loss leaders”. Thus, the entire 14.3% biweekly decline in the price of rice is the result of one supermarket slashing the price of domestically packaged Supremo rice by more than 30%,

Table 1. Changes in Rice and Coffee Prices

Product Coffee Rice

Weekly Change -5% 0%

Bi-weekly Change -17% -14.3%

from 2.50 to 1.65 Lari. Similarly, the same supermarket started offering a more than 10% discount on Jacobs coffee, selling it at 10.55 GEL as opposed to 11.80 GEL the previous week. By selling rice, coffee (and, possibly a few other key staples) at or below cost, the supermarket in question may be hoping to attract bargain-seeking customers, who, once lured inside, are quite

Monthly Change -10% -5%

Annual Change -11% -4%

likely to purchase other products as well. As a result of more aggressive pricing employed by some of the supermarkets, after a few months of convergence, we begin to observe a gradual divergence between the minimum and maximum Retail Food Price Indices, increasing the payoffs of those Georgian consumers who are willing to invest a bit of their time in bargain-hunting.

SOCIETY

UN Human Rights Point Man to Look into Plight of Georgia’s IDPs BY NATIA LIPARTELIANI

T

he United Nations’ Special Rapporteur on Human Rights, Chaloka Beyani, arrived in Georgia on Sunday to review the small South Caucasus country’s ongoing crisis regarding thousands of internally displaced persons (IDPs). During his four-day visit, Beyani will meet with Georgian government officials, civil society organizations and several IDPs. “I will review any progress made in regards to the protection and assistance provided to IDPs and look at current challenges and opportunities for durable solutions in Georgia, particularly the integration of IDP needs into broader development plans and initiatives,” said the Zambia-born Beyani. “I have continued to pay attention to

the protracted situation of IDPs in Georgia and their inability to voluntarily return to their places of origin. Some of those who did return to Abkhazia continue to face difficulties regarding their basic civil rights and freedom of movement.” Georgian government forces fought three wars against Russian-backed separatist forces in Abkhazia and South Ossetia between 1991-2008. The wars left thousands dead and led to the ethnic cleansing of a quarter of a million Georgians. Abkhazia and South Ossetia were recognized as independent states by Moscow following the 2008 war. According to the Ministry of IDPs from the Occupied Territories, Accommodation and Refugees of Georgia's latest statistics, there are currently 263,598 registered IDPs in Georgia. Beyani will later present his findings to the UN in a report compiled after his departure from Georgia.


Issue #882 Business