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Issue no: 1104/157

• NOVEMBER 27 - 29, 2018



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

Georgia’s 2018 Presidential Election by Numbers ISET PAGE 4

RSM Georgia's Journey to Sustainable Development: Summing up the Results of 10 Years Operation on the Market


ON THE RUN-OFF ISET and the Tbilinomics Policy Advisors take a look at the PAGE 2018 elections


National Bank Head Praises Gov’t Initiative of Annulling People's Debts Bidzina Ivanishvili. Gvenetadze explains that Cartu Foundation and commercial institutions had negotiations and reached the agreement that the foundation will take responsibility for the loans of 600,000 black-listed people in banks, whose loans do not exceed GEL 2000. The NBG Head explains that the central bank’s role in the negotiations is purely to give consultation to the parties. "The role of the National Bank in this case is to play the role of consultant in dealing with a transaction between two business entities, in order to ensure the negotiations are conducted without deficiencies,” he said.



oba Gvenetadze, the President of the National Bank of Georgia (NBG), says that the recent initiative of the government, which envisages annulment of bank debts of over 600,000 Georgian citizens including those on a so-called black list, is a “onetime but good initiative.” As stated by Georgian Prime Minister Mamuka Bakhtadze on November 19, the project is being carried out with the assistance of Cartu Foundation, which was established by the ruling Georgian Dream (GD) Chair, billionaire

Image source: 1TV

Continued on page 3


Giorgi Donadze: “Choirmaster’s Schools Were & Are a Priority” SOCIETY PAGE 13

Israel Inspires Georgian Politicians. For All the Wrong Reasons POLITICS PAGE 15 Prepared for Georgia Today Business by

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NOVEMBER 27 - 29, 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: After a successful career in sports and the public sector, Giorgi Gachechiladze decided to start his own business. The Free Trade Agreement with the EU motivated him to start a sock production factory: Tiflistex. With the support of Enterprise Georgia, he was able to construct the factory in just four months and today, the colorful socks made by Tiflistex are ready to be exported to Greece and Azerbaijan, while Austria and another EU member countries will also soon have the Georgian socks on their shelves. The founder has plans build more factories in future. Aleksandre Meskhi fell in love with miniature trees some 40 years ago during his childhood and is an active follower of Japanese culture Bonsai, a special technique for growing miniature trees. He studied several authors and experimented over 12 years and finally began growing his own miniature compositions. He now runs his website www.bonsai.ge, on which he shares his rich experience and expertise in Bonsai culture and sells valuable Bonsais, an ideal gift for green lovers. After four years on the Georgian market, fashion brand Gepherrini, which specializes in high quality leather products, has expanded production to include leather shoes and accessories. After leaving a 9-5 job, the founder Ilia Gepheridze spent almost a year with his wife Sophia Khositashvili to get the perfect prototype handbag. Today, the brand, headquartered in New York City, owns 32 shops, four in Georgia and 28 abroad. Gepherrini will soon be targeting the Chinese market with its leather goods. 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

Tensions between Russia & Ukraine Escalate, BBC Reports

Source: BBC. Image source: BBC



he tensions between Russia and Ukraine have sharply escalated since Sunday morning, November 25, when Russian naval forces opened fire and seized three Ukrainian naval vessels (two gunboats and a tug). The incident took place in the Azov Sea, off the coast of Crimea which was annexed by Russia in 2014. The Ukrainian ships were trying to pass the Kertch Strait on their way from Odessa to Mariupol. Six members of the Ukrainian crew are reported injured.

Ukraine claims the Russian forces attacked the ships and even though they tried to continue on their way, were prevented from doing so by a Russian tanker. Russia justifies its actions by accusing the Ukrainian vessels of having illegally entered its naval territories. In addition, it sent two fighter jets and two helicopters to the area. According to Russia’s FSB report, only three sailors were injured as a result of the incident. The European Union called on Russia to "restore freedom of passage in the Kerch Strait" while NATO said it "fully supports Ukraine's sovereignty and its territorial integrity, including its navigational rights in its territorial waters". According to the 2003 treaty between

Moscow and Kyiv, the Kerch Strait and the Sea of Azov are shared territorial waters. However, Russia has begun to attack all Ukrainian naval ships passing through the given area, which has become a major reason for escalating tensions. Speaking at the presentation of the 2018-2020 Action Plan of the Parliament of Georgia Foreign Relations Committee on November 26, Minister of Foreign Affairs of Georgia David Zalkaliani reaffirmed Georgia’s commitment to developing its relations with the EU. "The current situation in Ukraine makes it even more important to join forces and do everything possible to ensure security in Georgia," he said.




Brexit Deal Approved by the EU BY AMY JONES


n agreement on the UK’s withdrawal from the EU was approved by EU leaders on 25 November. Following 20 months of negotiations, which divided the UK, the deal was approved after less than an hour of discussions by 27 EU leaders. Describing the deal as the “best and only deal possible,” the EU hopes it will pave the way for an orderly withdrawal. A 585-page withdrawal agreement and 26-page political declaration form the basis of the deal. They outline how important issues such as citizens’ rights, the Irish border, and trade will be handled when the UK leaves the EU on 29 March 2019. The agreement sets out the calculations for the financial settlement or

“divorce bill,” amounting to £39 billion, that the UK will need to pay to the EU to settle all of its obligations such as pensions for EU officials. Part of the money will be the contribution the UK has to pay to the EU during the transition period. Another central policy priority covered by the deal is the future of trade relations between the UK and the EU. The UK’s access to European markets depends on whether the UK respects EU standards on competition, tax, environment, as well as social and employment protection. Although May stated that the UK and the EU would be “separate markets and distinct legal orders” after Brexit, many believe that the need to adhere to EU rules will still bind the country to the EU. Moreover, the shared customs territory in the Northern Ireland backstop will be built on and improved in a future trade deal which should maintain cross-

border cooperation and allow goods to pass freely across the border. Many believe that such a backstop binds the British government to a customs union. Despite British wishes for a bespoke deal on financial services, the UK will be treated like any other non-EU country. Bankers and traders will have to rely on “equivalence” which allows market access to be withdrawn by Brussels at 30 days’ notice. The withdrawal agreement also outlines the future for laws and disputes following Brexit. The UK will remain under the European Court of Justice (ECJ) jurisdiction for the duration of the transition. However, if the backstop is triggered and the UK forms a single customs territory with the EU, the ECJ will not be able to resolve disputes between the UK and EU directly. Analysts believe nonetheless that the European Court will continue to have indirect influence over the UK for many years to come.

Source: The Guardian, BBC

The deal must still be approved by the UK parliament in early December, the result of which remains uncertain. Labour, the Lib Dems, the SNP, the DUP, as well as many Conservative MPs are likely to vote against it. Many politicians are unhappy with the deal, believing that the UK will be worse off as a result. Labour Leader Jeremy Corbyn described the deal as “the worst of all worlds,” reaffirming that his party will oppose the deal. However, Jean-Claude Juncker, President of the European Commission, stated

that anyone in Britain who believes that the bloc might offer improved terms if MPs reject the deal would be “disappointed.” Although politicians are refusing to guess the outcome should British MPs reject the agreement, many believe it will set negotiations back to square one. Speaking in Brussels, Theresa May called for both Leave and Remain voters to stand behind the agreement. The British public “do not want to spend any more time arguing about Brexit,” she insisted. Whether the agreement is accepted by MPs, remains the be seen.

'Stamba’ Hotel Awarded New Concept of the Year at AHEAD Awards Europe ‘Stamba’ is the first brand and hotel that has been nominated and awarded on the world’s biggest, most prestigious and significant hospitality industry celebration.



n November 19, 2018, ‘Stamba’ Hotel won the award of ‘the New Concept of the Year’ at the AHEAD Awards Europe official ceremony in London. This prestigious prize was received by the CEO of Adjara Group, Valeri Chekheria, and Managing Director of the company, Levan Berulava. ‘I am honored that ‘Stamba’ Hotel won ‘the New Concept of the Year’ from


Image source: Adjara Group

AHEAD Awards, ‘I am proud and happy of my team’ – stated Valeri Chekheria. AHEAD is a global celebration of hos-

pitality experience and design, where the awards are dedicated to the best luxury boutique hotels worldwide.

Hotel ‘Stamba’ is situated on Kostava Street in Tbilisi, in the building of the former soviet-era publishing house. The five-story-high atrium of the hotel’s ‘jungle lobby’ is decorated with a variety of unique trees and foliage. Another outstanding feature of the hotel is a glassbottom rooftop swimming pool. The original appearance of the build-

ing of the hotel restored by Adjara Arch Group concept incorporates is preserved unchanged.

ADJARA GROUP Adjara Group is the largest and the most rapidly-growing company in Georgia’s hospitality sector. It is the leader in terms of implementing new standards, efficient management practices and innovative tendencies. Within the scope of the hospitality industry it has gained international recognition by creating such unique Georgian brands as, Rooms Hotel Tbilisi, Rooms Hotel Kazbegi, Stamba Hotel and modern Fabrika Hostel.

National Bank Head Praises Gov’t Initiative of Annulling People's Debts Continued from page 1 Gvenetadze noted the meeting was held in the NBG headquarters, which was requested by the financial institutions. He added that the representative of the Finance Ministry also attended the negotiations. The Director of the central bank says after the debts are annulled, the peo-

ple’s names will be removed from the black list, opening up the chance for them to find legal employment, a possibility previously closed to them due to their bank loans. “I think this is a positive moment and it should positively affect economic growth. These people can find official employment and contribute to the development of the country’s economy.

However, Gvenetadze underlined that there is one risk factor – the borrowers might think their debts will also be annulled in the future. “We declared from the very beginning that this is a onetime measure and it will not happen in the future,” he added. The non-governmental sector believes the initiative of the ruling party con-

tains signs of vote-buying ahead of the November 28 elections. “The decision announced by the government contains signs of vote-buying and is directed in favor of Salome Zurabishvili, the candidate supported by the ruling party, aiming at winning the hearts of voters before the second round of the election,” the NGOs said. The civil sector asked the Prosecu-

tor’s Office to study the case. The investigation has already been launched. GD Chair Ivanishvili rejected the accusations, saying he announced his plans to assist people in May. Ivanishvili added that the recently announced project about the annulment of black listed people’s debts is a good example that everything can work if you try hard.




NOVEMBER 27 - 29, 2018



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.

Georgia’s 2018 Presidential Election in Numbers BY DAVIT KESHELAVA


n December 28, the Georgian Central Election Commission (CEC) will hold the second round of the last direct presidential election in Georgia before the constitutional pivot to the indirect election. This change was the last stage of the political reform

the leaders of the ruling political party. The Georgian people had seemed to be quite loyal to the incumbent party, allowing them to reach a constitutional majority in the recent parliamentary elections (2016) and rule nearly all of the Georgian municipalities in the recent local selfgovernment election (2017). The confidence in victory was so high that the leaders of the Georgian Dream were barely involved in the pre-election campaign, not nominating their own candidate

Source: https://on.ge/elections/2018/results

aiming at replacing the presidential political system with the parliamentary one. The president’s powers in the new system are extremely limited and largely symbolic. Nevertheless, political parties consider the presidential elections of 2018 to be a rehearsal before the more influential parliamentary elections of 2020 and, therefore, the battle for the presidency seems to be much more intense than one could imagine before the first round. According to the CEC, slightly more than 1.6 million Georgians voted in the presidential elections with one of the highest attendance rates in Georgia’s recent history - 46.74%. The main competition was between Salome Zurabishvili, an independent candidate supported by the incumbent political party Georgian Dream (GD) and Grigol Vashadze, an oppositional candidate nominated by the United National Movement (UNM) and nine other opposition parties. The battle was so tight that none of the candidates were able to cross the 50% threshold to win the first round, and the difference between the two leading candidates was even less than one percentage point: Salome Zurabishvili got 38.64% of the total votes, while Grigol Vashadze only slightly below that at 37.74%. The results were totally unexpected for

and supporting an independent one in Salome Zurabishvili. Politicians and analysts identify three main reasons that might explain the failure of the ruling political party in the first round of the presidential election. First, even the leaders of the incumbent party recognize that socio-economic problems (poverty, unemployment, inequality, depreciation of the national currency, over-indebtedness, inflation, etc.) made people dissatisfied with the government’s performance. Second, some of the Zurabishvili’s statements regarding the Russia-Georgia war in 2008 were

not acceptable to a large part of society. Third, the opposition parties mounted an aggressive pre-election campaign to discredit the candidate supported by the ruling party. The following paragraphs will look in-depth at the statistical information about the results of the first round of the presidential election and the distribution of votes regarding the different characteristics. It is widely recognized that incumbents have a structural advantage over challengers during elections. This phenomenon is known as an incumbency advantage. The source of the incumbency advantage might be name recognition, easier access to the campaign finance, access to the government resources that can indirectly boost a campaign, and sometimes even the possibility to determine the timing of the election. Some aspects of the incumbency advantage are common not only for the developing countries but also for western democracies. Despite the incumbency advantage, the votes in the first round of the presidential election were quite evenly distributed between the two leading candidates. The only region where the candidate endorsed by the ruling political party received more than 50% of the votes was SamtskheJavakheti region, while the leading opposition candidate collected slightly more than half of the votes in the Georgian polling stations abroad. Moreover, the capital, as well as the four largest cities in the country, voted for the leading opposition candidate, while the rural population (and people living in small towns) voted for the candidate supported by the incumbent party. Mountainous regions and ethnic minorities were a solidly pro-Georgian Dream-backed presidential candidate (these regions usually vote for whoever is currently in

Source: https://imedinews.ge/ge/archevnebi-2018/shedegebi

Source: www.results.cec. gov.ge, Integrated Household Survey (Geostat), Author's Calculations Note: * Big Cities - four cities with a population more than 100,000 people. Tbilisi, Kutaisi, Batumi, Rustavi; ** Rural Regions - other cities, towns and municipalities (population less than 100,000); *** Mountinous Regions - municipalities where all or majority of the cities, towns and villigies officially considered as mountinous; **** Ethnic Minorities - regions where majority of the population is an ethnic minority. ***** Low Internet Usage - regions where significantly more people do not have access to the internet compared to the national average.

power), moreover, Salome Zurabishvili managed to collect a notably higher number of votes than the main opponent in the regions where the majority of the population has low internet usage. It is interesting to observe the distribution of votes based on their economic sentiments and expectations. According to the Integrated Household Survey (IHS), the percentage of the people claiming that the financial state of their family worsens in 2017 amounted to 41.7%, while for 52.4% of the sample the financial statement did not change at all, and 5.9% of surveyed people experienced financial improvement. The pessimistic sentiment of the Georgian population could potentially have a negative impact on the votes of the presidential candidate supported by the incumbent political party. Nevertheless, the votes are quite evenly distributed between regions with a significantly higher amount of people with the positive or negative sentiment. Still, as it was expected, the leading opposition candidate slightly outperformed Georgian Dream-backed independent candidate in the regions where significantly more people had negative sentiments compared

to the national average. In addition, Vashadze managed to collect more votes than the Zurabishvili in the regions where the majority of the people cannot satisfy basic needs and have limited access to the water and gas supply infrastructure. Grigol Vashadze slightly outperformed Salome Zurabishvili in the regions where significantly more people had either negative expectations about the future financial state or expected no changes. However, the candidate supported by the ruling political party managed to dominate in the regions were significantly more people were optimistic about the future financial state. Let the interpreting of this statistical information be upon the reader. Though there are only a few days left before the second round of the presidential election, it is quite hard to predict who will be the fifth president of Georgia. The only thing that we can say boldly is that voters will have to make a very difficult decision and regardless of the results of the election, the ruling party should take a valuable lesson from the election process to better prepare for the (more decisive) upcoming parliamentary elections.

Source: www.results.cec. gov.ge, Integrated Household Survey (Geostat), Author's Calculations Note: * Condition has Worsened - the regions where significantly more people stated that the financial statement deteriorated in 2017 yearly relative to the national average. ** Optimistic- the regions where significantly more people stated that the financial statement will improve yeraly relative to the national average.

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Natia Turunava: We Can Use Forest Waste Processing Technology in Georgia BY SAMANTHA GUTHRIE


eputy Minister of Economy and Sustainable Development Natia Turnava spoke to reporters late last week about the potential of using biomass as an energy source in Georgia. “In Lithuania, biomass is recycled highly efficiently to produce heat energy. We can use this alternative technology of biomass processing in different villages where, for various reasons, it is difficult to introduce natural gas,” said Turnava after participating in the closing conference of the EU Public Service Twinning project ‘Strengthening Sustainable Forest Management in Georgia.’ The project, at a cost of 840,000 EUR ($952,969), was financed by the EU Social Services Program. It included more than 120 visits to Georgia by international experts, six study visits of Georgian government officials to Lithuania and Hungary, and dozens of seminars and round-table discussions. Within the framework of the project, recommendations were developed to assist Georgian authorities to accelerate the process of reconciling practices related to the forestry sector with EU

Image source: Ministry of Economy

standards. The recommendations touched on several areas of the forestry sector, including legislative frameworks, institutional capacities, organizational best practices and forest management models, and reliable forest data collec-

tion and monitoring systems, focusing on intersectoral communication. Biomass briquettes are pressed bio fuel made from dehydrated wood chips and agricultural waste. After collection of bio mass, the goods are shredded and

later pressed under high pressure without any glue or other artificial additives. Biomass briquettes are a popular alternative to wood due to the long-lasting blaze, more affordable compared to legally purchased wood, and have a low negative impact on the environment Illegal logging, largely for firewood, “is a big challenge, because the forest is one of our most unique resources. Maintaining green cover and our forests is a big priority, and it should be connected to our energy policy. We are now actively working on special research in forest cover areas on how to make and apply policies in recreation areas so as not to damage the green cover and offer the population a very affordable alternative so that they do not need to cut down trees for heating purposes,” said Turnava. At the closing conference for the ‘Strengthening Sustainable Forest Management in Georgia’ project, presentations were given by several top officials from Georgia and the EU, including Georgian Minister of Agriculture and Environmental Protection, Levan Davitashvili, Minister of Environment of the Republic of Lithuania, Kestutis Navickas, Head of Cooperation for the EU Delegation to Georgia, Vincent Rey, and representatives of diplomatic missions in Georgia. Biomass has been on the minds of

Georgian energy experts for several years, but has only recently gained popularity in government circles. In July of this year, the Ministry of Economy and Sustainable Development held a joint workshop with the Lithuanian Biomass Energy Association (LITBIOMA) and LTD New Technology Center on the ‘Effective Use of Renewable Energy Resources in Mountainous Regions of Georgia’ to present a joint initiative of LITBIOMA, the Biomass Association of Georgia, and the Ministry of Economy and Sustainable Development to address the possibilities for biomass heating systems in Georgia. The EU has supported green energy projects in Moldova Since 2015. 75 towns and villages have been supported in switching to green energy, including 19 new biomass-heating systems installed in the first half of 2018. Moldova’s Energy and Biomass Project is part of the EU4Energy Initiative which also operates in Georgia. An EU-supported Covenant of Mayors Demonstration project is being implemented in Kakheti to renovate two kindergartens, in Telavi and in the village of Ikalto. The renovation is aimed at reducing energy consumption and switching to renewable energies like biomass heating systems, which will also reduce costs.

Kutaisi Free Zone at Ukrainian Business Forum 2018 BY ANNA DUMBADZE


n November 19, in Kyiv, the annual large-scale event ‘The Ukrainian Business Forum’ was held. A one-day professional platform for large and medium businesses, this year it featured two parallel stages, four panel discussions- with representatives of the Ministry of Finance, the NBU, the leading lawyers and auditors, 12 reports and 500 participants from Ukraine and the EU. Kutaisi Free Zone of Kutaisi ‘GIH’ made its own contribution and participated as a speaker at the forum. Deputy of the holding, Mikheil Didebulidze, talked about the economic situation and favorable investment climate of Georgia. “The Kutaisi Free Zone is oriented on attracting international companies-tenants which operate in different fields of business to carry out their export-oriented business activities in a tax-free zone,” he said. “Our clients have a unique opportunity to practice not only in the competitive infrastructure and lease terms of the Kutaisi Free Zone, but also have the support of State projects.” In conclusion, the deputy informed the audience about the opening of an operational office in Kyiv in partnership with the well-known Ukrainian consulting agency NIAR, that will help to simplify the process of registration for Ukrainian clients.




NOVEMBER 27 - 29, 2018

Georgian PM: Regions Must Be Developed

Image source: PM’s Press Office



he Prime Minister of Georgia, Mamuka Bakhtadze says that all the regions of the country must become developed and sustainable, have functioning basic infrastructure and access to all public services. The PM made the statement at the opening ceremony of a new Community Center in Tsnori, a small town in Kakheti region, eastern Georgia. Bakhtadze underlined that the government seeks to provide every Georgian region with equal development opportunities in order to ensure equal living conditions for all citizens. The PM added that the government wants the population in the regions to have equal access to such services as education, healthcare, and social infrastructure. “We are consistently progressing in this direction, as clearly evidenced by the opening of the Tsnori Community Center, a great gift for the local population. This Community Center will provide the same level of services as found in the rest of the country. At the same time, based on popular demand, many functions in the center are designed to meet

local requirements,” he stated. Bakhtadze explained that from now on Tsnori's population will be able to enjoy more than 200 public and private sector services without leaving their town, including ID services, access to the national archive, and services provided by the National Agency of Public Registry and the Social Service Agency. “The center will also feature the private sector. The relevant infrastructure has been created in the center for youth and adolescents, who will have access to a library which will offer e-books, computers, and many other important services of their liking. A conference hall will operate here which will host many important events,” he added. The conference room, which has 30 seats, is equipped with modern technology to host different informative and educational events, presentations and remote educational sessions, also film screenings. In total, there are 57 community centers of modern standards throughout the country which enables the population to enjoy more than 200 public or private sector services, 24-hour wireless internet connection, and Skype rooms. In addition, the libraries for youth are equipped with the latest technology to offer both electronic and print publications.




NOVEMBER 27 - 29, 2018

October: Average Hotel Prices in Georgia & Hotel Price Index


n Georgia, the average cost of a room1 in a 3-star hotel was 139 GEL per night in October 2018. The most expensive 3-star hotels in October in Georgia were in Samegrelo-Zemo Svaneti, 174 GEL. The average cost of a room in a 4-star hotel in Georgia in October 2018 was 241 GEL per night. The most expensive 4-star hotels in October were found in Kakheti, 298 GEL. The average cost of a room in a 5-star hotel in Georgia in October 2018 was 515 GEL per night. In Tbilisi, the average price was 668 GEL, followed by Adjara – 504 GEL, Kakheti – 395 GEL, and Samtskhe-Javakheti - 383 GEL. In October 2018, the average cost of a room in a guesthouse2 in Georgia was 69 GEL per night. The highest daily rates for guesthouses were found in Guria at 118 GEL.

HOTEL PRICE INDEX In October 2018, in Georgia the hotel price index3 decreased by 0.1% compared to September 2018. The daily rates for

standard double hotel rooms decreased the most in Kakheti (-1.7%) and Imereti (-1.6%). In Tbilisi, the overall price level of hotels decreased by 0.8%. Among ten regions of Georgia and Tbilisi, in October 2018, compared to September 2018, hotel prices increased only in Guria (2.2%) and Adjara (2.3%). The 3-star, 4-star and 5-star hotel price index decreased by 0.4% in October 2018, compared to September 2018. In these types of hotels, the highest price decreases were recorded in Kakheti and Imereti. In October 2018, compared to September 2018, the prices of 3*, 4* and 5* hotels were recorded only in Guria, Adjara and Samegrelo-Zemo Svaneti. In Tbilisi, the prices of these types of hotels decreased by 0.6%. For guesthouses, the price index decreased by 0.3% in October 2018, compared to September 2018. In this type of accommodation, the biggest percentage price decreases for standard double rooms were recorded in Imereti and Shida Kartli. In October 2018, compared to September 2018, the prices of guest-

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

Table 1: Percentage change of prices in October 2018 over September 2018 and over October 2017

houses increased only in Guria, MtskhetaMtianeti and Adjara. In Tbilisi the prices of guesthouses decreased by 1.4%. In October 2018, compared to October 2017, in Georgia the hotel price index increased by 7.2%. The daily rates for standard double hotel rooms increased the most in Adjara (22.7%) and Samtskhe-Javakheti (17.9%). In Tbilisi, in October 2018, compared to October 2017, the overall price level of hotels increased by 1.3%. Among ten regions of Georgia and Tbilisi, in October 2018, compared to October 2017, hotel prices decreased only in three regions of Georgia, Mtskheta-Mtianeti, Samegrelo-Zemo Svaneti and Kakheti. The increase of hotel price index in October 2018, compared to October 2017, can be linked to the increase in the number of international travelers. In October 2018, compared to October 2017, the number of international travelers visiting Georgia increased by 9%. Of these international travelers, the number of tourists (who stayed for 24 hours or more in Georgia) increased by 15.1%4. The 3-star, 4-star and 5-star hotel price index increased by 10% in October 2018, compared to October 2017. In these

types of hotels, the highest price increases were recorded in Adjara (36.5%) and Samtskhe-Javakheti (32.6%). During this period, in Tbilisi, the prices of these types of hotels increased by 0.5%. In October 2018, compared to October 2017, for guesthouses, the price index increased by 4.1%. In this type of accommodation, the biggest percentage price increases for standard double rooms were recorded in Mtskheta-Mtianeti (14.9%) and Kvemo Kartli (12.2%). During this period, in Tbilisi the prices of guesthouses increased by 3.5%.

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. Source: GNTA

New Book 'The Global...Development'


new book by Prof. Irakli Kovzanadze, Fiscal Committee Chair and Member of Parliament of Georgia, was launched in the Ballroom of Radisson Blu Hotel in Tbilisi, titled ‘The Global Economy: Post-Crisis to Sustainable Development.’

The book was published in the US and reviews and analyses macroeconomic, institutional and structural factors leading to global economic and financial crisis. In addition, cases of various countries and abundant statistical data are conveyed to suggest ways and methods to combat crises and exemplify economic

development and growth models. “Along with an overview of current key economic developments, the author presents significant and valuable measures which should be carried out during a financial crisis,” noted Francois Painchaud, Resident Representative of the International Monetary Fund (IMF) at the book

launch. “He also gives ideas how to make economic growth sustainable in the longrun and includes structural reforms, economic diversification, improvement of the business environment and public funds management, eradication of inequality, tightening of regulations and supervision in the financial sector.” Other guest speakers included Koba Gvenetadze, Governor of the National Bank of Georgia (NBG); Bruno Balvanera, Regional Director of the European Bank for Reconstruction and Development (EBRD); Ivane Matchavariani, Minister of Finance of Georgia; Acad. Giorgi Kvesitadze, President of the National Academy of Sciences of Georgia; Giorgi Kekelidze, Director of the National Library of Georgia; and Giorgi Isakadze, Editor-in-Chief of Forbes Magazine Georgia. The book launch was also attended by university professors, entrepreneurs, representatives of international organizations, Members of the Parliament of Georgia (MPs) and government officials. “Parallel processes have been developing in the global economy over two dozen years, seeing globalization and instability in economies and financial sectors,” Prof. Kovzanadze told the attendees at the book launch. “Banking is particularly exposed. As an economist and practicing banker, I have been actively observ-

ing and scrutinizing these developments all these years. This book is the result of the research carried out.” MP Kovzanadze has over 25 years’ work experience in the financial and banking sectors. In 2008-2012, he worked at the EBRD, while in 2007-2008 both at the EBRD and Organization of Economic Cooperation and Development (OECD) as Chairman of a Joint Commission of Corporate Governance of Banks in Eurasian countries. He is the author of seven monographies, one textbook and over 50 articles on economics and mathematics that predominantly relate to systemic banking crises in various countries, including transition economies.




RSM Georgia's Journey to Sustainable Development: Summing up the Results of 10 Years Operation on the Market BY MARIAM MERABISHVILI


SM Georgia, a member of RSM International, one of the leading global audit, tax and consulting networks, summarizes 10 years of operations on the Georgian market. The global network of RSM unites firms in over 120 countries, up to 800 offices and 43,000 professionals worldwide. The company is represented by up to 100 professionals and three offices in Georgia. RSM Georgia delivers a wide range of specialized services to business organizations, such as preparation of financial statements according to the International Financial Reporting Standards (IFRS), audit of financial statements according to International Standards of Audit (ISA), tax optimization services, accounting outsourcing, various financial and business decisions, private property assessment and legal advisory services. "We've been through challenges to get the results of sustainable development we have today,” said Giorgi Kvinikadze, Managing Partner of RSM Georgia. “The company was founded in 2008 under the Capto Group name. The hardest period of Georgia was also full of challenges for the company, which, on the one hand, provided some motivation for us. By 2010, the local audit company became interesting for the Global Audit, Tax and Consulting Network, RSM International. In the same year, we joined RSM and got access to global knowledge, ideas and insights. Global network membership is a huge responsibility. We are united under common values, the cornerstone of which is the client companies’ deep understanding and satisfaction of their needs. The global network tagline exactly matches our positioning statement - The Power of Being Understood. I am glad that after overcoming many challenges, we celebrate the results of the company's sustainable development for the company’s 10-year anniversary.” RSM was the first network of audit companies to establish common audit methodology in member companies in 1993. As the founding member of

Forum of Firms (FoF), an independent association promoting consistent and high-quality standards of financial reporting and auditing practices worldwide, it constantly transfers this experience to the member firms. Access to global knowledge enables the company to constantly enhance audit methodology in compliance with international standards and Code of Ethics. The company constantly conducts internal quality control. The international knowledge and insights of RSM professionals, combined with valuable expertise from a local perspective allows the company to take on projects of any complexity and scale which resulted in an increase in the number of international projects by 43% in 2017-2018. The sustainable development of RSM Georgia contributed to further expansion

New Fruit-Processing Factory Opens in Central Georgia

Image source: 1TV



ith the financial support of the State, a new fruit-processing factory was created in the village of Sagolasheni of Kareli municipality, central Georgia. The factory is equipped with modern and highstandard technologies and employs 29 locals. In total, 1,012,000 GEL ($381,041) was invested in the enterprise, out of which 405,000 GEL ($152,341) is a grant and 507,000 GEL ($190,709) a preferential agro-credit. Deputy Minister of Environment Protection and Agriculture, Giorgi Khanishvili, opened the new enterprise with Shida Kartli Regional Governor Giorgi Khojevinashvili and the Deputy Director of Agriculture Projects Management Agency, Giorgi Jibladze. The enterprise can process 10 tons of raw mate-

rials daily, from which such products as Tklapi, a traditional Georgian puréed fruit ‘leather’, and churchkhela, a traditional Georgian candle-shaped candy with nuts, as well as jams and fruit purees are made. At the initial stage, the production will be sold on the local market, but it is planned to export production in the future. With the support of the Agriculture Projects Management Agency, in 2019, the company plans to implement the ISO 22: 000 international standards of food safety. Since 2013, with the help of the State, 180 new enterprises have been financed in the framework of the Unified Agro-Project, which envisages providing entrepreneurs with preferential agro-credits. The project is designed for long-term development and aims to create an environment that will promote the increase of competitiveness in agriculture, stable growth of high quality products and introduction of international standards of food safety.

of the company's portfolio. RSM Georgia founded its sub-Brand ‘RSM Georgia Solutions’ in 2017 and has already had impressive results in growth. RSM Georgia Solutions is the partner of world class software solutions brands. In 2017 RSM Georgia Solutions became the first certified partner of SAP Business One in Georgia and in 2018 the company partnered with Oracle, based on which it plans SAP Business One and NetSuite software program solutions, ERP (Enterprise Resource Planning) systems, integrates them and issues relevant licenses. Last year, RSM Georgia Solutions was named by SAP Business One as the company having the fastest start, and in the same year won the second nomination - 'Net New Clients in the region’.

"Our main purpose is to help our client companies achieve their goals,” said Tea Katchkatchishvili, Commercial Director of RSM Georgia. “RSM is focused on deep understanding of its client companies’ business needs and on providing more benefits, more expertise, more confidence to them. This is why we took into consideration the insights of the business sector demand research conducted by us in Georgia and decided to bring the world leader brands of ERP systems into the local market, as well as to strengthen our legal services direction. After long-term negotiations, highly experienced and qualified specialist in the field of law, Aleko Sirbilashvili, joined our team, who is already leading the company's legal department." Strengthening the legal department and enlarging services allows RSM Georgia to offer its partner companies full legal support, counseling in any local issues connected to their activities, recommendations given to them on dealing with transactions, preparation of legal conclusions, preparing typical contracts at the request of the client and more. “RSM Georgia, within the main legal services also offers additional advocacy services to clients, in particular: protecting partner companies’ representatives and their interests in any category of case within all instance court and arbitration, in the administrative, tax, execution or investigation organs, preparation and submit of disputes, complaints or similar statements,” noted Aleko Sirbilashvili, Head of Legal Department of RSM Georgia. The Global Network of RSM allows client companies to receive consistent service that goes above and beyond their expectations, wherever they are in the world. RSM’s client ranges from growthoriented entrepreneurial businesses to leading multinational organizations and financial institutions operating in different business sectors nationally and across borders. RSM Georgia’s strategy is based on RSM's innovations-oriented corporate culture and is designed to promote accelerated growth through identifying potential markets, developing service lines and enhancing service quality.




NOVEMBER 27 - 29, 2018

Georgian Retailers Association to Protect Rights of Small & Medium Businesses



he first Retailers Association was founded in Georgia, the main purpose of which is to discuss and solve the problems and challenges existing in the business sector. The presentation of the newly established nongovernmental entity was held on November 6. The ceremony was attended and positively appraised by more than 250 guests, including shops, trade Reps and others. President of Ukraine Retailers Association, Yuri Bondarev, delivered a speech about the Associations’ success story in Ukraine. Within the framework of the presentation meeting, Coca Cola President Temur Chkonia made a supportive speech calling for GRA membership. The GRA Team also made a presentation on GRA aims, retailers’ problems, deliverables and services. 140 shops became members of the Association during the GRA presentation meeting and the event was widely covered by the local media due to its importance. The Georgian Retailers Association is oriented on protecting the rights of retailers operating throughout the country. The Association, a nonprofit legal entity, was established on October 29, 2018 with the main to protect the rights of small shops operating in Georgia, to provide them with information about legislation and to elaborate comprehensive mechanisms for entrepreneurial activities. The Association is innovative, and the only one of its kind in Georgia and the region that protects the interests of retailers and effectively informs them about their rights. The Association offers members a Hotline, legal advice and interactive meetings and trainings. Additionally, the Association provides effective advocacy while introducing new regulations, and performs the role of mediator between retailers and the government. Nowadays, there are many problems in the Georgian economic sector related to tightening the regulations, such as the so-called “regulations of May 1 and September 1”, tightened regulations and high fines, technical regulations of plastic bags, new draft law on labor safety, new draft law on protecting the customers’ rights, and communication with the Government (Revenue Service). Moreover, there are potential problems seen in licensing the stores to the expected requirements with regards total size of the retail area, number of employees, dressing and training of the employees, introducing a special system for sectioning, safety and sanitary requirements, regulations related to using alcohol, etc. The Georgian Retailers Association provides effective solutions for all the above-mentioned problems through its Advisory Board, establishing the proper relationships with the government, relationships with media representatives, and expressing the various opinions peacefully. The membership fee of the Georgian Retailers

Association is 100 GEL per year. Those who want to become a member of the Association will not have to pay the fee until December 1, 2019. According to the founders of the Asssociation, Beqa Midelauri, Elene Zautashvili, Tatia Nanobashvili and Levan Suramelashvili, their main aim was to help the representatives of the business sector to overcome the current challenges they have to face and timely provide them with all the necessary information about the changes in regulations. some representatives of the small business are not aware of such changes, later resulting in their having to pay high fines and suffer financial loss. To avoid these problems, the Association is ready to assist the representatives of the Georgian business sector on their way to success and development. “The new regulations on the use of tobacco, or on the use of plastic bags, were introduced very quickly and unexpectedly, and it made some representatives of small and medium business sector confused. To avoid such cases in the future, our Association will inform them about the regulations and help them to understand how to behave within the new rules. Moreover, we will provide effective advocacy and consultations for them, we will hold interactive meetings and trainings and we will do our best to eliminate their current problems,” noted the founders of the Georgian Retailers Association. The organization started functioning with great motivation, as protecting the rights of retailers operating throughout the country and informing them about their rights is essential for the future development of Georgia’s economy. “The representatives of the business sector strongly support our initiative and it is easily understandable why. The shops’ effective operating is directly connected with their future success and financial profit. If the shops close, of course, their revenues will be decreased. So, it is in their interest to support us,” they say. The Association is mainly oriented on small shops, as, in comparison with huge retailers, they do not have enough financial resources to employ professional lawyers and use their services to protect themselves. Accordingly, at the presentation meeting of the Association, the representatives of about 300 small shops were given informational brochures and survey forms to find out their main problems and needs. As the founders of the Association note, they are planning to hold meetings with the representatives of small business not only in Tbilisi, but in the regions of Georgia as well. The distributor companies also help them with all the necessary procedures to arrange meetings with interested companies. “Many businessman, such as Coca Cola Director Temur Chkonia, actively collaborate with us and they tell us that we can visit the regions of Georgia any time and hold informational meetings with the representatives of the local business sector in their offices, because they are fully aware of the financial loss small businesses might have to face if they are not up-to-date with the latest regulations and legislative changes,” the representatives of the Association elaborated.




NOVEMBER 27 - 29, 2018

Real Estate Company m² Opens Civil Engineering College in Tbilisi BY SAMANTHA GUTHRIE


onstruct² is a new civil engineering college founded by Georgian development giant m² Real Estate in collaboration with the Ministry of Education, Science, Culture and Sport. A ceremony to inaugurate the college was held on Sunday, attended by representatives of m², BK Construction, local self-government, media outlets and government officials including Deputy Minister of Economy and Sustainable Development Genadi Arveladze. BK Construction became a subsidiary of m² in 2017, with a focus on civil engineering management. Construct² aims to educate professionals who want careers in construction and to nurture the overall development of the construction field by increasing the skilled labor pool. The budget for the project is 3 million GEL ($1,125,703). The college will offer 11 short-term vocational programs, including in the subjects of labor safety and environmentally friendly technology, serving up to 600 students per term. Upon successful completion of a vocational program, students will be awarded the title of certified specialist. The courses are accred-

Image source: m² Real Estate

ited by the Georgian authorities. The college will also create jobs, employing 50 academics and 300 full-time administrators. The first students will matriculate to Construct² in 2019. m² CEO Irakli Burdiladze explained that the college is a corporate social responsibility project of m² Real Estate, “aimed at developing the construction sector through education and employment of the local population. The college

will enable young people to direct their potential in the right direction and become professionals. We will do our best,” promised Burdiladze, “to ensure that our students receive top-standard theoretical knowledge and practical experience and become a high-quality workforce on the labor market. We believe that soon the college will become an international-level vocational educational center and stimulate students interested

in the [real estate] development sector. Burdiladze also called the project “timely and necessary” for Georgia. Prime Minister Mamuka Bakhtadze showed his support for the project by visiting the construction site when work was in its final stages earlier this month. m² has several large residential complexes in Tbilisi and is currently developing two large hotels – Ramada Kutaisi and, in Telavi, the restoration of Soviet-

era former Intourist hotel. The Kutaisi project is under a franchise agreement with Wyndham Hotel Group. Wyndham Hotel Group operates the largest network of hotels in the world. In Telavi, the project aims to revive the historical and functional aspects of the hotel while blending it with Telavi’s existing architectural style. Developing skilled labor for projects such as these is one of the goals of Construct².



Giorgi Donadze: “Choirmaster’s Schools Were & Are a Priority” TRANSLATED BY KETEVAN KVARATSKHELIYA

Patients with Multiple Sclerosis Selected to Receive Treatment BY ANNA ZHVANIA



he State Folklore Center of Georgia works in the following directions: Georgian folk music, Georgian traditional chant, oral folklore, choreography, fine and applied arts. The Choirmaster’s School, one of the most significant projects carried out by the Center, which includes setting up and running choir mastery schools in the regions of Georgia, is ongoing and this year has seen the opening of a school in Tsageri Cultural Center. The existence of choirmaster’s schools is extremely important for the preservation and popularization of traditional Georgian music. Study of traditional chanting is free and only experienced specialists are employed and trained. Supported by the local governments of the regions, these schools remain one of the major priorities of the Center and there are now 21 ‘choirmaster’s schools’ functioning in Georgia serving more than 800 students. “The choirmaster’s schools were and are our priority. We started preparing in 2014, and in 2015 the first school was opened in Khobi, followed by a number of other regions. There will be 24 ‘choirmaster’s schools by the end of 2019. We believe youth mastering the language of traditional Georgian music in our schools, will soon make their statement for the development and promotion of this sphere. Currently, almost all the ensembles are based in Tbilisi, while earlier the situation was the reverse. We have to send the masters of ‘Krimanchuli’ to Guria from Tbilisi! We want professionals in the regions. Ozurgeti has a large,

well-equipped folklore center, with concert and exhibition halls and recording studios. It was made to bring the experts back from Tbilisi to the regions” noted Donadze, the Executive Director of the State Folklore Center of Georgia. Professionals working in the sphere note the importance of such schools for raising national awareness and intensifying the preservation of identity. Likened to the Society for the Spread of Literacy among Georgians, it passes on the Georgian traditions of singing and chanting to future generations. In already existing schools, polyphonic singing and chanting are taught. In future there will also be oral folklore, choreography, fine and applied arts departments.

In 2015, on the initiative of the Georgian government and the Ministry of Culture of Georgia, the State Folklore Center of Georgia started creating choirmaster’s schools in various municipal centers and self-governed towns throughout Georgia, with the aim of preserving and promoting Georgian traditional polyphonic singing, proclaimed by UNESCO as a masterpiece of Intangible Cultural Heritage of Humanity in 2001. In 2016 all the ‘choirmaster’s schools’ received musical instruments and equipment and infrastructure was renovated. The main objective of the State Folklore Center is to research folklore material, record, create archives and enrich databases.


atients with multiple sclerosis, their family members and doctors, met at the Radisson Blu Iveria hotel to discuss the disease and its treatment. The event was organized within the frames of the campaign ‘Together for Each Other’ which has seen the active involvement of the state and society. The event was attended by representatives of the Union of Patients with Multiple Sclerosis and Lead Neurologists. Attendees shared their experiences in the fight against the disease and asked questions of the top specialists. At the end of the event, patients from the Ministry of Healthcare, City Hall and the Parliamentary Committee on Health and Social Welfare prepared and forwarded the appeal, where they once again emphasized the need for adequate treatment of the disease. “We need state support. We once again appeal to the Government of Georgia to provide financial assistance to make the treatment available,” said patient, Maiko Mgeladze. “None of the families can be treated with the current resources,” said Neuromedicine Professor and Neurologic Direction Professor, Marina Janelidze. “No patient can support themselves, and this is exactly where the state comes in to aid those in need. In the last 25 years, disease treatment has been advancing. The civilized world has been able to prevent the progress of the disease, and to create a large group of vital organs for the recovery of the immune system.” Global action 'Together for Each Other' kicked off in spring to increase public awareness of the disease, its timely diagnosis and access to adequate treatment. On May 30, Georgia joined the campaign on the International Day of Sclerosis.

Ana Koshadze, Ia Sukhitashvili, Zura Balanchivadze, Goga Chanadiri, Gia Jajanidze, Eka Togonidze, Teona Dolenjashvili, Fridon Sulaberidze and others joined the project as ambassadors of goodwill and called for increased access to treatment to improve the quality of life and reduce the progression of disability. Multiple Sclerosis is a chronic, progressive neurological disease. 2.3 million people worldwide suffer from it. The first symptoms are predominantly observed among 20 to 40 years and it is the main cause of non-traumatic disability in young people. There are several forms: The recurring-remission form (80-85%), which occurs periodically, sees inflammation of the infection occurring in different parts of the brain, followed by inflammation during remission. The 2nd progressive form is any recurringremission which after some time transfers to a progressive form, which means the disease is progressing. The patient becomes handicapped. The first progressive form is found in 15% of patients, which has no stages of remission and sees the patient become disabled. The activity of the disease, ie. inflammatory processes in the nervous system that accompany the death of nerve cells in the brain, can occur even in patients without clinical symptoms. The main goal of treatment is to reduce the incidence of the disease at an early stage to prevent the development of disabilities. Today, the treatment of multiple sclerosis significantly reduces limb loss and the progress of disability.




NOVEMBER 27 - 29, 2018

Presidential Elections in Georgia: Hours Away OP-ED BY KYRA DEVDARIANI


he presidential elections in Georgia are literally a few hours away, polit-technologists and campaign strategists are putting in overtime billing, the networks keep additional slots ready for the breaking news, and the observers brace under the barrage of the new developments. And voters? What are they up to? It may seem that it’s business as usual in Georgia, the supporters of so-an-so “demonstrating” here, and their opponents – a couple of blocks away, at best. Media coverage makes it sound like there are at least two parallel realities in which the electoral process unfolds, one universe courtesy of Rustavi-2, and the other of all the rest of TV channels. Armchair pundits fight their Facebook battles, “marshrutka” drivers are asked to change the news station in the public transport to keep the peace, everyone is sick and tired of candidate posters, same old same old. But this time around, there is an added intrigue to the elections actually being decided in the polls, with no party knowing the outcome well ahead of the voting. The generation that circled the only candidate from the Communist party and put the ballot into the box is still alive and well. They haven’t quite gotten used to the democratic elections, but then, neither has the rest of the polity. Tumultuous years after the Declaration of Independence, the Saakashvili takeover with no real opposition, election of the current president – none of these were exactly the exercises to make voters feel empowered. Even the Parliamentary elections in 2012 were not as important as the ones we’re about to witness on November 28, although, they provide an important context, and we’ll come back to that. As is customary in Georgia, the presidential ballot was long and amusing, with the majority names barely anyone has heard of, outside of the candidates’ immediate family and friends. 25 hopefuls, single or in marriages of political convenience, presented themselves, splitting the vote and getting us to Round 2. But the main reason for “Indecision-2018” (borrowing the term coined by Jon Stewart) was the conspicuous absence of the ruling bloc candidate. Georgian Dream (GD) went through several months of deliberations, trying and failing to find a person they could nominate, sending mixed signals on whether they would support the independently running Zurabishvili, or rally against her. When finally, GD decided to back her up, the damage was done: in politics, you cannot just leave the open space and expect that no one will fill it in, especially when your opponents are from United National Movement (UNM). While the ruling group was whispering in couloirs, the average members of the Georgian Dream didn’t know which way the wind was blowing, and made some statements that needed to be retracted later; some talking heads were temporarily retired from the spotlight over that, too. Zurabishvili opponents were happy to sow discord, as the audition dragged on until after the deadline set by the Central Election Commission (CEC) for the nomination of the candidates. There was less than 50 days to undo the damage inflicted by all the opponents, but Zurabishvili fought this uphill battle valiantly, and got into the run-off, with the UNM candidate, Grigol Vashadze. We’ll come back to these two in a moment, but the rest of the field merits attention as well. The 3rd place with almost 11% went to Bakradze from “European Georgia”, a spinoff from UNM – predictably, for Round 2, EG is throwing its support behind the former party. Even in a simple move like this, Georgia managed to deliver much-needed comic relief: a local branch of the “European Georgia” walked out in full, declaring that they never intended to work for the UNM. A month earlier, another local branch of the same party discovered that they were in EG, not in UNM for all those years after the split, undermining all the ideological differences proclaimed by the EG leadership. Not that anyone actually believed that it was done for anything but optics – anyone outside the local branches, obviously. The fourth place in the October 28 elections went to Natelashvili, Our Perpetual Groom of Labor, who has made a decent career as an opposition politician, while managing to remain a super-convenient figure: never a real threat (a wellcalculated position), yet vocal enough to whip a crowd into a meeting, with enough regional presence to tick off the “political pluralism” checkbox on questionnaires of foreign observers and analysts. Shrewd enough to understand that he lacks ammunition to counter the big boys battling for the top portfolios, he is content with a couple of seats in the legislative body if Labor gets them, or, maybe something in the executive branch on a regional or local level. Places 5-6 were separated by literally 3 votes: Usupashvili, running with Alasania-less Free Democrats, and the founder of “Girchi”, Japaridze. The former has guided the GD-majority Parliament through tumultuous times of co-habitation and tensions running high, defusing many a conflict and doing a much better job than his successor, but fell out of favor when his thenRepublicans lost a bargaining war with the other parties in Georgian Dream. Out of the GD bloc, Usu-

pashvili failed to get even a single seat in the 2016 Parliament, and subsequently left the Republicans – for a good reason, it seems: after opposing UNM long before it was mainstream (or safe), the current leadership of the Republican party threw its support behind the ex-archenemy, presumably for a promise of a couple of ministerial posts. Japaridze, on the other hand, has been across the aisle in the Parliament elected in 2012, but left UNM in 2015, and has created quite a stir with his “pinecone” (“Girchi”, translated), with his inflatable churches for the would-be draftdodgers, and cannabis-centered talking points. He did endorse the UNM candidate in the runoff, but retracted quickly – this may be quite important on November 28, as Japaridze’s voters in Tbilisi have outnumbered those of the European Georgia’s, in some districts – not bad for a 3-year old spinoff with limited resources. Usupashvili, in turn, has penned an article emphasizing the importance of not giving the UNM free talking points in order to defeat their candidate, and suggesting that the President-elect should take the conciliatory stance to re-unite the society split by the campaign rhetoric. For the runoff candidates, Zurabishvili and Vashadze, who got under 35% each in the first round, every vote counts. With the alliances outlined above, and with many still undecided voters, the information and media coverage are the real battlefields. UNM is far more experienced in that area, and it showed: with the ex-president Saakashvili working overtime, taking up as much airspace as humanly possible, GD was put on the defensive, and lagged behind in providing an adequate response. However, the “Dreamers” managed to stand their ground on the key “bombshell revelation” thrown at them by the National Movement: the alleged printing of the fake IDs by the State Services Development Agency (SSDA), to falsify/embellish votes. In that battle, there was a heavy collateral damage, as three strong NGOs backed the hysteria spewed by the UNM propaganda arm, Rustavi-2: the accusations fizzled out, as UNM admitted to having no proof whatsoever. The “Transparency International” and GYLA went into the fearmongering stint without checking the information first, and have suffered reputational loss as impartial and fair entities. Not a good day for the NGOs who are viewed by many naysayers as grant-gobbling organizations engaged in political discourse. But, this allegation brought to light an interesting question: what are the defense mechanisms and control procedures at the SSDA – incidentally, a highlighted item on a CV of Vashadze Jr (of the same UNM, but unrelated to the candidate)? Is there an audit trail to be examined by an independent body, preferably going back several years to its inception? The spikes in printing national IDs might prove to be very telling. Another big item against Zurabishvili – and you’ll see the pattern of being on the defensive here, as GD has a huge mismatch in PR teams: with Russian spin-doctor professionals on the UNM side, Georgian Dream managed to hire an ex-Rustavi2 person (!) to manage the final stretch of Zurabishvili’s bid for Presidency (lame is the mildest word that comes to mind) – is the campaign finance. Georgian Dream is notoriously bad at optics, unable to present its strongest achievements in a format that people will actually understand and appreciate, and the PM announcing the payoff of bad debts under a certain amount, for a large chunk of the Georgian population, was no exception. Yes, many Georgians are in debt, and, unable to pay it off, are blacklisted by the financial institutions. And while ridding them of the said debt is an honorable idea, the way it’s being presented is simply wrong, if not formally illegal. Buying bad debt portfolios (usually, pennies on a dollar) is a customary financial transaction done by the collection agencies, even if in this case the buyer is an entity known to all Georgians for its charitable work. It is then up to the buyer to decide whether to pursue the collection, in full, partially, or not at all – but the PM of Georgia has absolutely no business announcing that, especially in light of the buying entity being owned by the ruling party chairman who has a candidate in the run-off in the presidential elections! Plus, there’s a risk of alienating many who have been paying their debts diligently, despite the hardships, and those who believe that the money spent on bad debtors would go a long way if invested in the economy instead. And still, despite those blunders, Salome Zurabishvili seems to be poised to become the first female President of Georgia – simply because her opponent is Grigol Vashadze, widely seen as Putin’s stooge, with his KGB past and well-known allegiances. This election is not UNM vs GD – and the current escalation in the Azov Sea is just a reminder that Russia is casting its shadow ever so ominously over its neighbors. The question on November 28 will be: does Georgia want a president who was a citizen of Russia at the time of the 2008 war (until late 2009, to be precise)? Whose allegiance was not to the country he was serving as a Minister of Foreign Affairs, but to the one occupying 20% of Georgia’s territory? Whom does Georgia want as Commander-in-Chief? Russia’s choice is clear, they support Vashadze. Georgia’s choice is open, and it’s up to the voters at the polls.




Israel Inspires Georgian Politicians. For All the Wrong Reasons POLITICAL BRIBERY



our years after rising to power in 1977, Israel’s Likud party was about to be dealt a major blow in the parliamentary election scheduled for June

30, 1981.

THE ISRAEL OF THE LATE 1970s was only “thirtysomething”, having barely survived a war with its much larger neighbors. It was not the “Startup Nation” that it is today; instead, it supplied the world with deadly weapons, Dead Sea minerals, and oranges. Likewise, Israel was very far from anyone’s democratic ideal. From 1948 till 1977, it was governed by Israel’s Labor Party (MAPAI), which dominated not only the country’s politics but also its economy, print media, education system, and military. Even worse, Israel’s Jewish-Ashkenazi majority – MAPAI’s political base – failed to properly integrate immigrants from North Africa, Iran and Iraq, relegating them (and their children) to life in the periphery, literally (in remote settlements) and figuratively (as far as Israel’s economy, society and politics were concerned). Likud’s leader and PM, Menachem Begin, was a newcomer to the business of government. Having spent almost 30 years in the opposition, his party won following a wave of protests against the social injustices inflicted by the white Jewish-Ashkenazi majority against their Sephardic brethren in 1977. Yet, instead of improving the lives of its underprivileged electorate, Likud’s liberalization policies, coupled with rampant spending on social programs, led to a massive devaluation of the currency, 3-digit inflation (133% in 1980), and a deepening of poverty and inequality. Polls held at the very end of 1980 provided little hope. Likud was widely expected to receive about 24 seats (20%) in the 120-member Knesset. Only 22% of those polled considered Menachem Begin to be fit for the top job. Although lacking in practical governing experience, Mr. Begin was no softy. At the age of 20, he created a self-defense group to stand up to bullying by antiSemites in Polish universities; in 1944-6, he ordered deadly terrorist attacks as part of a Jewish insurgency seeking to drive British authorities out of Palestine. He was ready and willing to put up a fight.


In January 1981, Begin appointed a new Finance Minister, Yoram Aridor, whose mission was to “lighten the yoke” on the people of Israel. And Mr. Aridor delivered, big time. On February 1, 1981, barely two weeks on the job, Aridor announced the government’s decision to reduce taxes by 10 to 15 percent on small and mediumsized cars, color television sets and a long list of electrical appliances. As reported by the Washington Post at the time, “Israelis scooped up an estimated 8,000 new cars, 10,000 television sets and 20,000 major electrical appliances in the first month – an enormous buying binge for a country with fewer than 4 million people.” WP’s “Israel's New Economics: Tax Cut for Every Pocket as Voting Nears” is worth replicating: “The huge Boeing 747 cargo planes lumber one after another into Ben-Gurion International Airport from West Germany and the United States laden with color television sets and luxury appliances. The goods arrive none too soon for frenetic Israeli customers, who buy the reduced-price goods off delivery trucks double-parked in the main shopping streets. Docks at the port of Haifa are crowded with newly imported cars, their duties slashed 10 percent, and the buyers line up at the showrooms clutching checkbooks […] It is election time in Israel.” In mid-March, Aridor expanded the tax cuts to additional categories of consumer goods and unveiled further plans to eliminate or reduce taxes on income, inheritance and property. All of these measures contributed to a consumer bonanza, but improved access to color TV sets became a real game changer. The demand for color TVs shot up thanks to a previous government decision to lift the Soviet-style ban on color television broadcasting – in force until then, – making Israel “the last country in the free world to change to color”. Though recognizing it for what it was – blatant election bribery, Israelis were happy with Aridor’s “supply-side economics”. His tax cuts even led to a lull in inflation, at least for as a long as it mattered, until June 30th. Yes, the surge in the importation of consumer goods may have depleted the country’s foreign currency reserves, but that was an issue to be dealt with after the elections. Likud's started to improve in public opinion polls – to the consternation of the opposition Labor Party. However, that was not enough. Something else was required, something appealing to the voters’ psyche, rather than their pockets.



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This ‘something’ came on June 8, 1981, three weeks before the elections. That day, when Israeli citizens turned on their color TVs, they were astonished to find out that Israeli jets had “bombed and destroyed an atomic reactor near Baghdad that would have enabled Iraq to manufacture nuclear weapons”. As reported by the New York Times, the action was justified by Prime Minister Menachem Begin as being “essential to prevent the ‘evil’ President Saddam Hussein of Iraq from attacking Israeli cities with atomic bombs of the type dropped on Hiroshima during World War II.” * * * We will never know whether the Iraqi reactor – built by French and Italian companies – was intended for military purposes. What we do know for certain is that: • Menachem Begin went on to win the elections, albeit by the smallest of margins; • Yoram Aridor’s policies led to a near doubling of inflation – from 102% in 1981 to 191% in 1983; • In June 1982, Begin’s government waged a senseless war against the Palestinian factions in Lebanon, resulting in the Sabra and Shatila massacre and a 3-year long occupation (in which I took part as a young paratrooper); • Mr. Begin retired from public life in August 1983, telling colleagues: “I cannot go on any longer”.


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Having emigrated to Israel in 1977, my parents were able to afford their first color TV in spring of 1981, at the height of Aridor’s baksheesh election politics. I therefore had a strong sense of déjà vu on November 20, 2018, when my Facebook newsfeed suddenly exploded with reactions to the announcement of a government-negotiated deal to write-off the debts of more than 600,000 Georgian borrowers, removing them from the lenders’ “blacklists”. Speaking at a press conference just a week prior to the second round of Georgian presidential elections, Georgian PM Mamuka Bakhtadze explained that the “deal” involves Georgia’s commercial banks and the Cartu Foundation (a philanthropic organization established by the Georgian Dream’s founder and chairman, Mr. Bidzina Ivanishvili). According to Bakhtadze, it will apply to nearly GEL 1.5 billion (USD 564 million) in small loans of which the principal balance does not exceed GEL 2,000 (USD 754). I had another déjà vu moment when driving my kids to school the following morning. Giant “No to Nazis, No to Evil” posters stared at me from Tbilisi’s billboards, portraying the opposition’s presidential candidate Grigol Vashadze in the company of the deeply unpopular Mikheil Saakashvili and his political associates. The language and the unflattering images brought up memories of a brutal smear campaign waged by Israel’s right wing nationalist groups in 2009 against Naomi Chazan, my Hebrew University teacher and president of the New Israeli Foundation (NIF). Chazan’s NIF

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was found guilty of supporting Israeli NGOs having the guts to criticize the indiscriminate bombing of Gaza by Israel’s Defense Forces. “Unpatriotic” Chazan was portrayed with a horn, intent on piercing the Israeli flag. As I found out, both smear campaigns had something (or rather somebody) in common: Moshe Klughaft, a maverick political strategist and spin-doctor from Israel. As we all know, Mr. Klughaft’s brutality did not bring Israel an inch closer to resolving the Gaza crisis or to keeping itself safe. Likewise, it is unlikely to make Georgia a better place. * * * Israel represents a daring experiment in the reconstitution of an ancient nation (and its language); in defying Mother Nature’s laws and building an agricultural empire in the desert; in successfully defending a newly acquired statehood against much larger enemies; in harnessing the Jewish people’s chutzpah and innovation capacity to make up for the lack of natural resources. Israel can and should inspire Georgian policymakers for all those reasons. Not for the ugly aspects of its political system.

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). His current advisees include the Caucasus University and the Finnish International School project.


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Profile for Georgia Today

Issue #1104 Business  

November 27 - 29, 2018

Issue #1104 Business  

November 27 - 29, 2018