Issue no: 806/8
• DEC. 29 - JAN. 7, 2015
• PUBLISHED TWICE WEEKLY
FOCUS ON BUILDING A BETTER GEORGIA
PRICE: GEL 2.50
In this week’s issue... Mikheil Janelidze to Fill Minister of Foreign Affairs Post PAGE 2
Russia to Abolish Wheat Export Tax, Stability Expected PAGE 3
Tbilisi Development Fund, Making Tbilisi Shine PAGE 4
Humanity Georgia: Better Products, Lower Prices
The 35-story Batumi Tower is being re-designed to become a complex comprising of presidential, deluxe and standard aparthotels, indoor and outdoor swimming pools, restaurants, a fitness center, a lounge bar, and a casino
New Year Brings a Welcome Merger… and the Expectation of More to Come BY KATIE RUTH DAVIES
eorgia’s English language newspaper market is facing a significant change as two independent English language newspapers, Georgia Today and Georgian Journal, announce a merger in the last week of 2015. English language newspaper Georgian Journal, published by ‘Palitra Media,’ is to become part of Georgia Today. The latter will keep its twice weekly publications - Georgia Today on Fridays and Georgia Today/Business on Tuesdays, with an increased page volume - while Georgian Journal will become a purely online media source under its previous name.
IRAKLI TEVDORASHVILI, PUBLISHER OF GEORGIAN JOURNAL: I am sure that both our readers and partner companies will support our decision and accept it positively. The merger will help us to fully concentrate on one product through joint efforts, optimized resources and shared experience in the newspaper publishing business. As a result, Georgia Today will not only keep its leading position but will increase its market share to present a more advanced and more interesting product to its target audience. GEORGE SHARASHIDZE, PUBLISHER & GENERAL MANAGER OF GEORGIA TODAY: This change will definitely affect Georgia’s English language media market. Georgia Today, with its fifteen years market presence, was
objectively considered as the leading English language newspaper in Georgia. However, the merger with Georgian Journal will give us an increased opportunity to improve the newspaper quality, both in terms of content and distribution. Thus, our partner companies will benefit from the best advertising platform with no alternative of such quality and efficiency in the country. The recent merger follows on from a rebranding and redesign by Georgia Today late autumn, as well as the move to expand readership by introducing the new weekly Georgia Today/ Business edition, covering the latest economics, law and business news and analysis, in addition to the general news coverage offered on Fridays. Continued on page 2
Oil Prices: Falling Again PAGE 8
Tegeta Motors: Make Your Car History PAGE 11
New Ski Lift Station Kokhta Opens in Bakuriani PAGE 13 Prepared for Georgia Today Business by
STOCKS BankofGeorgia(BGEOLN) GHG(GHGLN) TBCBank(TBCBLI)
COMMODITIES CrudeOil,Brent(US$/bbl) GoldSpot(US$/OZ)
DECEMBER 29 - JANUARY 7, 2015
Mikheil Janelidze to Fill Minister of Foreign Affairs Post
Minister of Economy to be Appointed Vice PM BY ZVIAD ADZINBAIA
eorgia’s candidate Prime Minister, Giorgi Kvirikashvili, has announced that Dimitri Kumsishvili, Minister of Economy and Sustainable Development, is to occupy the position of Vice Prime Minister alongside
the current Vice PM and Minister of Energy, Kakha Kaladze. “Once Parliament approves the new government, Dimitri Kumsishvili will be Vice PM,” Kvirikashvili said. The announcement follows the resignation last Wednesday of Ex-PM Irakli Garibashvili. The entire Cabinet is suspended awaiting the instalment of a new PM. The parliamentary majority of Georgian Dream has endorsed the candidacy
of Georgia’s acting Foreign Minister, Giorgi Kvirikashvili, for the Prime Minister’s post. After the parliamentary session, the nominee declared that he does not rule out a reshuffling of the Cabinet, however, he does not foresee any dramatic shifts. The remaining procedure for forming a new government is up to the legislative body, Parliament, which is expected to approve the new Cabinet.
New Year Brings a Welcome Merger… and the Expectation of More to Come Continued from page 1 From 2016, Georgia Today will also be presenting: WHERE.GE: Each foreign visitor to
Georgia, both tourists and business travelers, will be equipped with the new comprehensive tourist guide, WHERE.ge, unique in content and distribution network. Accessible through-
out Georgia’s HORECA, WHERE.ge will assist tourists to plan their holidays and adventure tours with more practical and up-to-date information though both print and online content.
BY ZVIAD ADZINBAIA
eorgia’s candidate PM, Giorgi Kvirikashvili, has announced he will soon present the acting governmental team to Parliament
for approval. Kvirikashvili named Deputy Foreign Minister Mikheil Janelidze as candidate for Foreign Minister. Mikheil Janelidze earned his first BA degree in International Relations from Tbilisi State University back in 2002. Subsequently, he continued his post-
graduate studies in International Law and European Law at Diplomatic Academy of MFA Russia. Janelidze holds a Master’s degree in Business Administration with Distinction from Grenoble Graduate School of Business and Executive Master of Business Administration from Caucasus School of Business, Tbilisi. At different times, Mikheil Janelidze has acted in both, private and governmental sectors. Before being appointed First Deputy Minister of Foreign Affairs of Georgia in September 2015. Since November 2011, Janelidze worked as a Deputy Minister of Economy and Sustainable Development of Georgia.
DECEMBER 29 - JANUARY 7, 2015
Russia to Abolish Wheat Export Tax, Stability Expected BY ANA AKHALAIA
ead of the Flour Producers Association, Levan Silagava, has claimed that Moscow is planning to abolish or significantly reduce export tax on wheat. The Russian government’s decision may provide flour and bread price stability in Georgia. Silagava said that this is a very positive decision, not only for Georgia but for the world markets, too. The wheat harvest is quite good throughout the world,
Levan Silagava, Head of the Flour Producers Association
including in Russia, and this is the reason for the recent decision. “The wheat harvest was good this year and Russia found it difficult to export their products because it had an export tax. Accordingly, in order to sell wheat on the world market at competitive prices, tax reductions would be necessary,” said Silagava. From February 1st, 2015, Russia set export tax on wheat at 15% +7.5 euros of the value. Additionally, Russia reinforced processing factories and decided to support flour export in order to create a domestic product and employ a local workforce.
According to Silagava, when a company imports flour from other countries, it takes benefits from the state. Therefore, it is difficult to compete with other countries. This is why, he says, there is USD 40 difference on 1 ton between milled flour prices in Russia and in Georgia. “Russian flour takes 90% of the wheat market in Georgia. As a result, if this trend continues, local production will be replaced by imports, and therefore the state budget will suffer, jobs will be cut and so on,” said Silagava.
The Happy Company Invests in Children’s Creativity and Learning BY PENELOPE CUMLER
Educational toys from Kosmos are among the many fun and creative items available at the Happy Company in Vake
NEW YEAR SALES!
years ago but keep an eye on their beloved homeland with the interest, also shared by parents, of promoting the educational opportunities of children. While living in Hamburg they often noticed the type of activities children engaged in: project based play that promoted concentration by following through on a process, such as scientific experimentation or building a model airplane. Continued on page 14
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n time for the New Year, new ideas about playing and learning are on view at the Happy Company, which recently opened their doors at 9 Abashidze St. in Vake. The brainchild of two Georgia natives, Lasha and Nino Papukashvili, and a German and friend of Georgia, Tobias
Winkler, the shop sells toys for children designed to awaken their creativity and promote hands-on learning. The corner shop features an open area for children and walls lined with shelves of scientific experiments and arts and crafts supplies and kits produced by well-known companies such as Kosmos and Max Bringmann KG/Folia®, primarily German manufacturers. The Georgian natives, professional chemists, immigrated to Germany many
FULLY RENOVATED FLATS IN BAKURIANI!
OPEN YOUR DOORS!
DECEMBER 29 - JANUARY 7, 2015
Tbilisi Development Fund, Making Tbilisi Shine G
iorgi Baidarashvili spoke to Georgia Today about the work of the Fund.
PLEASE SUMMARIZE 2015: WHICH ARE THE MOST IMPORTANT PROJECTS? WHAT WAS THE MAIN DIRECTION OF WORK FOR THE FUND? I have been Head of the Fund since July 1st, 2015, therefore it makes more sense to summarize the period over the last six months. The second half of 2015 has been marked by very important initiatives and changes for the Fund, there are three main aspects: new projects, organizing and implementing the planning for rehabilitation of certain areas in 2016 and institutional development of the Fund. Within a limited timeframe, in the second half of 2015, extremely important projects have begun in the historical part of the city and in terms of touristic development. The rehabilitation projects of the Wine Rise, Gudiashvili Square and historical buildings in the second part of Agmashenebeli will become a foundation for the increase of social and economic welfare of the citizens of Tbilisi. The second direction, which envisages preparation of projects for 2016, started, also in rapid mode, in September and October. The planning of the rehabilitation of up to 45 houses located in the second part of Agmashenebeli Avenue, will be finished by the end of this year. Moreover, preparation works will be ready for 15 historical monuments and/ or public infrastructural projects. These will serve as the basis for a very loaded yet correct working plan for the Fund next year. The same year, based on the Gudiashvili Square conservation, we plan to start working on plans for the rehabilitation of those addresses in the most severe state, and also to make the plans for works that should be carried out on the second part of Agmashenebeli Avenue, which will clarify what further decisions need to be taken. The third direction, which started in August, concerns organizational and methodological development of the Fund as well as personnel management: 1. At the beginning of November, a
The main action area of the Fund includes up to about 2000 monuments
completely new organizational structure was introduced in the Fund, developed by the employees, together with consulting firm Synergy Group. 2. The existing scheme of human resource distribution has been rethought, with consideration of abilities and qualifications. Moreover, the Fund has been recruiting new employees in an on-going process. The purpose of the Fund has been clearly defined and specified and envisions preserving the historical appearance of Tbilisi and increasing the value of real estate. The renewed structure of the Fund has been built on this principle and is comprised of the following three permanent strategy action plans: 1. Define the opportunities and necessities related to preserving the historical appearance of the city and increasing the value of properties (not only in monetary terms). 2. Plan correct ways of using these opportunities for the benefit of the city. 3. Realize these opportunities in a qualified, rapid and correct manner. The activities of the Fund have always been and will continue to be related to improving the touristic, economic and social potential of the city. In the areas where the Fund is carrying out its activities, the visual side of the city is improved, the condition of monuments, the number of tourists and visitors is increasing, and the value of the property and the price of its usage (rent). All this is the basis for the improved welfare of our citizens.
WHICH REHABILITATION PROJECTS INVOLVING UNIQUE HISTORIC HOUSES WOULD YOU DISTINGUISH? One of the best examples in this regard is No.36, D. Agmashenebeli Avenue, with its wonderfully painted entrance. The residential block on Shalva Dadiani Street, No.32-34 is also very important as it is considered as the oldest building in the historical district of Tbilisi. Its rehabilitation is planned for 2016. The main action area of the Fund includes up to about 2000 monuments, with 18th century monuments on Gudiashvili Square, buildings on Agmashenebeli and Orbeliani Square among them. The processes for planning the rehabilitation of these has started. We hope that we will be able to rehabilitate the ones that are in the most severe state. In this regard, in order to determine the priorities correctly, with the help of the company “Geography,” the Fund carried out a unique project for accounting and evaluating the conditions of historical monuments and for determining the right necessary works. Such thorough study and evaluation of monuments for the planning of rehabilitation, restoration, and conservation has never been carried out Tbilisi. This research is a clear and correct action frameworkdecision of the Fund for the following 3-5 years, made in order to use those unique opportunities that exist due to the many historical buildings, for the
benefit of citizens, Tbilisi and the country.
TELL US ABOUT ANY DIFFICULTIES THE FUND FACES. HOW DOES THE FUND OVERCOME THEM? Claiming that we and the City Hall do not face barriers, when works of this scope should necessarily be carried out, would be false. The most important problems, which we think we will be able to overcome through stable, continuous communication, are the following: First of all the attitude of citizens, especially the ones who own the monuments and who have stereotypes regarding their real estate. It is incorrect to think that the border of your house is only your door step, when you do not care what happens beyond it, when you are not interested in its constructional, visual or hygienic state. It is also incorrect to think that only the government is respon-
in its place. While this attitude exists, the pace of rehabilitation of historical areas will always be slow. Throughout the next years, the Fund will try to change existing stereotypes for the benefit of the Old city. The third is that the legal regulations need to be improved. Borders need to be determined for the Fund, the government in general and business, which instead of hindering will support saving the monuments and using them in the correct way. Without this they will never have anyone responsible for their preservation. The Fund will not spare itself to make a complex analysis in which the sequence all the necessary works should be carried out in order to renew-preserve and conserve historical monuments, and to reveal incorrect, outdated legal barriers, as well as vacuums, and suggest opportunities for correction. Afterwards, we will develop initiatives about changes and try to improve the situation in the legislation for managing the historical monuments.
TELL US ABOUT NEW PROJECTS FOR THE UPCOMING YEAR
Today, interest towards historical monuments in the Old city is unhealthy and rather short-term... with a focus on demolishing a building and constructing a bigger one in its place sible for preserving and developing the property, which is often more than 100 years old. When the attitude of the population is that they should necessarily gain something from the project, it becomes very difficult for the Fund to carry out the works at the relevant pace, to keep up with the pace with which the historical monuments are damaged daily. Second is the attitude and stereotypes of business representatives towards historical monuments and how they should be used. Today, interest towards historical monuments in the Old city is unhealthy and rather short-term. Most of those who are interested in monuments perceive them as a problem if they want to build something and/or purchase it; they focus on demolishing the monument and constructing a bigger building
The main concentration in 2016 will be on rehabilitation of the second part of Agmashenebeli Avenue and the main part of Gudiashvili Square. Also, finishing the majority of rehabilitation works within various separate projects that have started in 2015, with all addresses on the Wine Rise among them, Khetagurov’s House-Museum, Medicine Museum, various places in Kvemo Kala, and residential buildings on Tumaniani and Betlemi streets At the end of the first half of 2016, the planning of next year’s projects will begin, for which the preparation project on concepts of development of the Pirosmani-Constitution-KargareteliAgmashenebeli-Orbeliani avenues will be finished by the end of 2015. This project will determine the opportunities of development in the stated areas, and the Fund will use them in the following 2-3 years.
WHAT IS THE IMPORTANCE OF TOURISM FOR THE REHABILITATED OLD CITY? WHAT ABOUT THE CHARM AND ATTRACTION OF THE OLD CITY IN GENERAL? Deriving from the historicity of Tbilisi, it is extremely interesting in terms of tourism and it will become even more appealing if we are able to foresee the target area of exactly what touristic flow Tbilisi can gain in the next 3-5 years. It will be difficult to use the touristic potential of Tbilisi correctly if we don’t identify the potential touristic streams and stimulate the creation of interesting attraction spots for them. In future, the Fund will try to develop interesting routes for potential tourists based on this principle with all elements: creating interesting connections between exist-
ing routes, creating new attraction points, and supporting the development of Tbilisi by promoting it together with the relevant state and private tour operators.
WHAT IS THE BENEFIT OF DEVELOPMENT OF THE CAPITAL’S HISTORIC AREA? This is a unity of decisions, developed based on detailed research of up to 2200 buildings in the historic part of Tbilisi and derived from evaluating the scope of influence these can have on developing the city. The concept determines in which sequence the Fund should work on saving the historic-cultural monuments. Specifically, it determines which monuments the Fund should work on out of all 1700 monuments. What is most interesting is that the prioritization of working on these monuments is determined not only based on the necessity of saving the monument, but also on what effect saving it have on the development of the street, district, region and the city, as well as in terms of touristicsocial and commercial-economic aspects. Therefore, in terms of objectivity, the Fund has very clear action priorities for organizing the processes of rehabilitation of historic-cultural monuments in the upcoming 2-3 years.
WHICH OF THE ONGOING PROJECTS WOULD YOU SINGLE OUT? All of them are important, so it is difficult to choose a single one. In short, it is very important to connect the already rehabilitated parts of Tbilisi with touristic and commercial points and the parts that are interesting in terms of social life with each other. In this regard we plan to connect Pirosmani Street, which is connected to two large shopping centers in the city center – Tbilisi Central and Kavasla, with a highly important transportation hub (Railway Square), to the already partly rehabilitated Agmashenebeli Avenue via Constitution-Kargareteli Streets. Later, after rehabilitating this part of Agmashenebeli, Dry Bridge and Orbeliani Squares and the rehabilitated Gudiashvili Square will be connected with the rehabilitated Kvemo Kala. It will be logical to rehabilitate the roads leading to the Sameba Fortress and interconnecting the stated enormous rehabilitated touristic zone with it as Sameba represents a critical attraction for the city, together with many other buildings. While visiting Tbilisi, a tourist will by all means find himself here. Wine Rise is part of this route, which is why its rehabilitation is important within this route and not as a separate unity of addresses.
HOW DOES YOUR IDEAL TBILISI LOOK? It would be a city loved by people, in which each street, house, garden, square, entrance or elevator is an object that is handled just like our own homes... A place where people care for their city, respect each other and our guests.
Humanity Georgia: Better Products, Lower Prices BY ANA AKHALAIA
umanity Georgia has entered the Georgian pharmaceutical market with ambitious plans and aims to offer a wide range of medicines in the near future. According to the company, at the first stage, they will be offering the most common consumption drugs in Georgia at the end of December. The entrance of the new pharmaceutical company is positively assessed by specialists, doctors and politicians alike, who agree that it will contribute to competition on the countryâ€™s pharmaceutical market and increase access to medicines. â€œOur company is young but our advantage is that the best specialists with great experience are in the companyâ€™s man-
agement,â€? said Andrey Kuzma, the Director of the company. â€œA large part of the companyâ€™s employees have a lot of experience working with world brands, such as SANOFI and PFIZER. Humanity Georgia is a dynamically developing company and our goal here is to establish ourselves in the Georgian pharmaceutical business as a affordable, safe and quality product supplier.â€? According to Kuzma, their products are certified by the manufacturer EU GMP as well as with serial control of the World Health Organization certified laboratory. President of the Association of Pharmaceutical Companies, Irina Chelidze, who met with the Director of Humanity Georgia, said that the company represents a wide range of generic drugs on the Georgian market and mostly offers medicines produced in India. â€œToday, there are several strong play-
DECEMBER 29 - JANUARY 7, 2015
Andrey Kuzma, Director of Humanity Georgia and Natia Turnava, of the Partnership Fund. Humanity Georgia has entered the Georgian pharmaceutical market with ambitious plans
ers on the Georgian pharmaceutical market and I think that it will be very difficult for them to compete with the new company,â€? Chelidze said. I believe that the new company should enter the market with just the right marketing moves. In general, the pharmaceutical market is a living process, constantly changing. It is natural that one player goes and another enters. Monopoly in Georgia is out of the question. And, as it is easy to start a business [here], all kinds of imports can be carried out.â€? She also discussed the control on imported drugs in Georgia which are not properly checked. She suggests that the government establish a laboratory which will control imported medications, since the product identity is not confirmed in any way with the current registration. She further stated that the distributors
of medication is not transparent the law keeps it confidential. â€œWhen a drug is not accompanied by a document which does confirms its authenticity, it means that we are not insured from questionable products,â€? Chelidze said. â€œIn general, when we talk about drug effectiveness, the most important is bioequivalence. It does not have a great importance which the producing countries are; the important thing is to identify bioequivalence correctly. I believe that if the drug quality control tightens it will reflect on prices. Accordingly, access to medicines will increase. JSC Humanity Georgia was founded by Austrian company Humanity Holding GmbH which will build a high-tech pharmaceutical factory in Tbilisi with the Partnership Fund. The Ministry of Health and Social Affairs will actively participate in the project. The European standard pharmaceuti-
cal drug manufacturing factory will be equipped with the latest technology, modern laboratory quality inspection, warehousing and other necessary infrastructure. The factory, which will employ 300 people, including local and foreign specialists, will produce at least 800 types of medicine, both for local use and for export. A certain number of drugs will be imported by the company, which they plan to sell at reasonable prices in Georgia. The agreement for the new USD 130 million project was signed between the Partnership Fund, Humanity Holding GmbH and project company Humanity Georgia. The Company believes that importing safe and affordable medicines will guarantee a drop in prices on the Georgian pharmaceutical market averaging 30% or more.
),567(8523($167</( $3$570(176,1327, GORGASALI STR. 36
Total area - 110 m2 Balcony - 6 m2 (Agmashenebeli Street view) Balcony - 9 m2 (Sea view) Bedroom - 20 m2 Living room - 21 m2 Kitchen - 20 m2 Hall - 10m2 Bathroom - 5 m2
Total area - 53 m2 Balcony - 6m2 Bedroom - 14 m2 Living room and kitchen - 24 m2 Hall - 4 m2 Bathroom Ba B athro rooom m - 5m 5m 2
DECEMBER 29 - JANUARY 7, 2015
The Galt & Taggart Research team comprises Georgian and Azerbaijani finance and economic experts who have broad experience of covering the macro and corporate sectors of the two countries. Our current product offering includes Georgian and Azerbaijan macroeconomic research, Georgian sector research, and fixed income corporate research. For free access to Galt & Taggart Research, please visit gtresearch.ge or contact us at email@example.com.
Oil Prices: Falling Again BY KOBA GVENETADZE
il prices keep falling, below all previous projections and expectations. The price of Brent crude sank to US$34.8 per barrel on December 21, the lowest level since May 2004. This is 44% and 69% percent lower than the prices in June 2015 and June 2014, respectively. Natural gas and coal prices followed the trend, but fell by less as these fossil fuels are generally priced through oil-indexed contracts with some lag. Such a sharp drop in oil prices is not unique. Reflecting various geopolitical, economic and security factors, “Black Gold” prices have fallen sharply three times in the near past: in 1985-86, in 1990-91, and in 2008-2009. Low oil prices are good for the global economy, because they translate into lower cost of production, thus boosting profits and savings and enabling higher investments. A period of low oil prices is also a good time for the reduction of energy subsidies which were at US$548 billion (0.7 percent of the world GDP) at end-2013. Projecting medium to long-term oil prices has often proved to be an unsuccessful endeavor because of the variety and complexity of factors affecting the price movement. Instead, let’s look at the reasons behind the recent oil price collapse and try to understand if low prices are likely to persist.
WHY DID OIL PRICES PLUNGE? Slowdown of the global economy is the main demand factor behind the fall in oil prices. Global economic growth is projected to decelerate from 3.4% in 2014 to 3.1% this year, implying a weakening demand for oil. More importantly for the oil sector, 2015 growth in emerging economies—main consumers of the growing oil production—is projected to decline for the 5th consecutive year to 4% compared to 4.6% in 2014. Based on the BP database, the annual oil consumption growth in 2014 fell to 0.9% compared to an average annual growth of 1.8% during 2010-2013. The IEA estimates global oil demand in the last quarter of 2015 to increase by only 1.3 million barrels per day (mbd) from a year earlier, which is significantly lower than the 2.1 mbd annual demand growth registered in the third quarter of this year. Emergence of US shale oil appears to be the strongest supply factor that contributed to the drop in oil prices. Thanks to the so-called “shale revolution”, a new horizontal drilling technology that enables extraction of oil from tight rock formations, the US has added about 4 million barrels (about 5% of 2014 oil production) of unconventional crude to oil markets over the last four years, making the US the world’s largest oil producer in 2014. Shale oil production has a considerable advantage over conventional oil drilling. It requires a relatively low capital cost and has a much shorter life cycle (3 years) between the first
investment and production compared to a decade or longer needed for conventional oil drilling. Moreover, unconventional shale oil producers can adjust output levels reasonably quickly to changing demand. A shift in the strategic behavior of the Organization of Petroleum Exporting Countries (OPEC), accounting for 40% of the world’s oil supply, is another important contributor to the current supply glut. OPEC, and in particular
In 2015, growth in emerging economies—main consumers of the growing oil production—is projected to decline for the 5th consecutive year to 4% compared to 4.6% in 2014
Saudi Arabia, abandoned its traditional role as the global oil market’s swing producer—a supplier with spare capacity that can influence market prices by adjusting output—by leaving the production quotas unchanged in the face of growing non-OPEC supplies a year ago. Some analysts argued that Saudi Arabia’s decision was aimed at slashing the profits, and ultimately the oil production, of the US shale oil producers with relatively high extraction costs. While falling oil prices will force some shale oil producers out of business, Rystad Energy, an oil and gas consulting company offering analysis of the global databases, is of the view that US shale production has so far remained economical despite the drop in oil prices as the breakeven price—the minimum price level at which extracting oil remains profitable—for shale oil has also been falling every year. OPEC’s decision to maintain its collective production target unchanged in its recent meeting kept the oil market oversupplied and pushed the prices further down. Some geopolitical events also supported the increase in oil supply. Against many analysts’ expectations, crude oil production recovered quickly in Libya despite unrest and elevated security concerns. Invasion of Iraq by the Islamic State militants in June 2014 did not disrupt the oil production of OPEC’s second largest producer as the conflict did not spread to the south, where the country’s largest oilfields are located. Furthermore, Russian crude oil production has recently reached a post-soviet record high despite
sanctions following the Russia-Ukraine conflict. Overall, while both supply and demand factors played a role, the supply side factors appear to have weighed more on the recent drop in oil prices.
WHAT’S NEXT? Given the dominance and size of the supply factors in the recent collapse of oil prices, oil producers’ investment decisions will largely shape the longevity of the current low oil price cycle. A long period of high hydrocarbon prices can create preconditions for them to fall: high oil prices encourage massive investments in new production capacities that can lead to a sharp increase in production and result in global oversupply of oil. The residual oil is stockpiled, providing comfort to oil consumers and pushing oil prices down. According to the Rystad Energy analysis, the current oil supply glut and collapse in oil prices are direct consequences of overinvestment by the oil and gas industry in 2013 and the first half of 2014. Oil and gas companies invested as much as 900 billion USD in exploration, drilling, field development, and field maintenance in 2013. OECD crude oil inventories, according to the IEA, were at a record high 3 billion barrels at end-September 2015. Based on the same logic, falling oil prices should lead to lower capital investments in the oil sector and impact future oil production with some lag. Rystad Energy reports that fearing plunging oil prices, global oil companies have cancelled or deferred about US$175 billion
future upstream investments by mid2015. Overall, global exploration and production spending has been cut by US$250 billion in 2015 versus 2014 and a further US$70 billion reduction is projected for 2016. These cutbacks will eventually slow down the growth of oil supply and put upward pressure on oil prices. Expected higher growth of emerging economies in 2016 (4.5 percent) will also push up global demand for oil. Three additional factors could influence the global oil prices in the near future. First, last week the US congress removed the 40-year old export ban on crude oil exports. This means that US producers will soon be able to export light crude oil to already oversupplied international markets. Second, Iran’s likely return to the global oil market in 2016 is expected to increase global supply of oil, causing global oil prices to ease. Third, the US Federal Reserve Bank’s recent increase of the policy interest rate is likely to keep the US dol-
lar strong, which will also support low oil prices. The above factors suggest that while gradually recovering from the current level, oil prices can be expected to stay relatively low for some time. A good way to sense where the oil prices are heading is to look at the futures’ prices as they reflect market participants’ expectations. The Brent futures contracts dynamics as of today show that the market participants expect a slow recovery in oil prices. The moderately upward sloping futures prices will supposedly discourage risky and bold investment in the oil sector, but provide enough incentives to carry on the ongoing projects and start investing in new viable ones.
LAST, BUT NOT LEAST While supporting global growth, low oil prices, unfortunately, promote usage of energy intensive technologies in industry and agriculture, thus causing environmental damage from production of fossil fuels and increasing emissions of carbon dioxide and other greenhouse gases. More importantly, low hydrocarbon prices provide little incentive to policymakers to fund research and development of renewable (hydro, solar, wind) sources of energy and cleaner energy technologies. Introduction of a tax on carbon is often suggested by economists to reduce the environmental damage from carbon emissions. Until this happens, however, let’s hope that the recently adopted United Nations Climate Change Conference Paris dec-
laration, which aims to transform the energy sector by accelerating investments in cleaner technologies and energy efficiency, will bring tangible results even in the environment of low oil prices.
Author Koba Gvenetadze is on leave from the International Monetary Fund (IMF). The views presented in this article do not represent those of the IMF or its Executive Board.
DECEMBER 29 - JANUARY 7, 2015
Furniture Made in Georgia to Head to Sunny Spain BY ANA AKHALAIA
utdoor Furniture, one of the many companies under the Produce in Georgia program, is planning to enter European
market. The company will send its furniture in Spain from January, with a collection
having already been selected and to appear in Spanish stores from spring. The company is also in negotiation with Armenia and Azerbaijan. “We are sending only straw furniture which is seasonal for spring, summer and autumn,” said Shota Bukhaidze, Director of Outdoor Georgia. “We couldn’t produce enough for export before but now we are actively working in this direction. We will export chairs, deck chairs, sofas, tables and swings.”
Outdoor Furniture does not pay custom tax which enables it to access the market of the EU member country. The Deep and Comprehensive Free Trade Agreement (DCFTA) between Georgia and the EU came into force on September 1st, 2014. This provides preferential trade relations between Georgia and the EU, in particular, it repeals import and export taxes on products in trade. Under the DCFTA, the customs tax will be abolished which is mandatory
for third countries. The tariff established by the EU is 5.6% of the value of this type of furniture. Before the DCFTA, preferential trade was possible with GSP+ according to which such products were also released from tax but temporally. Outdoor Furniture company has DCFTA on a permanent basis. Expansion and re-equipment of the furniture company was carried out under the program Invest in Georgia. VTB
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Russian Company Caught Selling Georgian Sulguni Cheese in Europe BY ANA AKHALAIA
he Ministry of Agriculture discovered counterfeit Sulguni cheese in Italy and Bulgaria, Tengiz Kalandadze Deputy Head of the Food Safety Agency, told eugeorgia.info. Kalandadze states that Georgian cheese packaged by a Russian company in Europe
was found on the internet. Sulguni is registered as a Georgian geographical indication, therefore, its production in other countries is considered to be counterfeiting. The EU Association agreed on the protection of products originating from a certain geographic area, however, the list does not include Sulguni and so they are unable to take appropriate action. “The agreement between Georgia and the EU on the protection of geographi-
cal indications of agricultural and other food products was signed in 2010, at the National Intellectual Property Center. Sakpatenti registered Sulguni in 2012,” said Nikoloz Gogiladze, Chairman of Sakpatenti. “We are working on resolving this issue, it has already been discussed at the joint committee meeting and, along with Georgian cheese, we will also add other recently registered products to the list. However, the document needs to be ratified by Parliament.”
Georgian Tapas Menu at g.Vino 0322 93 21 21 fb: g.vinotbilisi
bank provided a USD 150,000 loan to the company. Enterprise Georgia will co-finance 10% from a 13% total loan interest for two years. Outdoor Furniture bought new equipment, expanded and improved the production process with the loan. According to the director, the company is now manufacturing wooden straw furniture with the new equipment. The number of employees has also increased from 20 to 40.
DECEMBER 29 - JANUARY 7, 2015
Tegeta Motors: Make Your Car History BY ANA AKHALAIA
egeta Motors is now offering its customers a new innovative service which allows the car owner to see all his personal car data on a computer screen: costs, savings, updates or different reminders with relevant recommendations and a general history of the car. After registering on www.mycarhistory.
10 Galaktion Street
ge, you can see all your operations, for example, when the last time was you replaced the oil or accessory; receive information via messages and even get recommendations. At the same time, the system will constantly remind you what procedures are necessary for the optimal performance of your car. My Car History personal page stores information about all the cars the owner has ever owned and used Tegeta Motors services on. Of course, visitors to the website can optionally show or hide this information. Most importantly, all the
details are confidential and only the direct owner will have access to the personal data. If you plan to sell or change your car, the new user will not be able to see old data. In addition, the site has no editing function, which means that confidential information is not in danger and, in the case of data loss, the owner can feel secure. The program includes Loyalty Cards. With the My Car History project, new TEGETA CARDS were created: Tegeta Classic, Tegeta Silver and Tegeta Gold.
Tel: (995 32) 2 45 08 08 E-mail: firstname.lastname@example.org
The Tegeta Classic will be given to all those who use the company’s services and, with the accumulated bonus points, adequate services or products will be available. If the cost on the card is more than 500 GEL, it will be updated to Silver status. The Gold Card will be available after spending more than 1500 GEL. As for the advantages, Tegeta Silver owners will receive a 5% discount and Tegeta Gold owners – 10%. My Car History not only systemizes the information, but also takes care of the user’s security and, in the form of
notification, constantly reminds users what needs to be changed or repaired. This project has no analogue on the Georgian web and is available only for Tegeta Motors customers, provides security and reducing worry. The owners will not have to fill their car diary as Tegeta Motors will take care of all the details. The website www.mycarhistory.ge also provides video instructions. Operators also can help you to create a personal history of your car on Tegeta Motors hotline: 226 44 44.
DECEMBER 29 - JANUARY 7, 2015
MetroCity: The Best Innovative Project BY EKA KARSAULIDZE
ulticomplex construction project MetroCity Batumi was among the winners of the first Eastern Europe and Asia Real Estate Forum and Project Awards. The Forum gathered 49 organizations from Ukraine, Belarus, Kazakhstan, Azerbaijan and Georgia and was held under the Ukrainian Real Estate Club and EuropaProperty.com organization. According to the organizers, the Forum was a great platform for establishing business contacts and finding new partners, as well as an effective way to advance projects, especially if the project is at an early stage of implementation. During the discussion, hot topics were raised such as the real estate market in Belarus and Ukraine in the time of world economic crises, the attractiveness of the New Silk Road countries – Georgia, Azerbaijan and Kazakhstan, as well as a third discussion panel fully dedicated to the Georgian hotel market. “There were various presentations, marketing research in the field of audit and financial accounting in the Forum. Moreover, we also had a presentation of our MetroCity project and thought it was an interesting example for our
colleagues,” said Irma Kamadadze, Head of MetroCity Sales Group. “It was a very important forum for our company – we
familiarized ourselves with the Ukraine, Azerbaijan, Belarus and Kazakhstan projects and established business relationships with their representatives. We have already signed a number of contracts and established formal relationships.” The Forum also reviled the best construction project in seven categories: the Best Office Project, the Best Commercial Real Estate Project, the Best Development Commercial Real Estate Project, the Best Residential Complex Project, the Best Residential Complex, the Best Multicomplex Project, the Best Hotel Project, and awarded some special prizes like the Best Innovation Project of the Year, which went to MetroCity. MetroCity won the prize for Best Innovative Project thanks to its unique and multicomplex aspect, which includes two residence complexes with 464 apartments from 38 m2 to 300 m2, two five star hotels, two casinos, private swimming pools, panoramic terrace restaurants, spa, a shopping center including 100 brand stores, sports club, a la carte restaurants, cinema, a bowling center, a playground for children, a golden sandy beach and the biggest conference hall in Transcaucasia for 1500 guests. MetroCity is a huge construction in Batumi City, which was begun in February 2015 and it will be successfully completed in April 2017.
DECEMBER 29 - JANUARY 7, 2015
NBG Sells USD 20m to Strengthen Lari
BY KATIE RUTH DAVIES
he National Bank of Georgia (NBG) sold USD 20 million at a foreign currency auction last week in order to support the national currency Lari (GEL) which, as a result, strengthened to 2.4023 per U.S. dollar from 2.4107. The move marked the central bank’s ninth intervention this year with total sales reaching USD 286.96 million. The beginning of this month saw Georgia’s foreign exchange reserves at USD 2.479 billion, up from USD 2.449 billion the previous month, and down
from USD 2.699 billion at the beginning of 2015. IMF mission said on December 8 that it “strongly supports the NBG’s policy to allow the Lari to float and to limit foreign exchange interventions only to dampen excess exchange rate volatility.” The Lari has been stable at around 2.39-2.40 to the USD since the summer, yet since the beginning of the year has lost 27.6% of its value and 37% since November 2014, when the Georgian currency began to depreciate due to global strengthening of the USD and a slowdown in export. The depreciation of GEL has increased the debt burden of borrowers with loans in USD. Around 64% of the total loans in Georgia have been taken out in a foreign currency, the majority of those in USD.
New Ski Lift Station Kokhta Opens in Bakuriani
The opening was attended by Georgia’s candidate Prime Minister, Giorgi Kvirikashvili, and acting Ministers of the Georgian Cabinet. Photo: Georgian National Tourism Administration
BY ANA AKHALAIA
renovated ski lift station was opened on Kokhta Mount in Bakuriani, one of Georgia’s leading ski resorts, on December 27th. The opening was attended by Georgia’s candidate Prime Minister, Giorgi Kvirikashvili, and acting Ministers of the Georgian Cabinet. After an eight-year pause, the Kokhta 6-chair Ski lift was rebuilt by leading Austrian company Doppelmayr in three months. The total length of the renewed Kokhta ski track is 3 km and 100 m, now the most challenging track in Bakuriani. The maximum altitude is 2100 m. The new ski lift has been launched with a mid-station. The multi-million dollar project was implemented with collaboration between the state and
the private sector. The Mountain Resorts Development Company under the Ministry of Economy and Sustainable Development, and investment company GRDC, are actively involved in the development of the historic resort of Bakuriani and from 2016, a 500bed tourist infrastructure will be built at Kokhta. Bakuriani is one of the locations where the Georgian Ski Federation is holding the 2015-2016 season Ski Championship. With the opening of a new ski lift, the first stage of the Ski Championship was launched with a giant slalom on the 27th December and a slalom competition on the 28th. The high level tournament, is supported by the Ministry of Sport and Youth Affairs and the Mountain Resorts Development Company. The Georgian Cup of the Ski Championship, sponsored by Silknet, is to include all the country’s active ski resorts: Gudauri, Bakuriani, Goderdzi and Mestia.
The Rike-Narikala Cable Car will be open to citizens without charge from 23:00 on December 31 to 15:00 on January first
Travel Free Around Tbilisi this New Year
BY KATIE RUTH DAVIES
bilisi Metro and the Rike Cable Car service will be running free of charge on New Year’s Eve and Christmas Eve. Tbilisi Mayor Davit Narmania announced that the Metro and RikeNarikala Cable Car will function for longer and will be free to all. The Metro will be free from 23:00 on December 31 to 04:00 on January 1, and from 23:00 on January 6 to 04:00 on January 7. The Cable Car will be open to citizens without charge from 23:00 on December 31 to 15:00 on January 1.
DECEMBER 29 - JANUARY 7, 2015
The Happy Company Invests in Children’s Creativity and Learning visits with suppliers. Ms. Papukashvili is enthusiastic about all there is to do and is already planning to expand on the idea of bringing creativity and educational-based play to Georgia. The Happy Company is in exchange with scientists and teachers
Continued from page 5 Their ideas about the efficacy of these educational toys and their benefits for children were further confirmed by the presents they gave their own nieces and nephews back in Georgia. The children loved the toys. “Creativity and scientific inquiry doesn’t end with childhood,” explained Ms. Papukashvili. Taken from their own professional experience with brainstorming and creativity as an input process that brings inner calm and satisfaction, Ms. Papukashvili believes that these toys bring families
in Germany and Georgia and searching for partners and venues to realize further programs and events to be offered in the future such as a Little Scientists Club and an Artists Club for children to be led by local professionals. The company is also
talking with local schools and other educational institutions to bring these products to Georgia as a local distributor. The Happy Company shop, with 5 employees, is open hours from 11 to 8 Monday to Friday and 12 to 8 on Saturday and Sunday.
together and promotes happiness, experiences needed in Georgia, she says. This is how they came up with the idea of the Happy Company. “We wanted to bring to people in Georgia what we had experienced ourselves.” They thought through the earlier phases of their idea and then contacted the German Business Association Georgia (DWVG) http://georgien.ahk.de/ at 24 Rustaveli Avenue for help in realizing their project. The DWVG helped them build a network of contacts for finding products and partners. They also visited trade fairs in Germany with further plans for more
WHAT’S ON IN TBILISI THEATRE
GABRIADZE THEATRE Address: 13 Shavtelis St. Telephone: 2 98 65 93 December 31 MARSHAL DE FANTIE’S DIAMOND Rezo Gabriadze Directed by Rezo Gabriadze English Subtitles Start time: 20:00 Ticket price: 10, 15, 20 Lari TBILISI NODAR DUMBADZE STATE CENTRAL CHILDREN’S THEATRE Address: 99/1 Agmashenebeli Ave. Telephone: 295 39 27 December 29 NEW YEAR EVE AND COSMIC ALIENS Tale Directed by Dimitri Gvtisiashvili Language: Russian Start time: 12:00 Ticket price: From 6 Lari TBILISI VASO ABASHIDZE MUSIC AND DRAMA STATE THEATRE Address: 182 D.Agmashenebeli Ave. Telephone: 2 34 80 90 www.musictheatre.ge December 29 DIVORCE Directed by Davit Doiashvili Musical Start time: 19:00 Ticket price: From 8 Lari TBILISI CIRCUS Address: 1 Heroes Sq. Telephone: 298 30 35 December 29, 30 NEW YEAR JOURNEY TO ISLAND LASTA-RIKA Start time: December 29 - 17:00 December 30 – 13:00, 17:00 Ticket price: 10, 15, 20, 25 Lari
AMIRANI CINEMA Address: 36 Kostava Str. Telephone: 2 99 99 55 www.kinoafisha.ge December 29-31 STAR WARS: THE FORCE AWAKENS Directed by J.J. Abrams Cast: Daisy Ridley, John Boyega, Oscar Isaac Genre: Action, Adventure, Fantasy Language: English Start time: 20:10 Language: Russian Start time: 20:10, 22:50 Ticket price: 11.50 – 14.50 Lari BRIDGE OF SPIES Directed by Steven Spielberg Cast: Tom Hanks, Mark Rylance, Alan Alda Genre: Biography, Drama, Thriller Language: Russian Start time: 14:30, 22:30 Ticket price: 9.50 – 14.50 Lari LOVE THE COOPERS Directed by Jessie Nelson Cast: Diane Keaton, John Goodman, Ed Helms Genre: Comedy Language: Russian Start time: 14:30, 22:30 Ticket price: 9.50 – 14.50 Lari RUSTAVELI CINEMA Address: 5 Rustaveli Ave. Telephone: 2 55 50 00 www.kinoafisha.ge STAR WARS: THE FORCE AWAKENS (Info Above) Language: Russian Start time: 17:00, 19:30, 22:30 Ticket price: 11.50 – 14.50 Lari BRIDGE OF SPIES (Info Above) Language: Russian Start time: 14:00, 17:15, 19:45, 22:35 Ticket price: 9.50 – 14.50 Lari
LOVE THE COOPERS (Info Above) Language: Russian Start time: 11:40, 14:30, 17:45, 20:10, 22:35 Ticket price: 8.50 – 14.50 Lari CAVEA IMAX Address: 2 Tvalchrelidze Str., East Point December 29, 30 STAR WARS: THE FORCE AWAKENS (Info Above) Language: English Start time: 22:30 Language: Russian Start time: 13:00, 16:30, 19:30, 22:55 Ticket price: 19 Lari BRIDGE OF SPIES (Info Above) Language: English Start time: 19:45 Language: Russian Start time: 13:30, 16:45, 22:00 Ticket price: 8-13 Lari LOVE THE COOPERS (Info Above) Language: Russian Start time: 12:10, 14:30, 17:00, 20:00, 21:45 Ticket price: 12 – 13 Lari POINT BREAK Directed by Ericson Core Cast: Édgar Ramírez, Luke Bracey, Ray Winstone Genre: Action, Crime, Sport Language: English Start time: 19:30, 17:30 Language: Russian Start time: 12:00, 14:40, 17:20 Ticket price: 7-12 Lari THE PEANUTS MOVIE Directed by Steve Martino Cast: Noah Schnapp, Bill Melendez, Hadley Belle Miller Genre: Animation, Adventure, Comedy Language: English Start time: 16:00 Ticket price: 9-10 Lari
GEORGIAN NATIONAL MUSEUM SIMON JANASHIA MUSEUM Address: 4 Rustaveli Ave. Telephone: 2 99 80 22, 2 93 48 21 www.museum.ge ARCHAEOLOGICAL TREASURE PERMANENT EXHIBITION November 17 - May 1 GEORGIAN NATIONAL MUSEUM AND ALEXANDER KARTVELI ASSOCIATION PRESENT AN EXHIBITION DEDICATED TO THE GREATEST MILITARY AIRCRAFT DESIGNER IN HISTORY. December 21 – January 30 THE EXHIBITION THE TRAVELING MUSEUM OF THE CAUCASUS SHALVA AMIRANASHVILI MUSEUM OF ART Address: 1 Lado Gudiashvili St. Telephone: 2 99 99 09 www.museum.ge December 16 – January 15 THE JANI MEDZMARIASHVILI’S SOLO EXHIBITION IOSEB GRISHASHVILI TBILISI HISTORY MUSEUM - KARVASLA Address: 8 Sioni Str. Telephone: 2 98 22 81 December 10 - January 5 GEORGIAN NATIONAL MUSEUM IOSEB GRISHASHVILI TBILISI HISTORY MUSEUM INVITES YOU TO THE PHOTO EXHIBITION OF HIROTAKE MAEDA. December 10 - January 5 PROMOTING THE CULTURAL COOPERATION BETWEEN GEORGIA AND JAPAN, THE GEORGIAN NATIONAL MUSEUM
IOSEB GRISHASHVILI TBILISI HISTORY MUSEUM INVITES YOU TO THE PHOTO EXHIBITION OF HIROTAKE MAEDA. GALLERY
THE NATIONAL GALLERY Address: 11 Rustaveli Ave. www.museum.ge December 25 – February 10 GEORGIAN NATIONAL MUSEUM DIMITRI SHEVARDNADZE NATIONAL GALLERY INVITES YOU TO THE EXHIBITION DEDICATED TO THE 120 YEAR ANNIVERSARY OF THE DISTINGUISHED GEORGIAN MODERNIST ARTIST SHALVA KIKODZE. BAIA GALLERY Address: 10 Chardin Str. Telephone: 2 75 45 10 December 27 – January 8 IRAKLI PARJIANI’S EXHIBITION THE EUROPE HOUSE Address: 1 Freedom Sq. Telephone: 2 47 03 11 December 15-January 17 PSILOCYBIN MUSHROOMS MUSIC
TBILISI CONCERT HALL Address: 1 Melikishvili St. Telephone: 2 99 00 99 December 29, 30 WORLD FILM MUSIC MASTERPIECES Special Guest: Anita Rachvelishvili Georgian Philarmonic Orchestra and Nikoloz Rachveli Soloists: Natalia Kutateladze, Giorgi Tsagareli, Giorgi Shamanauri, Rezo Kiknadze Start time: 20:00 Ticket price: 15, 20, 25, 35, 45, 75 Lari
DECEMBER 29 - JANUARY 7, 2015
The Work Goes On: Red-Co Invests More than $50m in Georgia
BY MARIAM KIASASHVILI
stablished in 2012, Red-Co real estate development company was one of the pioneers of introducing an essentially new type of residential complexes to the local housing market, specifically â€˜aparthotels,â€™ which have proved profitable for the company and have attracted a vast number of foreigners. By carrying out various construction projects across the country, with the most remarkable ones in Gudauri and Batumi, Red-Co has thus contributed largely to boosting the job market as well as the touristic potential of the regions. Mirian Katamadze, General Director of Red-Co spoke to Georgia Today about the company, ongoing projects, future plans and how the country benefits from them.
DOES GEORGIA HAVE AN ATTRACTIVE INVESTMENT MARKET AND HOW MUCH HAS RED-CO INVESTED SO FAR? Almost 90% of our investments are foreign and most of them are channeled towards touristic regions of Georgia, which are highly attractive and carry enormous potential, though do not always satisfy the demands set by the industry in the 21st century, a case which we hope to change. As foreign investors can freely invest wherever they want in the developed world and any country would be more than happy to accept that, it has been a challenge for Red-Co to persuade them to focus on Georgia. However, RedCo has succeeded and already invested more than $50m in the last two years with the prospect of doubling that in the forthcoming years.
BATUMI WILL SOON BOAST THE HIGHEST CLASS HOTEL TO BE OPERATING TO THIS DAY IN GEORGIA, TELL US ABOUT THE PROJECT
Indeed, after purchasing the 35-story Batumi Tower, a former to-be technological university building, for $25m in March 2015 and with the obligation of spending another $15m on it in the following three years, we have started an enormous investment project. The tower is currently being re-designed to finally make up a complex comprising of presidential, deluxe and standard aparthotels, inner and outer swimming pools, restaurants, a fitness center, a lounge bar on top, and a casino. But since the stated building did not satisfy the standards necessary for opening a 5 star hotel, which we had planned beforehand, we have already started constructing an additional building on the territory and are proud to have signed a contract with Starwood Hotels and Resorts on bringing in its luxury brand Le Meridien, which will be operating in the country for at least 30 years. We have hired up to 20, mainly international, consulting and operating firms through tenders to work on the Le Meridian project. Having extensive experience in providing professional technical and management support, the local representative of Aecom is coordinating and managing the construction process, Rooms is working on the interior design, while others are focusing on issues of safety, lightning, conditioning, kitchen, etc. to be in compliance with highest possible international standards. About 150 workers are currently employed on a rotation basis. And the complex comprised of Batumi Tower and Le Meridien, which we plan to finish by the summer season of 2017, will employee up to 400 people.
The potential of Gudauri is very impressive and I believe the number of tourists can even double in the near future, taking into consideration tense relationships between the neighboring countries. However, at this point, the resort is not ready to host such numbers of tourists and we are thinking on expanding our works in this area. After a hopefully positive outcome of negotiations with the government, private owners and allocating relevant resources, we plan on constructing another 1000 rooms, thus providing relevant supply to the growing demand. The total estimated investment by 2017 will be about $40m.
WHAT ARE SOME OF THE OTHER ONGOING PROJECTS AND THE FUTURE PLANS OF RED-CO? We have already signed a deal with Radisson, which will open in one of our buildings in Gudauri. This will be the first 4 or 5 star international brand-hotel in Gudauri. Currently, we are finishing a $10m aparthotel project in Bakuriani. Red-Co is building a house near Mziuri, with commercial property and offices on the first two floors and residential apartments on the rest. We already have confirmation from yet another Starwood family-member, W Hotels, which we hope to open in Tbilisi in the coming 2-3 years.
RED-CO HAS BEEN FOCUSING ON TOURISTIC REGIONS OF GEORGIA. ONE OF YOUR FIRST AND BIGGEST PROJECTS - NEW GUDAURI - HAS BEEN AN IMPORTANT DEVELOPMENT Starting construction in the middle of nowhere, we have already finished a complex with three aparthotels in Gudauri that can accommodate a total of 8000
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people and another is underway. Red-Co manages the buildings and its infrastructure, as well as restaurants, swimming pool and wellness center. The project employed about 300 workers during construction, while 50 people are working there on an everyday basis now. Apart from benefiting the local population, the apartments have also proved interesting for foreigners. Most of them have been purchased by citizens of Ukraine, Azerbaijan, Russia and some European countries, which means they plan to spend their time, thus money, in our country, and by doing so the overall livingstandardsandwelfareshouldincrease in the region.
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