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facebook.com/ georgiatoday

Issue no: 916/63

• JAN. 31 - FEB. 2, 2017

• PUBLISHED TWICE WEEKLY

FOCUS ON THE ENERGY SECTOR Meet the man behind the biggest an investment in Norwegian Georgia to date

PRICE: GEL 2.50

In this week’s issue... Adventure Tourism School to Open in Gudauri

PPAGE AGE 5 NEWS PAGE 2

The Gazprom Deal and Georgian Energy Security. What Should Georgia do Next? ISET PAGE 4

Dechert OnPoint: Georgia & the Energy Charter Treaty PAGE 6

CoE Secretary General Visits Georgia BY THEA MORRISON

C

ouncil of Europe Secretary General, Thorbjorn Jagland arrived in Georgia on Monday to hold bilateral meetings with Georgian leaders and officials. First on the agenda was a meeting with Georgia’s Foreign Minister, Mikheil Janelidze. Georgia – CoE co-operation, the situation in Georgia’s occupied territories, and the involvement of the Council in human rights protection in Georgia’s occupied Abkhazia and South Ossetia regions were the key issues of the meeting. Following the face-to-face meeting, the officials held a joint press-conference at which Minister Janelidze thanked the CoE secretary General for his visit. “Georgia has done a lot of work to get closer to European standards. We appreciate the CoE’s positive assessment of the reforms implemented in Georgia, including the October parliamentary

elections,” he said, adding that the sides had discussed co-operation including in the implementation of the Action Plan for Georgia 20162019.

Jagland underlined that Georgia has made great progress during recent years and praised the implemented reforms in the country. “We join your common policy to create a solid state, and also to have a good security policy with the outside world,” he said. The Secretary General then spoke about the situation in Georgia’s occupied regions and said the CoE would like to closely monitor developments there. He went on to condemn Russia’s destruction of an archaeological and architectural monument during the construction works of a military polygon in Tsebelda village, Gulripshi District, Abkhazia. “The CoE will do its best to put a stop to this process. We are now working on a new international convention which will have the form of international law and will prohibit illegal trade with art pieces and antiquities,” he added. During his two-day visit, the Secretary General will also meet the President of Georgia, Giorgi Margvelashvili, Prime-Minister, Giorgi Kvirikashvili and the Parliament Speaker, Irakli Kobakhidze.

Development Company Axis Claims Leading Position in Georgian Market PAGE 7

Russian MoH Asked to Clear the Russian Market of Ukrainian Meds PAGE 8

Optimization at Ministry of Defense Leaves 2250 Dismissed PAGE 11 Prepared for Georgia Today Business by

Markets Asof27ͲJanͲ2017

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2,6950

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3,3842

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915,92

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2294,69

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860,97

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0,7967

Ͳ2,8%


2

NEWS

GEORGIA TODAY

JANUARY 31 - FEBRUARY 2, 2017

Adventure Tourism School to Open in Gudauri

Adventure Tourism School Students

BY NINO GUGUNISHVILI

O

n the joint initiative of the Ministry of Economy and Sustainable Development of Georgia, Ministry of Education and Science, The Mountain Resorts Development Company and the Mountain Guide Association of Georgia, a school for adventure tourism is set to open in Gudauri. The Adventure Tourism School aims

to prepare mountain and hiking guides, avalanche and security specialists and ski instructors. The project will continue for two years, with each training group to have 25 students. The program currently starts with a 10-day training course provided by Cyril Berco, a specialist from Switzerland. The school plans to closely cooperate with the International Mountain Guide Federation and other international organizations, acquainting the Tourism Adventure School trainees with the existing European standards in the sphere.

Enviroserve Launches E-Waste Recycling 350 Dismissed from Azot Enterprise Hold Protest Rallies Program in Georgia Enterprise Azot in Rustavi. Source: For.ge

BY NINO GUGUNISHVILI

BY THEA MORRISON

T

he 350 dismissed employees of enterprise Azot in Rustavi claim they have been fired without explanation. They are holding protest rallies in Tbilisi along with metallurgy, mining and chemical industry workers, Trade Union members and the representatives of the students’ movement Green Fist. The employees say that they were dismissed on January 25 and claim that the enterprise plans to make a total of 700 redundant. According to the protesters, the Bank of Georgia has bought shares of Rustavi Azot and refused to prolong contracts with the workers. “They had no motive for our dismissal. When we went to work on January 25,

our permits were annulled and we were told that our services were no longer required,” former employee of Azot, Mamia Shamugia, said. Tamaz Dolaberidze, Head of the Trade Union, says that the protest will continue until the released employees are returned to work. The protesters are also going to file a lawsuit to protect their rights. The Bank of Georgia has yet to comment. However, Rustavi Azot leadership says the employees have not been dismissed “The old contracts expired and the company is working to prepare new contracts.” At 50-years-old, chemical enterprise Azot, located in Rustavi city in the southeast of Georgia, is the only manufacturer of nitrogen fertilizers not only in Georgia, but in the whole region of the South Caucasus.

E

nviroserve, a Dubai-based company operating in recycling e-waste using Swiss technology, held a presentation announcing the launch of its electronic waste recycling program in Georgia. In partnership with the Caucasus Environmental Network (CENN) and the Waste Management Technolo-

We’ll be assisting Georgia to meet EU directives on environmental controls

gies in the Regions program (WMTR), and Ecovision’s Spare Project, Enviroserve plans to distribute e-waste collection boxes across the country, in easyto-access locations around Georgia’s major cities. After collection, containerized scrap from the collection boxes will be shipped to Dubai for recycling. The final step of the process is for a “Green Certificate,” confirming the complete destruction of the e-waste, to be generated and sent to applicable ministries and other authorities. Enviorserve entered Georgia last December, making it the seventh country in the company’s network. “It’s a call to action for Georgian citizens and for companies to benefit from the program we’re launching, to have a healthier, greener Georgia. E-waste affects every one of us,” said Stuart Fleming, CEO of Enviroserve, presenting the goals and solutions the company plans to offer in Georgia. Corporate social responsibility programs are an integral part of the company’s activities, he says. Enviroserve has also let rumors spread regarding future developments aimed at creating safe recycling solutions for Freon gas, plastics, metals, and so on. If this took place in Georgia, it would represent a significant investment and step

Containerized scrap will be shipped to Dubai for recycling towards turning Georgia into a regional recycling hub. According to Fleming, e-waste or computer waste is the fastest-growing source of waste in the world, in addition to being the most toxic. “We’ll be assisting Georgia to meet EU directives on environmental controls,” he said. During the presentation, Ekaterine Grigalava, Deputy Minister of the Environment Protection and Natural Resources of Georgia, stressed the importance of the new initiative, especially regarding the recycling requirements Georgia has to start complying with since signing the EU-Georgia Association Agreement.


4

BUSINESS

GEORGIA TODAY

JANUARY 31 - FEBRUARY 2, 2017

THE ISET ECONOMIST A BLOG ABOUT ECONOMICS AND THE SOUTH CAUCAUS

www.iset-pi.ge/blog

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

The Gazprom Deal & Georgian Energy Security. What Should Georgia Do Next? Russia that would have been obtained with the earlier deal. On the other hand, to be fair, it is not clear that a better deal could have been achieved.

BY LEVAN PAVLENISHVILI AND NORBERTO PIGNATTI

WHAT ARE THE IMPLICATIONS FOR ENERGY SECURITY AND WHAT DO WE DO NOW?

E

very winter, one of the most actively discussed issues of energy policy - both on TV and in professional circles - is natural gas. Prices and supply conditions are frequently part of the political debate. The main reason behind such active discussion is energy security concerns. What is energy security? The International Energy Agency defines energy security as “the uninterrupted availability of energy sources at an affordable price.” Obviously, all countries around the world care about energy security, because interruptions in the availability of energy sources, or sudden increases in energy prices, can have dramatic economic and social consequences. But why is the security of the natural gas supply the most pressing energy security issue in Georgia? There are several reasons. First, Georgia’s consumption of natural gas in total energy used has been rapidly increasing in the last couple of years, from 28% in 2013, to 33% in 2015. Second, Georgia imports 99% of the natural gas it consumes. Third, the country has only two sources of import: Azerbaijan and Russia. Finally, gas plays a vital role in electricity generation in winter. Georgian customers experienced the importance of energy security during the 2006 energy crisis, when the sabotage of gas pipelines, and of the electricity transmission network in the North Caucasus, caused a countrywide blackout and left many Georgians without sources of heating during the snowy winter. After this incident, Georgia gradually switched to importing most of its natural gas from Azerbaijan. However, Russian imports are still in the picture, primarily because Georgia gets in-kind – volume based – transit payments amounting to 10% of total gas supplied to Armenia (in 2015, this covered 11% of Georgia’s total gas consumption). In addition, in the recent past, Georgia has been importing a small share of its natural gas imports (6% in 2015) from Russia (at the cost of USD $215 per 1000 cubic meters) to balance its peak demand in winter.

THE DEAL Over the last two years, the Russian Energy giant Gazprom has been requesting permission to monetize the payment of the transit fee, moving away from the existing in-kind payments. Early this year a final agreement between Georgia and Gazprom was reached, but the details are largely unknown, the lack of transparency about the deal being justified on the basis of “commercial confidentiality”. However, a few aspects have become known to the public. According to the Deputy Minister of Energy, the outcome of the negotiation is a two-year contract. During the first year (2017), the transit fee will be paid half in-kind and half as a monetary payment. From 2018, the transit fee will be fully paid in monetary form. Based on official sources, the agreement will also enable Georgia to import natural gas from Russia, paying USD $185 per 1000 cubic meters instead of the previous price of USD $215. While this development may seem very positive, it is important to note that the price of natural gas on the European market has declined considerably in the last four years, with the European Union Natural Gas Import Price more than halved since January 2013, and now very close to the price agreed between Georgia and Gazprom. In addition, although the monetary transit fee amount has not been made public, there is a widespread concern that the amount received as a compensation for transit services after 2018 will not be sufficient to purchase the same quantity of gas from

One of the simplest measures suggested to increase energy security comes from finance: diversify the supply portfolio to mitigate possible risks. The Georgian strategy over the last decade has not exactly been based on diversification. Over this period, in fact, Georgia has chosen to count on the mutually beneficial partnership with Azerbaijan to ensure its energy security. Still, the relatively smaller quantity of gas received every year from Russia continued playing an important role. If the new deal with Russian Gazprom leads to less diversification (or to higher average costs of importing gas from Russia, once the switch from in-kind to monetary payment takes place), this will imply a deterioration of Georgian energy security. At this stage, the hope is that the partnership with Azerbaijan will consolidate and guarantee that, even with very limited diversification, energy security will be ensured. On this front, there are reasons for optimism. One is the expected completion of the South Caucasus Pipeline Expansion (SCPX) project in 2018. The SCPX will be part of the Southern Gas Corridor supplying Caspian gas to Europe, and its completion will enable Georgia to receive additional supplies from the Shah Deniz 2 Field in Azerbaijan. As a transit country, Georgia will become part of the European energy security agenda. This is expected to contribute to the long-term energy security of Georgia. The Georgian government, however, could do more to improve Georgian energy security. First, it could invest in relevant infrastructure. To stabilize seasonal supply and safeguard itself from short-term supply disruptions, Georgia needs an underground gas storage facility. Such an infrastructure would help the country better handle threats such as the 2006 energy crisis. A gas storage facility could also provide commercial services, supplying the market with natural gas during the peak demand and reducing price volatility. A feasibility study for such a facility, capable of storing from 210 to 280 million cubic meters of natural gas (9-12% of Georgian total annual consumption) has recently been prepared. As soon as the project is complete, Georgia will become more secure, and its natural gas market will become more stable. Georgia should also actively take part in negotiations between European partners and Turkmenistan to increase its role as a transit country and encourage the development of its natural gas sector. Finally, greater emphasis should be placed on monitoring and analysis of the trends characterizing the internal demand for natural gas and natural gas imports. Numerical models such as the Global Gas Model (Holz, Richter, Egging, 2016), the EUGAS Model (Perner and Seeliger, 2004), the TIGER Model (Lochner and Bothe, 2007), and/or others, should be used to simulate patterns of consumption and imports to find possible flaws and weaknesses in the system that need to be addressed. This, in parallel with infrastructure building, will facilitate anticipating (and coping with) possible mismatches between demand and supply, and reduce the risks to energy security stemming from the lack of diversification in natural gas imports. To conclude, the Gazprom deal is likely to have negative effects on Georgian energy security, but its impact should not be overly dramatized. There are currently plenty of opportunities that could lead to a substantially more energy-secure Georgia. Pursuing this path will take a lot of work and resources, but the goal is definitely worth the effort.


BUSINESS

GEORGIA TODAY

JANUARY 31 - FEBRUARY 2, 2017

5

Clean Energy’s Brandtzaeg Talks about the Biggest Norwegian Investment in Georgia to Date EXCLUSIVE INTERVIEW BY VAZHA TAVBERIDZE

L

ast week, when the news broke that a Norwegian company was investing eight billion Kroners to build a hydropower plant in Georgia, everyone got excited. And for a reason – first, it’s the largest Norwegian investment to come to Georgia so far, and second, much in tune with largest investment, the to-bebuilt plant will also be the largest of its kind in the country. Eight million Norwegian Kroners translates to roughly $ 750 000. The plant in question is the Namakhvani hydroelectric power plant (HPP), which entails the construction of a cascade on the Rioni River in Imereti region, consisting of two plants- Namakhvani HPP and Tvishi HPP, with a total installed capacity of 433 MW and an average annual generation of 1514 GWh. The company to see this ambitious project come to fruition is Clean Energy Invest AS (CEI), based in Norway, and they are no strangers when it comes to Georgia and building hydro power facilities. They first entered the Georgian market in 2010, successfully winning, in a gov-

ernment-announced tender, a license to build, own and operate the hydropower potential on the Adjaristskhali river (in Adjara, Georgia) and its tributaries. This resulted in the construction of two hydro power plants on Adjaristskhali - the 187 MW Shuakhevi and 9 MW Skhalta HPP, while a third plant, the 115 MW Koromkheti HPP, is being developed by Georgian company Koromkheti Georgia LLC (KGL). GEORGIA TODAY and the Businesscode TV show were privileged to have an exclusive interview with the Clean Energy’s CEO Bjorn Brandtzaeg, who was kind enough to provide additional details on the project development. “We’ve been investing here since 2010,” Bradtzaeg says. “We were responsible for developing the hydropower potential of Adjaristskhali River, resulting in 187 MW Shuakhevi Project, the largest hydropower plant built in Georgia to date. Over these past six years, we’ve got to know Georgia and the Georgian market very well; we’ve great confidence in the policy framework here in Georgia and are delighted to do business here. “As it is, the local market is acceptable, but what we are really excited about is this ongoing process of Georgia’s accession to the EU energy community, which spells further developments in the energy

sector for Georgia. We believe that due to these reforms, before 2020 there will be a fully functioning energy market here. “It’s a joint venture – Clean Energy is

partnered with Turkish company ENKA, one of the largest construction companies in the world. Clean Energy developed the Shuakhevi project (187 MW) from scratch, so we have a lot of experi-

ence in structuring up and developing complex hydropower projects. As for ENKA, they are currently constructing for BP in Georgia, so that also gives you some idea of their reliability. All of this makes us believe we have the right expertise to pull it off. “So far, we haven’t discussed any further details with the government – after all, we won the tender only last week. In February, we’ll start intensive discussions with the government on the framework for the project development. It needs to be said that the government looks at this project as a strategic priority – it is the largest hydro project ever to be developed in Georgia and it also comes with a big reservoir. What that means is that Georgia is going to be more flexible in its energy system, while the Georgian people will have more stable access to electricity." In closing, Brandtzaeg emphasized that Clean Energy is a responsible investor: “I’d like to underline one thing - this is a very complex infrastructure project and what we will ensure first and foremost is that people affected by this project will receive fair compensation.” What could we possibly add? Looks like both the company and its CEO are capable and very confident that the project will be a success.

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6

BUSINESS

GEORGIA TODAY

JANUARY 31 - FEBRUARY 2, 2017

Dechert OnPoint: Georgia & the Energy Charter Treaty T he 1994 Energy Charter Treaty (“ECT”) was ratified by Georgia on 22 February 1995 and entered into force on 16 April 1998 (the “Effective Date”). With regard to related agreements, Georgia also became party to the 1994 Protocol on Energy Efficiency and Related Environmental Aspects and the 1998 Amendment to the Trade related provisions of the ECT. The ECT establishes legal protections for foreign investment in the energy sector, provides for the transit of energy and energy products without discrimination as to origin, destination or ownership, promotes transparency and competition, and aims at bringing about non-discriminatory access to the sector. Importantly, the ECT provides a comprehensive system for settling investment disputes, which is similar to that offered by the bilateral investment treaties (“BITs”) concluded worldwide. Under the ECT, the most important mechanism for settling investor–state disputes is final and binding arbitration before the International Centre for the Settlement of Investment Disputes (the “ICSID”) or the Arbitration Institute of the Stockholm Chamber of Commerce (the “SCC”), or ad hoc arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law (“UNCITRAL”). Dechert is publishing a series of OnPoint articles providing review and explanation of Georgia’s basic obligations under the ECT. This edition of OnPoint provides an overview of the investment aspects of the ECT.

THE MAIN OBLIGATIONS OF MEMBER STATES REGARDING INVESTMENT Part III of the ECT, titled “Investment promotion and protection”, offers protections comparable to those provided by most BITs. The rights guaranteed under the ECT include fair and equitable treatment, constant protection and security of investments, prohibition of discriminatory measures, most-favorednation treatment, and payment of prompt, adequate and effective compensation for any nationalization, expropriation or other measures having an effect equivalent to nationalization or expropriation. However, it’s first necessary to consider what those rights actually cover and who can benefit from them. Definition of investments under the ECT: The term “Investment” is defined at Article l(6) of the ECT. This provision provides a non-exhaustive enumeration of the types of assets that can be considered investments. Adopting an

approach similar to that of many BITs, this definition extends its coverage to “every kind of asset” which may be “owned or controlled directly or indirectly” by an investor. The Treaty itself provides guidance as to the meaning of “control” in the Understandings to the Final Act of the European Energy Charter Conference. According to the final act, “control” of an Investment means “control in fact”, which is determined after an examination of the circumstances of each situation. As for the time period of the ECT’s application, “Investment” includes all investments whether existing at the time of or made after the date of entry into force of the ECT, provided that the treaty applies to matters affecting existing investments after its entry into force. Article l(6) of the ECT further stipulates that the term “Investment” refers to any investment associated with an economic activity in the energy sector, something consistent with the sectoral nature of the ECT. Article l(5) of the ECT defines “economic activity in the energy sector” as “economic activity concerning the exploration, extraction, refining, production, storage, land transport, transmission, distribution, trade, marketing, or sale of Energy Materials and Products except those included -in Annex NI, or concerning the distribution of heat to multiple premises.” Definitions of an investor under the ECT: The definition of “Investor” is provided in Article l(7) of the ECT, according to which an “Investor” is “any natural person having the citizenship or nationality of or who is permanently residing in a Contracting Party in accordance with its applicable law and any company or other organization organized in accordance with the law applicable in a Contracting Party.”

THE PROTECTIONS GUARANTEED TO INVESTMENTS UNDER THE ECT The ECT establishes that an investment made by an Investor of another Contracting Party must be treated no less favorably than the investments of domestic investors (“national treatment” or “NT”) or investors of any third country (“most favored nation” treatment or “MFN”). Apart from standard exceptions (e.g. on grounds of national security), the only specific exception to the better of MFN or NT rule is in respect of direct taxes; here fairness requires that the taxation of the parent country be taken into account. This rule of according “national treatment” also applies to portfolio investment, thus reassuring those who wish to buy shares in an enterprise

The ECT is of great importance for Georgia...to expand its impact on the region’s energy efficiency and to better exploit its energy resources controlled by a domestic company. Apart from the above, the ECT lays down certain legal requirements of the contracting parties, including: • Fulfilling any obligations a Contracting Party has entered into with an investor of another Contracting Party; • Permitting investors to employ key personnel of their choice, regardless of nationality, so long as such personnel have work and residence permits; • Paying compensation for any losses suffered by a foreign investor in time of war or civil disturbance at least as fully as for losses suffered by the country’s own nationals and prompt, adequate and effective compensation if the loss results unnecessarily from the country’s own actions; • Paying prompt, adequate and effective compensation for any assets expro-

priated. The compensation has to amount to the market value immediately before it was affected by the intention to expropriate; and • Allowing a foreign investor to freely transfer out of the country, in fully convertible currency, the capital he/she invested as well as any associated earnings. On a more general note, the obligations of contracting parties include the encouragement and creation of stable, equitable, favorable and transparent conditions for the Investors of other Contracting Parties to make Investments in its Area. Such conditions include the commitment to accord fair and equitable treatment at all times to Investments of Investors of other Contracting Parties. Investments shall also enjoy constant protection and security and no Contracting Party shall in any way impair by unreasonable or discriminatory measures their management, maintenance, use, enjoyment or disposal.

CONCLUSIONS The ECT and its related obligations are of great importance for Georgia as it wishes to expand its impact on the region’s energy efficiency and to better exploit its energy resources. In that light, we will continue to review the different aspects of the treaty in our upcoming editions of Dechert OnPoint.

ROUTING

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

*** Note: This article does not constitute legal advice. You are responsible for consulting with your own professional legal advisors concerning specific circumstances for your business. Dechert Georgia, through the contribution of partners Archil Giorgadze and Nicola Mariani, joined by associates Irakli Sokolovski, Ana Kostava, Ana Kochiashvili and Natia Lapiashvili, is partnering with Georgia Today on a regular section of the paper which will provide updated information regarding significant legal changes and developments in Georgia. In particular, we will highlight significant issues which may impact businesses operating in Georgia. Dechert’s Tbilisi office combines local service and full corporate, tax and finance support with the global knowledge that comes with being part of a worldwide legal practice. Dechert Georgia is the Tbilisi branch of Dechert LLP, an international specialist Law firm that focuses on core transactional and litigation practices, providing world-class services to major corporations, financial institutions and private funds worldwide. With more than 900 Lawyers in our global practice groups working in 27 offices across Europe, the CIS, Asia, the Middle East and the United States, Dechert has the resources to deliver seamless, high quality legal services to clients worldwide. For more information, please visit www. dechert.com or contact Nicola Mariani at nicola.mariani@dechert.com.

FLIGHT NUMBER

TK 387 TK 385 TK 383 TK 386 TK 384 TK 382

WEEK DAYS

DEPARTURE

ARRIVAL

EVERYDAY

05.50 11.45 18.10 01.40 07.30 13.55

07.25 13.25 20.00 04.55 10.50 17.15

07.40

09.00

20.45

00.10+1

17.50 13.55

19.10 16.55

TK 381 EVERYDAY TK 380 TK 393 TK 392

EVERYDAY


BUSINESS

GEORGIA TODAY

JANUARY 31 - FEBRUARY 2, 2017

7

Development Company Axis Claims Leading Position in Georgian Market BY THEA MORRISON

D

evelopment company Axis, which has been operating in the Georgian market for over 18 years, is advertising itself as having kept a leading position in the country’s development

market. The firm has constructed 38 multi-story residential buildings so far, with fifteen more projects to be implemented during the coming year. The company, when speaking to the press, divides its portfolio into three, distinguishing between work from before the 2008 crisis, from immediately after the crisis, and from the most recent years. 18 multi-story residential buildings were built in ten different locations throughout Tbilisi before 2008. For the post-crisis period, 20 multi-story residential buildings were built in eight different places across Georgia. The company claims that the year 2016 was a special one for Axis, due to ongoing work on the Axis Towers project. After stalling, the project was resumed in 2015 in a cooperative deal between Axis and Georgia’s Co-investment Fund. The complex consists of 41 floors with a height of 147 meters. It hopes to include five developmental models, including housing, office space, hotel space, and commercial and recreational functionality. Construction is slated for completion this year, with the hotel opening, barring setbacks, in summer 2018. Several other projects are scheduled for Axis during the fiscal year 2017-2018, among them the Axis Palace trade center, which will be one of the largest shopping centers in Tbilisi. The Sairme Palace project is considered to be of the utmost importance for Axis. Construction had been suspended but is set to resume this month.

Carlson Rezidor VicePresident Checks Progress of New Radisson BLU Gudauri

New Gudauri. Source: Red-Co

BY THEA MORRISON

T

he Vice President of Carlson Rezidor Hotel Group, David Jenkins, came to Tbilisi last week to check ongoing works on the new five-star hotel Radisson BLU being built in Georgia’s famous ski resort Gudauri, 120km north of Tbilisi. The project will be implemented by one of the largest and most dynamic hotel groups worldwide, Carlson Rezidor, along with Georgia’s local Real Estate Development Company (Red-Co). Red-Co and Carlson Rezidor signed a cooperation agreement in February 2016, which envisages a $15 million investment from Red-Co to open a 105-room hotel with a restaurant, spa and swimming pools.

Jenkins met Georgia’s Deputy Economy Minister Ketevan Bochorishvili and discussed further investment potential in Georgia’s mountainous areas. The officials travelled to Gudauri where Jenkins visited the construction site of the Radisson Blu Gudauri hotel. “It is important that international brands like Radisson are interested in Georgia’s regions, which, of course, will bring additional recognition to our country, improve the quality of services and increase the number of international visitors,” Botchorishvili said. The hotel is located at the base of the Gudauri ski gondola and is expected to open in 2018. Red-Co representatives say Radisson Blu Gudauri will be the first five-star international hotel brand in the mountain resort not only in Georgia, but also in the whole Caucasus region.


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BUSINESS

GEORGIA TODAY

JANUARY 31 - FEBRUARY 2, 2017

Georgian Students Attend Winter School on Personal Data Protection

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ver 30 law and media students from Georgian universities are attending the Winter School on Personal Data Protection organized by the Personal Data Protection Inspector of Georgia with assistance from the European Union, United Nations Development Program (UNDP) and Office of the United Nations High Commissioner for Human Rights (OHCHR), in cooperation with the International Center for Migration Policy Development (ICMPD) and Training Center of Justice. Tamar Kaldani, Personal Data Protection Inspector of Georgia, opened the Winter School in Kvareli on 28 January, International Data Protection Day. The event brought together representatives of the Georgian Government, Parliament, civil society, media and international organizations. The one-week Winter School will inform the students about the rights and responsibilities of citizens as personal data owners, rules and mechanisms of personal data protection, and Georgian and international legislation in this field. The course will focus on a range of topics, including the prevention of crime and practical cases of the European Court of Human Rights. The Winter School participants will also meet with leading national and international experts in the area of personal data protection. The European Union (EU) is supporting personal data protection in Georgia to promote the overall culture of human rights. Working closely with the Personal Data Protection Inspector of Georgia, the European Union helps increase public awareness about this relatively new concept and introduce personal data protection standards to the public and private sectors. The enhancement of personal data protection is one of the priorities of the joint initiative of the European Union (EU) and United Nations “Human Rights for All”. With the budget of Euro 4 million, the program supports the implementation and monitoring of the National Human Rights Strategy and Action Plan of Georgia.

ProCredit Bank Georgia Summarizes 2016

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BY NINO GUGUNISHVILI

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uring a press conference held at the ProCredit Bank head office on Friday, Dr. Claus-Peter Zeitinger, Chairman of the Supervisory Board of ProCredit Holding, Ilir I. Aliu, Chairman of ProCredit Bank Georgia’s Supervisory Board, and the bank’s management team discussed business strategy, recent achievements, and future goals. As a member of International ProCredit Group, founded by the ProCredit Holding, ProCredit is the only European bank represented in the Georgian banking sector today. “According to the statistics we serve 25 percent of small and medium sized entreprises (SMEs) in this country,” Dr. Zeitinger said. “We are highly concentrated. We are not doing what we did in the past: consumer landing, micro-loans, very small loans… our biggest challenge is to find re-financing in Lari’s or in Dollars and we must be more attractive for depositors. That’s why we’ll do everything to attract more companies to do business with us.”

Although, according to the CEO, 99 percent of the bank’s transactions are already automated, the press conference promised an even greater focus on e-banking in the future. In order to make its services easier and more comfortable for clients, ProCredit Bank Georgia has implemented 24/7 self-service areas in every branch, where customers are able to carry out nearly all essential bank transactions themselves. The house bank strategy still remains a priority, specifically the offering of new mortgage loans for physical entities. “For us, it’s very important to support the country in the process of the formalization of the economy, through implementing European standards and European experience,” Dr. Zeitinger said. ProCredit Holding’s recent inclusion on the Frankfurt’s Stock Exchange Premium Listing is a significant step in that direction, allowing the strengthening of the bank’s reputation amongst European investors. Zeitinger struck a positive note to round off the event. “We are here to stay,” he promised, “as a specialized, good bank with extremely well-educated staff.”

Mnatobi str. 41a, Tbilisi, Georgia / +995 32 2910009 / +995 577 763685 / www.hotelthefamily.ge / welcome@hotelthefamily.ge


BUSINESS

GEORGIA TODAY

JANUARY 31 - FEBRUARY 2, 2017

Russian MoH Asked to Clear the Russian Market of Ukrainian Meds BY DIMITRI DOLABERIDZE

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he Russian Ministry of Health was asked to investigate the situation with Ukrainian medicine on the Russian market, with Chairman of the State Duma Committee on Economic Policy, Industry, Innovative Development and Entrepreneurship, Sergey Zhigarev, sending an appeal on the issue to parliament. The move came following a statement by Chetvergov (the head of Pharma-Management, a Russian pharmaceutical company), which seems to suggest that Ukraine is literally leading Russia into a pharmaceutical war. "In recent years, despite the extremely strained relations between the two countries, Ukrainian medicine is being actively imported into Russia. However, their manufacturers are dumping the price (forced to do so by the current level of the economy in Ukraine and the lack of other markets),” Chetvergov says. “This prevents Russian companies, including ours, from investing in the development of technologies for such drugs.” Chetvergov goes on to bring specific examples. There is an original drug for the treatment of liver "Essentiale H" (produced by Sanofi, a global pharmaceutical company with headquarters in Paris) and there are generics - "Essential phospholipids" (Chetvergov’s company Binergiya, Russia), Phosphogliv (Pharmstandard, Russia), "Lesfal" (Farmak, Ukraine), and others. According to Chetvergov, before the arrival of the Ukrainians on the Russian market, "the demand on the hepatic group was already down.” He cites two more examples - Ukrainian "Artifrin" (a dental anesthetic) and Ukrainian "Vitakson" (vitamin complex). They have also, he says, displaced the Russian manufacturers from the Russian market, in particular Chetvergov’s company Binergiya. Chetvergov asks that "an aggressive economic

Chetvergov asks that an aggressive economic policy be taken against Ukrainian medicines

The healthcare system should be kept out of politics policy be taken against Ukrainian medicines," and proposed "prohibiting the acquisition of goods of Ukrainian production." Market experts say that while Ukrainian producers may have interfered with Binergiya’s market, in general, their presence is not dangerous to Russia. According to the agency DSM Group, which monitors the pharmaceutical market, the share of Ukrainian products on the Russian market is now less than 1%. And even in 2013, before the revolutionary events in Maidan, the share of Ukrainian medicine in Russia was little more - 1.4%. In fact, the volume of Ukrainian products on the Russian market is shrinking from year to year. “On average, about 24 million packages of Ukrainian drugs, worth 2.8 billion Rubles, are sold in Russia every year,” says CEO of DSM Group, Sergey Shuljak. The most popular Ukrainian pharmaceutical products at present are "Corvalol" (a sedative), "Urolesan" (an antispasmodic), "Guttasil" (a laxative), "Chlorophillipt '(anti-worm medicine) and "Pinosol "(nasal drops) while the top-5 Ukrainian manufacturers on the Russian market are: Farmak JSC, Pharma Start LLC, Halychpharm JSC, Health of FC Ltd, and Kyivmedpreparat JSC. DSM Group also analyzed the Russian list of VED (Vital and Essential drugs, whose prices are regulated by the State). In its almost 30 thousand SKU (Stock Keeping Unit), only 279 SKU is of Ukrainian origin. In addition, it is highlighted that public preference should be given to domestic producers. When an application is filled in by at least two suppliers of the Eurasian Economic Union, companies from other countries are not allowed to participate. The structure of the EAEU includes Russia, Belarus, Armenia, Kazakhstan and Kyrgyzstan - Ukraine is not there. “The healthcare system should be kept out of politics,” says the director of the Institute of Health Economics School, Larisa Popovich. “What Ukraine produces does not concern us. They can make anything, but our position has to be correct. Patients should not remain without drugs, and no political debate should interfere with the system of medicinal treatment of citizens.”

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BUSINESS

GEORGIA TODAY

JANUARY 31 - FEBRUARY 2, 2017

Gov’t and Private Sector to Establish Tsinandali Music Festival BY THEA MORRISON

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Best Western Hotel in Kutaisi. Source: Partnership Fund

Best Western Hotel to Open in Kutaisi BY NINO GUGUNISHVILI

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ithfinancialassistance from the Partnership Fund, Capitol Kutaisi Hotel has finished construction of the first Best Western Hotel in Kutaisi. Best Western is the first brand hotel in the Imereti region, located in the historic center of the city and boasts 40 standard and five luxerooms,threeconferencehallsandindoor and outdoor café and restaurants.

The hotel will start to operate from spring this year. The budget for the project is 3 million USD, 1.4 million USD invested by the Partnership Fund. Best Western International is one of the biggest international hotel chains in the world, uniting more then 4000 hotels in over 100 countries. Spanish T3 Hospitality Management, a company with 20 years’ experience and a portfolio of 22 projects around the world working with some of the big names in the hotel industry, is to run the management of the new hotel in Kutaisi.

high-level classical music festival is to be established in the historic village of Tsinandali in Georgia’s famous wine-making province of Kakheti. The Georgian National Tourism Administration (GNTA) of the Ministry of Economy and Silk Road Group signed a memorandum of understanding, which envisages establishment of the annual classical music event - Tsinandali Festival, to kick off from 2019. Before the signing ceremony, Georgia’s Prime Minister, Giorgi Kvirikashvili held a meeting with representatives of the company. It was noted that a concert hall for 900

guests, a 60-room hotel, an open amphitheater, a library, a conference hall and multi-functional facility will be built in Tsinandali to accommodate the festival and other events. The project also includes the establishment of a music academy, through which a youth orchestra of 60 musicians will be created. Kvirikashvili underlined that implementation of such projects through public-private partnership will promote the development of tourism and services, helping create new jobs in the region and offering talented young musicians ample opportunity to succeed. The meeting with the Prime Minister of Georgia was attended by co-authors of the Tsinandali Festival project, Martin Engstroem, Verbier Festival Executive Director and Avi Shoshani, Executive Director of the Israeli Philharmonic

Orchestra. They believe the project has great potential to turn Tsinandali into a regional hub of classical music. “I am convinced that investing in this musical festival will contribute to the formation of a functioning economy," Martin Engstroem said. Executive Director of the Israeli Philharmonic Orchestra claimed the establishment of a music festival and an academy is important for the educational, artistic, economic, and political directions of Georgia. Tsinandali village is famous for the estate and its historic winery which once belonged to the 19th-century aristocratic poet Alexander Chavchavadze. It is situated in the district of Telavi, 79 km east of Tbilisi. In 1947, the estate was organized into a museum and many tourists now visit it year-round.

Tsinandali palace. Source: ipress.ge

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BUSINESS

GEORGIA TODAY

JANUARY 31 - FEBRUARY 2, 2017

UK John Smith Trust Fellowship Scheme to Be Reintroduced in Georgia

Ministry of Defense. Source: netgazeti.ge

Optimization at Ministry of Defense Leaves 2250 Dismissed BY THEA MORRISON

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he Ministry of Defense of Georgia (MoD) says the optimization process within the ministry has been completed and, in total, 2250 people have been dismissed. The MoD statement released Monday reads that due to optimization, 400 part-time and 1350 fulltime employees have been dismissed, alongside 217 officers and 123 Sergeants from the Armed Forces. The Ministry says that 209 officers decided to leave the army themselves and the compensation to be issued to them amounts to more than 5 million GEL. Moreover, the statement reads that according to the order of the Chief of General Staff, a special

BY KATIE RUTH DAVIES

B

ritish Ambassador Justin McKenzie Smith on January 30 hosted a reception at the British Embassy to announce the re-introduction of the John Smith Trust Fellowship Scheme in Georgia. The event was attended by Baroness Elizabeth Smith, Member of the House of Lords, John Smith fellowship alumni, government officials, civil society and members of the business community. “The John Smith Fellowships built an extraordinary bond of friendship between Britain and Georgia since it started in 1996,” said Ambassador McKenzie Smith. “Following a two year gap, I am delighted that once again we are supporting a scheme that will connect Georgian future leaders with the UK.” For the past two decades, the John Smith Trust (JST) has successfully delivered over 20 fellowship programs in countries of the former Soviet Union, and has more than 400 alumni from the region. This new phase of the program is expected to “build on its track-record to create a powerful experience which is relevant to the challenges these young leaders face, and which forges enduring relationships with and between participants,”- the JST statement reads. The JST seeks to promote good governance, social justice and rule of law by nurturing a new generation of leaders committed to making a difference

working group was set up on November 12, 2016, in order to discuss the staff members and existing structures and to implement recommendations needed for optimization. The MoD says that mainly civilians, not servicemen, were dismissed. “The optimization has also affected the leadership of the ministry and the position of Minister’s Advisor was abolished, which saved 389,556 GEL. The Advisors of the General Staff and its structures were also dismissed, which on the whole saved more than 1 million GEL,” the statement reads. As a result of the reorganization and optimization of the Ministry of Defense, the savings amounted to over 32 million GEL. The optimization in all 18 ministries of Georgia was instructed by the Prime Minister, Giorgi Kvirikashvili, who commissioned the ministers to save state funds in order to improve the economic situation in the country.

in their countries and societies. It was created to provide a permanent memorial to one of Britain's most respected politicians, who died suddenly in May 1994. John Smith was held in high affection because of the sincerity with which he promoted democracy, social justice and good governance. The aim of the Trust is to honor him by promoting the ideals he held close to his heart. The JST Fellowship Programs seek to show how a mature democracy supports and develops good governance, the rule of law and the protection of human and legal rights. They also aim to discuss how the British form of democracy encourages the participation of voluntary and other non-profit organizations that seek to relieve poverty, to promote human rights and to give a voice to those who lack political influence, drawing on a wide range of speakers and panellists who generously give their time - all of whom share an interest in good governance and open debate. These contributors include politicians, business leaders, academics, civil servants, civil society and media organizations. The Trust provides a forum for them to interact and participate in discussion and informed debate in an informal and ‘off the record’ context. “The UK is uniquely well-positioned to share the experiences – good and bad – of how a mature democracy handles issues relating to governance, rule of law and social justice in both theoretical and practical terms,” says JST Chair Baroness Catherine Ashton. “I am very much looking forward to the next two years, and very grateful for the FCO’s support.”

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GEORGIA TODAY

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EDITORIAL DEPARTMENT:

Editor-In-Chief: Katie Ruth Davies

Journalists: Tony Hanmer, Zaza Jgarkava, Maka Bibilashvili, Karen Tovmasyan, Dimitri Dolaberidze, Maka Lomadze, Tim Ogden, Joseph Larsen, Vazha Tavberidze, Nugzar B. Ruhadze, Nino Gugunishvili, Thea Morrison, Natia Liparteliani

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SOCIETY

GEORGIA TODAY

JANUARY 31 - FEBRUARY 2, 2017

Blaze Destroys Trade Center Children’s World & Shops in Didube District

Georgian Soldier Detained in Kyiv Released BY THEA MORRISON

V Photo source: ghn.ge

BY THEA MORRISON

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he whole building of trade center Children’s World, located in Didube District, was destroyed by a fire which broke out early Monday morning. Around 30 firefighters were working over six hours to extinguish the blaze. The Emergency Management Service says that around 13,000 square meters have been damaged by fire, including warehouses, shops and a market located near the trade center. They say the building is a write-off and will have to be demolished. Didube district governor, Irma Zavradashvili, said that the loss caused by the fire will be large-scale. “Only the district administration alone will not be able to compensate this loss,” she said, adding: “This is a large-scale problem. I hope the trade center shops

were insured. The police are here and they are investigation the cause of the fire.” Tbilisi Mayor Davit Narmania also appeared at the scene. He said that many traders were affected and the market administration is responsible to them. “The damage is huge. Many people worked here and had their shops here, so the market administration should appear and answer the questions of the victims,” the Mayor said. Some traders, whose shops completely burned down during the fire, believe the fire was deliberately set in the trade center and claim the building was sold at auction and was intentionally burnt to make the traders leave the territory. The affected people say they have bank loans to pay and are asking the government for help. The Ministry of Internal Affairs has launched an investigation into the incident under Article 187, pertaining to destruction of another’s property, causing substantial damage.

ice-Colonel Giorgi Tsertsvadze, who was detained in Kyiv on January 15 on the basis of the Interpol red notice requested by Russia, was freed from pre-trial detention late Thursday. The hearing of Tsertsvadze’s case was postponed by the decision of the Court of Appeals on January 26, and he was left in pre-trial detention. However, several hours later, he was freed following the intervention of the Ukraine’s Prosecutor’s Office. After his release, Tsertsvadze gave a statement to the press, saying that Russia wants to detain people who have information about Georgia’s security. "Another motive is that Russia wants to punish the people who actively participated in the fighting against Russia," he said. Tsertsvadze, 47, was an employee of the Ministry of Internal Affairs until 2012. A year later, he left the country for Ukraine. According to Georgian media, he participated in hostilities against Russia in the 1990s and in the 2008 GeorgiaRussia war. He later took part in the conflict in Ukraine’s Donbass region. He was put on Interpol’s international wanted list on December 23, 2016, at Russia’s request and was detained by Ukrainian law enforcers immediately after crossing the border into Ukraine this month. Russia accuses Tsertsvadze of a murder

in Sochi in 2003 and of illegal possession of arms, and demands his extradition. Tsertsvadze’s defense lawyer argued that the accusations have been fabricated by Russian authorities for political reasons and are connected to the soldier’s participation as a volunteer fighter in the war in Ukraine’s south-eastern region. Georgia’s opposition party, United National Movement (UNM), and parliamentary minority European Georgia party have alleged that Russia acquired information on Tsertsvadze either from the Georgian Ministry of Internal Affairs (MIA) or the Justice Ministry of Georgia. They accuse the government of indifference to the case, and are calling on the diplomatic corps to show more interest.

Georgia’s Prosecutor’s Office has responded to the release of Tsertsvadze in a statement. According to the statement, extradition proceedings against Tserstvadze will be concluded within the next few days, implying that some procedural activities and formal considerations remain. “The Chief Prosecutor’s Office of Georgia will continue collaborating with its Ukrainian colleagues until extradition proceedings against Giorgi Tserstvadze end in his favor,” the statement reads. Although Tsertsvadze was released from pre-trial detention, his extradition procedures are still ongoing. He cannot leave Ukraine for forty days, or until the process is over.

Issue #916 Business  

January 31 - February 2, 2017

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