Caucasian Business Week #16 by Caucasian Business Week

DISTRIBUTED FREE OF CHARGE

BUSINESS WEEK August 05, 2013 #16

caucasian business week

August 05, 2013, Issue 16

BE INFORMED, DO BUSINESS

GEORGIA MINISTRIES OF ECONOMY AND FINANCE MADE JOINT STATEMENT ON GDP STATISTICS

inistries of Economy and Sustainable Development and Finance released joint statement on GDP preliminary statistics, published by Geostat: Pg. 5

GEORGIA’S DEBTS TO IMF SHRINK BY 49.6%

ccording to Finance Ministry’s data as of June 30, Georgia’s debt toward IMF made up $325 million, declining quarter-on-quarter by 49.6%). Pg. 2

KUTAISI AIRPORT MAY LAUNCH FLIGHTS TO TOKYO, LONDON AND STOCKHOLM

tarting October 1 Kutaisi International Airport will carry out additional flights, Giorgi Sigua, a head for the National Tourism Administration noted. Pg. 6

TURKISH AIRLINES RANKS FIRST IN GEORGIA’S PASSENGER TRAFFIC

eorgian Civil Aviation Agency reported that according to passenger traffic, passed by regular flights through Georgian airports in the first half of the year. Pg. 6

EUOBSERVER - GEORGIA’S PRIME MINISTER LAYS OUT EUROPEAN ‘DREAM’

REKI - Georgia’s billionaire-Prime-Minister, Bidzina Ivanishvili, has a “dream” for his country’s future. But opponents say he is a danger to democracy. Pg. 7

GDP DROP WAS MENTIONED IN JUNE Pg. 5

ccording to preliminary evaluation, in June 2013 GDP drop was mentioned in comparison with analogical period of last year. According to statistics, published by Geostat, real GDP growth rate equaled to -0,8% in June, average real growth of GDP in the second quarter 2013 equaled to 1,3%, average real growth of GDP in the first 6 months 2013 equaled to 1,8%. GDP growth in April was 4,6%, in May - 0,2%. It’s noteworthy that these two data are corrected, as according to statistics published by the end of Jude, growth in April was 4,5%, in May - 0%>. Geostat preliminary evaluations are calculated on

AZERBAIJANI CELLULAR OPERATOR LAUNCHES NUMBER PORTABILITY SERVICE

zerbaijani cellular operator Bakcell has launched Mobile Number Portability (MNP) service, the company told Trend news agency on August 1.

he National Statistical Service of Armenia says unemployment rate was recorded at 16.9% in the country in the first quarter 2013 – 3.2% year-on-year decrease. Pg. 10

CIS RUSSIA WILL BE EUROPE’S LARGEST CAR MARKET BY 2016

rivate Bank (Georgia) completed first half 2013 with 2,5 million GEL loss (first quarter - 553 138 GEL loss). By July 1 clients’ deposits are 371 million GEL (first quarter - 251 million GEL.), overall credit portfolio - 276 million GEL (first quarter - 264 million GEL), share of

problem loans - 24%. Bank’s actives equal to 463 million GEL (first quarter - 426 million GEL), market share - 3,1% (first quarter - 3%). Ratio of liquid actives to overall actives is 32,4% (first quarter - 33,5%), Return on Actives and Equity (ROA, ROE) are negative and respectively equal to -1,09% and -12,8%. Bank operates since 1994 (named as EximBank, First Commercial Bank, TaoBank). In spring 2007 Ukrainian Private Bank owns the banks, share of which is 62,6%; 32,4% belongs to Unimain Holdings Limited, 2,7% to Bogdan Lesyuk, 1,3% - to Alexander Chochia. Beneficiary owners are Gennady Bogolyubov (45,23%) and Igor Kolomoysky (45,16%). For the reporting period bank’s stock capital is 37 million GEL (first quarter - 38,5 million GEL).

Pg. 9

ARMENIA 16.9% UNEMPLOYMENT IN ARMENIA IN 1ST Q 2013

the basis of the agency’s statistics (turnover, fiscal and monetary data of VAT-payer enterprises). These evaluations are internationally recognized practice, used to get short-term preliminary operative data. In the spheres where monthly data are absent (for example, agriculture, unobserved economic volume), evaluation is made on the basis pf previous period data. Respectively, real quarterly calculations may significantly be different from preliminary evaluations. Besides, previous months’ turnovers of VAT-payer enterprises may be corrected on the monthly basis, which respectively causes correction of real growth monthly preliminary data.

PRIVATBANK ENDS 1H13 IN 2.5 MILLION GEL LOSSES

s of the 1st quarter, 10 banks out of 20 ones, operating in Georgia, have taken into possession property of 79.89 million lari. Pg. 8

AZERBAIJAN

Richard Norland: Coming Presidential tial Elections Give a Chance to Georgia to Prove the Country Has Favorable Investment Environment Pg. 2

0,8%

TEN COMMERCIAL BANKS TAKE OVER 80 MILLION GEL PROPERTY

caucasian1

he Russian automobile market is poised to overtake Germany and become Europe’s largest by 2016, and the world’s fifth biggest, by 2020, according to a new report. Pg. 11

WORLD NEWS EUROZONE JOBLESS DOWN FOR FIRST TIME IN 2 YEARS

ARDI GROUP URGES ALDAGI TO CHANGE LOGOTYPE

art of clients of ARDI Group insurance company was misled after Aldagi insurance company introduced similar logotype and symbols as a result of the rebranding process, the ARDI Group management says. According to the statement, last period many existing and potential clients were misled by green logotype and symbols Aldagi insurance company introduced as part of the rebranding process.

“Clients erroneously perceive the company and they associate Aldagi with ARDI Group”, the statement reads. “Therefore, we addressed Aldagi insurance company and urged to change the rebranding strategy on the insurance market. Many experts and marketing specialists have agreed on our pretences and all of them note the resemblance of the brand symbols is evident and this is inadmissible for two companies in the same business industry. We hope Aldagi insurance company will take into account our demand and the new trends of the rebranding project will be revised again”, the statement reads.

Mikheil Saakashvili: Train Of Country’s Economics Jumped The Track Pg. 5 Bakradze asks Ivanishvili for meeting to discuss crisis Pg. 5

Zurab Japaridze: paridze: The Main n Problem Is a Feeling ng Off Instabilityy Pg. 5

Competition with Tractors or Competition with Proofs Pg. g. 3

Case on Agriculture Minisry in Pretrial Period

Don’t Advertise, entertain! Omar Rostom - Consumer Engagement & Media Manager for Nokia Near East, North Africa, & Levant

Pg. 4

Gift of Georgian Chant Fund for Georgian listeners - Share Hamlet Gonashvili’s Immortal Album with Generations

Pg. 13

MAIN EVENTS caucasian business week

August 05, 2013 #16

US AMBASSADOR: COMING PRESIDENTIAL GEORGIA’S DEBTS TO IMF SHRINK ELECTIONS GIVE A CHANCE TO BY 49.6% ccording to Finance Ministry’s amounted to $2.66 billion (decline – 0.7%) and GEORGIA TO PROVE THE COUNTRY HAS data as of June 30, Georgia’s debt accounted for 64.5% of total debt volume. toward IMF made up $325 mil- Debt toward bilateral creditors made up $743.8 FAVORABLE INVESTMENT ENVIRONMENT lion, declining quarter-on-quarter million (growth – 2%).

he next presidential election is a chance to show the world a stable, successful political and investment climate, U.S. Ambassador to Georgia Richard Norland said after a meeting at the Ministry of Foreign Affairs. He said that the whole world is interested in the upcoming presidential elections. According to the ambassador, today’s meeting was a good possibility to receive information about the steps that are aimed at ensuring free and fair elections. “It is very important that this process will not be violent. Incidents that we saw in Zugdidi, when people were throwing stones and bottles, should not be repeated. The government said today that the offenders will be immediately punished and security measures will be provided for a safe election campaign”, said Richard Norland. According to the U.S. ambassador, the meeting also discussed the role of small parties. “It’s important for small parties to also have equal access to funding, representation in the Central Election Commission and media. I think the government should work on this issue. The upcoming election is a chance to show the world that there is a stabile political and successful investment climate in the country. I think this election will be proof for this”, said Richard Norland.

TRADE TURNOVER WITH TURKEY DECREASES

akstat reported that export to Turkey in the first half of this year totaled to $81.88 million, being declined by 0.8% if compared with the same period of previous year. In its turn, import from Turkey totaled to $610.87 million, declining by 6.8% year-on-year. Year-on-year growth was fixed in the following categories of export: knitted t-shirts – 2 times (up to $13.2 million), meat and fish flour – 19.7 times (up to $8.4 million), building bars of carbon steel (armature) – 129 times ($6.5 million), fish fat – 41 times ($6.05 million). Semi-finished goods of iron and unalloyed steel were not exported in the first half of previous

year, while their export amounted to $9.9 million in the reporting period. Export of other articles totaled to $37.8 million, declining 2 times year-on-year. As for the import from Turkey, growth was fixed in following categories: drugs – by 63.4% (up to $27.2 million), sanitary-hygiene means – 25.9% ($17 million). In its turn, year-on-year decline was fixed in following showing: black metal constructions – by 22.3% (to $15.4 million), plastic pipes – 29% ($13.5 million), refrigerators and freezing devices – 20.8% ($13.3 million). Export of the rest goods totaled to $524.4 million (decline – 8%).

NATIONAL FOOD AGENCY EXPECTS RUSSIA TO REMOVE EMBARGO ON GEORGIAN AGRICULTURE PRODUCTS IN NEAR FUTURE

ational Food Agency says in its 6-month report that visit of Russian State Sanitary Service’s representatives to Georgia is planned for near future. Within about 1 month after the visit, Russia will cancel own decision to ban import of Georgian agricultural products, says the Agency. The mat-

ter concerns high-risk products, subjected to phytosanitary control. As the Agency’s report points, Russian Sanitary Service has allowed on June 28 import of Georgian low-risk products, subjected to phytosanitary control. Besides, export of Georgian wine to Russia has started also in June, for the first time since embargo was imposed in 2006.

EBRD TO TAKE PART IN PREPARATION OF GEORGIA’S DEVELOPMENT STRATEGY

eorgian Ministry of Finance declared that EBRD will be actively engaged in designing of final version of document on Georgia’s development strategy. The document should be ready by September. The corresponding decision was made today, during the meeting of the Minister Nodar Khaduri and EBRD director for Caucasus, Moldova

by 49.6%). Debt to the World Bank’s International Development Association (IDA) made up $1.27 billion (quarter-on-quarter growth – 0.8%). The World Bank’s International Bank for Reconstruction and Development (IBRD) accounted for $358.4 million (growth – 0.14%). Asian Development Bank (ADB) accounted for $426.6 million (growth – 2%). European Bank for Reconstruction and Development (EBRD) accounted for $100.6 million (growth – 1.1%). In total, debt toward multilateral creditors

At that, Germany accounted for the largest share of debt volume – $329.7 million (growth – 1.7%), being followed by Russia – $103.4 million (decline 1.1%) and Japan – $98.7 million (growth – 12.5%). Volume of loans, received under guaranty of the state, made up $2.96 million (decline – 0.7%) and accounted in the reporting period for Germany only. Sovereign Eurobonds amounted to $500 million (decline – 11.5%). Overall, foreign public debt of Georgia amounted as of June 30 to $4.13 billion, declining quarteron-quarter by 3%.

GEORGIAN EXPORT TO AZERBAIJAN INCREASED, WHILE IMPORT FROM THIS COUNTRY DECREASED

akstat reported that Georgian export to Azerbaijan amounted in the first half of the year to $332.8 million, being increased by 17.5% if compared with the same period of the previous

year. On the other hand, import from Azerbaijan in the reporting period made up $273.2 million, declining year-on-year by 15.3%. Year-in-year growth of export is fixed in the following groups: cars – by 25.9% (up to $189.6

million), livestock – 10.9% ($21.3 million), cement – 28.5% ($18.4 million), carbon steel rods (armature) – 15% ($17.2 million). In its turn, export of trucks decreased by 28.7%, totaling to $11.9 million (1,539 trucks were exported). Import growth is fixed for gas – by 17.9% (up to $119.1 million), gypsum, anhydrite, plaster – 71% ($9.7 million), vehicles of special purpose – $2.7 million (63 times). At that, import decreased of oil-products – by 36% (to $106.6 million) and other goods – by 33% (to $32.4 million).

TBILISI AIRPORT’S RATIO IN GEORGIA’S TOTAL PASSENGER TRAFFIC ACCOUNTS FOR 81%

ivil Aviation Administration reported that number of passengers, transferred by Georgian airports in the first half of the year (both regular and charter flights), made up 750,910. This number exceeds by 28.4% the showing of the same period of last year. Out of total number, Tbilisi airport accounted for 81% (at that, year-on-year growth made up 16.4%). Batumi airport accounts for 10.9% (growth – 37.2%), Kutaisi airport – 7.9% (there were no flights from this airport in the first half of 2012), while Mestia airport – 0.02% (also no flights in the first half of 2012). During the reporting period, Georgian airports transferred 8.55 million t of cargos (year-on-year growth – 9.43%). In total, 5,654 flights (including cargo ones) have been implemented (year-on-year growth – 6%). At that, regular flights accounted for 77.4% (growth in number – 14.9%), while the rest were charter flights (decline – 15.8%).

JULY RECORDS 609 189 VISITORS

n July 2013 historical maximum of the visitors was registered - 609 189 (06/13 -490 575); the data has increased by 24% in comparison with previous month. Ministry of Internal Affairs analytics department informs that the flow is 15,6% higher in comparison with analogical period last year (527 006 visitors). Like in previous months, in the reporting period majority of visitors crossed border from Turkey. Since 2006 dynamics has been positive. In 2012, 50,2% growth was registered, the only exception was 2008 - with 52,3% reduced data.

and Belarus Bruno Balvanera. As the Ministry says, the main goal of the meeting was discussion of possibility to hold annual meeting of EBRD board of governors in Georgia in 2015. On this year’s annual meeting, held in May in Istanbul, EBRD board of governors named Georgia as possible host of meeting in 2015, the Ministry notes.

BUSINESS WEEK

caucasian The Editorial Board Follows Press Freedom Principles Publisher: LLC Caucasian Business Week - CBW Director: Levan Beglarishvili DISTRIBUTED FREE OF CHARGE Editor-in-chief: Evgeni Mikeladze Mobile phone: 591 013936; 555 472234 Commercial Department: Irakli Lekvinadze Email: caucasianbusiness@gmail.com

Dynamics is changed in comparison with last month, Russia with 52% monthly growth removed by 1 step, to the 3rd position. Visitors flow from Turkey reduced and respectively was rated second.

BUSINESS & ECONOMY August 05, 2013 #16

caucasian business week

COMPETITION WITH TRACTORS OR COMPETITION WITH PROOFS Case on Agriculture Minisry in Pretrial Period

GEORGIA’S COINVESTMENT FUND TO DRAW GEORGIAN, AZERBAIJANI, KAZAKH, RUSSIAN AND ARAB CAPITAL

n July 13, 2013 Thomas Hammarberg, an EU special adsvisor in Georiga in constitutional reforms and human rights issues, sent a letter to Lasha Natsvlishvili, a deputy chief prosecutor over the so-called tractors case. “I have carefully explored the documents and I am not sure this case is substantiated by proofs against detainees. The letter refers to the fact the preliminary arrest has been prolonged to five detained bodies. Preliminary detention is applied in special cases, when suspect may avoid investigation and annihilate proofs or stage pressure on potential witnesses. I have informed the prime minister on my worry over the issue and I believe all five persons must be released immediately”, the letter reads. The City Court will start discussions over this case. Several days before, two detainees assistant professor Zaza Makharoblidze and Otar Karchava were released with the mediation of the prosecution. “Do I look like a criminal? I am ready to fight to the death and prove I am honest and unguilty”, Zaza Makharoblidze, who was a director for the mechanization institution before the detention, noted after his release. Lasha Natsvlishvili has not responded to the letter, in any case, media agencies have no information on similar response. On July 22, 2013, in 9 days after the letter was sent, the chief prosecutor made the following statement: “The investigation has given an answer to both questions. Namely, the investigation has proved Ivaniadze has given testimony on his own will, independently, without any illegal pressure and all facts in the testimony are true. Their authenticity and truth is proved by tens of other witnesses, documents, proofs, including video and other

manifest and persuading proofs”, the statement reads. On July 23, 2013, in 10 days after the Hammarberg’s letter, the Interior Ministry spread a statement and divulged a new footage of test of tractors. The Interior Ministry introduced investigative experiment contrary to experts materials. The Ministry demonstrated video footage of competition between tractors. The Ministry has also given the following explanation: “ZETOR PROXIMA POWER 120 and NEW HOLLAND TD5 110 tractors were compared and the test has showed NEW HOLLAND TD5 110 won all components. The experiment with the participation of experienced mechanizators showed ZETOR PROXIMA Power 120 fulfilled land works with problems and delay. Defense Lawyer Soso Baratashvili: “When an investigator carries out experiment, naturally, an expert should be invited. Neither investigator nor prosecutor is an expert. It is inadmissible that incompetent body issue a scientific conclusion”. Experts could not attend the experiment process, he added. “Having received information from the investigator we immediately applied to the investigator with the demand for inviting experts and involving experts Zaza Makharoblidze and Otar Karchava in the process. The investigator ignored our demand. In exchange, the prosecutor and the investigator conducted the experiment themselves”. “The investigation should answer the questions: why the tractors were not weighed? why the pressure of tires were not measured? Why has the experiment ignored the fact the Turkish

tractors were new ones, while ZETOR tractors had worked for over 300 hours? Why has the experiment ignored the fact the Czech tractors were without back balast? The trial will start in the near future and they try to persuade the society as if real criminals had been arrested over the case of tractors”, the defense lawyer says. Representatives of the association of young lawyers of Georgia (GYLA) note activities of the prosecutor’s office are not in line with the Georgian legislation and the investigation is being carried out by methods that may contain crime signs.

zerbaijan’s state energy company SOCAR entered Georgia’s co-investment Fund, which was established upon the initiative of Prime Minister Bidzina Ivanishvili. The fund reported that it already attracted $6 billion and its activity will begin in autumn of 2013. The resources of various companies and foreign investors are being accumulated in Georgia’s coinvestment Fund. The Fund will invest in spheres such as energy, infrastructure, industry, agriculture and tourism. It will invest in one or another facility, will manage it for some time, and then transfer it to a private company. One of the goals is the financing of around 25-75 percent of expenses on individual investment projects. Currently, the Fund members are “Dhabi group”, “RAKIA”, SOCAR, Batumi terminal, “KazTransOIl”, “Celik Holding”, Milestone International Holdings Group Limited, as well as Bidzina Ivanishvili himself and members of the family of the late billionaire Badri Patarkatsishvili, Kazakh Billionare Aeleksand MASHKEVICH and Russian Billionare Shalva Breus SOCAR is involved in exploring oil and gas fields, producing, processing, and transporting oil, gas, and gas condensate, marketing petroleum and petrochemical products in the domestic and international markets, and supplying natural gas to industry and the public in Azerbaijan. Three production divisions, two oil refineries and one gas refinery, an oil tanker fleet, a deep water platform fabrication yard, two trusts, one institution, and 22 subdivisions are operating as corporate entities under SOCAR. The company annually invests billions of dollars in transport infrastructure and is involved in key projects designed to increase Europe’s energy security.

TETHYS PETROLEUM IS INTERESTED IN LAUNCHING BUSINESS IN GEORGIA

1 july, a meeting with representatives of the oil company Tethys Petroleum was held in Georgian Ministry of Finance. As the Ministry reported, the company expresses desire to launch business in Georgia. To note, Tethys Petroleum declared earlier in this month about acquisition of strategic shares in several oil PCS (production sharing contracts) in Georgia. Total cost of deals makes up $16 million. Tethys Petroleum owns assets of the Central Asian countries (Kazakhstan, Tajikistan, Uzbekistan) while the company’s shares are put in London and Toronto stock exchanges.

TBILISI INTERNATIONAL FESTIVAL OF THEATRE International Program 23 SEPTEMBER, 2013 …It is even a more cynical world than the one in Shakespeare’s play… …There is no use looking for a God here, an extrasensory world, the forces of nature… William Shakespeare

MACBETH Directed by Maja Kleczewska About performance: Nobody than Shakespeare could better and in a more sensitive way put the mirror to the nature.

The times and epochs change, but human desires, passions and dreams remain the same. Maja Kleczewska found our entire modernity in the text of Shakespeare along with its cruelty and evil. The King Duncan is located somewhere between Pruszków and Wołomin, Mackbeth and Lady Mackbeth, are an unfulfilled marriage, and the world presented seems to be very close to the reality of the movies by Lynch and Almodowar. Kleczewska asks a question: how is the evil born, who is responsible for this, to what extent we direct our fate and to what extent it plays with us? Duration: 120 minutes Without Intermission Web-site: http://teatropole.pl/en/macbeth/ www.tbilisiinternational.com www.facebook.com/TbilisiInternational

INTERVIEW caucasian business week

DON’T ADVERTISE, ENTERTAIN!

mar Rostom is the Consumer Engagement & Media Manager for Nokia Near East, North Africa, & Levant. His focus is to drive integrated consumer engagement strategies for Nokia where he manages and oversees the company’s media strategies & digital assets. With almost a decade of experience honed in building integrated communication strategies with some of the biggest brands in the region; such as Proctor and Gamble, BMW, and many others; he is an acknowledged thought leader and innovator that challenges the conventional wisdom to create richer brand experiences. Omar is one of the key note speakers at the “Marketing Brilliance Awards”, Georgia, held in Tbilisi on 25th October 2013. Marketing Brilliance Award offers: • One-day conference featuring world-class speakers from Microsoft, BBC, London Transport Museum, Nokia, Philips and many more • Gala dinner and the Awards Ceremony

Q: Why is Social Media Important for Businesses? A: Today social media is the most translucent, interactive and engaging form of Marketing and PR. Social Media offers a remarkable opportunity to find and engage potential clients as well as to create a strong brand identity.; It makes real time engagement possible and allows brands to develop deeper connections with clients and prospects in ways that were previously not possible. Social media can be a powerful business-generating tool, or a total waste of time. If performed correctly, it can measurably increase leads and sales. Q: Could you tell us, how do you create social media marketing that appeals to consumers? A: The most important elements are; to respect your consumers and put yourself in their shoes. In this day and age, consumers are constantly bombarded with advertising messages screaming for their attention. The advertising scene has become increasingly cluttered and our receptiveness to those messages is continually decreasing. The only way brands can secure mind share with consumers is by delivering informative and entertaining content that consumers can experience - otherwise, it’s just another ad for another brand. Q: What is required from marketers to create these kinds of experiences? A: Marketing expert Scott Cook said: “A brand is no longer what we tell the consumer it is – it is what consumers tell each other it is.” Once a marketer is ready to grasp this concept, he or she will be able to create experiences that will inspire consumers rather than push advertising at them.

Q: You are a key-Note Speaker at the Marketing Brilliance Conference, Georgia; could you tell us what will the delegates take out form your presentation? A: I’ve been fortunate enough to work with a variety of different countries and brands with very rich cultures and identities. I will be talking about the value of Social Media Content Marketing and showcasing to the audience some successful examples. I will also be showcasing a recent Nokia campaign that secured some interesting results by focusing on educating and entertaining consumers. Social media presences are fundamentally about building communities. Our focus at Nokia has always been to add value to people’s lives by engaging, educating, and interacting with them on our presences. Q: Is this your first time in Georgia? A: This will be my first time in Georgia and I am very excited to visit a country with so much history and natural beauty. I am sure this will be a great event and experience for both the audience and the speakers! Omar Rostom is one of the key note speakers at the “Marketing Brilliance Awards”, Georgia, held in Tbilisi on 25th October 2013. The ceremony is organised by British company – BOC Global Events Group, supported by most of Georgian Media: Event Marketing Partner: Marketer.ge; General Media Partner: Palitra Media, Official Radio: Palitra Radio, Radio Imedi ; Official Online TV: Palitra TV, ITV.ge; Media Partners: BPI, Caucasus Business Week, Ambebi.ge, iMarketing.ge, Presa.ge, People. ge, Droni.ge. Find Out More: www.Marketing-Brilliance.boc-uk.com

August 05, 2013 #16

“NONE OF THE BUSINESS SECTORS OF GEORGIAN ECONOMY IS SO CLOSE TO THE EUROPEAN STYLE OF BUSINESS MANAGEMENT AS BANKING”

iorgi Tsutskiridze, executive director of Georgian Banking Association, notes that according to The Banker, which publishes rating of 1,000 largest banks, Georgia is on the 9th position as of the bank asset growth pace. While commenting on situation on the local market, Tsutskiridze points at decline of the interest rate. The rates are decreased by 3% on average, while on the consumer loans – by 4-5%, he notes. The expert links the rates’ decline to growth of operation efficiency, noting that “high interests in previous years were conditioned with political factors together with other ones”. “The biggest mistake of the former government was its objectionable interference in the economy”, Tsutskiridze declares and points at the “politically colored” legislative amendments and restriction of the property rights.

GEORGIAN SME ASSOCIATION TO WORK ON IMPROVING PUBLIC PROCUREMENT

eorgian Small and Middle Enterprises’ Association will implement 8-month project, being funded with grant of Open Society – Georgia Foundation. The project aims to promote larger involvement of small enterprises in public procurements. Besides, information in the field of public procurements will be systematized, the Association said.

CARE INTERNATIONAL CAUCASUS SUPPORTS POVERTY REDUCTION IN MARGINAL GROUPS

are International Caucasus announced grant competition, which aims to promote poverty reduction in marginal groups (including women and youth). Deadline for applications’ submission is August 19. The competition is announced within “Local Participants Unite for Inclusive Economic Development and Governance in the South Cauca-

sus” project, which is funded with 1.14 million EUR by the Austrian Development Cooperation (ADC). Grant program focuses on meat, dairy and vegetable production in several districts of South Georgia (Gardabani, Marneuli, Dmanisi, Akhalkalaki and Ninotsminda). Grants will be issued in volumes of 10,000-40,000 lari, while co-financing principle is effective.

CREATIVE BUSINESS CUP FOR PROMOTING THE ENTREPRENEURS

he annual Creative Business Cup, an international competition aiming to develop the creative business industry, invites entrepreneurs to submit their business ideas before August 22. The contest is being implemented by the Innovation and Entrepreneurship Development Centre together with the event management company SEVENT in partnership with Global Entrepreneurship Week (GEW), the Denmark Centre for Culture and Experience Economy and the Denmark Ministry of Business and Growth. “Our responsibility is to choose the most qualified national winner of Creative Business Cup in our country. To have a successful competition, we need to promote this project primarily to all relevant participants and secondly to other stakeholders in Georgia. The jury of local competition consist of experts with knowledge and expertise in areas such as creative industries, entrepreneurship, PR, marketing, sales, product development etc.”- The President of the Innovation and Entrepreneurship Development Centre, Tinatin Gholadze, as a National Host (NH), told us. “Our organization as the local representative of GEW in Georgia, aims to assist the innovators and job creators in our country, who launch startups that bring ideas to life, drive economic growth and expand human welfare” Last year 21 countries were participated in the Cup, while this year it has expanded up to 40. Business concepts will be judged according to originality, creativity and competitiveness. “The Global Award Show itself will be held on November 20th 2013 in Copenhagen, Denmark as the culmination of the Creative Business Cup. It will be a platform to emphasize the growth potential of entrepreneurs from the creative industries within a global perspective. While looking at the business ideas, the jury takes into consideration the creative competencies as a core asset of presented concept. Aesthetics, design,

senses, interaction, art, visuals in a broader sense or other creative aspects must be one of the central components of its success. The second criterion is to show the profitability. The goal of the competition is to emphasize that creativity can be the basis of a sound business.” she explained. Any global citizen with a business idea and a background from within the creative industries is eligible to compete in the Creative Business Cup. A participant can be an individual as well as a group of people collaborating in a team. At least one participant in the team must have a background in one of the creative industries. Mako Jaoshvili, a co-organizer and GEW advisory board member, stated that the ideas should be innovative and commercial. Other criteria for judging are: Originality - Is the business idea a new one or is it being used in a new context? Creativity - Are creative competencies crucial for the success of the business idea? Market potential - Does the business concept entail a market potential? “As far as you know Creative Business Cup is a competition amongst business concepts from the creative industries. The fields for participation are as followed: design/architecture, film/video production, radio/TV production, advertisement, art/craft, gastronomy and festivals. Submitted business concepts must not exceed 8 pages or 12 slides. They must be written in English. Every business concept should address the majority of the following topics: Physical and organizational base for business, description of product/service, value propositions, sales channels, market and customers, competitive situation, analysis of risks, financial plans” – she explained. The only restriction is that the amount of external capital invested in the participating company must not exceed $ 500.000 US. There are no other requirements related to company’s age, annual turnover or number of employees.

High marks are given to businesses that are Revolutionary in terms of their product or service, customer approach, markets or other ways. “The jury pays attention how the concept 1. Change the value chains of the creative industries. 2. Engage customers or others in creative processes. 3. Generate new needs and new markets. The presented concept should be realistic in terms of risks and possibilities” – told Mako Jaoshvili. Lower marks are given to businesses that comprise: A new take on a well-known idea and/or follow the rules of the market rather than make them. “The score is low if the concept deals with local businesses without ways of scaling or growing. In addition, the ideas should show good investment, a new start-up approach and market expansion possibilities. Also, it’s very important to have the proper evaluation of risks and the financial aspects in order to show the market potential of this idea. In order to gain a high score, the ideas should be targeted globally as well and not only to domestic markets,” she added. The business concept should cover the bases of the or-

ganizational structure, sales, market research, income, partners, the management team and its competitiveness. “We also place great importance on how effectively the idea is presented; we should see the originality in it as well,” said Jaoshvili, adding that the local jury needs to be quite objective, as the winner will represent Georgia in Denmark on an international stage. Through September and October, the advisory board of the GEW will give recommendations on improving the business skills of the entrepreneurs and consulting the winner to prepare a full business plan based on international standards and practice, as well as a public speech. Interested participants are required to submit a brief description of their business idea in English and Georgian at info@iedc.ge by August 22. After that, 3 to 5 participants will be selected, who make the business concept presentation in front of the jury on August 30 and will be announced the winner of CBC Georgia to be sent to the Creative Business Cup Global Finals in Copenhagen from November 18-20. The main prize is 50,000 euro.

ECONOMY August 05, 2013 #16

GEORGIAN PRESIDENT:

caucasian business week

TRAIN OF COUNTRY’S ECONOMICS JUMPED THE TRACK

eorgian President Mikheil Saakashvili estimates that “train of the country’s economics has jumped the track”. “Otherwise, such rapid cancelation of economic growth is impossible”, he declared at yesterday’s meeting with members of the Parliament minority. There is no objective reason for so poor development of Georgia and for drop of 11-percent growth below zero, the President pointed. He said that incompetence in economic decisions “is direct result of nepotism”. Saakashvili stressed that the new government “has intentionally killed dozens of projects” and pointed at such suspended projects as Tbilisi bypass railway, Lazika port, etc.

BAKRADZE ASKS IVANISHVILI FOR MEETING TO DISCUSS CRISIS

BILISI, DFWatch–Davit Bakradze, the National Movement’s presidential candidate, asks Prime Minister Bidzina Ivanishvili for a meeting to discuss how to get the country’s economy out of the crisis. The PM has not yet responded. On Wednesday, the National Statistics Department, GeoStat, published a new report which showed that Georgia’s GDP growth in June was minus 0.8 percent. The report led to criticism against the government from members of the UNM.

At a briefing Thursday, Bakradze poked fun at the Ivanishvili-led government and compared it to an ostrich that sticks its head into the sand. “It is not serious when the government and ministers remain in an ostrich pose as if nothing is happening in the economy,” he said. Bakradze went on to say that the crisis mostly will impact on the poor population and make their situation even more difficult. “So the government should leave its ostrich pose and begin to have an open discussion,” he appealed. The UNM’s candidate for president suggested that his meeting with Ivanishvili should deal with how to create stability in business. He suggested a five year ‘moratorium’ on establishing new regulations for business. Bakradze also proposed creating a convenient business environment and continuing the reduction of taxes. “We planned to reduce income taxes from 2013. The government declined this, and now we propose to again choose this direction,” Bakradze said. DF Watch tried to get an answer from the PM’s office, but without result. Davit Usupashvili, Speaker of Parliament, however said that if Bakradze has anything he wants to discuss he can call him. Usupashvili added that he hasn’t received any proposal from Bakradze recently.

MINORITY MP ZURAB JAPARIDZE: THE MAIN PROBLEM IS A FEELING OF INSTABILITY

n his open letter, member of the parliamentary minority Zurab Japaridze points that Georgian economics is in a difficult condition and that the main problem, which the government does not want or can not to admit, is a feeling of instability. “As our or foreign citizens find it difficult to foresee what will be Georgia’s economic or political environment, they are reluctant to make investments, take a loans, start/expand business, etc. here”, Japaridze declares. Moreover, part of them tries to move own capital in more stable space, as “future has become extremely unpredictable in Georgia after last year’s parliamentary elections”, he adds.

Japaridze considers that such situation is conditioned by the government’s decisions, including ones in legislative sphere – in particular, by deletion from Tax Code of provision, which reduced several taxes from January 1 of this year, by amendments to Labor Code, ban to selling agricultural land to foreigners, etc. In order to overcome the created situation, Japaridze appeals to the Prime Minister – “Start with admittance”. “Admit that economic program of your political team was completely useless”, that you failed to discover elite corruption (of the former government), could not find monopolies, oligopolies and cartel agreements on fuel or pharmaceutical markets, Japaridze calls the Premier. Admit that recent years’ advancement of Georgia in international ratings was a real success and not a facade, he continues, warning the Premier to stop “giving illusive, unrealistic and confusing promises”. Stop making economics development plans (strategic, tactical or operational), the MP says, adding that “economics does not love plans, it loves freedom”. Japaridze also calls the Prime Minister to change experts and establish an effective control over his own parliamentary majority.

MINISTRIES OF ECONOMY AND FINANCE MADE JOINT STATEMENT ON GDP STATISTICS

inistries of Economy and Sustainable Development and Finance released joint statement on GDP preliminary statistics, published by Geostat: “Due to public interest and to raise awareness of our people, we state: Preliminary evaluation data of June economic growth is not final and it will be specified twice more. It’s only preliminary evaluation and does not include some data, among them agricultural data. To our expectations, agriculture will cause about 1% - 1,5% GDP growth only in June, which is proved by National Statistics Service and which means that growth is not negative, but positive. In addition, in the six month of 2013, totally Georgian economy did not reduced, but increased by at least 1,8%. In the first 7 months 2013 in terms of tax mobilization, tax incomes in the budget are not reduced, but exceeds to the data of 2012 same period (in January-July 2013 tax incomes of the joint budget equaled to 3 785 million GEL, which exceeds by 32 million GEL to 2012 analogical data. tax incomes of the state budget equaled to 3 558 million GEL, which is 28 million GEL more than analogical data 2012). Because budget incomes exceed to expenditures and the budget does not have problem in the spending part, we state with all responsibility that the government will fulfill all obligations to the citizens as in terms of social, or all important infrastructural project funding. Currently Georgian economy undergoes structural improvement process. During the office term of previous government, though harsh intervention, unjustified expenditures, short-term results of economic growth were artificially reached, which did not reflect on the people’s welfare. Non-industrial infrastructural projects (new parliament building in Kutaisi, Batumi Tower,

Alphabet Tower and so on), also infrastructural projects, implementation of which were started without technical economic benefits study (for example Tbilisi roundabout railway) and for which over 1 billion was spent, created shortterm, immediate effect of economic growth and did not serve to economic improvement process. One of the ways of economic growth with artificial, wrong methods was business-implemented non-profile, expensive and economically unreasonable projects, made by “advice” of highest governmental bodies, which lead these businesses to bankruptcy. To reach illusory economic success, intermediary firms (for example intermediary oil companies) were created based on “creative” decision of National government. Their function was market control, did not create real value and only inflated turnovers. These intermediary firms do not exist today and it was naturally reflected on the indicators. Besides, part of the companies existed before could manage winning of infrastructural projects or getting of several hundreds million GEL orders without tenders due to corrupt deals. These corrupt deals were annulled and investigation is going; to continue started projects, announcements of new tenders according full legislation procedures became necessary. It procrastinated some projects. Ineffectiveness of above-mentioned violent economic decisions became apparent in July of last year, when growth and direct foreign investments started to reduce. Because business really felt freedom, and new government did not continue violence over business, unlike previous one, real trend is increasing from March of the current year, economy is going out of National Shock and irreversible improvement, sustainable process of economic structure has started. Nest stage is healthy, natural growth. On this stage foreign trade balance has been enhanced by export increase and import decrease.

JULY RECORDS 0.2% ANNUAL DEFLATION

eorgia still has deflation. After 0,2% inflation in June, annual deflation equaled to 0,2% in July. In comparison with June of the current year, deflation equaled to 1,3%. Besides, average inflation level in July was 0,8%. Geostat informs that in 12-months period prices on food and non-alcohol beverages reduced by 1,1%. Respectively, groups’ share in the overall data of annual inflation equaled to 0,38 percentage points. During 1 year prices were reduced on the following sub-groups: Fish (-5,7%), vegetables and cereals (-4,1%), sugar, jam and other sweets (-7,5%). Besides prices increased on fruits and grapes sub-group (12,7%). Prices reduced by 2,9% on the transport group. Group’s share in the overall data of annual inflation equaled to 0,37 percentage points. In this

sub-group prices declined on purchase of vehicles (-8,3%). Prices increased in healthcare group by 5,6%. Prices increased on ambulance service by 16,1%. In comparison with June, in July prices increased by 4,6% in the group of food and non-alcohol beverages, in healthcare sector prices increased by 1,6%.

BUSINESS caucasian business week

August 05, 2013 #16

WINERY ACCOUNTS FOR BIGGEST PART OF LOANS, ISSUED WITHIN THE 3RD COMPONENT OF PREFERENTIAL AGROLENDING PROJECT

griculture Project Management Agency reported that loans of $16 million are issued within the 3rd component of preferential agrolending project (funding of agricultural enterprise). At that, winery accounts for approximately 33% ($5.2 million). Cattle breeding accounts for 21% ($3.24 million),

processing – 14% ($2.2 million), warehousing (cold storage, dryer, storehouse) – up to 11% ($1.7 million), greenhouses – up to 7% ($1 million). The rest fields (plant growing, fish farming, poultry farming, dairy farming, etc.) accounted for 15% in total ($2.3 million). According to the Agency, 125 loans have been issued, while 22 loan applications are under consideration.

KUTAISI AIRPORT MAY LAUNCH FLIGHTS TO TOKYO, LONDON AND STOCKHOLM

tarting October 1 Kutaisi International Airport will carry out additional flights, Giorgi Sigua, a head for the National Tourism Administration noted. Kutaisi international airport offers quite favorable terms to airlines, Sigua added. “Starting October 1 we will add new destinations. Negotiations are underway with various airlines so as they perform flights to Kutaisi International Airport that offers very favorable terms to airlines. Kutaisi international airport represents a very important destination with excellent potential. The number of employees has increased by 100%. Previously the airport used to employ 80 persons, while now the airport employs 160 persons”, Giorgi Sigua noted. The number of flights has increased by 710%

Georgian Airways occupies the second place – 12% (69,873 passengers, decline – 5.7%). Next comes Ukraine International Airlines with 11% (64,598 passengers, growth – 82%). Turkish low-budget carrier Pegasus accounts for 9% (50,401 passengers), Russian S7 – for 5.9% (34,393 passengers), while Belorussian Belavia – for 5.6% (32,571 passengers). In total, foreign carriers account for 85% of regular flights in Georgian airports.

MZIA GHVALADZE - THE LUCKIEST WINNER OF NATAKHTARI’S TRADITIONAL DRAWING

atakhtaris’s traditional drawing came to an end. This year, the luckiest winner is from Tbilisi. “It was an evening with our guests. We decided to have beer and I went down to the shop. I was thinking to buy a small bottle, but then I changed my mind and finally bought a 2.5l bottle of Natakhari. It was probably a premonition … I was so happy I could not believe it…. I’m 60 and I have never ever felt such joy, it was incredible… I would never think of winning GEL 50 thousand!”. We visited Mrs. Mzia Ghvaladze, the winner of Grand Prix - GEL 50,000, who could not hide her emotions and joy. Mzia Ghvaladze lives with her children and grand-

The Joint Project of Marneuli Food Factory and Culinary Academy came to an end Following tasting, 5 the most “Wholesome Cooks” got identified who received presents –household equipment from Marneuli Food Factory and the best three were given vouchers for amateur course at the Culinary Academy.

since the inauguration and the airport will add new destinations in the near future, and this will draw a new flow of tourists, Giorgi Sigua noted. “In 10 months after the inauguration, the number of flights has increased by 710%. Today, a total of five airlines perform flights to 22 destinations from Kutaisi international airport: These destinations are as follows: Kyiv, Donetsk, Kharkov, Katovitsa, Warsaw, Moscow, Minsk and Israel. The flights are performed by Georgian Airways, Wizz Air, Ural, Belavia and Sibir”, Sigua added. Negotiations are underway with several other airlines to launch flights to Tokyo, London, Stockholm and other destinations, Sigua said. “Negotiations are underway with Wizz Air, FlyGeorgia and Ukraine International Airines”, Sigua said.

TURKISH AIRLINES RANKS FIRST IN GEORGIA’S PASSENGER TRAFFIC eorgian Civil Aviation Agency reported that according to passenger traffic, passed by regular flights through Georgian airports in the first half of the year, Turkish Airlines is still number one carrier. In the reporting period, this airline has transported 110,728 passengers, accounting for 19% of total traffic (584,465). Its traffic has increased by 33.5%, if compared with the same period of 2012.

GIORGI JANKARASHVILI BECAME A “MARGEBELI (WHOLESOME) COOK”

children in a quiet house in Mukhiani District. She never dreamed of winning as she says, she thought it unbelievable, however Natakhtari completely changed her opinion: “I never believed in it. I’m not a beer fan, however I was buying Natakhtari because of drawing. So was that evening. I do not remember such noise, joy and agiotage around me for a long time. My husband died 7 years ago and I was considering myself as an unlucky person, but everything is in God’s hands and so it happened.” - You think it was luck to win GEL 50,000? - Surely it was luck, I went to buy beer. I did not think it was happening in reality, everyone was screaming there was such noise. - Do you like beer? - I would lie if I said yes. However I’m a venturesome person, when watching ads I wanted to be lucky and win and therefore I was always buying Natakhtari when shopping for beer. From now on I will never buy beers other than Natakhtari. It made my life so colorful and happy. - What is your occupation? - I’ve been working all my life. I am a teacher of English language and literature at the Secondary School N 143. My life will dramatically change. I always wanted to help my children though I could not manage it with my salary, now it will be different. - What will you change in your life? - My son acquired an apartment which is under construction and I will also make my contribution to it, which makes me happy. I’ll share my winning with the other family members as well, since all of us have our plans and wishes to make true.

PRIZES GOT ALLOCATED BY NOMINATIONS AS FOLLOWS:

he Joint Project of Marneuli Food Factory and Culinary Academy came to an end. Participation in the project was simple and “wholesome” as well. Project initiators, during one month, by means of special contest, gave the opportunity to gourmands chefs, cookery specialists , especially to those interested in photography or distinguished by special fantasy, to show their culinary talents. They took photos, uploaded those and proved that “it is wholesome”! Marneuli Food Factory awarded the first ten participants with household equipment. Rustavi 2 TV Program the “The Other Noon” was a media partner and supporter of the contest “Wholesome Culinary”. As regards the second stage of the contest, for increasing motivation, participants were given the chance to acquire additional prize. The second stage was staffed by the best 20 of contest participants, whose photos collected more likes. The contenders showed their talents in practice. They cooked the meal/ dessert on the photo and made jury members to taste those.

Ist Prize - “ Wholesome Cook” „ Giorgi Jankarashvili Roast trout’s fillet with citrus purée, stewed green onions, peas and pea purée https://www.facebook.com/photo.php?fbid=508 455609227469&set=a.500162393390124.10737 41857.452118611527836&type=3&theater II – III Prizes – “The Best Wholesome Dessert” and „The Best Wholesome Meal” Salo Kelenjeridze Soufflé with walnut jelly, berries and ice-cream. Contender – Phridon Kikilashvili Spring fish ragout „Phirosmani” IV - V Prizes Giorgi Ninidze Veil Chanakhi (meal) Marneuli Food Factory will award the winner with additional present – it will prepare a special video for the winning recipe to be uploaded to the company’s webpage! Irka Kelekhsashvili Spaghetti Napolitana

NEW DUTY ON MINERAL WATER USE TO COME IN FORCE IN OCTOBER

mendments to law “On Dues for Usage of Natural Resources”, envisaging establishment of new dues for mineral water usage, will enter in force on October 1. The amendments, being adopted by the Parliament in July, were published today. According to amendments, dues on usage of Borjomi and Nabeglavi mineral waters are increased 3 times and amount respectively to 30 lari and 18 lari per cubic m.

Ministry of Economy and Sustainable Development and Natural Resources Agency, the authors of this legislative initiative, declare that dues per bottle makes up “quite a small part of its cost, accordingly, the increase of dues will not significantly influence on financial expenses of the producer companies”. To note, total sum of dues, paid to the state budget for usage of Nabeglavi and Borjomi waters, made up about 2.28 million lari in 2011 and 2.22 million lari – in 2012.

FOREIGN PRESS August 05, 2013 #16

caucasian business week

IS GEORGIA REALLY COMMITTED TO EUROPEAN VALUES?

EORGIA’s relationship with the European Union seems to be moving in the right direction. On July 22nd, negotiators concluded talks over a Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU. Progress towards visa liberalisation continues. The chances of securing an Association Agreement at the Vilnius summit in late November look strong. Such progress, the Georgian government insists, is based on commitment to European values such as democracy, human rights and the rule of law. As his Independence Day address on May 26th showed, the prime minister, Bidzina Ivanishvili, is certainly keen to make the right noises in public. But the government’s deeds have often failed to live up to its words. Take minority rights. UNM politicians (at central and local levels), gay rights demonstrators and Muslim worshippers have all faced angry mobs in 2013. Police protection has been inadequate, and punishment too rare. The previous government pursued order at the ex-

pense of the rule of law; the current government’s focus on the rule of law is undermined by weakness in enforcing public order. The government’s pledge to restore justice is in line with European values. But the way in which it has arrested and prosecuted scores of UNM officials leaves much to be desired. Question marks hang over the government’s use of pre-trial detention. Statements by government officials that assert the guilt of senior UNM figures undermine the presumption of innocence. The failure to build a compelling narrative around these arrests has led tofears of selective justice amongst Georgia’s allies, even if most Georgians do not appear to agree. Public attitudes further emphasise the distance between Georgia and Europe. In one recent poll, 52% of those interviewed in the same poll approved of the counter-demonstration against gay rights demonstrators on May 17th; 25% even approved of the counter-demonstrations turning violent. Traditionalism is deep-rooted in Georgian society. The Orthodox Church, by far Georgia’s most

respected institution, has long railed against the corrupting influences of modernity. The growing power of ultra-conservative clerics is making it more intolerant. Last week, the National Forensics Bureau began to certify brides’ virginity–for a fee. Hymen restoration procedures have become increasingly popular in recent years. Yet that only tells part of the picture. According to the same poll, 51% of those asked said that those who broke the law on May 17th should face justice. 58% think that minority rights are important. The Georgian government may have more support to confront intolerance than it thought. To underline the government’s credentials, Mr Ivanishvili has pledged “exemplary” presidential elections on October 31st. That will require assertive policing. Stone-throwing demonstrators greeted UNM rallies in Zugdidi on July 20th and Batumi the following day. That 14 people were arrested and fined shows a belated willingness to punish. But the UNMscolded the police for failing to prevent what happened. These elections matter. Polls show that although

Georgian Dream has high approval ratings, its presidential candidate, Giorgi Margelashvili, is much less popular than his party. In contrast, the UNM candidate, Davit Bakradze, is far more popular than his. The key question is whether Georgians will vote for the individual or the party. The answer will help to shape Georgia’s future political landscape. With Mikheil Saakashvili, the president, due to step down at the end of October, and Mr Ivanishvili hinting that he will leave soon after, Georgia’s two dominant political personalities will soon leave office. A strong showing for Mr Bakradze could cement the UNM’s role as a legitimate opposition force. For that to happen, Mr Saakashvili should avoid interfering in Mr Bakradze’s campaign. In the interests of democracy, Mr Ivanishvili should also stop trying to influence the shape of the opposition. The election campaign will provide both men with another platform to continue their feud. The best way to demonstrate their personal commitment to European values is by spurning it. economist.com

GEORGIA’S PRIME MINISTER LAYS OUT EUROPEAN ‘DREAM’

REKI - Georgia’s billionairePrime-Minister, Bidzina Ivanishvili, has a “dream” for his country’s future. But opponents say he is a danger to democracy. Ivanishvili spoke to EUobserver in a recent interview at his summer residence in Ureki, on the Black Sea coast. He said he wants to transform Georgia into a “typically European” society and into a Dubaitype business hub between Europe and Asia. “It’s my dream. There is a possibility, if everything develops ideally. Of course, I don’t want to say this too loudly in order not to be laughable. But deep down in my heart, I believe … the possibility exists,” he noted. The 57-year-old businessman made his fortune in metals and banking in 1990s Russia. He entered politics in 2011 and he unseated the centre-right UNM party of President Mikhail Saakashvili in a free election in 2012. He told this website it might take “20 years” to make his dream a reality. He also said he will step down as PM “before the new year” in order to work with NGOs to implement his master plan. The plan is to purge Georgia of high-level corruption, to build decent schools, hospitals and roads and to attract foreign investors and tourists. Since coming to power, Ivanishvili’s prosecutors have indicted five UNM ex-ministers and several officials and local councillors on charges ranging from misuse of public funds to bribery and contract killings. The new PM has promised to destroy Saakashvili’s “black boxes” - illegal wiretaps, secret videos and data gathered in a mass Internet surveillance

programme. He said the snooping operation is “reminiscent of George Orwell’s ‘1984’,” a British novel about totalitarianism. He added that Saakashvili himself might face trial when his presidential immunity expires in October. “Politically, it is not my desire … But the rule of law applies to everyone,” he said. To maintain credibility, he invited a crowd of foreign monitors, such as Thomas Hammerberg, a Swedish diplomat and Nobel laureate, to oversee his actions. He also threw the book at two of his own ministers who broke the law. In the economic sphere, he has created a privatesector investment fund which he says will reach $10 billion by the end of the year. In international relations, he is on the way to initialing an association and free trade pact with the EU in November and he expects to see “a serious step forward” in Georgia-Nato integration in 2014. He has also improved ties with Russia. On the one hand, Russia is tightening its military grip on Georgia’s breakaway regions of Abkhazia and South Ossetia. But on the other hand, it has lifted a trade embargo on Georgian mineral water and wine. Ivanishvili said the more Georgia prospers, the greater the chance Abkhazians and South Ossetians will seek reunification. “To bring back our brothers, we need to convince them that it’s in their interest to live with us,” he noted. Referring to his personal contacts with the Russian elite, he said that “a talented and smart intelligentsia” is slowly changing Russia’s “sickly” attitude to its former republics.

Hot snow But for its part, the UNM party believes Ivanishvili has sinister intentions. Giga Bokeria, a UNM leader and the outgoing head of Georgia’s National Security Council, told EUobserver in Tbilisi that the prosecutions of exministers is “selective justice … with the goal of destroying a major political party.” He admitted the UNM in its nine years in charge made a “grave mistake” by giving too much power to security services. He described UNM-era incidents of police brutality, torture of prison inmates and the mass snooping operation as “shameful … disgusting.” But he noted: “Tyrannies don’t lose elections. They don’t concede election results. It’s an oxymoron, like hot snow.” He added: “Overall, Georgia was moving toward a liberal democracy … It was a free country. But now I believe there is a real threat.” Bokeria accused Ivanishvili of planning to rule Georgia from behind the scenes after he steps down as PM. “He wants a puppet government and a balkanised political system, with many weak parties. This would make him invincible in his palace … This is the classic dream of a 1990s’ oligarch,” he said. He added: “A democracy where the legitimate players are weak and someone outside the system pulls the strings is not a real democracy.” In Europe, the UNM’s main ally, the EPP group of centre-right political parties, has also damned Ivanishvili for using courts for political revenge. Some EU diplomats remain agnostic, however.

One EU contact, who asked not to be named, said that Saakashvili “monopolised power” and that Georgia now has “an opportunity to become a deep democracy.” But he voiced doubt whether Ivanishvili is the right man for the job. “He is not the first big businessman who, in his mid-50s, wants to prove to himself that he can also do politics. He is learning fast, but he doesn’t have the political experience. He doesn’t know all the traps,” the contact said.

Knowing the traps For Bokeria, Ivanishvili has already walked into one pitfall. He said the PM has given a free rein to populist and far-right elements in his coalition, who say liberal EU values are incompatible with Georgia’s Russian Orthodox identity. He noted that “Orthodox fundamentalist” groups have “mushroomed” in the new political climate. He also said that Ivanishvili freed from jail dozens of far-right “thugs” whom he labelled as Saakashvili’s “political prisoners.” Bokeria, in his role as Georgia’s top security advisor, said some of the same men almost beat to death a handful of pro-gay-rights protesters in Tbilisi in May, while Orthodox priests and the police looked on. Ivanishvili later wrote an op-ed for EUobserver promising to protect minorities. But Bokeria noted that the PM’s domestic statements were “ambivalent” and that nobody faced justice for the assault. “If they continue tolerating these kinds of groups and praising these kinds of people as heroes, then our country will go to hell,” he said. euobserver.com

8 LIBERTY BANK PROFITS IN JANUARY TO JUNE MARKED 2.238 MILLION GEL

SC Liberty Bank completed first half 2013 with 2,238 million GEL profit (first quarter 2013 - 319 000). By July 1, deposit portfolio is 997 million GEL (first quarter 2013 - 825,5 million GEL); loans - 489,4 million GEL (first quarter 2013 - 403,3million GEL). Overall obligations are 1,032 billion GEL (first quarter - 875,8 million GEL). Actives are 1,149 billion GEL, market share 7,7% (first quarter 2013 - 991 million; 7%, 2012. -906,5 million GEL, 6,3%). Liquid actives ratio to overall actives is 44,8%; Return on Actives (ROA) is 0,63%, Return on Equity - 5,6%. Direct and indirect owners of Liberty Bank stocks are Den Korsace Patriciu (73,1%), Lado Gurgenidze (8%) and BNY (NOMINEES) LIMITED (11,3%). Bank’s stock capital is 118 million GEL (first quarter 2013-115,5 million GEL).

LIBERTY BANK CONTINUES NETWORK MODERNIZATION AND EXPANSION

BANKING NEWS BANK SECTOR’S TOTAL ISSUE SHRINKS TO 5.7 MILLION GEL

verall issue of Georgian Banking sector equaled to 71 million GEL in June, which is 5,7 million GEL less that June 2012 data. According to preliminary Geostat data, overall issue of the private banks in June was 65,3 million GEL, which is 5,7 million less

s of the 1st quarter, 10 banks out of 20 ones, operating in Georgia, have taken into possession property of 79.89 million lari. At that, 57.857 million accounts for Sakartvelos Banki (Bank of Georgia). Expert Michael Tokmazishvili notes: “The more loans are issued by the banks, the more complicated their security becomes and therefore, the share of repossessed property is grown as well”.

TRADE SECTOR’S RATIO IN BUSINESS LOANS PORTFOLIO ACCOUNTS FOR 46%

up 29.8%). In the reporting period, the bank’s total assets amounted to 979.755 million lari, declining by 1.7% year-on-year. Net loans made up 661.68 million lari (decline – 4.7%), while loan loss reserve – 31.4 million lari (growth – 17.2%). Return on assets (ROA) made up 1.51% (instead of 2.24% in the same period of 2012), return on equity (ROE) – 11.2% (instead of 17.57%), ratio

PROCREDIT BANK GEORGIA ENDS JANUARY TO JUNE PERIOD IN 7.58 MILLION GEL PROFITS

SC Progress Bank completed first half 2013 with 236 175 GEL profit (2012 1,5 million GEL profit). By July 1, Bank’s deposit portfolio is 23 million GEL (01/01/13-4,053 million GEL), loans - 25,8 million GEL (01/01/13- 16 million GEL), Ratio of problem loans to overall loans - 1,8%. Overall obligations of the bank equal to 24,4 million GEL (01/01/13 - 5,5 million GEL). Loan portfolio increased by 61% in 6 months, deposits - by 467%, actives - by 92%, to 39,8 million GEL and market share - by 0,3% (01/01/130,2%). Ratio of liquid actives to overall actives is 26,13%, Return On Actives (ROA) - 1,38%, Return on Equity (ROE) -3,08%. Kakha Kaladze’s fund Kala Capital is the owner of the bank’s control package, 22% belongs to Prime Minister Bidzina Ivanishvili. Stock capital of Progress Bank equals to 15,4 million GEL.

than June 2012 data. In June of the current year, issue of National Bank of Georgia equaled to 5,7 million GEL, like in June 2012. Data of the total issue of the commercial banks in January of the current year was 62,6 million GEL, in February - 59,2 million GEL, in March - 65,3 million GEL, in April - 73,3 million GEL, in May - 71,5 million GEL. As for National Bank’s issue, NBG issue in January was 6,5 million GEL, in February - 4,9 million GEL, in March - 5,6 million GEL, in April - 6 million GEL, in May - 5,7 million GEL. Georgian banking sector is represented by 20 commercial banks. In May last year 19 commercial banks operated.

TEN COMMERCIAL BANKS TAKE OVER 80 MILLION GEL PROPERTY

iberty Bank continues modernization and expansion of the service network. Bank informs that on July 30 deputy director general of the bank Zurab Tsulaia opened a new branch, with modern standards, in Dedoplistskaro (#1 Alazani street). The branch will provide full banking service to individuals and legal entities. All kinds of loans, international and local money transfer systems, opening of various deposits, payment of communal taxes are available in the branch. Over 30 new branches and service centers were opened and modernized throughout Georgia during 2012 - 2013. Liberty Bank has the largest banking network, through which 1,4 million individuals and over 60 000 legal entities has been served. By June 2013, Liberty Bank’s market share according to total actives is 7,7$.

n the overall lending of legal entities, share of trade sector reduced by 0,3% since the beginning of they ear and by July 1 equals to 46,7% (01/01/13 -47%). NBG informs that overall amount of trade lending by July 1 is 2,2 billion GEL (01/01/13 -2,237 billion GEL). For the reporting period, amount of the loans issued for industry is 954,4 million GEL (01/01/13 - 993,2 million GEL) and takes 19,8% in the total portfolio of the legal entities (1/01/13-20,9%). 9,4% comes on the construction - 453,5 million GEL (01/01/13 -9,2%, 435,7 million GEL). Hence, 75,9% (01/01/13 -77,1%)out of overall lending of the legal entities comes on 3 sectors industry, construction and trade. Totally, corporative loans portfolio is 4,8 billion GEL (01/01/13 -4,7 billion GEL).

August 05, 2013 #16

caucasian business week

According to the expert, among the causing reasons of mortgaged borrowing, healthcare (need of paid medical assistance) was on the 1st place for years, while start a business was on the 2nd place. “If provision of population’s healthcare does not increase and support of business start-ups will not be done, it is clear that the share of immovable and movable property, seized by the banks, will be grown further”, Tokmazishvili declares.

PROCREDIT BANK COMPLETED 6 MONTHS WITH NET PROFIT OF 7.58M LARI

roCredit Bank reported net profit of 7.58 million lari for the first half of the year. In the same period of 2012, the showing made up 10.8 million lari (i.e. year-on-year decline made

of idle loans to total credits – 5.27% (instead of 3.75%). As of June 30, total liabilities of ProCredit Bank amounted to 852.84 million lari, declining yearon-year by 2.43%. At that, sum on clients’ current accounts made up 105.56 million lari (decline – 2.8%), demand deposits – 196.17 million lari (growth – 32.8%), while fixed deposits – 203.56 million lari (decline – 21.6%). Ratio of sum on clients’ current accounts and demand deposits to total assets made up 30.8% (instead of 25.79% in the same period of 2012). Single owner of ProCredit Bank is German ProCredit Holding AG & Co.

IBAR ENDS 2Q13 IN 543 521 GEL PROFITS

nternational Bank of Azerbaijan – Georgia reported net profit of 543,521 lari for the 2nd quarter. The volume is decreased by 8.7% quarter-on-quarter and by 60.6% – year-on-year. As of June 30, total assets of the bank amounted to 157.9 million lari, increasing by 82% year-onyear. Net loans made up 116.93 million lari (growth – 98.2%), while loan loss reserves – 10.38 million lari (growth -31.9%). Ratio of idle loans to total loans made up 6.98% against of 9.71% in the same period of 2012. Return to assets (ROA) was 0.72% (instead of 2.79%), return on equity (ROE) – 4.5% (instead

of 12.64%). In the reporting period, total liabilities amounted to 132.85 million lari, increasing 2 times yearon-year. At that, sum on clients’ current accounts made up 9.57 lari (decline – 36.4%), while fixed deposits – 7.88 million lari (decline – 17.1%). In the first half of the year, the bank had no demand deposits. Ratio of sum on clients’ current accounts and demand deposits to total assets made up 6.06% (instead of 17.35% in the same period of 2012). Shareholders of the bank are International Bank of Azerbaijan – 75%, Azerbaijan Industry Bank – 12.5% and Vano Chkhartishvili – 12.5%.

BANK REPUBLIC ENDS 1H13 IN 10.5 MILLION GEL PROFITS

ank Republic reported net profit of 10.54 million lari for the first half of the year. In the same period of 2012, the showing made up 7.5 million lari. According to audited report of the bank, total assets amounted to 847.62 million lari, increasing by 16.4% year-on-year. At that, net loans made up 556.8 million lari (growth – 32%), while loan loss reserve – 61.9 million lari (decline – 6%). As of June 30, return on assets (ROA) made up 2.60% (instead of 2.16% in the same period of 2012), while return on equity (ROE) – 16.55% (instead of 14.35%). Ratio of idle loans to total

credits made up 11.09% (instead of 15.88%). In the reporting period, total liabilities amounted to 716.06 million lari, increasing by 16.3% yearon-year. At that, sum on clients’ current accounts made up 186.27 million lari (growth – 63.7%), demand deposits – 108.36 million lari (growth – 12%), while fixed deposits – 169.54 million lari (growth – 20.5%). Ratio of current accounts and demand deposits to total assets made 34.76% (instead of 28.91% a year ago). Shareholders of the bank are Societe Generale (93.64%) and EBRD (6.36%). In March, Societe Generale purchased share of Lasha Papashvili – 5.6%.

TBC BANK REMOVES BENEFIT ON GOLD DEBIT CARD

ank informs clients that from August 1, annual rate for the deposit from $2000 will not be granted. Currently, on the positive balance from $2000, annual rate of 4%, from 4000 GEL - 6% is granted. TBC Bank removed privileges for tariff package owners. Consumers of TBC service packages Stimuli, Universal and Prestige, pays 1,9/4,9/15,9 GEL fee from July 1, which was annulated or halved before that, depending on balance.

VTB INTRODUCED 2-MONTH PROMO ON AUTOLOAN

TB introduced autoloan with unprecedented rate. 2-month promo started, in the framework of which purchase of second-hand vehicles is possible with loan with 12,99% interest rate, vehicle insurance - for 2,99%. To get the loan, with renovated conditions, it’s only necessary to present ID and it takes only 20 minutes to complete the procedure. “Mainly interest rate was change, minimal rate of which decreased from 17,9% to 12,00%. Any person who wishes to purchase second-hand car or the person wishing to refinance loan in other commercial banks, can participate in the promo”, - bank states. VTB Bank Georgia also introduced quick corporate autoloan in April as well, with partnership of KIA and HYUNDAI and 40 minutes was defined for its confirmation. Loan interest rate starts with 0%, terms - from 3 months to 5 years.

VTB BANK ENDS 1H13 IN 5.448 MILLION GEL PROFITS

C VTB Bank completed first half 2013 with 5,448 million GEL profit (first quarter 2013 - 2,4 million GEL). By July 1 deposits (excluding banks’ deposits) equal to 351 million GEL), credit portfolio - 440 million GEL (first quarter 2013 - 393 million GEL), overall obligations - 551 million GEL (first quarter 2013 0 498 million GEL). Bank’s actives are defined at 613 million GEL, market share - 4,1% (first quarter 2013 0 560,8 million GEL, 4%). Ratio of liquid actives to total actives is 22%, Return on Actives (ROA) is 1,9%, Return on Equity (ROE) - 17,4% (22,31%, 1,72%, 15,6%). Bank’s income is 40,6 million GEL, expenditures - 33,9 million GEL). Former United Georgian Bank operates on the market since 1995. According to second quarter data, 96,31% of the bank’s authorized capital belongs to Russian VTB, 2,08% - to Lakarpa Enterprises Limited affiliated with it. Beneficiaries include Russian Federation (58,7%) and Bank of New York International Nominees (12,2%). Recently VTB made a decision to emit 12 250 000 common stocks of 1 GEL nominal values. In the second quarter bank’s stock capital is 62 million GEL.

ZIRAAT BANK ENDS 1H13 IN LOSSES

SC Ziraat Bank (Tbilisi branch of Turkish bank) completed first half 2013 with insignificant, 182 000 GEL loss (first quarter 2013 - 0,07 million GEL). Bank actives equal to 34,7 million GEL (first quarter 2013 - 28,3 million GEL), market share - 0,2%. Loan portfolio is 3 million GEL (first quarter 2013 - 2 million Gel), deposits (nonbanking) 17,5 million GEL, overall obligations - 17,6 million GEL. Return on Actives and Return on Equity (ROA, ROE) are negative and respectively equal to -1,2% and -2%. Ziraat Bank operates since 1998. Turkish state treasury is the bank’s stockholder.

AZERBAIJAN August 05, 2013 #16

caucasian business week

AZERBAIJANI CELLULAR OPERATOR LAUNCHES NUMBER PORTABILITY SERVICE

zerbaijani cellular operator Bakcell has launched Mobile Number Portability (MNP) service, the company told Trend news agency on August 1. According to the company, currently customers of other cellular operators may contact Bakcell customer service offices by submitting a SIMcard and the identity card. The MNP service over Bakcell’s network is free. The Azerbaijani Ministry of Communications and Information Technologies said that the cellular operators have not met their obligations on the launch of the MNP service, the ministry told Trend. According to the ministry, since the operators haven’t implemented the technical obligations for the launch of the service in their networks, it inflicted financial damage to the ministry. The ministry has therefore issued a final warning to the operators and plans to file a plea to the court for compensation of the financial damage. MNP, which is implemented across the world, enables mobile telephone users to retain their phone numbers when changing a network operator. The two providers in an MNP transaction are called

the ‘Recipient’ (new provider) and the ‘Donor’ (previous provider). The MNP system will be coordinated by the data processing center of the ministry. The agreements on the application of the service have been signed with the three operators, Bakcell, Azercell and Azerfon. Legal documents under the MNP service launching have already been adopted and the required equipment has been installed in the operators’ networks. A replacement will take about six days, while returning to the previous operator will be possible in three months if the user has no debt. However, this service is not available for SIM-cards used in Data-cards. One of the project’s important components is the subscriber’s transition to another operator without an outstanding bill. Otherwise, the service will not be rendered. Number portability envisions full migration of a subscriber’s phone number with the operator’s prefix by replacing the SIM card. Operators have been instructed to use a 10-digit

set of subscriber numbers. So, it is necessary to dial the operator’s prefix (050, 051, 055, 070 or 077) and the seven-digit phone number. The introduction of the MNP service will allow the users to choose a provider as well as increase competition, and prompt operators to provide more advantageous services to attract new customers. azernews.az

AZERBAIJAN-RUSSIA TRADE TO HIT RECORD HIGH IN 2013

zerbaijan and Russia will reach a record level of bilateral trade in 2013, according to Russian trade representative in Azerbaijan Yuri Shchedrin. The two countries are focused on achieving the $4 billion mark, he told Trend news agency on July 30. “A record level of trade turnover between Azerbaijan and Russia was already achieved in 2012. There is full confidence and hope that record levels of bilateral trade will be reached this year,” the trade representative said. According to Shchedrin, the Azerbaijani-Russian trade turnover has significantly increased. The increase is indicated by the growth seen in JanuaryMay. According to Russian statistics, the growth rate has hit 47.2 percent, while according to Azerbaijani statistics, it reached 38.3 percent. Last year, bilateral trade amounted to $3.4 billion. “The main point is that earlier, Azerbaijan was among Russia’s top five trading partners among CIS countries,” Shchedrin said. “At present, it is among four countries and the leading partner of Russia after Kazakhstan, Belarus and Ukraine.” “The top-level meetings will give a significant impetus to the development of bilateral cooperation in the economic, energy and other areas,” Shchedrin added. There is extensive legal framework between Azerbaijan and Russia, with more than 30 eco-

nomic documents already signed. Currently, work is underway to expand the legal framework in energy, transport and other sectors. A package of documents is expected to be signed during Russian President Vladimir Putin’s visit to Azerbaijan scheduled for August. Azerbaijan has invested about $563 million in the Russian economy over the past ten years. At present, 479 companies with Russian capital operate in Azerbaijan. Around $468 million has been recently invested by the Russian side in the Azerbaijani economy. At present, 71 out of 83 regions of the Russian Federation have been involved in foreign trade with Azerbaijan. Visits, business forums and business meetings are being organized to further expand bilateral relations. 12 business forums, business meetings and exhibitions have been conducted with Russia’s entities over the last three years. This contributes to further expansion of relations between Azerbaijan and the Russian regions.

Hefty Azerbaijani investment expected

Shchedrin went on to say that Azerbaijani entrepreneurs are preparing for significant investments in the Russian economy despite the lack of an agreement on mutual protection of investments

between the two countries. According to him, the process of coordination is underway. Negotiations on the Chelyabinsk province, Karachay-Cherkessia, Krasnodar Territory, the Moscow province and some other regions of Russia are being held. “Azerbaijani investors have intensified their activity in the Russian market. They are ready and there are examples of significant investments in the economy and the social sphere of Russia and its regions,” he said. However, according to Shchedrin, Azerbaijan and Russia are still unable to reach agreement on a draft agreement on mutual protection of investments. The main reason of the delayed conclusion of this agreement is substantial differences over the determination of national sectors. The Russian side will not sign an agreement without determining the national sectors, and Azerbaijan has no intention to back down from its stance either. “The agreement will not be signed within the upcoming summits. So, entrepreneurs will have to work under the existing rules,” Shchedrin added. In particular, the governments of the two countries are yet unable to reach compromise on the issue of the agreement’s timing. Azerbaijan offers to refer it to the entire history of cooperation between Azerbaijan and Russia, while the Russian side insists on the coverage period from 1992.

IFC SIGNS LOAN AGREEMENT UNDER ITS FIRST ENERGY EFFICIENCY PROJECT IN AZERBAIJAN

he International Finance Corporation (IFC), a member of the World Bank Group, has signed an agreement with Azerbaijan’s Bank Respublika on a $15 million loan to finance energy efficiency projects, a report of the Baku office of the corporation said on July 29. IFC will help the bank to create new projects in the area of financing energy efficiency. Trainings on raising the awareness of the bank’s employees on new possibilities in the market and evaluating the projects on energy efficiency will be conducted as well. This loan is the first IFC project in this field in Azerbaijan. The project is a part of IFC’s financing sustainable energy in Europe and Central Asia, supported by the Austrian Finance Ministry. With a total project cost of $15 million, IFC will provide $14 million of its own money, and $1 million from Canada Climate Change Program. IFC approved the first loan to Azerbaijan to finance renewable energy and energy efficiency (RE/EE-credit) projects in May 2013. Chairperson of Bank Respublika executive board Khadija Hasanova said at the signing of the

agreement that Bank Respublika has positive experience of working with IFC since 2007. “We are particularly interested in cooperation with the corporation in this new sphere, as this will provide the possibility to present new bank products to the market, which in its turn will allow increasing clients’ awareness about energy efficiency,” she said. Permanent representative of IFC in Azerbaijan Aliya Azimova said in turn that promoting energy efficiency is a part of IFC’s strategy for impact on climate change. “Cooperating with Bank Respublika in this sphere, we want to demonstrate that the financing of sustainable energy is a profitable business for both financial institutions and for borrowers. This creates opportunities for the introduction of modern technologies, reducing energy costs, improving efficiency and competitiveness,” she said. Azerbaijan became a member of IFC in 1995. Since then IFC has invested almost $393 million and leveraged nearly $73 million from other lenders under 67 projects in financial services, infrastructure, and manufacturing. IFC has also implemented advisory projects focused on private sector development. In addition,

the State Oil Fund of the Republic of Azerbaijan (SOFAZ) has committed $350 million to three funds managed by IFC Asset Management Company that invest alongside IFC in private sector projects in emerging markets. IFC is the largest global development institution focused exclusively on the private sector. It helps developing countries to achieve sustainable growth by financing investment, mobilizing capital in international financial markets, and providing advisory services to businesses and governments. In FY12, IFC investments reached an all-time high of more than $20 billion, leveraging the power of the private sector to create jobs, spark innovation, and tackle the world’s most pressing development challenges. Bank Respublika has been operating since 1992 and is one of the leading banks of Azerbaijan. Among its shareholders are two large German financial institutions - DEG, a member of KfW banking group, and SIDT, a member of Sparkassen-Finanzgruppe, with a share in the bank at a rate of 25 percent + 1 share. Bank Respublika has a B2 rating with “stable” forecast by the international rating agency Moody’s Investors Service.

SOCAR OIL EXPORT EXCEEDS 2.03 MILLION TONS IN JULY

he SOCAR Marketing & Economic Operations Department has announced that Azeri oil export in July reduced by 5.1% versus June 2013. The Department reports that this July it was exported 2.03 million tons of oil against 2.15 million tons in June, 2.14 million tons in May and 2.3 million tons in February (still the best index for 2013). The last year’s best index on export was registered in July (2.36 million tons). In July 2013 it was exported 169,671 tons via Baku-Novorossiysk, 157,690 tons via Baku-Supsa and 1.706 million via Baku-TbilisiCeyhan (BTC) n.a. Heydar Aliyev oil pipelines. “For Jan-Jul 2013 export reached 14.358 million tons of oil, including 994,989 tons via Baku-Novorossiysk, 1.5 million tons via Baku-Supsa and 11.8 million tons via BTC,” it was reported. Over 2012 it was exported 25.006 million tons of oil, including 2.06 million tons via Baku-Novorossiysk, 2.7 million tons via Baku-Supsa and 20.199 million tons via BTC. In 2011, export reached 27.609 million tons, including 2.57 million tons in June (past year’s month peak). Last year oil transportation via pipeline Baku-Novorossiysk totaled 1.988 million tons, Baku-Novorossiysk 2.65 million tons, and BTC 22.969 million tons. In 2013 oil was not exported via Baku-Batumi railway, as well as in 2009-2011. SOCAR says that the MEOD exports both its own oil and oil falling on the share of the government within PSA contracts.

SOCAR STRIVES TO DOUBLE EXPORT OF GASEOUS HYDROCARBONS FROM ITS TERMINAL IN GEORGIAN PORT KULEVI

he State Oil Company of Azerbaijan (SOCAR), which started physical export of gaseous hydrocarbons through its Georgian terminal on 25 December 2012, aspires to increase their shipping. SOCAR reports that dispatching of this product from the terminal has entered in stable regime. “4,500-5,000 tons of hydrocarbons are shipped from the terminal monthly on average. However, we are striving to improve the shipment up to 8,000-10,000 tons per month - the terminal has such capacity,” the company said. The limitation of the actual doubling of shipping is the volume of the actual production of hydrocarbons of butylene-butadiene fraction and propylene at the facilities of production association Azerikimya in Sumgait. Special capacities, the unique in Georgia, were created for such export at the SOCAR’s Black Sea Terminal (BST Ltd) launched on 16 May 2008. Originally shipping of the first tanker at the terminal for loading with liquid propylene was scheduled for mid-July, but repairs at production capacities in Sumgait did not allow doing that. At primary stage shipping of liquid propylene will be carried out by tanker shipments of 2,000 or 3,000 tons. Work on creation of special terminal capacities at BST Ltd were completed at the beginning of this summer. Besides Kulevi, no one terminal in Georgia has capacity for transshipment of such cargo. Liquid polypropylene designed for export will be produced at SOCAR chemical sub-company Azerikimya located in Sumgait. The new terminal facilities are designed for transshipment of liquid polyethylene and liquid polypropylene. Their construction was delayed because of troubles with delivery of manufacturing equipment from South Korea. New capacities, in addition to liquid polyethylene and liquid polypropylene, will enable, if necessary, also transship liquefied or compressed gas. Currently the Company orients to transshipment of 8,000-9,000 tons of LPG per month or 110,000-120,000 tons per year with annual capacity of the new terminal up to 150,000 tons. Currently terminal BST Ltd is designed to transship 10 million tons of oil a year. It is able to accept Aframax tankers. abc.az

ARMENIA caucasian business week

August 05, 2013 #16

ARMENIA’S AGRICULTURE OUTPUT GROWS 2.1% TO AMD 200.2 BILLION IN JAN-JUNE 2013

n Jan-June 2013, Armenia produced agricultural products worth about AMD 200.2 billion – 2.1% year-on-year growth, the National Statistical Service reports. The joint output of agriculture and fishery grew 3.3% in Jan-June 2013, compared with the same priod a year before, to more than AMD 209.5 billion. According to the statistical report, cattle breeding segment of agriculture accounted for 1.5% yearon-year growth in Jan-June 2013, when its output amounted to AMD 139.6 billion. Plant-growing segment showed 3.6% growth and an AMD 60.6-billion output. Fishery sector reported 34.5% growth and AMD 9.3 billion. Sales of meat shrank 2.2% in the 1st H 2013,

compared with the same period a year earlier, to AMD 4,500 tons. Gegharkunik and Armavir provinces were singled out by the statistical service for largest sales – 700 tons each. Some 78,400 tons of milk were produced in Armenia in June 2013 – 5% year-on-year growth. In June 2013, Gegarkunik produced the largest volume of milk – 14,900 tons. Some 89.8 million eggs were produced in May 2013 – 0.2% year-on-year decline. Armavir produced the largest number of eggs in May 2013. According to the statistical report, 435.1 tons of fishes were produced in June (26.5% year-onyear growth), and the whole output was sold. ($1 – AMD 409.75).

CONTRACTION IN FOREIGN INVESTMENTS IN ARMENIA’S ECONOMY IN TUNE WITH GLOBAL TRENDS

ontraction in foreign investments in the real sector of Armenia’s economy in the first quarter of this year was in tune with global trends, Gagik Minasyan, an MP from the Republican Party of Armenia and the head of the National Assembly’s finance and budgetary committee, told journalists on Thursday. “As a rule, investments shrink first of all amid uncertainty and crises,” he said adding that not a single country has its investments increased this year. ARKA News Agency has found growth in investments in the 1st Q 2013 at least in three CIS countries – investments in Uzbekistan grew 13.2%, in Ukraine 76% and in Belarus 18.2%. According to the national Statistical Service of Armenia, $131 million has been invested from the outside in the real sector of Armenian economy over a period between January and March 2013 not via banks and without state administration – 11.9% year-on-year contraction. Direct foreign investments in the real sector of the Armenian economy amounted to $57.7 million – 35.4% year-on-year decline.

FAMOUS YEREVAN RESTAURANT DOLMAMA TO OPEN IN MOSCOW ON ROMANOV ALLEY

olmama, a famous restaurant located in Yerevan, will become the first leaser on the Romanov Alley in Moscow, The Village reported Wednesday referring to RD Group –founder of the Romanov Alley. “As of now, Dolmama restaurant is located in Yerevan only. The Dolmama in Moscow will offer not only Caucasian dishes, but also European. However, the main dish on menu will still remain dolma. A restaurant veranda will be also built,” according to the source.

ARMENIAN COMMERCIAL BANKS’ AGGREGATE PORTFOLIO OF OVERDUE LOANS GROWS 5.9% TO AMD 22.6 BILLION IN JUNE

rmenian commercial banks’ aggregate portfolio of overdue loans reached AMD 22.6 billion in late June after growing 5.9% over the month and made up 1.35% of their aggregate loan portfolio, the National Statistical Service of Armenia reports. Short-term loans totaled AMD 22.2 billion and constituted 98.2% of the banks’ aggregate overdue loan portfolio.

PRICES FOR SERVICES IN ARMENIA RISE 5% IN JULY

rices for services in Armenia rose 5% in July, compared with June, mainly due to 12.1% increase in prices for utilities, the National Statistical Service of Armenia reports. In particular, transportation fares went 0.1% up, prices for medical services rose 0.4% and public catering prices rose 0.4% as well.

Instead, juridical and banking services became 0.9% cheaper and services in culture area 0.5% cheaper. Prices for pipeline gas, car gas and electricity leapt 14.5% in July, compared with June. In all the cities under review, services prices climbed 4.7-5.7%. In Yerevan, prices for services rose 4.9%

Prolonged loans have grown 13.3% since the beginning of June to AMD 71 billion by the end of the month. Short-term loans here amounted to AMD 616 billion. According to the statistical report, the aggregate loan portfolio of the country’s commercial banks amounted to AMD 1575.36 billion in late June after shrinking 0.8%, compared with late May. Loans extended in foreign currencies totaled about AMD 998 million. ($1 – AMD 409.75).

SOUTH CAUCASUS RAILWAYS’ INVESTMENT PROGRAM FOR 2014 TO COST AMD 7.5 BILLION

16.9% UNEMPLOYMENT IN ARMENIA IN 1ST Q 2013 he National Statistical Service of Armenia says unemployment rate was recorded at 16.9% in the country in the first quarter 2013 – 3.2% year-on-year decrease. Unemployment in the country’s cities stood at 23.3% in the 1st Q 2013 against 28.8% in the 1st Q 2012, and in villages 8% against 6.9% respectively. Employment agencies reported about 68,400 jobseekers, of which 60,700 are completely jobless. Some 20,500 people are seeking job in Yerevan. There were 1,359,600 economically active people in the country in the first quarter – 4.5% year-on-year reduction. Human resources have contracted by 7.4% in the first quarter of this year to 2,132,000 people. Some 3,011,900 people lived in Armenia in June 2013. Of them, 1,904,400 live in cities and 1,107,500 in rural areas.

The source says Dolmama is one of the prestigious and expensive restaurants of the Armenian capital. Many high ranked guests are invited there. Prince Charles of Wales also had his dinner at Dolmama. It is located in Yerevan downtown, particularly Pushkin street. RD Group restores some historical old buildings of the XVIII century in Moscow. By the end of 2013 the first leasers are expected to arrive at the Romanov Alley: Dolmama, Paul bakery and Christie’s auction house. The project investor is Luxembourg-based Moscow Construction and Development.

outh Caucasus Railways CJSC’s investment program for 2014 will amount to AMD 7.5 billion against the previous year’s 6.3 billion, Viktor Rebets, CEO of the company, said in an interview with ARKA News Agency. “We will put special emphasis on creation of technologies connected with the train separation system of traffic regulation system, i.e. a system of semi-automatic blocking, as well as on automation of our switch facilities at stations and reinforcement of our railway facilities,” he said. Fore example, he said, the reconstruction of our motive-power depot in Gyumri has made it possible to change periodicity of repairs of locomotives, get rid of outside contractors and increase periods between repairs. “Before that, we repaired cars every year, without taking into account how many kilometers they have run, while now we see their mileages, and taking into account short distances in Armenia, we can say that the periodicity of repairs will shrank twice (once in two years),” Rebets said. “We won’t pay for that many times – it can serve

for at least one decade.” Rebets also stressed that in 2008, when the company came to Armenia, there were 420 derailing cases, and in 2012 their number reduced to five thanks to investments in the infrastructure, particularly to the repair of 300 kilometers of railways. Speaking about plans for the next year, Rebets said that the process of creation of the unified data transmission network from the final to the first stations as well as fortification of bridges will be completed in 2014. “We built three bridges in 2012. This year we are fortifying three other bridges, but are not building new ones, since there is no necessity to do this.” South Caucasus Railways, a 100-percent subsidiary of Russian Railways, runs Armenian Railway. Armenian Railways was handed over to the South Caucasus Railways on February 13, 2008 for 30year concession management with a right to prolong the management term for other 10 years. ($1 – AMD 410.30). ARKA

CIS August 05, 2013 #16

caucasian business week

RUSSIA WILL BE EUROPE’S LARGEST CAR MARKET BY 2016 Western and local

he Russian automobile market is poised to overtake Germany and become Europe’s largest by 2016, and the world’s fifth biggest, by 2020, according to a new report. A growing middle class, an increase in car ownership, low fuel prices, and Russia’s expanding economy are all factors that will drive the Russian car market, according to a forecast by the Boston Consulting Group. “Fundamentally it’s an attractive market in terms of cars per thousand inhabitants and therefore we are bullish long-term - but that doesn’t mean that every year will be a good year,” Ewald Kreid, an author of the report and partner at BCG in Vienna, said. Russia’s auto market is slated to grow by an annual rate of six percent through 2020, when annual sales will reach 4.4 automobiles and Russia will become the world’s fifth largest automobile market, by volume of sales.

Emerging markets

The report forecasts emerging markets will dominate global car sales by 2020, and will account for 65 percent of global sales, more than double in 2000. China, the US, India, and Brazil will occupy the first four places, displacing Japan, which is cur-

NEW UKRAINIAN OFFICE TO PROTECT BUSINESSES’ RIGHTS

kraine could set up an ombudsman office as early as next month to protect business people’s rights, First Deputy Prime Minister Sergey Arbuzov said Tuesday, according to Xinhua. “In Ukraine, there is a need to establish an institution that would provide out-of-court settlement of disputes between state agencies and businessmen. Therefore, we support the proposals of our partners, in particular the European Bank for Reconstruction and Development (EBRD), to intensify work in this direction,” Arbuzov told journalists. The government has already established a working group to develop mechanisms for creating the business ombudsman office, Arbuzov said, adding responsible officials would collaborate with investors to work out the conception of the new institution. EBRD in Ukraine Director Shevki Akuner urged Kiev in June to appopint a business ombudsman. unian.info

rently the third largest market. Russia, which was ranked seventh in 2012, will surpass Germany, currently the fifth largest consumer and Europe’s largest economy. Increase in car sales is an indication of Russia’s overall integration into the global economy, as its economy is pegged by the World Bank to grow by 2.2 percent in 2013 and 3 percent in 2014, far ahead of its European counterparts who are struggling to keep their economies from contraction. Germany’s own Bundesbank cut its growth forecasts for Germany for the next two years, cutting its 2013 growth projection to 0.3 from 0.4 percent, and the 2014 forecast was cut from 1.9 down to 1.5 percent. According to recent World Bank figures, in terms of Purchasing Power Parity, Russia’s GDP is stronger than Germany’s- Russia with $3.4 trillion and Germany with $3.3 trillion The success of Russia’s auto market is dependent on how quickly the economic situation in Europe stabilizes. German exports have kept their economy shielded from the euro crisis, but Russia may be infringing on this export market. In 2012, the total value of motor vehicles, parts and accessories produced in Russia surpassed Germany by 51 million euro, a five-fold increase since 2000.

Russia locally produces many of its cars, as many Western companies have invested heavily in plant, production, and sales, having foreseen the market boom. The market niche is ripe in Russia- presently there are only 290 cars per 1,000 Russians, versus the already saturated market in Europe, where 560 of every 1,000 is a car-owner. Ford, General Motors, Renault-Nissan, and Fiat have a large presence in Russia, as well as local brands like Lada, which adhere to the demand for small, compact cars. The report said both local and international car makers are expanding, and projects total production capacity to rise to 3.3 million vehicles per year after 2016. The boom isn’t limited to automobiles. Russia’s expanding economy, over the backdrop of sluggish Europe, is a leader in electronics, toys, and other products.

Doubt

Russia was on track to become Europe’s biggest automobile market by 2008, but it was derailed by the financial crisis, even after the Kremlin pumped $5 billion in stimulus into the industry to provide a buffer. “So far in 2013, Ford has not been performing well in Russia,” Carol Thomas, an analyst with LMC Automotive, which tracks global sales and makes industry predictions, told RIA Novosti. A slump in Western auto sales in Russia may play out through 2013, and will increase in tandem with domestic market strength. Fifty percent of Russia’s GDP is dominated by oil and gas production and export, which provides both a lot of financial liquidity but at the same time fear the wealth could be gone any minute. The financial resources of the Kremlin are abundant, and can prop up the automobile industry in a way no other economy is capable. Russia’s automobile industry directly employs around half a million people, and could be the missing link to transform the Russian economy from a petrol-state into a self-sustaining economy. Rt.com

MOSCOW RANKED 2ND MOST EXPENSIVE CITY FOR EXPAT

he Russian capital is the 2nd most expensive city in the world for expatriates, because of high city center rent in Moscow. The Mercer Consulting report is designed to help multinationals determine compensation for their expatriate employees. The survey measured the cost of over 200 items in more than 200 cities such as housing, transportation, food and clothing, using New York as a the base city. One of the main criteria was the cost of rental housing, BFM quotes the research. Moscow was ranked 2nd primarily because of higher prices for rental properties in the center of the city. An apartment with two bedrooms on average costs $4.600 in Moscow, according to the study. Angola’s capital Luanda tops the list. Africa’s second largest oil producer attracts large multinational firms. Last year, the average monthly rent for a luxury two-bedroom apartment in Luanda was $6,500, according to Mercer, just about $500 less than the cost in Hong Kong - which is con-

sidered one of the world’s most expensive real estate markets. Japan’s Tokyo ranks third. The researchers noted that, in general, the greatest impact on the rating are local variations in exchange rates against the dollar, and a general increase in the price of goods and services around the world. “Deploying expatriate employees is an increasingly important aspect of multinational companies’ business strategy,” hcmag.ru quotes Garry Adams of Mercer. “With volatile markets and stunted economic growth in many parts of the world, a keen eye on cost efficiency is essential.” Earlier this year a similar rating was published by ECA consultancy. According to it, Moscow was ranked 5th after Oslo (Norway), Luanda (Angola), Stavanger (Norway) and Juba (Southern Sudan), BFM reports. In 2008, Moscow was named the most expensive city in the world for foreigners to live. Rt.com

Kazakhstan

azakh Development Bank Plans $1 Billion Loan Sale to State Fund. Development Bank of Kazakhstan, a state-owned lender that promotes industry, plans to sell 151 billion tenge ($1 billion) of bad loans to government-controlled Investment Fund of Kazakhstan. Development Bank wants to sell the loans at a discount equal to the amount of provisions set aside to cover potential losses, Deputy CEO Mirzhan Karakulov said by phone today from the Kazakh capital, Astana. The assets will be transferred by year-end so the bank will be eligible for tax breaks, he said, without naming the discount.

ax Petroleum strikes Uytas oil. London-listed Max Petroleum has hit oil in its latest appraisal well on the Uytas field in Kazakhstan. UTS-10, the third well in a 13-well programme on the company’s Block A, was drilled to a total depth of 484 metres. The company now plans to complete the well and place it onto test production “as soon as practicable”, it stated on Tuesday. Zhanros ZJ20, the rig used to drill the well, will now return to Block E to drill the BOR-4 production well in the Borkyldakty field. Max received approval from the Kazakhstan government for the full commercial development of this field earlier this month.

Kyrgyzstan Kyrgyzstan starts exporting electricity to Kazakhstan. Kyrgyzstan has started exporting electricity to Kazakhstan with a weight capacity of 380 MW at a price of 4 cents per 1 kWh. It is worth noting that earlier Kyrgyzstan supplied Kazakhstan with electricity at a price of 0.028 dollars per 1 kWh. The increase in the value of exports of electricity became possible thanks to negotiations between the governments of Kyrgyzstan and Kazakhstan.

Uzbekistan

etronas withdraws from all of its hydrocarbon investments in Uzbekistan. The Malaysian company Petronas will withdraw its investments in projects on developing and extracting hydrocarbons in Uzbekistan in 2013. This decision Petronas adopted is final. The Uzbek government is now preparing documents to legally complete Petronas’ withdrawal from the upstream-projects. The source estimates that Petronas’ withdrawal from the major projects in Uzbekistan is linked to the “general strategy on optimising activities in the region.” In other words, the company could have considered its activities in Uzbekistan would yield no credible results.

IMF TO ENHANCE MONITORING ON UKRAINE OVER HUGE DEBT

he International Monetary Fund (IMF) has asked Ukraine to take part in the special post-program monitoring over the large debt owed to the global lender, local media reported Tuesday, according to Xinhua. The IMF said that Ukraine’s debt reached some 8 billion U.S. dollars or over 383 percent of the quota as of the end of June. Under the post-program monitoring, Ukraine is obliged to undertake more formal consultations with the global lender, with a focus on macroeconomic and structural policies, the IMF said. A 15-billion-dollar loan program to Ukraine was frozen in the early 2011, after the post-Soviet country failed to fulfill the IMF requirements to raise gas price for households and to reduce its ballooning fiscal deficit. Ukraine is seeking a new 15.5-billion-dollar loan from the fund.

WORLD NEWS caucasian business week

COSTLY GREECE: IMF SAYS LENDERS NEED TO ‘FORGET’ ABOUT €7.4BN OF ITS LOANS

urozone governments should be prepared to write off big chunks of their loans to Greece, around about €7.4bn within the next two years, according to the IMF. To make Greek debt manageable, the country’s lenders may be forced to accept big losses on their aid to the Athens, the International Monetary Fund (IMF) told in its fourth review of Greece’s performance under an economic program it must follow to qualify for the loans. Almost all of the Greek debt is now held by European governments. In 2013 it’s expected to go up to the sky-high 176% of the country’s GDP. “If investors are not persuaded that the policy for dealing with the debt problem is credible, investment and growth will be unlikely to recover as programmed,” the IMF said in the 207-page report. “Should debt sustainability concerns prove to be weighing on investor sentiments even with the framework for debt relief now in place, European partners should consider providing relief that would entail a faster reduction in debt than currently programmed.” It’s not the first time the IMF has called on the

government lenders to write off part of their loans to struggling Greece. The main thing that’s changing is the scale of the losses. The new report comes just 2 months ahead of the polls in Germany, which can become a real problem for its current Chancellor Angela Merkel. Ms Merkel and other members of her ruling Christian Democratic Union have insisted Greece should pay its debt back in full; that there would be no “haircuts” on their bailout loans, the Financial Times (FT) said. On Wednesday, German officials said Greece was hitting all of its bailout targets. The German finance ministry spokesman, Martin Kotthaus, said recent action by the Greek government inspired hope into the financial markets, with any further calls for help probably undermining improving sentiment. However, in the words of German’s budget spokesman for the opposition Social Democratic party Carsten Schneider the IMF had “told the bitter truth yet again” and the current financial turmoil in the Athens resulted from the “failed policy that has been decisively pursued” by Ms Merkel.

August 05, 2013 #16

EUROZONE JOBLESS DOWN FOR FIRST TIME IN 2 YEARS

here is more evidence the eurozone economy is on the road to recovery. The EU statistics office said on Wednesday that the number of unemployed across the 17 eurozone countries fell in June by 24,000 to 19.27mn. That’s the first fall since April 2011. The number of people out of work across the European countries that use a single currency decreased in June, though in relative terms June unemployment rate was stable compared with May - at 12.1%. Youth unemployment, however, remained a concern, as the proportion of people under 25 among economically active population in the Eurozone was up in June to 23.9 percent from 23.8 percent in May. The eurozone economy has been shrinking since the last quarter of 2011 as the raging debt crisis prompted many countries to pursue tough austerity policies that weighed on economic activity and confidence. Despite being marginal, the decline may mark another sign that the recession in the Eurozone countries may have ended. Figures this week showed the Spanish recession

nearly ended in the second quarter. Madrid’s National Statistics Institute, or INE, said the country’s gross domestic product contracted 0.1 percent between April and June. This marked an improvement over the first quarter’s 0.5 percent contraction and the fourth-quarter 2012 contraction of 0.8 percent - the worst rate of decline since the start of the crisis in 2009. On top of that, there are hopes that even Greece may start growing again at the end of this year following a recession that’s wiped out around a fifth of the country’s output. Analysts think figures next month will show the region may have eked out a modest growth during the second quarter, thanks mainly to a rebound in Germany, Europe’s biggest economy. Separately, Eurostat reported consumer price inflation in the eurozone was unchanged at 1.6 percent in the year to July, in line with expectations. Though inflation remains below the European Central Bank’s target of keeping annual price rises just below 2 percent, rate setters are expected to keep the bank’s main interest rate unchanged at the record low of 0.5 percent following the conclusion of their monthly policy meeting on Thursday.

CHINA CLOSES DOOR ON BMW FACTORY EXPANSION

MW was not been given approval by the Chinese government to expand a factory which would double production, stoking speculation China is becoming less willing to cater to multinational companies. BMW’s joint venture in Shenyang, BMW Brilliance Automotive, was denied, permission to expand their factory, which would boost production by 400,000 sedans per year. The Chinese Ministry of Environmental Protection rejected the Munich-based company’s plan, citing inadequate waste water analysis and the plant’s failure to meet the government’s anti-pollution targets. The statement also said the jointventure has failed to pass an inspection on its first phase of the plant. “Drinking polluted water while driving BMW sedans is certainly not the type of industrialization we are looking forward to,” China’s Environment Minister Zhou Shengxian, said in an interview with People’s Daily on Wednesday. A spokesman for BMW said the carmaker had

already requested follow up documents and details pertaining to the application’s rejection. Bill Russo, a former Chrysler executive, said it was ‘unusual’ for an expansion project to be nixed. “There’s definitely a pattern here of the government making an example of high-profile foreign companies.”Bill Russo, a Beijing-based automotive consultant told the Financial Times. The rejection sent shares near a four-month low in Hong Kong in Tuesday, and BMW is trading low in Frankfurt, down 1.37 percent at 73.40 euro per share at 10:55 GMT. BMW Brilliance Automotive owns two plants at Tiexi and Dadong, each which have an annual production capacity of 100,000 cars. The German luxury carmaker has experienced great success in the Chinese market, with sales increasing year-on-year 31 percent in May. China has the world’s largest car market. China’s growth slowed to 7.5 percent year-onyear in the first half of 2013, signaling a slowdown to some, and a healthier, robust, and sustainable economy to others.

GUCCI TO DEVELOP IN RUSSIA INDEPENDENTLY

ne of the best - selling luxury brands in Russia, Gucci is to take over the direct management of its operations in the country. Gucci is looking for a prime site in Moscow for a branded shop, as Vedomosti daily referring to real estate agents. The experts said the brand had already rented about 200 square metres of office space in Moscow’s Pitero House business centre. “The decision is fully in line with the overall brand strategy – to constantly increase direct control,” a Gucci representative told Vedomosti, without stipulating an exact timeframe. In Russia, where love for luxury seems to be unshakable by any crisis, Gucci is among the 10 most desired brands, according to Darya Yadernaya, managing director at Esper Consulting Group. In 2012 the sales of luxury goods in Russia, including clothes and accessories, were up about 7%, according to data from Fashion Consulting Group (FCG). That’s despite the price for fashionable items

from western producers being about 30% higher in Russian boutiques, says Anush Gasparian, a commercial director at FCG. This makes many companies attempt to maximise the potential of the Russian market and avoid distributors. They try to develop and control their brands independently, adding to profit, Gasparian said. Gucci is not the first luxury brand wanting direct operations in Russia, Prada and Hermes have already left their distributors, Yadernaya says. For distributor Mercury a split with Gucci wouldn’t point to its inconsistence, but to its professionalism, according to Yadernay. Mercury hasn’t just made the brand recognized, but also built up a firm platform for future development, as well as a certain client base, Yadernaya concluded. Today Gucci has 6 shops in Moscow, with another one set to be opened soon. The brand’s distributor in Russia, Mercury Group, owns TSUM one of Moscow’s most luxurious department stores. rt.com

PUBLICITY August 05, 2013 #16

caucasian business week

GIFT OF GEORGIAN CHANT FUND FOR GEORGIAN LISTENERS - SHARE HAMLET GONASHVILI’S IMMORTAL ALBUM WITH GENERATIONS

evised album of Hamlet Gonashvili, the merited singer, was presented at the office of the Georgian Chant Fund. The album consists of two CDs and it includes musical collection recognized by all Georgians as a treasure. The album was produced with support of the Georgian Chant Fund and fans of Georgian folk singing will have the opportunity to buy it shortly. Uniquely sweet songs sung by Hamlet Gonashvili were being played at the presentation. Among guests gathered in the yard of the Georgian Chant Fund Office were businessman Vano Chkartishvili, the Founder of Georgian Chant Fund, Anzor Erkomaishvili and Archimandrite Ioane (Kikvadze) the Council Members, Svimon Jangulashvili, Head of the Tbilisi Holy Trinity Cathedral Choir, Makvala Gonashvii, the Chair of the Georgian Writers’ Union, Hamlet Gonashvili’s family members and Georgian musicians. The concert to be held on September 28 at the Rustavely State Theatre, devoted to the 85th anniversary of Hamlet Gonashvili, was also addressed at the presentation. “I’m happy, but of course it is not complete

happiness since Hamlet Gonashvili will not attend his 85th anniversary. Today, on July 29, the events dedicated to Hamlet Gonashvili’s 85th jubilee are being launched. The Georgian Chant Fund published collection of Georgian songs in two CDs, where all songs sung by him are included. He got beloved by people in his life and his death aggrieved the public. Now when he is not with us his songs immortalize him. This is a great honor. His gene is alive since Georgian people love their prominent son, and as long as his songs are being liked and listened he will not die. This is the way to immortality because Hamlet’s unique voice and songs represent a real treasure for all generations. Therefore, the concert organized at Rustavely State Theater on September 28, will be a grand celebration, respecting memory of a great singer loved by Georgian (and not only Georgian) society. Hamlet himself, along with his friends, will “take part” in this concert. Ensembles where he used to sing will perform at the concert. He spent 17 years in Ensemble “Rustavi” and visited many countries during this period. In countries where Rustavi did not have

concerts after Hamlet’s death and we are arriving now people still come to listen to him and when they hear about his death they get very much aggrieved. What can be a bigger recognition than this. He brought international recognition to Georgian folk songs and this is the real immortality. Hamlet Gonashvili will never die, he will live for centuries with his songs,” – said Anzor Erkomaishvili, the Founder and Art Director of Ensemble Rustavi. Lamara Tsintsabadze, Hamlet Gonashvli’s Wife: “My heart is full of joy and pride, because after 28 years following his death he was remembered with so

much love and respect. I’m happy that his songs are not affected by time, on the contrary, the interest and love are increasing. All generations like and listen to them. The jubilee evening is ahead…. I would like to express my gratitude to the Georgian Chant Fund for such a good work and to those who somehow contributed to this matter and love and respect Hamlet’s work.” Julietta Gonashvili, Hamlet Gonashvili’s Sister: “wherever I go and people hear that I’m Hamlet’s sister I am treated with great love … his love is accompanying me for my whole life. Our father was teaching us singing and we were always singing together. I’m happy that the Georgian society likes Hamlet’s work and shares it with coming generations”.

EXHABITION caucasian business week

August 05, 2013 #16

TBILISI GUIDE August 05, 2013 #16

Embassy United States of America Embassy 11 Balanchivadze St., Dighomi Dstr., Tbilisi Tel: 27-70-00, 53-23-34 E-mail: tbilisivisa@state.gov; askconsultbilisi@state.gov United Kingdom of Great Britain and Northern Ireland Embassy 51 Krtsanisi Str., Tbilisi, Tel: 227-47-47 E-mail: british.embassy.tbilisi@fco.gov.uk Republic of France Embassy 49, Krtsanisi Str. Tbilisi, Tel: 272 14 90 E-mail: ambafrance@access.sanet.ge Web-site: www.ambafrance-ge.org Federal Republic of Germany Embassy 20 Telavi St. Tbilisi Tel: 44 73 00, Fax: 44 73 64 Italian RepublicEmbassy 3a Chitadze St, Tbilisi, Tel: 299-64-18, 292-14-62, 292-18-54 E-mail: embassy.tbilisi@esteri.it Republic of Estonia Embassy 4 Likhauri St., Tbilisi, Tel: 236-51-40 E-mail: tbilisisaatkond@mfa.ee Republic of Lithuania Embassy 25 Tengiz Abuladze St, Tbilisi Tel: 291-29-33 E-mail: amb.ge@urm.lt Republic of Latvia Embassy 4 Odessa St., Tbilisi Tel: 224-48-58 E-mail: embassy.georgia@mfa.gov.lv Greece Republic Embassy 37. Tabidze St. Tbilisi Tel: 91 49 70, 91 49 71, 91 49 72 Czech RepublicEmbassy 37 Chavchavadze St. Tbilisi Tel: 291-67-40/41/42 E-mail: czechembassy@gol.ge Web-sait: www.mzv.cz Japan Embassy 7 Krtsanisi St. Tbilisi Tel: 75 21 11, Fax: 75 21 20 Kingdom of Sweden Embassy 15 Kipshidze St. Tbilisi Tel: +995 32 2 55 03 20 , Fax: +995 32 2 22 48 90 Kingdom of the Netherlands Embassy 20 Telavi St. Tbilisi Tel: 27 62 00, Fax: 27 62 32 People’s Republic of China Embassy 52 Barnov St. Tbilisi Tel: 225-22-86, 225-21-75, 225-26-70 E-mail: zhangling@access.sanet.ge Republic of Bulgaria Embassy 61 Agmashenebeli Ave. Tbilisi Tel: 91 01 94, 91 01 95, Republic of Hungary Embassy 83 Lvovi Street, Tbilisi Tel: 39 90 08 E-mail: hunembtbs@gmail.com State of Israel Embassy 61 Agmashenebeli Ave. Tbilisi Tel: 95 17 09, 94 27 05 Embassy of Swiss Confederation’s Russian Federation Interests Section Embassy 51 Chavchavadze Av., Tbilisi Tel: 291-26-45, 291-24-06, 225-28-03 E-mail: RussianEmbassy@Caucasus.net Ukraine Embassy 75, Oniashvili St., Tbilisi Tel: 231-11-61, 231-12-02, 231-14-54 E-mail: ukraina_pu@wanex.net; emb_ge@mfa.gov.ua Consular Agency: 71, Melikishvili St., Batumi Tel: (8-88-222) 3-16-00/ 3-14-78 Republic of Turkey Embassy 35 Chavchavadze Av., Tbilisi Tel: 225-20-72/73/74/76 E-mail: turkemb.tbilisi@mfa.gov.tr Address: 8, M. Abashidze str. Batumi, Georgia tel: (8-88-222) 7 47 90 Republic of Azerbaijan Embassy Kipshidze II-bl . N1., Tbilisi Tel: 225-26-39, 225-35-26/27/28 E-mail: tbilisi@mission.mfa.gov.az Address: Dumbadze str. 14, Batumi Tel: 222-7-67-00 Fax: 222-7-34-43 Republic of Armenia Embassy 4 Tetelashvili St. Tbilisi Tel: 95-94-43, 95-17-23, 95-44-08 E-mail: armemb@caucasus.net Web: www.armenianembassy.ge Consulate General, Batumi Address: Batumi, Gogebashvili str. 32, Apt. 16

caucasian business week Kingdom of Spain Embassy Rustaveli Ave. 24, I floor, Tbilisi Tel: 230-54-64 E-mail: emb.tiflis@maec.es Romania Embassy 7 Kushitashvili St., Tbilisi Tel: 38-53-10; 25-00-98/97 E-mail: ambasada@caucasus.net Republic of Poland Embassy 19 Brothers Zubalashvili St., Tbilisi Tel: 292-03-98 Email:tbilisi.amb.sekretariat@msz.gov.pl Web-site: www.tbilisi.polemb.net Republic of Iraq Embassy Kobuleti str. 16, Tbilisi Tel: 291 35 96; 229 07 93 E-mail: iraqiageoemb@yahoo.com Federative Republic of Brazil Embassy Chanturia street 6/2, Tbilisi Tel.: +995-32-293-2419 Fax.: +995-32-293-2416 Islamic Republic of Iran Embassy 80, I.Chavchavadze St. Tbilisi, Tel: 291-36-56, 291-36-58, 291-36-59, 291-36-60; Fax: 291-36-28 E-mail: iranemb@geo.net.ge United Nations Office Address: 9 Eristavi St. Tbilisi Tel: 225-11-26/28, 225-11-29/31 Fax: 225-02-71/72 E-mail: registry.geo@undp.org Web-site: www.undp.org International Monetary Fund Office Address : 4 Freedom Sq., GMT Plaza, Tbilisi Tel: 292-04-32/33/34 E-mail: kdanelia@imf.org Web-site: www.imf.ge Asian Development Bank Georgian Resident Mission Address: 1, G. Tabidze Street

Freedom Square 0114 Tbilisi, Georgia Tel: +995 32 225 06 19 E-mail: adbgrm@adb.org; Web-site: www.adb.org World Bank Office Address : 5a Chavchavadze Av., lane-I, Tbilisi, Georgia Tel: 291-30-96, 291-26-89/59 Web-site: www.worldbank.org.ge Regional Office of European Bank for Reconstruction and Development Address: 6 Marjanishvili St. Tbilisi Tel: 244 74 00, 292 05 13, 292 05 14 Web-site: www.ebrd.com Representation of the Council of Europe in Georgia Address : 26 Br. Kakabadze, Tbilisi Tel: 995 32 291 38 70/71/72/73 Fax: 995 32 291 38 74 Web-site: www.coe.ge

Hotels in Georgia TBILISI MARRIOTT Tbilisi , 13 Rustaveli Ave. Tel: 77 92 00, www.marriott.com COURTYARD MARRIOTT Tbilisi , 4 Freedom Sq. Tel: 77 91 00 www.marriott.com RADISSON BLU HOTEL, TBILISI Rose Revolution Square 1 0108, Tbilisi Tel: +995 32 402200 radissonblu.com/hotel-tbilisi RADISSON BLU HOTEL, BATUMI Ninoshvili Str. 1, 6000 Bat’umi, Georgia Tel: 8 422255555 http://radissonblu.com/hotel-batumi SHERATON METECHI PALACE Tbilisi , 20 Telavi St. Tel: 77 20 20, www.starwoodhotels.com SHERATON BATUMI 28 Rustaveli Street • Batumi Tel: (995)(422) 229000 www.sheratonbatumi.com HOLIDAY INN TBILISI Business hotel Addr: 1, 26 May Square Tel: +995 32 230 00 99 E-mail: info@hi-tbilisi.com Website: http://www.hi-tbilisi.com BETSY’S HOTEL With Marvellous Tbilisi Views Addr: 32/34 Makashvili St. Tbilisi Tel: +995 32 293 14 04; +995 32 292 39 96 Fax: +995 32 99 93 11 E-mail: info@betsyshotel.com Website: http://www.betsyshotel.com

Restaurants CHARDIN 12 Tbilisi , 12 Chardin St. , Tel: 92 32 38 CHINA TOWN Tbilisi , 44 Leselidze St. (ent. from Chardin St.) Tel: 43 93 08, 43 93 80, Fax: 43 93 08 BREAD HOUSE Tbilisi , 7 Gorgasali St. , Tel: 30 30 30 BUFETTI - ITALIAN RESTAURANT Tbilisi , 31 I. Abashidze St. , Tel: 22 49 61 DZVELI SAKHLI Tbilisi , 3 Right embankment , Tel: 92 34 97, 36 53 65, Fax: 98 27 81 IN THE SHADOW OF METEKHI Tbilisi , 29a Tsamebuli Ave. , Tel: 77 93 83, Fax: 77 93 83 PICASSO Tbilisi , 4 Miminoshvili St. , Tel: 98 90 86 SAKURA - JAPANESE RESTAURANT Tbilisi , 29 I. Abashidze St. , Tel: 29 31 08, Fax: 29 31 08 SIANGAN - CHINESE RESTAURANT Tbilisi , 41 Peking St , Tel: 37 96 88 VERA STEAK HOUSE Tbilisi , 37a Kostava St , Tel: 98 37 67 BELLE DE JOUR 29 I. Abashidze str, Tbilisi Tel: (+995 32) 230 30 30 VONG 31 I. Abashidze str, Tbilisi Tel: (+995 32) 230 30 30 BRASSERIE L’EXPRESS 14 Chardin str, Tbilisi Tel: (+995 32) 230 30 30 TWO SIDE PARTY CLUB 7 Bambis Rigi, Tbilisi Tel: (+995 32) 230 30 30 LOFT 11. I. Mosashvili str, Tbilisi Tel: (+995 32) 230 30 30 RESTAURANT NERO 21 Abano Street, Tbilisi Tel: (+995 32) 292 10 15

SH. RUSTAVELI STATE THEATRE Tbilisi. 17 Rustaveli Ave. Tel: 93 65 83, Fax: 99 63 73 TBILISI STATE MARIONETTE THEATRE Tbilisi. 26 Shavteli St. Tel: 98 65 89, Fax: 98 65 89 THEATRE OF PANTOMIME Tbilisi. 37 Rustaveli Ave. Tel: 99 63 14, (77) 41 41 50 Z. PALIASHVILI TBILISI STATE THEATRE OF OPERA AND BALLET Tbilisi. 25 Rustaveli Ave. Tel: 98 32 49, Fax: 98 32 50

Galleries ART GALLERY LINE Tbilisi. 44 Leselidze St. BAIA GALLERY Tbilisi. 10 Chardin St. Tel: 75 45 10 GALLERY Tbilisi. 12 Erekle II St. Tel: 93 12 89 GEORGIAN NATIONAL MUSEUM - PICTURE GALLERY Tbilisi. 11 Rustaveli Ave. Tel: 98 48 14 KARVASLA’S EXHIBITION HALL Tbilisi. 8 Sioni St. Tel: 92 32 27, KOPALA Tbilisi. 7 Zubalashvilebi St. Tel: 99 99 02, Fax: 99 99 02 MODERN ART GALLERY Tbilisi. 3 Rustaveli Ave. Tel: 98 21 33, Fax: 98 21 33 M GALLERY Tbilisi. 11 Taktakishvili St. Tel: 25 23 34 ORNAMENT - ENAMEL GALLERY Tbilisi. 7 Erekle II St. Tel: 93 64 12, Fax: 98 90 13

Akhvledianis Khevi N13, Tbilisi, GE. +995322958377; +995599265432

Cinemas AKHMETELI Tbilisi. “Akhmeteli” Subway Station Tel: 58 66 69 AMIRANI Tbilisi. 36 Kostava St. Tel: 99 99 55, RUSTAVELI Tbilisi. 5 Rustaveli Ave. Tel: 92 03 57, 92 02 85, SAKARTVELO Tbilisi. 2/9 Guramishvili Ave. Tel: 8 322308080,

Theatres A. GRIBOEDOV RUSSIAN STATE DRAMA THEATRE Tbilisi. 2 Rustaveli Ave. Tel: 93 58 11, Fax: 93 31 15 INDEPENDENT THEATRE Tbilisi. 2 Rustaveli Ave. Tel: 98 58 21, Fax: 93 31 15 K. MARJANISHVILI STATE ACADEMIC THEATRE Tbilisi. 8 Marjanishvili St. Tel: 95 35 82, Fax: 95 40 01 M. TUMANISHVILI CINEMA ACTORS THEATRE Tbilisi. 164 Agmashenebeli Ave. Tel: 35 31 52, 34 28 99, Fax: 35 01 94 METEKHI – THEATRE OF GEORGIAN NATIONAL BALLET Tbilisi. 69 Balanchivadze St. Tel: (99) 20 22 10 MUSIC AND DRAMATIC STATE THEATRE Tbilisi. 182 Agmashenebeli Ave. Tel: 34 80 90, Fax: 34 80 90 NABADI - GEORGIAN FOLKLORE THEATRE Tbilisi. 19 Rustaveli Ave. Tel: 98 99 91 S. AKHMETELI STATE DRAMATIC THEATRE Tbilisi. 8 I. Vekua St. Tel: 62 59 73

THE BEST GEORGIAN HONEY OF CHESTNUTS,ACACIA AND LIME FLOWERS FROM THE VERY HART OF ADJARA MATCHAKHELA GORGE IN THE NETWORK OF GOODWILL

PUBLICITY August 05, 2013 #16

caucasian business week

CHEAP MORTGAGE LOANS FROM LIBERTY BANK

From 8.99% News! Cheap mortgage loans from Liberty Bank in Gel at a lowest annual interest rate of- 8.99%! While using low-cost mortgage loans, the borrowers not only get the lowest percentages but also receive bonus products for free

Cheap mortgage loans available for: For purchasing Residential and Commercial Real Estate / repair / building Land plot purchasing, personal car purchase Purposes of consumer financing Loan consolidation-re consolidation of one or more loans from commercial banks

Cheap mortgage loan principal terms: Currency – Gel Term – minimum 6 months – maximum 15 years The annual interest rate – from 8.99% . Loan Amount - Minimum - 5 000 Gel / Maximum - 300 000 Gel The borrower’s minimum monthly income - 800 Gel

Bonus Products: Special Liberty basic package for free, which includes: Multi currency account Bank Card – Visa Gold or MasterCard Gold Premium Smartivi Card Internet Bank SMS Bank All borrowers who take advantage of cheap mortgage loans will accrue an annual interest rate of 7.00% - which will be deposited into their liberty account 3 If desired by the borrower, at the time of receiving the low-cost mortgage loan (the borrower) will receive the credit card - Magic card, with double amount of credit limit of the borrower’s monthly net income For more information regarding cheap mortgage loans please call: The Banks 24-hour call center +955 32 255 55 00 or *55 00 (from mobile phones)