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October 28, 2013 #27

October 28, 2013, Issue 27

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georgia

SHARE OF HAZELNUT AND NATURAL WINE INCREASED IN EXPORT

GIORGI MARGVELASHVILI

akstat has published 9 months data, according to which, hazelnut and other kinds of nuts and natural wines are on the 5th and 6th positions in the country’s export. Pg. 2

New President of Georgia

Kakha Kaladze: Georgia to Build Two Hydro Power Plants

GEORGIA’S MACROECONOMY AT A GLANCE, OCTOBER 2013

he macroeconomic situation in Georgia, weighed down by political uncertainty since the October 2012 elections, has shown tentative signs of improvement in the recent months. Pg. 7

Azerbaijan SOCAR starts drilling new well offshore

zerbaijan’s state energy company SOCAR has started drilling a new well in the shallow part of the Gunashli field in the Azerbaijani sector of the Caspian Sea. Pg. 10

Armenia Economic activity increased in Armenia

he indicator of the economic activity of Armenia by the months of January-September has exceeded the indicator of the same period of the previous year by 3,2%. Pg. 11

cis Ukraine seeks compromise with Russia on gas deal

kraine hopes to overcome disagreements and end disputes over a 10-year gas supply contract signed with Russia in 2009, Ukrainian Prime Minister Mykola Azarov said Friday, according to Xinhua. Pg. 12

VTB Bank May Buy Liberty Bank

avid Eristavi, a founder of Eristavi Legal Group, says, according to certain information, VTB Bank plans to buy Liberty Bank. VTB Bank ranks 6th in terms of assets. The bank ended 1H13 in 5.448 million GEL profits (2.4 million GEL in 1Q13). Deposits marked 351 million GEL (except bank deposits), the credit portfolio is 440 million GEL (393 mil-

lion GEL in 1Q13). Total liabilities stand at 551 million GEL (498 million GEL in 1Q13). The bank’s assets stand at 613 million GEL. The market ratio is 4.1% (560.8 million GEL in 1Q13, 4%). Correlation of liquid assets to total assets is 22%. Return on Assets (ROA) makes up 1.9% and Return on Equity (ROE) is 17.4% ((22.31%, 1.72%, 15.6%). Pg. 8

Schirnhofer Accuses VTB Bank of Pg. 8 Foisting One-Sided Credit Agreement The Onishchenko Era Ended - Russia’s “Legendary” Sanitary Doctor has Resigned

ccording to Russian Prime Minister’s press secretary Natalia Timakova, a decree on the resignation of the head of Rospotrebnadzor has not been signed yet. Timakova confirms that Onishchenko’s term really expires, but the head of the government should decide whether he will remain on his post or will be replaced by another candidate. While Onishchenko himself called Vice Premier of the Russian Government Olga Golodets who told journalists about his resignation “a strange character “ who is not one of those people who take the decisions”. Pg. 12

WORLD NEWS Fama, Shiller, Hansen Win Nobel Prize for Asset-Price Work

SOCAR Organizes Sukhishvilis Master-Classes in Marneuli Tea House

Rompetrol Welcomes Amendments to Georgia’s Labor Pg. 5 Code Nurken Murzagaliev Rompetrol director general

UK Ambassador to Georgia: My Advice to Georgia is to Let Facts and Processes to Speak for Themselves IMF Representative Shows Readiness to Refine Unemployment Forecast Methodology

Azim Sadikov - Resident representative of IMF in Georgia

Does your organization suffer from lack of initiatives from the lower level manage ment?

Pg. 3

Europe-Bet Bookmaker Violates Election Law

urope-Bet Bookmaker has started accepting bets for Georgia’s presidential elections. It should be noted the third clause of the 46th article of the Georgian election code bans making bets over election candidates. “Betting over election related issues is

Do not create organizational structure on your own! banned”, the legislation says. The highest coefficient is recorded for Giorgi Margvelashvili – 1.1. The figure makes up 7.0 for David Bakradze and 10.0 for Nino Burjanadze, 1000 for Giorgi Targamadze, 1500 for Shalva Natelashvili and 2000 for all other candidates.

Pg. 6

main events caucasian business week

GEORGIAN GOVERNMENT WELCOMES EUROPEAN PARLIAMENT’S RESOLUTION IN SUPPORT OF EU ASSOCIATION AGREEMENT INITIALING

uropean Parliament (EP) adopted resolution, which supports initialing of Georgia-EU Association Agreement. Yesterday evening, Georgian government made a statement, which welcomes this resolution. The resolution, adopted ahead of the Eastern Partnership Vilnius Summit, to take place in the end of November, “recognizes the progress, achieved (by Georgia) in modernization of the country and in meeting the requirements of the Association

Agreement”, the government stated, expressing hope that EP “supports initialing of the Association Agreement” at the Summit. The government declared that regarding Georgian foreign policy, resolution of EP “supports efforts of the Georgian government to lessen tensions with Russia while preserving the country’s pro-European orientation”. The resolution emphasizes that “Georgia should not abstain from European aspirations and should resist Russian pressure to give up association with the EU”, the government noted.

ARMENIA, GEORGIA AND MOLDOVA JOINED EASTERN EUROPE ENERGY EFFICIENCY AND ENVIRONMENTAL PROTECTION COOPERATION

U Neighborhood Info Centre informed that Georgia, Armenia and Moldova joined Eastern Europe Energy Efficiency and Environment Partnership (E5P). Within the partnership, these countries “will now benefit from support for energy efficiency and the reduction of harmful emissions due to the E5P

Fund”, press release said. “The European Commission, as the main donor of the Fund, is ready to provide up to 30 million EUR for the three countries that are joining the facility, in order to co-finance energy efficiency and environmental projects in municipalities,” EU Commissioner for Enlargement and European Neighborhood Policy Stefan Fule said.

TRADE TURNOVER WITH EU COUNTRIES DECREASED, WHILE WITH CIS COUNTRIES INCREASED

akstat has published 9 months data, according to which, trade turnover with European Union (EU) countries decreased in January-September by 2%, while with CIS countries – increased by 9% year-on-year. Turnover with EU countries made up $2.02 billion, including Georgian export of $373 million (growth – 43%) and European import of $1.65 billion (decline – 9%). EU countries accounted for 27% of Georgia’s total foreign trade ($7.585 billion), at that export to these countries accounted for 18% of total Georgian export, while European import – for 30% of total import to the country (in the same period of 2012 – 27%, 15% and 31%, respectively). EU

countries accounted for 36% of Georgia’s total trade deficit (in the same period of 2012 – 38%). During the same 9 months of the year, trade turnover with CIS countries amounted to $2.6 billion. At that, Georgia’s export made up $1.12 billion (year-on-year growth – 23%), while import – $1.47 billion (growth – 0.3%). CIS countries accounted for 34% of Georgia’s foreign trade, at that export made up 56% of total Georgian export, while import – 26% of total import to the country (in the same period of 2012 – 31%, 51% and 25%, respectively). CIS countries accounted for 10% of Georgia’s total trade deficit (in the same period of 2012 – 14%). Negative trade balance with these countries decreased by 63% year-on-year.

SHARE OF HAZELNUT AND NATURAL WINE INCREASED IN EXPORT

akstat has published 9 months data, according to which, hazelnut and other kinds of nuts and natural wines are on the 5th and 6th positions in the country’s export. Namely, export of nuts amounted for $82.4 million (4.1% of total export), increasing by 25.1% year-on-year. In the same period of 2012, this group was among top five, occupying the 4th position with share of 3.7%. Export of natural wines amounted to $74.16 million (3.7% of total export), increasing by 73.9% year-on-year. In the same period of 2012, this article was not included in top five, having share of 2.4%. Sakstat reported that leader of January-September was export of cars again. The volume made up

$511.7 million (25.3% of total export), increasing by 18.4% year-on-year. Next come ferroalloys – $183.26 million (9.1% of total export), year-on-year decline – 9.7%. The 3rd place was occupied by nitrogenous fertilizers still – $98.96 million (4.9% of total), decline – 5.5%. Copper ores and concentrates remain on the 4th place – $96.3 million (4.8% of total), growth – 2.5 times. Rest groups of top ten are mineral waters – $72.8 million (year-on-year growth – 60.1%), ethyl alcohol and alcohol beverages – $61.8 million (growth – 0.8%), raw or semi-processed gold – $55.76 million (decline – 10.2%), ferrous or plain steel semi-finished goods – $48.5 million (growth – 16.2 times).

BUSINESS WEEK

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October 28, 2013 #27

SALARIES OF PARLIAMENT MEMBERS EXCEED BY 420% WAGE OF EMPLOYED PERSONS

ccording to data, provided by the article, difference between salaries of an ordinary citizen and a member of the Parliament makes up 420% in Georgia. To compare, this rate is 766% in Turkey, 630% in Russia, 361% - in Ukraine, 250% - in Azerbaijan and 100% - in Belorussia. Monthly income

of members of Georgian parliament includes salary of 2,000 lari, which is added by the bonus for implementation of their authority (for instance, income of speaker is 5,905 lari, while of committee chairmen - 4,705 lari). The article notes that “in the West, salaries of not only of ordinary officials, but of high-ranks as well are often lower than private sector employees’ wage”.

October 28, 2013 #27

business

caucasian business week

SOCAR Organizes Sukhishvilis MasterClasses in Marneuli Tea House Under the auspices of the company SOCAR, during last two weeks dancers of Georgian National Ballet Sukhishvilebi – Nino Gharibashvili and Giorgi Manjgaladze conducted master-classes of Georgian dance for the Tea House students. Both students and choreographers were happy with results. The project promotes integration of the regional youth in the Georgian society.

Irakli Zubitashvili

(SOCAR Energy Georgia, a head of corporate business communications department)

he State Oil Company of Azerbaijan (SOCAR) has successfully operated on Georgia’s oil market for many years. The company has carried out tens of charity projects, contributed to the educational and sports sectors, supported athletes and youth. The idea of a Tea House establishment was to promote education, culture and sports in the region. Classes of Georgian dances and songs, chess, painting, carpet weaving, foreign languages and other classes attracts young people and fosters their development.

local self-government and court system. According to the report, progress is noticed in respect of media freedom, reform of local selfgovernment at the legislative level, renewal of strategy of integrated border management. OSGF has several recommendations still, including: strengthening of capacity of anti-corruption council, prevention of arbitrary dismissal of public sector employees and practical measures for competitiveness and transparency secure during their hiring, continuation of inclusive process of elaboration of anti-corruption action plan for 2014-2016, etc. To note, Georgia received Road Map for Eastern Partnership in May 2012. Road Map lists those reforms, which the Georgian government should implement until Vilnius Summit of EU’s Eastern Partnership (November 28-29, 2013).

National Bank to Issue 710 million GEL T-bills in 2014

raft budget-2014 envisages upper limit for net growth of domestic debt by emission of treasury bonds and treasury bills as 400 million lari.

SOCAR has organized a project of “Art for Children” in the Marneuli social-cultural center of the Tea House. In the framework of the project “Art for Children” master classes are organized to the students united in the art classes. Incomparable performers of Georgian dances, such as choreographers of the ensemble Sukhishvilebi, conducted 6 master-classes for the students of dance class. I think the children had unique opportunity to improve dancing technique. They are very happy and pleased.

The harmonious synthesis of the tradition and and modern architectural features creates appropriate environment for the art house. The Tea House is very popular in the region and it has changed life of tens of teenagers to the better. Project Art for Children has been implemented successfully for the Tea House students. Teenagers attend master-classes in various spheres of the art as part of the project. Painter-sculptor Chingiz Babaev conducted a frost master-class in painting. Another masterclass was about carpet weaving, conducted by Naiba Kerimova.

OSGF: GEORGIA COMPLETED ABOUT 70% OF OBLIGATIONS UNDER ROAD MAP FOR EASTERN PARTNERSHIP eti Khutsishvili, executive director of Open Society – Georgia Foundation (OSGF), declared that according to their survey, Georgia has completed about 70% of obligations, undertaken under Road Map for Eastern Partnership. Accordingly, the country is ready for initialing of Association Agreement at Vilnius Summit, she said. Khutsishvili did not excluded that initialing of the Agreement will be followed by even stronger pressure from Russia, but pointed that this document is of great importance for Georgia. In the monitoring report, presented by OSGF, political part of the Road Map obligations was evaluated, namely 7 major spheres: freedom of media, elections, fight against corruption, cyber security, border management and foreign policy, reforms of

Accordingly, emission of treasury securities with nominal value of 710 million lari will be implemented during 2014. Respectively, securities with nominal value of 310 million lari should be paid during the year.

Azerbaijan is Georgia’s Major Exports Market

rade turnover with Azerbaijan has increased by $17,3 million in a year. Geostat informs that in the 9 months of the current year, trade turnover with Azerbaijan exceeded to $958 million, while in the 9 months 2012 turnover equaled to $940,6 million. Turnover with the neighbor country equals to 12,6% of the total turnover and rates second with this data. Meanwhile, it rates first according to export. In 9 months products of $529 million has been exported to Azerbaijan. As for import, this data has reduced by $43 million in a year and equals to $429,1 million. Motorcars take leading place among the export

products. Their amount has increased in comparison with last year and exceeds to 303 million. This data equaled to $254 in 2012. Bovine animals rate second with $34,8 million, so called armature rates third with $30,7 million. Top-5 list includes cement (26,3 million) and trucks (18,7 million). As for import, oil and oil products rate first, import of which has reduced by 73,5 million, to $199 million in a year. Import of oil airs and gaseous hydrocarbons rate second with 159,2 million; gypsum, anhydrites and plaster import rates third with 15,5 million. Top-5 list includes trucks and special purpose vehicles respectively with 6,9 million and 5,8 million.

Turkey Remains Georgia’s Major Trade Partner despite Decline in Trate Turnover

n January-September 2013, trade turnover with Turkey equaled to $1 078 519 100, which is $90,8 million less than data of the analogical period 2012. Decline of the turnover caused import reduction. In a year import has declined almost by 109 million and equals to $942,5 million. IN the same period products export to Turkey has increased by 20,1 million, to 136 million. It’s noteworthy that considerable growth is mentioned in the top-5 list of the export basket. Amount of the nitrogenous fertilizers has increased almost by 13 times. In 9 months of the current year nitrogenous fertilizers of $22,5 million were exported. In the same period semi-fabricates of the iron and non-alloyed steel of $21.39 million were exported. They had not been exported last year. Textile shirts of $16,3 million were exported, which is 1,6 times more than 2012 data. Meat and fish export equaled to $10,8 million, export of so called armature - $10,5 million.

Medicines take leading place among the imported products from Turkey with 35,8 million. Sanitary-hygienic products rate second with $24,9 million; black metal constructions rate third with $24,3 million. Plastic pipes and tubes are included in the top-5 list with $22,8 million and wires and insulated cables with $20,2 million.

Award

caucasian business week

October 28, 2013 #27

Marketing Brilliance Awards, 2013

• Best Brand Marketing - Geocell • Best Direct Marketing - TBC Bank • Best PR Campaign - Gepra • Best IMC Campaign - Windfor’s • Best Marketing Agency - Leavingstone • Best Social Media Campaign - Aldagi • Best Billboard Design - Geocell • Best Video - Windfors • Best Product Video - Georgian Railway • Best Rising Star - Levan Lefsveridze • Best New Product Launch - Geocell

October 28, 2013 #27

business & economy

caucasian business week

Q1 Records 22.4 million GEL Profits for Insurance Companies

nsurance State Supervision Service informed that in the 1st quarter of the year net profit of 13 insurance companies (life and non-life insurance) made up 22.4 million lari. Besides, the companies got investment income of 2.83 million lari. Pension activity brought loss of 95,393 lari.

Premiums, attracted in the reporting quarter, amounted up to 110.5 million lari. Reinsurance premiums made up 7.2 million lari. In premiums, attracted in direct insurance, share of medical (health) insurance accounted for 81.8 million lari (74.06% of total volume). Data for the 2nd quarter should be published in near future.

Georgia Imports 265.7 million KWH and Exports 361.06 million KHW in January to September 2013

SC Electricity System Commercial Operator (ESCO) reported that in 9 months of the year, import of electricity amounted to 265.736 million KWh. In the same period, electricity export made up 361.06 million KWh. Out of total import, Russia accounted for 99.998% (i.e. 265.735 million KWh), while the rest 1,014

KWh was imported from Armenia. Russia also accounted for 77.9% of total export (i.e. for 281.29 million KWh), Armenia – for 20.3% (i.e. 73.16 million KWh), while Azerbaijan – for the rest 1.2% (i.e. 6.6 million KWh). In the same period of 2012, import was conducted from Azerbaijan and Turkey, while export – to Turkey only.

Georgia to Build Two Hydro Power Plants

eorgia’s Energy Ministry signed an agreement with Georgian Hydro Power today regarding construction of 2 hydroelectric stations with total installed capacity of 22 MW. The Minister Kakha Kaladze declared that UbisaHES (4 MW) will be built in Imereti region, while AkvaretaHES (18 MW) – in Ajara. Total cost of these projects made up $30-35 million, the Minister said. Georgian Hydro Power should submit a feasibility study to Energy Ministry within 15 months, while after the presentation, performance characteristics of the stations will be determined. Shamil Birkadze, director general of the company, told Sarke that construction of UbisaHES needs up to a year and a half, while construction of AkvaretaHES – about 3 years. Respective sums were attracted from Chinese companies, Birkadze said. He noted that contract, signed with Chinese, envisages development of hydroelectric stations of 300 MW in Georgia, and the mentioned 2 stations are pilot projects.

New Companies Show Solidarity to Goodwill

ew companies are joining in solidarity to “Goodwill” company. “Commersant” radio station reports that “Pepsi”, D & L Service, “Europroduct”, “Telavi Wine Cellar “ and other large providers have resumed supplies of products with the conditions of payment after the sale. Note: A businessman Temur Chkonia was the first who offered assistance to “Goodwill” being in financial crisis. He not only resumed supplies but is ready to become a guarantor for the company with his own funds and real estate. Other businessmen also join him. As it became known to “Commersant”, the gathering of big business, “TBC Bank” and “Goodwill” founders is being held in “Goodwill” for 2 days. According to “Pepsi” manager Levan Kasradze, they didn’t stop the supply of products to “Goodwill, however, supplied a limited number of products, and after the agreement the supplies will be restored in the usual way . Kasradze says “Goodwill” company has always been a good and disciplined payer and along with that, it is the Georgian brand which has been operating in the market for many years. “Business declares solidarity with “Goodwill” , but in this case, the most important is the position of the bank and its support, “ - notes Kasradze. “Telavi wine cellar “ company announces that

the negotiations with “Goodwill “ have been successfully completed , as a result, products supply will be restored within a few days. According to “Telavi wine cellar”, the company took this decision in order to protect the interests of both companies. “D & L Service” also declared solidarity with “Goodwill”. The company’s Director Levan Kharazishvili says : “ We have a long relationship with “Goodwill”. We’ll restore the supply of products in a normal mode, but the main goal of this meeting was to clarify the position of banks. All suppliers are ready to supply products to “Goodwill” with the conditions of payment after the sale in order the company to be able to work normally during a rehabilitation period, but all this requires “TBC bank’s” support. We addressed some questions to the bank. They should determine a normal rental fee, which will be the main financial factor of “Goodwill’s” solvency. Mamuka Khazaradze states that “TBC bank” will do its best to create normal working conditions for “Goodwill” during the rehabilitation period. We are waiting for a decision from the bank in 2 days, “ - says Levan Kharazishvili. The businessman Temur Chkhonia points out that 90 companies should gather to resume the delivery to the “Goodwill” hypermarket. In his words, a meeting with 70 companies has already been held and “TBC bank” is ready to offer “Goodwill” lease payment at an acceptable price.

Rompetrol Welcomes Amendments to Georgia’s Labor Code Rompetrol welcomes the amendments to the labor code and the company has taken response steps. Namely, the company has increased wages to the staff and cut the working hours. The amendments to the labor code were adopted in summer in 2013 and came in force on July 4, 2013. According to the new resolution of the parliament (chapter IV, the article 14th), the working hours must not be over 41 hours a week. Break and rest hours are not considered working hours. At the same time, the interval between working days must not be under 12 hours. Rompetrol is the first oil products company in Georgia that has introduced the European standard bill requirements into the management. CBW has taken an interview from Rompetrol director general Nurken Murzagaliev no the issue.

- Mr. Nurken, Rompetrol is the first company that has taken concrete steps in response to the amendments to the labor code. How would you appraise the amendments? -Rompetrol operates in many European countries and follows the domestic local code requirements everywhere. We appreciate the Georgian government has brought the issue to order and taken adequate measures. The bill has adjusted the labor code to European standards. -What are concrete changes the company has taken after the amendments? -In line with the amendments to the labor code, we have improved the work conditions – we have employed 130 new persons for our fuelling stations and added a new shift. Currently, instead of 3 shifts we have 4 shifts and our staff has not to overwork. Wages to staff, managers of fuelling stations and coordinators have increased by 20% and we have also added guaranteed vacation periods. We are proud of these changes and we are glad to have improved the conditions to our staff that serve our clients and offer the best product. -As to the company plans and other changes what should the clients expect from Rompetrol? -We plan to open seven new fuelling stations until 2014. New assets will open in several districts in Tbilisi where we did not have fueling stations. The new assets will have new design. Under the restyling project, the new stations will be colored in white, orange and red colors. Rompetrol will invest about 2 million USD in the network expansion and introduce automatic systems in new

fueling stations. - MR. Nurken how would you appraise the Rompetrol’s development dynamics on the Georgian market? -At this stage, Rompetrol’s ratio on the Georgian market is 18%. The company management continues development on the Georgian market and the company has been successfully introducing innovations and European standards for 8 years. To ensure accuracy in refueling process, Rompetrol has been introducing automatic systems in the fueling network. The company will launch several promo campaigns and projects for customers in the near future. CBW has also interviewed Malkhaz Metreveli, a manger for one of the fueling stations of Rompetrol, concerning the changes. - The improved working conditions have made the job in Rompetrol more prestigious and encouraging. We feel much support and care from the management and we have got more stimulus to better serve our clients. I can openly say today our staff has less job and more wages , Malkhaz Metreveli noted. Rompetrol transnational company represents Georgia’ major importer of European standard fuel. Rompetrol’s head office is situated in Amsterdam and currently the company unites about 50 entities all over the world. At this stage, Rompetrol distributes five varieties of fuel in Georgia: three varieties of petrol – Euro Regular, Efix Euro Premium and Efix S and two varieties of Diesel – Efix Euro Diesel and Euro Diesel.

STATE FOREIGN DEBT OF GEORGIA INCREASED BY 0.11% IN Q3

he Finance Ministry reported that as of September 30, state foreign debt of Georgia made up $4.13 billion. This volume increased by 0.11%, if compared with the 2nd quarter. Debt toward IMF amounted to $291.6 million (quarter-on-quarter decline – 10.26%). Debt toward World Bank’s International Development Association (IDA) made up $1.3 billion (quarter-on-quarter growth – 2.2%). World Bank’s International Bank for Reconstruction and Development (IBRD) accounted for $360.8 million of total debt (growth – 0.66%). Asian Development Bank (ADB) accounted for $446.48 million (growth – 4.64%). EBRD accounted for $105.57 million (growth –

4.95%). In total, debts toward multilateral lenders made up $2.69 billion (i.e. 65.22% of total sum), growth – 1.18%. In turn, debts toward bilateral creditors totaled to $782.1 million (growth – 5.15%). Of this volume, Germany accounted for the largest share – $342.23 million (growth – 3.79%). Next came Japan – $107.77 million (growth – 9.14%) and Russia – $101.63 million (decline – 1.75%). Volume of loans, guaranteed by the state, made up $3.05 million, while only Germany accounted for it in the reporting period (growth – 3.34%). Sovereign Eurobonds amounted to $500 million (unchanged).

interview 6 UK Ambassador to Georgia: My Advice to Georgia is to Let Facts and Processes to Speak for Themselves caucasian business week

Alexandra Hall Hall, the United Kingdom’s Ambassador to Georgia. - The political situation in Georgia is interesting now, especially since we have presidential elections coming. What are your expectations? How would you assess the pre-election environment? - Obviously I’m new to Georgia, so it is harder for me to make precise comparisons as to how this election will be, compared with previous years; but what most commentators are saying and colleagues who have been here longer than me and also in my trips to various parts of Georgia the consistent message I’m hearing is that the environment for this year’s elections are good and do represent meaningful progress on last year. I don’t want to prejudge the final days and the Election Day itself and we will be taking part in an observation mission ourselves with the American and Dutch embassies and I don’t want to prejudge the final outcome and what the OSCE observers might say, but judging from where we’ve got to so far I’m hopeful that the election will be sufficiently free and fair to mark another step forward for Georgia’s democracy. - The prime minister recently met with the editors of newspapers and radios. The meeting was quite long, during which he said that ‘at no cost will Georgia change its Euro-Atlantic direction.’ We also have to consider there is a big player in the region – Russia – and Russia wants former Soviet countries to join the Customs Union. You would have heard that the Armenian president unexpectedly changed his decision about joining the Union. Do you see this as potential threat to Georgia’s Euro-Atlantic aspirations?

- Three very clear points on this: 1) It is a strongly held view and endorsed in the OSCE Helsinki principles, that every country should be free to choose its own relations and associations, and that is the sovereign right of every country. So, just as we recognize and accept that Armenia has recently decided where it wishes to form an association; so we respect and continue to believe Georgia should be free, independently of any pressure, to decide its own relations and associations free from any pressure. 2) Georgia has made it very clear, both in its government statements and also reflected in a cross party resolution from the Georgian parliament, that it wishes to pursue its Euro-Atlantic trajectory. We believe that the Association Agreement and DCFTA, the free trade agreement with the EU, will offer Georgia huge economic benefits over the years both in terms of access to the huge European market and in terms of offering consumers here in Georgia more choice and huge scope for Georgia’s economy to grow. The process is long and quite hard and it does require some reforms and regulations to harmonize our standards, but the long term benefits to Georgia’s economy and consumers are absolutely clear. It is also the case that technically and factually Georgia cannot at the same time have a DCFTA with the EU and join the Customs Union with Russia. This is not a politically imposed problem, it is simply technically impossible, because the standards and trading mechanisms that need to be set in place to realize the FTA with the EU are not the same as the mechanisms and procedures that would be required with the Customs

Businessman Tsezar Chocheli to Cooperate with CoInvestment Fund

he businessman Caesar Chocheli announced about his intention to implement a number of projects with the Co-investment Fund. In particular, according to the available information, it is about the construction of four new enterprises such as production of food, building materials and packing. “This is about a pretty big investment. Against the background of some of the problems, these projects are suspended. Currently we are in talks with foreign businessmen as well as the Co-investment Fund “- says the businessman. In his word , despite the problems with the cur-

rent government, his group will remain the country’s largest industrial group. “Because of the charges brought by the Investigation Service of the Ministry of Finance, the development of the existing businesses as well as new directions has stalled. Because of this, we were forced to lay off 700 people. The main problem is that the property of our companies is arrested, and for this reason we have difficulty in relationships with banks and investors. The situation is complicated, but whatever it was, we intend to build another four enterprises. As soon as the problems of our business group are settled, the process will be speeded up, “- says Chocheli.

Union. 3) The Eastern Partnership and the desire to initialize and sign the Association Agreement and DCFTA with Georgia is not conceived or intended at the expense of Russia; it is not some geo-political game designed to force Georgia to choose between developing relations with the EU or developing relations with Russia. The UK is part of the EU and has of course very extensive trading with our European partners and also is engaged in the process to develop our political and trading relationships with Russia and Georgia can develop its Free Trade Agreement with the EU and also continue to have relations with Russia and it is not a zero sum game. - Sadly Russia sees it that way. - Well, my final point was to say it is actually also an opportunity for Russia, to the extent that by deepening trade and economic relations between Eastern Partnership countries the EU helps grow their economies; so that is an opportunity also for Russia to develop its trade and business opportunities with these richer and bigger and more stable economies. So it is also an opportunity for Russia as well, and we would very much like and we consistently convey to Russia that this is not a threat but an opportunity for them as well, and it takes us further forward to the vision of a Europe which is free and whole and prosperous from Lisbon to Vladivostok. - When there are conflicts obviously the most successful strategies are the win-win strategies. Important parts of Georgia are occupied and the symbol of this occupation is not only tanks and soldiers, but also the wires and fences that are today installed in the villages which border with the so-called South Ossetia, dividing people, property, relatives, doesn’t allow ordinary people to do their work, to visit the cemetery. How do you see this situation and what specific steps must be taken in order to fulfill the agreement which was signed by the efforts of the EU after the 2008 war? - Well, of course we hope that the 2008 SarkozyMedvedev agreement would be respected, and we’re aware that that is not fully the case. I agree with you that what we should be looking for is a win-win scenario, and unfortunately the situation we’re in at the moment if you look at it from the perspective of people affected on the ground, is lose-lose. Obviously, it will be highly desirable if there could be some radical breakthrough and negotiated agreement reached at the high level between all parties concerned, but pending that I think a very productive way to proceed is to think about how to improve the lives of people affected immediately on the ground. I made it a priority to visit the administrative boundary lines both with South Ossetia and Abkhazia in my very first month here, because I wanted to see for myself and understand exactly how it does impact the people on the ground and irrespective of the wider geopoliti-

October 28, 2013 #27

cal significance of the borderization. What I really saw and felt first hand was that very damaging impact it had on families on the ground who had been communicating and working and trading and relating to each other for years and now having these barriers put between them, and I think that is extremely sad in the 21. century, to have such new fences going up irrespective of the broader political implications. So I think it is important for us to think about how we can improve and address the issues looking at how it impacts people on the ground and here I’m not just talking about people immediately on the lines but I also don’t want to forget the situation of IDPs, many of whom had been displaced for twenty years from their homes. We need to think about how to address the conflicts from that human perspective, while also hoping for progress at the Geneva talks, which remain the main and important forum. To that extent, we’ve been encouraged and like to support this government’s efforts to engage in a respectful dialogue and using courteous terms, talking about brothers and sisters in Abkhazia and South Ossetia, trying to improve the tone of that dialogue and relationship and try to find ways to cooperate. - There are debates about the issue about upcoming debates in the European Parliament about political prisoners here and about former Interior Minister’s, Vano Merabishvili’s status, what is your opinion about it? - It’s the nature of free speech that all sorts of opinions can be expressed, and it’s not possible to insist or predetermine how other people speak, but what Georgia can do is control what it does with its own processes, and my advice to Georgia is to let the facts and processes to speak for themselves and do the best you can to observe international human right standards which Georgia has pledged to do and let those processes speak for themselves. The investigations and the prosecutions are incredibly sensitive and so Georgia has to be careful and has to demonstrate that it is living up to the highest judicial standards in those investigations and if it can do so those processes will speak for themselves. - One of the most important subject of debates lately is also the issue of Georgia’s participation in the upcoming Sochi Winter Olympics, whether Georgia should boycott it. How may a boycott be seen from the outside? - I would like to believe that politics and sports do not mix, and in the spirit of the Olympic truce that we tried to observe when the UK hosted the Olympics last year, the ideal is for politics not to interfere in the way of international sporting events. How Georgia wants to handle its attendance in Sochi is really something for this government and the people of Georgia to decide and it wouldn’t be right for me to say what is the right for it to do. dfwatch.net

IMF Representative Shows Readiness to Refine Unemployment Forecast Methodology

zim Sadikov, resident representative of IMF in Georgia, declared that IMF partly shares the criticism of Georgian Finance Minister regarding their unemployment forecast and expresses readiness to refine forecast methodology. At the end of the year, there will be clearer picture regarding unemployment, since there will be data of 2013 as well as statistics of GDP, Sadikov noted. To note, IMF said earlier that unemployment rate in Georgia, making up 15% in 2012, will reach 16.7% in 2013 and 17.3% – in 2014. This forecast faced sharp

criticism of Georgia’s Finance Minister Nodar Khaduri, who declared that “this forecast lacks any factual or logical justification”.

October 28, 2013 #27

economy

caucasian business week

GEORGIA’S MACROECONOMY AT A GLANCE, OCTOBER 2013 The Highlights The macroeconomic situation in Georgia, weighed down by political uncertainty since the October 2012 elections, has shown tentative signs of improvement in the recent months. Despite the internal political uncertainty and a host of unfavorable external factors, the real activity in agriculture has picked up in the second quarter of 2013. Such important sectors as trade and manufacturing also posted small growth gains. Sluggish aggregate demand has been one of the culprits of the general growth slowdown. The falling prices and weak import growth since the beginning of the year have pointed towards the overall weakening demand conditions, with both consumers and businesses reluctant to spend and invest. For example, in the second quarter of 2013, household consumption dropped by 1.7% compared to the same period last year, while gross capital formation (which includes investment expenditure by both private and government entities) dropped by 17.6%. Government expenditures also declined in the second quarter, but mostly due to a decrease in collective spending (public administration, defense, social security and safety). At the same time, the government expenditure on personal services (such as health and education) has increased in the second quarter relative to the same period last year.

activity – are also up by 6.6%. ISET PI has updated the forecasts for Georgia’s real GDP growth rates using the August 2013 releases of predictor indices. The updated (fifth) growth forecast for the 3rd quarter of 2013 was revised upward from 1.4% to 2.3%; the second forecast for the 4th quarter growth rate currently stands at 5.2%. Consumer Confidence Index in August dropped to -13.3 (its lowest level since May 2012), translating into a y/y drop of 2.7 points. However, CCI added 5 points in September, reaching -7.9. While some of this improvement in CCI may be related to seasonal factors, such as “rtveli” (traditional grape harvesting), September CCI is also up 4 points y/y (compared to September 2012). Most of the annual gains in CCI are related to improvement in the Present Situation Index (up 5.5 points). Prices The level of consumer prices, as measured by the CPI index, continued to decline in September. CPI lost -0.1% over August 2013, and -1.3% over August 2012. At the end of August, base inflation (change in CPI without taking into account the highly volatile food and energy prices) decreased as well, by 1.1%. The deflationary trend can be to some extent explained by decreasing import prices. In September, imported consumer goods lost 2.2% while domestically produced consumer goods added 0.5%. The Producer Price Index (PPI) posted a decline of 0.4 percent after a small, 0.2% increase in August. PPI decreased by a more significant 4.6% y/y, i.e. compared to September 2012. The Financial Sector The net profits of the Georgian banking sector have significantly improved in August 2013 over the same period of last year. Net profits increased by 87% and reached 214.6mln GEL. However, overdue loans increased as well by 6.7mln GEL relative to July 2013, and amounted to 6.7% of the total banking credit portfolio. The lending interest rates remained generally stable, although the lending rates in national currency have inched up slightly after a period of decline since the beginning of the year.

The aggregate demand weakness appears to have eased somewhat between August and September, possibly due to seasonal factors, such as the traditional grape harvest (“rtveli”). In particular, consumer sentiment seems to have picked up. According to the ISET Consumer Confidence Index (CCI), the monthly change in consumer sentiment was mainly due to a sharp improvement in peoples’ expectations about the future, while the annual gains in CCI are mainly associated with a rise in the Present Situation Index. While these indicators should be interpreted with due caution, they are nevertheless encouraging in the uncertain economic climate. According to a recent release by the GeoStat, the external trade sector in the first nine months of 2013 has seen an increase in exports (14% annual growth) while imports declined by 4%. The slowdown in imports is consistent with the general weakening of aggregate demand conditions we observed throughout the year. The National Bank of Georgia maintained low policy (refinancing) rates to help combat deflation, although the market lending rates inched up slightly over the past month. In the same time, private credit to the national economy in the month of August increased by 2% relative to the previous month, and by 10% relative to the same period last year. The real effective exchange rate declined by 4.5% in August (as compared to the same period last year), making Georgian exports cheaper and foreign imports more expensive. These developments, which are part of the overall downward trend of the real exchange rate, could in part explain the relatively robust export growth and the weakness of imports in recent months.

External Sector According to GeoStat, Georgia’s external trade turnover amounted to USD 7,585 million in JanuarySeptember 2013, which is roughly on par with first nine months of 2012. The composition of trade, however, is undergoing significant changes. Compared to January-August 2012, exports added 14 %, reaching USD 2019 million, while imports lost 4%, reaching USD 5,566 million. As a result, Georgia’s trade deficit currently stands at USD 3,548 million or 47 percent of the total trade turnover, as opposed to USD 4,054 million (53 percent of the total trade turnover) last year. The Monetary Sector The National Bank of Georgia kept the monetary policy rate at 3.75% to combat deflation and stimulate the economy as a whole. In August 2013, interest rate spread increased by 1.2 percentage points vis-à-vis August 2012, reaching 11.8%. However, the weighted average of market lending interest rates decreased by 0.9 percentage point relative to August 2012, reaching 17.8%. Bank credit to the national economy (both to households and to resident legal entities) increased by 2% in August over the previous month, while the bank credit to households alone increased by 3.3% in the same period. In August 2012, market interest rate on deposits decreased by 0.6 percentage points relative to July, reaching 6%. Bank deposits in national and foreign currency increased by 2% compared to last month. The real and nominal effective exchange rate decreased by 4.5% and 0.4% respectively, over August 2012. This means that inflation is higher in Georgia’s major partner countries, and that Georgian goods thus become cheaper relative to foreign alternatives.

Real Sector According to prior estimates of the National Statistics Office of Georgia (GeoStat), y/y GDP growth equaled to 1.1% in August 2013. GeoStat updated y/y growth rate of GDP in July by 0.2 percentage points, putting it at 0.8%. As a result, Georgia’s average growth performance in the first eight months of 2013 is estimated to be 1.6%. Based on GeoStat’s official report, in the 2nd quarter y/y GDP growth equaled to 1.5%. Very importantly for Georgia, the sector which employs the largest share of the country’s population, namely agriculture, expanded at the annual rate of 6.7% in the second quarter of 2013. Other important sectors, like manufacturing and trade (which together account for over 30% of GDP) have also posted Q2 growth, although the rates of growth are smaller compared to the same period of last year. The electricity/gas/water figures – which are generally very good indicators of the level of economic

The Public Sector In contrast to July 2013, the Georgian consolidated budget in August had a negative balance and accounted -59.7mln GEL. The revenues of the Georgian consolidated budget decreased by 22.6% and expenditures continued to decline by 3.1% over the previous month. The decrease in revenue is mainly due to the decrease in tax revenues. In August only import tax revenues increased by 25.6% while all other tax revenues decreased significantly: income tax (-3,6%), VAT (-14,25%), profit tax (-11,6%) and real estate tax revenues (-17,5). World World prices were stable, with food prices declining by a further 2% and crude oil prices rising by 2.37% compared to August 2012. iset-pi.ge

TBC Bank Ends January to September Period in 45.4 million GEL Profits

SC TBC Bank increased profit by 14,7 million in the 3rd quarter and by October 1, 2013 profits of 9 months equals to 45,4 million GEL (II quarter - 30,8 million GEL). Credit portfolio of the bank is 2,332 billion GEL (II quarter - 2,307 billion GEL), deposit - 2,5 billion GEL (II quarter - 2,273 billion GEL), overall obligations - 3,08 billion GEL. Bank’s actives equal to 3,66 billion GEL, market share - 23,2% (II quarter - 3,605 billion GEL, 24,1%). Bank operates for over 20 years. Its major stockholders are: TBC Holding, European Bank for Reconstruction and Development (EBRD), IFC, DEG (Deutsche Investitions- und Entwicklungsgesellschaft mbH), Development organization of German bank KfW, Development Bank of Netherlands FMO (Nerlandese Financierings-Maatschappi Voor Ontwikkelingsladen N.V.). Overall stock capital of the bank is 579,4 million GEL.

Bank of Georgia Ends January to September Period in 77.6 million GEL Profits

SC Bank of Georgia completed JanuarySeptember with 77,7 million GEL profit. In the 3rd quarter profit has increased by 18,3 million (01/09/13 -71,6; II quarter - 59,3 million GEL). By October 1 it rates first among 16 profitable banks. According to actives, market share of the Bank of Georgia is 34,1% (II quarter - 34,7%). Amount of actives equal to 5,4 billion GEL (II quarter - 5,3 billion GEL).

BANK KSB COMPLETED 9 MONTHS WITH NET PROFIT OF 5.45M LARI

OR Standard Bank (KSB) reported net profit of 5.45 million lari for the 3rd quarter. This volume exceeds by 47.3% the showing of the same period of 2012. Total assets made up 451.5 million lari, increasing by 12.9% year-on-year. In the reporting period, net loans amounted to 233.35 million lari (year-onyear growth – 10.9%), while loan loss reserves – to 12.7 million lari (growth – 10.4%). Ratio of idle loans to total credits made up 3.96% (instead of 5.57% a year ago). Total liabilities amounted to 360.5 million lari, increasing by 14.2% if compared with the showing of September 2012. Sum on clients’ current accounts made up 118.9 million lari (growth – 6.2%), fixed deposits – 130.9 million lari (growth – 28.8%), while demand deposits – 25.96 million lari (growth – 21.3%). Return on assets (ROA) and return on equity (ROE) made up, respectively, 1.73% (instead of 1.25% a year ago) and 8.2% (instead of 5.98%). As of September 30, equity of the bank amounted to 91.14 million lari, increasing by 7.86% year-on-year.

BANKING NEWS caucasian business week

VTB Bank May Buy Liberty Bank From Pg. 1

VTB Bank revenues stand at 40.6 million GEL, expenditures totaled 33.9 million GEL. The former United Bank of Georgia launched operation in 1995. According to 2Q13, 96.31% of the bank’s authorized capital is owned by Russian VTB, 2.08% is owned by Lakarpa Enterprises Limited. Beneficiaries are the Russian Federation (58.7%) and Bank of New York International Nominees (12.2%). Recently, VTB has taken decision to issue 12 250 000 ordinary shares with a nominal value of 1 GEL. JSC Liberty Bank ended the January to September period in 18.7 million GEL profits (10 million GEL in 2012). At the end of 3Q13, deposits marked (nonblank) 1.1 billion GEL (687.6 million GEL as of January 1, 2013). The credit portfolio is 561.3 million GEL (402.5 million GEL as of January 1, 2013). Total liabilities stand at 1.2 billion GEL (794.7 million GEL as of January 1, 2013). The bank’s assets stand at 1.3 billion GEL. Direct and indirect owners of Liberty Bank shares are Dinu Patriciu (73.1%), Lado Gurgenidze (8%) and BNY (Nominees) Limited (11.3%). The stock capital is 133 million GEL (111.8 million GEL as of January 1, 2013). The bank was bought off from the family of Jincharadze in 2008 by pressure, but this is the violation on the Jincharadze’s rights and they plan to apply to all instances of the court to return the property, David Eristavi says. “Almost all state institutions were staging pressure and at

03.00 o’clock on December 29 the bank’s sales documents was signed”, Eristavi noted. People’s Bank was bought by EuroOil company founded in Great Britain a year before at 10 million USD and the company sold the bank to Liberty Capital Group at 15 million USD in September 2009, Eristavi says. New Energy company paid 10 million USD to the family of Jincharadzes. One of the founders of New Energy is Tsezar Chocheli, the defense lawyer says and adds the participation of New Energy in the operation in proved by protocols of interrogation and testimonies. The real value of the bank was over 15 million USD in 2008 and the assets stood at 318 million GEL, the defense lawyer says. The pressure started when Lado Gurgenidze, the former director general and currently executive director for the supervisory board of Liberty Bank, was a Georgia’s Prime Minister. Majority MP Giorgi Goguadze from the United National Movement, a People’ Bank shareholder, was also co-acting with the Government. He has withdrawn 7 million USD unshared profits and he has left the country”, Eristavi noted. Liberty Bank representatives have told Sarke new agency the new management started working with 79 million GEL losses, while currently the bank’s profits stand at 18 million GEL. Moreover, Liberty Bank refuses the information as if the bank has put up shares for sales and Russian VTB Bank plans to buy Liberty Bank.

October 28, 2013 #27

Basisbank Net Profits Grow 21.3 Times

asisbank reported net profit of 6.5 million lari for 9 months of the year. This volume increased 21.3 times, if compared with same period of last year. In the reporting period, total assets of Basisbank amounted to 348.14 million lari (year-on-year growth – 64.8%). Ratio of liquid assets to total assets totaled to 46.04% against of 51.93% a year ago. Net loans amounted to 159.77 million lari (growth – 2.24 times), while loan loss reserves – to 6.2 million lari (growth – 1.75 times). Ratio of idle loans to total loans made up 4.19% instead of 5.04%. Total liabilities made up 239.9 million lari (yearon-year growth – 29.4%). Sum on clients’ current accounts totaled to 64.7 million lari (decline – 18.8%), demand deposits made up 49.7 million lari (growth – 32.6%), while fixed deposits – 64.75 million lari (growth – 51%). Return on assets (ROA) made up 2.97% against of 0.24% a year ago, while return on equity (ROE) – 10.41% instead of 1.55%. Bank’s share capital amounted to 108.2 million lari (year-on-year growth – 4.2 times). Shareholders of the bank are Chinese Xinjiang Hualing Industry & Trade Group – 95.51%, EBRD – 1.9% and Zurab Tsikhistavi – 2.59%.

Schirnhofer Accuses VTB Bank of Foisting One-Sided Credit VTB Bank Agreement offers chirnhofer company accuses VTB At the same time, I would like to note the issue Bank of foisting a lone-sided credit is not of credits of several millions that is the one agreement – Irakli Ninua, a defense unaffordable for payment. Therefore, we are inconsumers lawyer for LLC Schirnhofer and LLC terested whether the bank is interested in approWest Distribution, and Irakli Ghlon- priating the company property. I hope our address distance ti, a chairman for the center for association of will be interesting for the bank”, Ghlonti noted public initiatives, told a news-conference at the and urged the business ombudsman to explore receipt of FrontNews press club. Irakli Ghlonti overviewed the issue. At the same time, the company defense theions between the companies and the bank. lawyer Irakli Ninua talked about the credit line the quick He does not rule out the Russian bank may be between the bank and its clients and noted VTB carrying out secret intervention in the Georgian Bank has signed a one-sided credit agreement economy. with the company. As a result, the company has money “About 30 citizens fired by Schirnhofer and LLC faced financial problems. West Distribution have applied to my organiza- “Today these enterprises have come to standstill, transfers tion. These people have successfully worked for in practice, as all financial resources were di-

these companies up to November 2012. The companies named sharp financial crisis between the companies and VTB Bank as a reason for their firing and as if the management had to fire the employees. Schirnhofer provided free services to the Georgian armed forces during the 2008 August hostilities. Thus, I have questions whether this is a Russian intervention in the Georgian economy and whether this is the Russian bank’s revenge. This is an absolutely logical question.

rected for covering the liabilities and these enterprises had served these liabilities up to February 2013. However, the new credit line signed by the sides on September 24, 2013 (70 000 GEL with a 24% annualized interest rate and a 6 month maturity period ) has led the company to a grave situation and the company has failed to fulfill the liabilities. Consequently, legal disputes started in August 2013 and currently four disputes are underway”, the defense lawyer noted.

Bank Sector’s Revenues from Loans Mark 1.1 billion GEL and Costs on Deposits Equaled 392 mln GEL

n January-September 2013 banking sector got 145 million (9%) more income in comparison with analogical period last year and made 17 million GEL (1,2%) less expenditure. At the end of the 3rd quarter sector’s revenues equals to 1,757 billion GEL, expenditures - 1,459 billion GEL. According to National Bank of Georgia’s (NBG) statistic, 63%

of the revenues - 1,1 billion GEL is received from the deposits of individuals and legal entities. 27% of the expenditures - 393 million GEL comes on the deposits. In January-August banking sector spent 281 million GEL on the maintenance of the staff, in the analogical period last year - 250 million GEL. Currently banking sector of Georgia is represented by 21 commercial banks.

Bank Sector’s Profits Grow by 98$ Y-o-Y

anking sector completed 3 quarters with 275 million GEL profit. Profit of 9 months of the last year equaled to 139 million GEL. The profit has increased by 98%. 16 banks are profitable, other 5 - unprofitable. In the analogic period 7 banks out of 19 were unprofitable. For the reporting period own capital of the banking sector (stock capital) equals to 2,763 billion

GEL (01/10/12-2,305 billion GEL). Supervision capital equals to 2,838 billion GEL (01/10/12-2,499 billion GEL), capital adequacy coefficient - 18% (01/10/12-16,8%). For the reporting period Return on Equity (ROE) is 14,1%, Return on Actives (ROA) - 2,5% (01/10/12 - respectively 8,1%, 1,4%). Consolidated data includes results of 21 commercial banks. IN August former microfinance organization Credo got banking license.

TB Bank Georgia announced about the new service, which is distance receipt of the quick money transfers, during 24 hours in Georgia and abroad. The bank informs that the consumer should have account in the VTB Bank and obtain call service code. To get money on distance, the bank client should contact call center (224-24-24) and has call service code. Receipt of the following transfers is available through the call center: Western Union, Contact and Express. Limit for distant transfers is 500 GEL, USD and Euro. The service is free.

Banks’ loans equaled to 9,5 billion GEL by the endSeptember

n the total portfolio of the banks, share of problematic loans equaled to 8,8% by the end of the 3rd quarter (01/10/12 -7,7%). According to statistics of the National Bank of Georgia (NBG), by October 1 amount of the problematic loans (non-standard, dubious, hopeless) equaled to 847 million GEL. Annual growth of the inactive loans is 27%. Overall portfolio has increased by 11% from the analogical period last year (01/10/12 -16%). Total portfolio of 21 banks equals to 9,5 billion GEL (01/10/12 -8,6 billion GEL).

October 28, 2013 #27

foreign press caucasian business week

Confident, Happy, And Supremely Rich, Georgia’s Prime Minister Prepares To Step Down

eorgian Prime Minister Bidzina Ivanishvili is looking forward to his impending retirement with a firm sense of accomplishment and no regrets. Literally, none. In the year since he scored an upset election victory that marked the first peaceful transition of power in this small Caucasus republic, Ivanishvili says he has done “absolutely everything, even better than I expected.” “How many examples can you name where a politician shows up and says, ‘I’ll come [to power], I’ll sort everything out, and I’ll go?’” Ivanishvili told BuzzFeed last week in his metal-and-glass offices snuggled into the hills overlooking the capital and scattered with pricey art by the likes of Anish Kapoor and Robert Indiana. “None. They’re aren’t any. This is unprecedented.” A billionaire who made his fortune in Russia (Forbes estimates it at $5.3 billion), Ivanishvili, 57, has pledged to step down following a presidential election on Sunday after which constitutional changes making Georgia a parliamentary republic take effect. There is little intrigue as to the election result. Ivanishvili’s preferred candidate is widely expected to win in the first round. The bravura and clashes of personality that long dominated politics here are largely absent too: The two main contenders are seen as meek proxies for Ivanishvili and his nemesis, outgoing President Mikheil Saakashvili. Instead, the question mark hanging over Georgia is Ivanishvili himself. For all his frequent assurances that Georgia remains intent on joining the European Union and NATO, many observers fear his oligarchic ties to Russia will lead him to deliver his country into the embrace of the Kremlin. Despite praise for improving Georgia’s human rights record, uncertainty created by a string of idiosyncratic legal initiatives, bizarre pronouncements, and seemingly politically motivated prosecutions has created worries Georgia may be heading back to its old authoritarian ways. He says he intends to “control the government publicly” from afar, but offers few details as to what he means. One thing, however, is clear: Ivanishvili thinks he’s been the best leader in Georgia’s two decades of independence, and he wants his citizens to agree. “Ivanishvili has very specific ideas on how things should function,” said Temuri Yakobashvili, a former Saakashvili ally and Georgian ambassador to the U.S. who is now a fellow at the German Marshall Fund in Washington, D.C. “The way he understands governance is not governance. He has visions instead of ideas, and he’s not able to recognize he’s wrong.” Ivanishvili’s expected departure opens the door to a new chapter in Georgian history after the Saakashvili era, which began when 2003’s “Rose Revolution” swept aside a staid neo-Soviet government. Saakashvili won a subsequent election in a landslide and was much loved in Western capitals for his anti-corruption policies, liberal reforms, and willingness to challenge Russia. Voters, however, blamed him for not doing enough to combat poverty and unemployment; for combating graft and crime with a zero-tolerance policy that gave Georgia one of the highest incarceration rates in the world; and for the brief but traumatic war with Russia that Georgia fought in 2008. Many also accused him of trying to circumvent term limits by becoming prime minister under the constitutional changes, passed two years later.

Ivanishvili tapped that anger by forming Georgian Dream, a loose coalition of Saakashvili castoffs and minor opposition parties fronted by actors, poets, and a soccer star, and pledging to right Georgia’s course in two to three years, then leave politics entirely. Despite the Saakashvili’s government’s attempts to pressure him — Ivanishvili says he nearly fled the country three times — and remove his citizenship, Georgian Dream overcame initially low polling numbers to win the election at a canter. If that plan was unusual, Ivanishvili was even more so. He lived in his home village and kept such a low profile that almost nobody knew what he looked like. Legend holds that he would visit rural parts of Georgia and ask farmers what they thought about him; the only time anyone caught him out was when a villager saw him sneaking back to his helicopter. He has an art collection valued at over $1 billion that he says “he’s not that into,” as well as a private menagerie that includes penguins and zebras. In a country famed for obstreperous gregariousness and long-winded feasting, he is wiry, gets up and goes to bed early, and practices yoga. Visitors to his house say he is the rarest of Georgians to offer guests foreign wine, rather than the local vintages most here offer as a matter of national pride. He has quietly spent between $600 million and $1 billion on charity, his aides say, including modernizing his home village, giving its residents stipends and paying for medical treatment, as well as bankrolling several government projects. Ivanishvili has a political naïf’s tendency to say what he actually thinks. This has revealed a petulant intolerance for criticism that many professional politicians doubtless share but would never dare expose in public. Earlier this month, he summoned TV journalists for a televised four-hour dressing-down and berated them for not praising his “wonderful” achievements. Last week, Ivanishvili abruptly told newspaper editors that he would be “insulted” if Georgian Dream’s presidential candidate got less than 60 percent of the vote, 10 points more than needed to avoid a runoff, and that he should drop out in shame if one were required. “I came [to politics] because I felt I needed to. It would hardly have been possible to correct the situation [in Georgia under Saakashvili] without me,” Ivanishvili

told BuzzFeed. “If the people doubt your abilities and aren’t that keen that you do it, then, subsequently, I’m relieved of my responsibility.” “I’m not against a second round” in principle, Ivanishvili adds, after repeating that he believes he is so popular as to make one highly improbable. “I’m against forcing my opinion on my own people. I came [to politics] because I thought I could do it and others couldn’t, so I had to. If the people show me that others could do it to, then by all means, guys! I’m not going to stand in your way.” Though Georgian Dream remains by far the most popular party in the country, the honeymoon is starting to wear off. Ivanishvili has particularly struggled to fulfill campaign promises on mortgage relief for homeowners, several of whom went on hunger strike outside his house in protest. One even set herself on fire. Kakha Bendukidze, the architect of reforms that helped Georgia climb to 12th in the World Bank’s ease of doing business rating under Saakashvili, accuses Ivanishvili of scaring off foreign investment by doing “lots of strange, crazy things” like banning selling land to foreigners; ending a visa-free travel arrangement with Iran on the day of an Iranian-Georgian business conference in Tbilisi; eroding Saakashvili initiatives through efforts such as nationalizing private hospitals; and declaring his intent to ban gambling in the popular resort city of Batumi. Ivanishvili is not without progress to which to point. A recent report from an EU envoy generally praised Georgia’s efforts on human rights issues, though Western officials remain wary of charges against 35 officials from the Saakashvili government, including a former prime minister. Ivanishvili recently floated the possibility of Saakashvili himself being prosecuted. And still, Georgia is on track to initial an association agreement with the EU in November and is set to join a NATO rapid reaction force in 2015. Fears that Ivanishvili would realign with Russia have been largely offset by Moscow’s obvious unwillingness to scale back all of its aggressive policies. Russia’s envoy for Georgian relations suggested last month that the change in government has done little to satisfy the Kremlin. Russian troops have advancedborder fences in Abkhazia and South Ossetia, disputed territories that declared their independence from Georgia after the

2008 war but are de facto controlled by Russia, dividing some villages in half. Earlier this month, Ivanishvili threatened to boycott the 2014 Sochi Olympics after a decorated bomber pilot from the war was featured as one of the Olympic torchbearers. “I think that what [the Kremlin] is doing is useless for Russia too, but it looks like Russia hasn’t realized that yet,” Ivanishvili said. “We need to hope that Russia will change in the future and become more democratic,” Ivanishvili said. When asked if that meant he wanted Vladimir Putin to leave the Kremlin, he replied, “Everyone goes when their time comes,” but declined to say whether he would prefer to see the back of him sooner rather than later. Ultimately, Georgia may come to desire Ivanishvili less as a leader than a rich uncle of the nation. Many in Tbilisi argue he owes his popularity the hope that he could replicate his efforts to modernize his home village nationally by essentially giving Georgians money. Georgian Dream had campaign events in which they encouraged supporters to write their dreams down on paper and place them in “dream boxes.” The reality of government has proved harder. Unemployment remains at 15 percent officially, and in reality is far higher, since Georgiaconsiders anyone who works at least one hour a week to be employed. A quarter of Georgians live in poverty. As his job approval ratings gradually slow, Ivanishvili may have taken the hint. He recently announced he would put up $1 billion in a new $6 billion private equity fund aimed at increasing Georgia’s foreign direct investment, a staggering sum on its own (equal to all of Georgia’s FDI since the 2008 war) and a particularly troubling one given his intent to teach Georgians to “choose and control [the government] correctly.” When pressed for details as to what his retirement plans really entail, Ivanishvili’s vague answers — “the way you do it, there are statements, there’s the media, the press, I might create a small monitoring group” — give the impression of a cross between a government-in-exile and an ex officio Hugo Chavez–like figure constantly appearing on television to hector politicians and the public. Nor has he given any indication of whom he plans to anoint as prime minister, though Tbilisi’s smart money is on Interior Minister Iraki Gharibashvili, a longtime Ivanishvili confidant. The sense is less that his intentions are sinister than he has simply not thought it through in great detail. Ivanishvili says he plans to spend more time with his animals and collection of exotic trees, and is considering writing a book about all the thoughts about human nature that have struck him in the last 40 years. “I love thinking and walking,” he said, beaming. “Thinking is awesome.” Yet Ivanishvili clearly understands the power he has. He even suggests that he may scale back his efforts to help ensure Georgia remains prosperous and democratic if Georgian Dream’s candidate, Giorgi Margvelashvili, performs poorly at the polls. “It was responsibility alone that brought me [into politics]; I didn’t have the urge to be a politician, to come and run things because I can,” he said. “If I don’t know the Georgian people, if I’m wrong about what I’m doing, what’s the point in me helping society, or advising someone, or anything like that?” From a man worth nearly 40 percent of his country’s GDP, this is no idle threat — whether he means it that way or not. buzzfeed.com

Azerbaijan

caucasian business week

Emirates among active investors in Azerbaijan

he investors from the United Arab Emirates (UAE) are among the most active ones in the Azerbaijani market, head of the Azerbaijan Export and Investment Promotion Fund (AZPROMO) Rufat Mammadov said on October 24. “Our cooperation is actively developing... I am sure this development will continue, and not only due to government initiatives, but also the private sector,” Mammadov said. Speaking at a presentation of Azerbaijan’s investment opportunities, organized by the Dubai Exports Agency with the support of AZPROMO, Mammadov said that since the establishment of diplomatic relations between the two countries in 1992, both Azerbaijan and the UAE has come a long way in development. Informing the UAE delegation on Azerbaijan’s economic achievements, the AZPROMO head said that in the past 10 years, Azerbaijan’s economy grew by 3.4 times and more than $150 billion

has been invested in the country. “Since the restoration of independence in 1991, the share of the private sector in country’s GDP has increased from zero to 73-74 percent,” Mammadov told the UAE delegation which is attending the 19th Azerbaijan International Construction Exhibition BakuBuild 2013. The UAE recognized Azerbaijan’s independence in December 1991. Diplomatic relations between the two countries were established in September 1992. The trade turnover between the two countries is around $115-120 million per year. However, this is not the limit for the potential of economic cooperation between Azerbaijan and the UAE. The investors from the UAE have invested over $360 million in the Azerbaijani economy. The establishment of Azerbaijan’s Consulate General in Dubai and the opening of the first and only foreign representation of Dubai Chamber of Commerce and Industry in Baku illustrate the close ties between the two countries.

October 28, 2013 #27

Azerbaijan invited to join OIC Trade Fair in Iran

zerbaijan invited to participate at the 14th Trade Fair of the Organization of Islamic Cooperation (OIC) Member States to be held at the Tehran International Exhibition Centre on October 28 -November 1, the Azerbaijani Economy and Industry Ministry reported. The Islamic Centre for Development of Trade and the Iran International Exhibitions Company have allocated a free 21 square meter area for Azerbaijan at the exhibition, which is organized by the Iranian Ministry of Industry, Mining and Trade. The organizers of the exhibition invite Azerbaijani entrepreneurs to participate in the exhibition. The ministry reported that the cost of the additionally equipped square meter of the area is $190, and unequipped - $175. Additional information on participation in the exhibition can be obtained at the Iran International Exhibitions Co. as well as the Islamic Centre for

the Development of Trade. The State Customs Committee of Azerbaijan reports that, the trade turnover between Azerbaijan and Iran totalled $200.65 million and goods worth $55.77 million was exported to Iran from January-August, which is 24.13 per cent lower than in January-August 2012. The import of the Iranian production in Azerbaijan increased by 22.95 per cent on the annual rate and totalled $144.88 million.

SOCAR starts drilling new well offshore

A Egypt interested in Azerbaijani investment

gypt is interested in Azerbaijan’s investments, Azerbaijani Ambassador to Egypt Shahin Abdullayev told Baku-based Trend news agency on October 23. “The government of Egypt is taking interest in Azerbaijani investments for restoration of the country’s economy. This interest has been repeatedly expressed by government officials during meetings,” Abdullayev said. According to him, the Egyptian government is considering the possibilities of attracting Azerbaijani investments in such fields as economy, infrastructure and agriculture. “The Azerbaijani side is also interested in investing in Egypt. However, it is necessary to obtain assurances from the Egyptian authorities about the safety of these investments, as well as ensure the safety of representatives of Azerbaijani companies which will operate in Egypt in the future,” the diplomat said. According to Abdullayev, a regular meeting of the intergovernmental commission on economic cooperation is planned at the beginning of next

year and all aspects of future cooperation will be discussed during the meeting,” Abdullayev said. Egypt recognized Azerbaijan’s independence in December 1991 and the diplomatic relations between the two countries were established in March 1992. In 2012, the trade turnover between the two countries amounted to over $31 million. Abdullayev also said that the Azerbaijani embassy in Egypt has fully resumed its activity. All diplomats who had previously left over the worsening situation in the country returned to Cairo. He said that following the events that occurred in the country, he and one more diplomat worked at the Azerbaijani diplomatic mission. The remaining diplomats and their families were evacuated from Egypt in late August after the situation deteriorated in the country. Abdullayev said that some Azerbaijani citizens who worked and studied in the country before those events returned with the diplomats to Egypt. “It is relatively quiet in Egypt now. But one cannot say that the situation has completely stabilized,” Abdullayev said.

Azerbaijan not to include in EU

eputy Minister of Foreign Affairs of Azerbajan Araz Azimov has announced the journalists that Baku does not consider it expedient to join the European Union. Armenpress reports it citing contact.az news website. “I do not think we should make turning changes in our policy. Azerbaijan is a member of international community, it is a member of a number of international organizations. I do not see much benefit in adopting unilateral direction, ” said Deputy Minister of Foreign Affairs of Azerbaijan Araz Azimov.

zerbaijan’s state energy company SOCAR has started drilling a new well in the shallow part of the Gunashli field in the Azerbaijani sector of the Caspian Sea, SOCAR said on October 22. The projected depth of the well on the Gunashli13 platform constitutes 3,450 meters. According to the forecast, the well will produce 100 tons of oil per day. Operational work in the well will be carried out by “28 May” Oil and Gas Department. The Gunashli field’s deep-water section is in the Azeri-Chirag-Gunashli block of oil and gas fields and is being developed by SOCAR jointly with foreign companies. SOCAR, which includes production associations Azerneft (companies involved in production of oil and gas onshore and offshore), Azerkimya (chemical industry enterprises), and Azeriqaz (gas distribution), is involved in exploring oil and gas fields, producing, processing, and transport-

ing 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. The company, which is keen on expanding operations in the retail oil products market abroad, owns gas stations in Azerbaijan, Switzerland, Georgia and Ukraine. It has representative offices in Georgia, Turkey, Romania, Austria, Switzerland, Kazakhstan, Britain, Iran, Germany and Ukraine, and trading companies in Switzerland, Singapore, Vietnam, Nigeria, and other countries.

Azerbaijani firms vow to protect IP rights Azerbaijan’s BestCompGroup, Bestel and Bakinity сompanies signed the Declaration on the Protection of Intellectual Property Rights, Microsoft Azerbaijan Company reported. According to the declaration, the companies are committed to providing customers and clients with exclusively licensed software. The spread of counterfeit software is unlawful and a violation of the intellectual property rights of the holder companies. Head of the Microsoft Azerbaijan Rufat Hajialibekov said that preventing the spread of pirated products is one of the priorities of the Microsoft strategy. “Due to the fact that piracy makes the economy more vulnerable, and impedes economic growth and creating new jobs, reducing piracy and the use of licensed software is not just the right choice for the users, but also an important factor in the growth of the national economy,” Hajialibekov said. According to the expert, Azerbaijani IT-companies are aware of the harm that computer pirates

cause to the country, and now companies are trying to correct this situation, openly expressing their desire to develop local civilized high-tech market by refusing the spread and use of counterfeit products. Hajialibekov said that this step will help to develop IT market and promote the level of the economy in general. It is expected that signing the declaration serve as an example for other companies that respect the copyright, and play an important role in addressing the problem of piracy. According to the research conducted by IDC and BSA, software piracy in Azerbaijan is alarmingly high, amounting to 87 percent. A recent joint study by BSA and INSEAD, one of the leading business schools in the world, shows that the growth of the licensed software market will have a greater impact on the country’s economy compared to the increase in the volume of the pirated software market. The increase of the licensed software market by 1 percent will increase the national production by $38 million. azernews.az

October 28, 2013 #27

Armenia

caucasian business week

Agriculture registered growth in Armenia

Armenia stands out for its policy in protection of foreign investors

rmenia stands out in the region from the other countries of the CIS for its capacity to cooperate with the foreign investors. Statistics show that in the policy of protection of foreign investors, fewer legal proceedings have been instituted against the Government of the Republic of Armenia than against Azerbaijan or Georgia. In a conversation with Armenpress the Managing Partner of the law firm GPartners Sargis Grigoryan stated: “There were only two legal proceedings instituted against Armenia’s Government. While Georgia, Azerbaijan and Ukraine have to face with 3-5 cases annually. It is encouraging that the Government of the Republic of Armenia tries to solve the disputes with the foreign investors via negotiations and does not let the case come to court. This approach the Government has adopted is beneficial for the both sides.” As part of British Days in Armenia and to promote the British-Armenian business relations, the British Embassy to Yerevan hosted a Conference on Protecting Investment Flows between the UK and Armenia conducted by the worldknown London-based Freshfields Law Firm. The event supported by the Armenian-British Business Chamber (ABBC) was a big success with local businesses, state authorities and international investors’ present and showing big interest and involvement into the topic. Jonathan Aves, the British Ambassador to Armenia, said: “London is the place to go for international legal services. It is great to see a firm of the caliber of

A reshfields in Yerevan. I am sure this event will encourage closer business links between Britain and Armenia.” The Embassy is planning more activities in the near future on further promoting trade and commercial relations between the UK and Armenia. “The elimination or reduction of political risks attract the foreign investors; notwithstanding, in Armenia it has not entered the stage, the foreign investor expects for. According to the Freshfields Law Firm, the legal norms regulating the field are far from their implementation, which has more artificial character. That is, the business has the ability to function, but lacks opportunities”, - said Sargis Grigoryan. The investments protection policy issues between the two countries are regulated by the Armenia-UK bilateral agreement, signed in 1993. Armenia has signed investments protection agreements with about 40 countries. The bilateral agreements are good mechanisms for the regulation of the possible risks and may serve as a tool for the foreign investors, if the state system violates their rights. In case of the violation of the investors’ rights by the state, the investor has the right to appeal to the International Court of Arbitration, which functions in the framework of the World Bank. Taking into account the latest developments in the foreign policy of the Republic of Armenia, it should be noted that the protection of the foreign investment flows should be regulated in accordance with the international norms both in case of signing the Association Agreement and joining the Customs Union.

Armenia-EU cooperation to expand: EU official

he European Union is ready to continue the cooperation with the Republic of Armenia, though the Armenia’s decision to join the Customs Union should be taken into account as well. The Director for Countries of Eastern Europe, Southern Caucasus and Central Asia Gunar Vigand stated about it at the briefing held before the launch of the session of the ArmeniaEU Cooperation Committee on October 22. “We have little time before the Vilnius summit and we are here to discuss the future of the Armenia-EU cooperation and find solutions to the current situation”, - said Gunar Vigand. “I can only say confidently that the cooperation will be continued and expanded and the format of the cooperation will be probably discussed at the Vilnius summit”, - said the Director for Countries of Eastern Europe, Southern Caucasus and Central Asia. The EU official stated that during the Yerevan session the interlocutors will discuss the issues related to the Armenia-EU cooperation in the framework of the European neighborhood

policy and the European Eastern Partnership, as well as the future of the economic and bilateral relations. On April 22 1996 the Republic of Armenia and the European member countries signed an agreement on cooperation and partnership, which was put into force since July 1999. In zccordance with the 83rd article of the agreement, a Cooperation Committee was established, the sessions of which are convened once a year in Yerevan or Brussels. In the result of the negotiations on September 3, 2013 in Moscow the Presidents Serzh Sargsyan and Vladimir Putin confirmed the aim of the Republic of Armenia and the Russian Federation in the direction of further development of economic integration processes in the Eurasian territory. In that context the President of the Republic of Armenia Serzh Sargsyan announced about the Armenia’s decision to join the Customs Union and the necessity of implementation orresponding steps for that aim and in future about participating in formation of the Eurasian economic union. The President of the Russian Federation Vladimir Putin expressed his support to the abovementioned decision of Armenia and informed about the readiness of the Russian side to support the process. Serzh Sargsyan noted that this decision is not refusal from dialogue with European organizations. Earlier it was intended that Yerevan will sign the Association and Free Trade Zone Agreement with the European Union in Vilnius. The Eastern Partnership summit will be held on November 28-29 in Vilnius, during which the signing (or pre-signing) of the Association Agreement with some Eastern Partnership countries is expected.

positive growth has been registered in the field of agriculture in 2013. The Deputy Minister of Agriculture of the Republic of Armenia Garnik Petrosyan stated about it at the meeting with the journalists on October 21. According to him, the progress in the field is conditioned by the agricultural consultative services and the activities of the republican center for agricultural assistance and provincial centers. “Each consultant serves 8-10 communities. 185,000 economic entities annually use the services of the consultative services. The consultations are held in different directions. Numerous seminars and

consultative-demonstrative events are held”, - said the Deputy Minister, Armenpress reports. Garnik Petrosyan stated as well that the agricultural assistance centers are considered to be the most important base of the Ministry of Agriculture. They are the connecting circle of the Ministry-economic entities. The indicator of the economic activity of Armenia by the months of January-September has exceeded the indicator of the same period of the previous year by 3,2%. In comparison with the months of January-September of 2012 during the first nine months of 2013 the volumes of the services have increased by 2,8% and the volume of the gross agricultural output – by 5,5%. The trade turnover has grown by 2,1%.

Armenia and Kazakhstan to restore air communication

he launch of the Astana-Yerevan direct flights is on the agenda of the session of the intergovernmental commission on the Armenian-Kazakh economic cooperation 20142015. The approval of the direct flights may foster the increase of the tourist flows. Armenpress reports that the Deputy Minister of Agriculture of the Republic of Armenia Grisha Baghyan stated that the Armenian-Kazakh relations have development prerequisites, especially when Armenia expressed its intention to join the C ustoms Union. “Being a member of the C ustoms Union, Kazakhstan has quite a big experience and our commission should implement a corresponding work to study and use that experience”, - said Grisha Baghyan. During the eight months of the current year the foreign trade turnover between the two countries

has increased twice and small and medium enterprises have been established. The Deputy Minister of Agriculture of Kazakhstan Marat Talibayev highlighted the ArmenianKazakh friendship and emphasized the existence of the Armenian community in Kazakhstan and its role in the further development of the bilateral relations.

Armenian brandy-maker finds Armenia’s accession to the Customs Union profitable

he Armenian brandymakers are excited at Armenia’s decision to join the C ustoms Union. The country’s economy is linked with the Russian Federation and the C IS countries. The General Director of Shahnazaryan WineBrandy House Samvel Shahnazaryan stated that it’s much preferable to choose the C ustoms Union’s direction, as the EU states have not yet overcome the consequences of the crisis. In the result of the negotiations on September 3, 2013 in Moscow the Presidents Sargsyan and Putin confirmed the aim of the Republic of Armenia and the Russian Federation in the direction of further development of economic integration processes in the Eurasian territory. In that context the President of the Republic of Armenia Serzh Sargsyan announced about the Armenia’s deci-

sion to join the C ustoms Union and the necessity of implementation corresponding steps for that aim and in future about participating in formation of the Eurasian economic union. The President of the Russian Federation Vladimir Putin expressed his support to the abovementioned decision of Armenia and informed about the readiness of the Russian side to support the process.

Economic activity increased in Armenia

he indicator of the economic activity of Armenia by the months of January-September has exceeded the indicator of the same period of the previous year by 3,2%. The National Statistical Service of the Republic of Armenia informed Armenpress that the growth has been registered nearly in all the spheres, except for the fields of construction and electric energy production. In comparison with the months of January-September of 2012 during the first nine months of 2013 the volumes of the services have increased by 2,8% and the volume of the gross agricultural output – by 5,5%. The trade turnover has grown by 2,1%. The volume of the industrial production has increased by 7%. The volume of the construction has made 9,2%. The electric energy production has decreased by 4,1% and the average monthly salary

has increased by 4%. The volumes of the foreign trade turnover have grown in comparison with the months of January-September of 2012 by 4,5%. The export has increased by 10,6% and the import – by 2,5%. armenpress.am

CIS

Kazakhstan, Hungary eye coop

azakh Prime Minister Serik Akhmetov met with Chairman of the National Assembly of Hungary Laszlo Kever in Astana on October 24, the Kazakh Prime Minister’s web site reported. The parties discussed issues of bilateral relations including trade, economic and investment cooperation. “Hungary is one of the main partners of Kazakhstan in Central and Eastern Europe,” Akhmetov said.He also noted that the two countries enjoyed a historical strong partnership and had considerable potential to increase bilateral trade. The sides expressed mutual interest in strengthening Kazakh-Hungarian business cooperation. azernews.az

Kazakhstan ups excise taxes

he Kazakh Parliament’s lower chamber approved the bill amending taxation issues on the second reading on October 23. The amendments envisage increase in excise taxes on alcohol and tobacco. Moreover, the taxes on luxury goods including transport vehicles and property will be increased. The bill also raises tax rates on lands that have not been developed for a certain period after they were granted. Earlier, Kazakh President Nursultan Nazarbayev ordered that taxes be levied on luxury goods. “As I ordered, it is necessary to impose indirect taxes on luxury goods, expensive cars and all sorts of evil passions such as alcohol and cigarettes and so on,” the president said. azernews.az

Ukraine seeks compromise with Russia on gas deal

kraine hopes to overcome disagreements and end disputes over a 10-year gas supply contract signed with Russia in 2009, Ukrainian Prime Minister Mykola Azarov said Friday, according to Xinhua. “If the Russian leadership agrees to make a concession on this issue, we are also ready to meet halfway,” Azarov said in an interview with local TV channels. Azarov claimed that the price pegged in the agreement between Ukraine’s Naftogaz and Russia’s gas giant Gazprom is “absurd” and the current contract benefits neither Kiev nor Moscow. He explained that Ukraine will be forced to abandon the costly imports if there are no changes in the deal and Russia will lose its largest buyer of fuel. Ukraine is already purchasing gas from Europe and making efforts to increase its own production to ease dependence on Russian gas, Azarov said. Under the deal, which was approved by the previous Ukrainian government, Kiev agreed to buy 52 billion cubic meters of gas per year. The price is expected to reach 410 U.S. dollars per 1,000 cubic meters in the fourth quarter of 2013. Kiev and Moscow have been negotiating on gas pricing for about three years. In exchange for lower gas costs, Moscow is seeking to gain partial control of Ukraine’s energy infrastructure or force Kiev to join the Customs Union. Ukraine so far has rejected the conditions. unian.info

caucasian business week

scheduled for March of the same year. Hundreds of Ukrainian suppliers were suddenly left without a major export market. “War” is still going on.

The Onishchenko Era Ended - Russia’s “Legendary” Sanitary Doctor has Resigned

ecall that information about a resignation of Russia’s Chief Sanitary Doctor was disseminated today. It is already known that Gennady Onishchenko’s Deputy Anna Popova will occupy a post of Russia’s Chief Sanitary Inspector. Note: Gennady Onishchenko’s name is associated with a ban on the import of Georgian products to Russia in 2006 due to quality -related complaints. By Onishchenko’s order, Russia imposed an embargo on the Ukrainian confectionery brand “Roshen” in July the current year while this month limited the import of dairy products from Lithuania. Gennady Onishchenko has been on the post of Russia’s Chief Sanitary Doctor since 1996 and led “RosPotrebNadzor” from 2004. A few weeks ago, the Ukrainian “Forbes” published a rating of seven largest bans announced byOnishchenko. The rating is as follows: European vegetables The epidemic began in Germany in 2011, which soon spread throughout Europe. Enteric bacterium E.coli which enters the patient’s body through raw vegetables was named a reason. Epidemic killed 48 people. In this situation Russia imposed a ban on vegetables from all Western European countries. The EU Health Commission assessed Russia’s actions as excessive. Embargo lasted for about two months, and then

October 28, 2013 #27

Polish meat Polish producers of meat products lost the right to supply meat to the Russian market not only because of its “low quality”, as Gennady Onishchenko’s agency asserted. A reason was a doubt that smuggled goods from other countries entered Russia with the Polish certificates. Russia lifted the embargo only at the end of 2007. The Ukrainian cheese In February 2012, “Rospotrebnadzor “ asked three Ukrainian enterprises to leave the Russian market. Gennady Onishchenko said that the reason for banning was a sharp deterioration in the quality of Ukrainian cheese. But Ukrainian producers were able to return their lost positions.

Rospotrebnadzor opened the border with the condition that each party of products would have an additional inspection certificate. Belarus milk In the summer of 2009, “ Rospotrebnadzor “ banned milk products from Belarus. It was the largest embargo announced by the Russian Sanitary Service in recent years, because it covered about 500 products. In December 2008 new technical regulations for milk and dairy products entered into force in Russia, which meant , for example, a change of the rules for labeling of goods. Belarusian importers had to obtain permitting documentation anew, however, if we believe Onishchenko, they failed to do so. Belarusian President Alexander Lukashenko explained “Rospotrebnadzor” acts differently: He said that Moscow blocked supplies due to the fact that the Belarusian government refused to sell state-owned shares of dairy enterprises to Russian investors. The embargo was lifted in a record period of time, two weeks. The Ukrainian meat and milk Moscow began “milk and meat war” with Ukraine in January 2006 . The formal pretext was a non-compliance with phytosanitary norms. Ukrainian producers believed that the prohibition of products in Russia is nothing more than a pressure of the Russian government ahead of parliamentary elections which were

Moldovan wine Russia banned Moldavian wine and brandy in the territory of Russia in March 2006. A reason was a presence of metals and pesticides in alcohol products. Moldavian brandy and wine returned to the Russian market a year later, in the spring of 2007. Georgian wine and mineral water At the moment when a ban came into force, a volume of import of wine reached 80 million USD while in the case of mineral water- 23.6 million USD. According to Economy Ministry, in 2005 70% of Georgian wine export fell on Russian consumers, which means about 60 million bottles . In 2006 examining samples of Georgian wine “Rospotrebnadzor” inspectors found that they did not comply with sanitary safety regulations. The Georgian side explained this decision as politically motivated from the very beginning. In 2006, export of Georgian wine to Russia decreased 3 fold. In two months “Rospotrebnadzor” banned import of mineral water “Borjomi” as well. The reason for the embargo Gennady Onishchenko’s agency named the incompatibility with sanitary and taste norms. Recall that the new government of Georgia started negotiations with the Russian government for the purpose of the opening of the Russian market for Georgian goods. As a result, Russia has resumed export of Georgian wine and mineral water.

Russia and China strengthen trade ties with $85 billion oil deal

he world’s fastest-growing energy market China and world’s biggest oil producer Russia have strengthened their business ties on Tuesday after signing 21 trade agreements, including a new 100 million ton oil supply deal with China’s Sinopec. Under the new energy deal, Rosneft, the world’s largest-listed oil producer, will supply China with up to 100 million tons of crude oil over 10 years. The agreement is testimony the neighbors have “reached a higher and a brand new level of cooperation,” Prime Minister Dmitry Medvedev said during an onlinechat with Chinese citizens, Xinhua reported. Rosneft will export through China’s Sinopec, company chief Igor Sechin said. Up to 30 percent of the shipment payments will be prepaid. Rosneft controls nearly 40 percent of Russia’s crude oil. Medvedev is on an two-day official visit to Beijing and met with Chinese Premier Li Kegiant and Zhang Yujing, the president of the Chamber of Commerce, at the 18th annual economic summit of Russian and Chinese government and finance ministers. “The collaboration in the energy field is key to bilateral cooperation. I hope the deals we signed today can be implemented in an orderly way and those deals that are still under negotiation, such as natural gas deals, can reach an agreement very soon,” Medvedev said in Beijing. Liquefied natural gas is another point of the energy negotiations, as Novatek, Russia’s biggest independent natural gas producer, signed preliminary memorandums with CNPC on Tuesday to sell at least 3 million tons of LNG per year between Yamal LNG and PetroChina In-

ternational. The partners still need to finalize delivery contracts and pricing, which will be announced before the end of the year. Currently, Russian gas is not supplied to China. Under Russian law, neither company is allowed to trade LNG abroad, only state-run Gazprom is allowed to ship to foreign markets. Both Rosneft and Novatek may be eligible to export LNG starting December 2013, if Russia’s Energy Ministry awards the companies permits. Russia, holder of the world’s biggest natural gas reserves, is looking to China as a key energy market as demand from Europe remains weak and the Americas are becoming more self-sufficient in their energy needs. Rosneft, which is 75 percent state-owned, is vastly expanding its LNG projects to diversify its portfolio, and

is focusing heavily on eastern markets, like Japan and China. Rosneft and China National Petroleum Corporation (CNPC) struck a $270 billion contract over 25 years at the St.Petersburg Economic forum in June, and secured advance payments from China to help finance its $55 billion acquisition of TNK-BP. In the next 25 years, Russian oil exports to China will exceed 700 million tons. China will pump $20 billion of investment into domestic projects in Russia focusing on transport infrastructure; highways, ports, and airports, and they hope to increase investment in Russia four-fold by 2020. By the same year trade turnover between the two countries is expected to reach $100 billion. Rt.com

Uzbekistan, Latvia boost bilateral ties

zbekistan and Latvia signed several agreements following the meeting between Uzbek President Islam Karimov and his Latvian counterpart Andris Berzins, the Uzbek National Information Agency (UzA) reported. An intergovernmental agreement was signed on cooperation in the field of health and medical science. The Uzbek Ministry of Foreign Economic Relations, Investments and Trade and the Latvian Transport and Communications Ministry signed a Memorandum of Understanding in the field of transport and transit and a memorandum of understanding on measures promot-

ing bilateral trade relations. The Uzbek and Latvian Foreign Ministries signed a cooperation programme for 2014-2016. The Uzbek State Committee for Nature Protection and the Latvian Ministry of Environmental Protection and Regional Development signed an agreement on environmental cooperation. National company Uzbektourism and the Latvian Tourism Development Agency (TAVA) signed a memorandum on cooperation in the field of tourism. During the visit, Karimov got the Latvian highest state award the ‘Cross of appreciation’ of the first degree, while the Latvian president received one of Uzbek’s highest awards the ‘Buyuk xizmatlari uchun’ (‘For

great merit’). President Karimov paid a state visit to Latvia upon President Berzins’s invitation on October 16-17. During the talks, the two presidents discussed the prospects of bilateral relations and analysed the main areas of cooperation in the political, financial-economic, cultural and humanitarian spheres and exchanged views on important regional and international issues. The sides said that Uzbekistan and Latvia are important and reliable partners . They also stressed the similarity of approaches and positions of Uzbekistan and Latvia on all discussed issues. azernews.az

October 28, 2013 #27

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Fama, Shiller, Hansen Win Nobel Prize for Asset-Price Work His research showed that investors can be irrational and that assets from stocks to housing can develop into bubbles. “Shiller found that stock prices were bad ‘weathermen,’” said Nobel laureate George Akerlof, an economics professor at the University of California at Berkeley and husband of Janet Yellen, President Barack Obama’s nominee to be Federal Reserve chairman. “Historically, they have been much more variable than the current value of the dividend streams. “From this evidence, he concluded that rational models of the stock market, in which stock prices reflect rational expectations of future payouts, are in error. This clever combination of logic, statistics, and data implies that stock markets are, instead, prone to irrational exuberance.”

ugene F. Fama, Robert J. Shiller and Lars Peter Hansen shared the 2013 Nobel Prize in Economic Sciences for at times conflicting research on how financial markets work and assets such as stocks are priced. The three economists, all Americans, “laid the foundation for the current understanding of asset prices,” the Royal Swedish Academy of Sciences, which selects the winner, said today in Stockholm. “It relies in part on fluctuations in risk and risk attitudes, and in part on behavioral biases and market frictions.” Their work spans almost 50 years of research, beginning with the finding by the University of Chicago’s Fama that it’s difficult to predict price movements in the short run. That conclusion forms the basis for the theory that financial markets are efficient and led to the development of stock-index funds. Later papers by Shiller and the University of Chicago’s Hansen focused on longer-run price swings and the extent to which they could be explained by such fundamental features as dividend payouts on stocks and the risk appetite of investors.Yale University’s Shiller, in particular, took issue with the argument that investors are always logical, using the phrase “irrational exuberance” to explain run-ups in asset prices. The winners represent a “very interesting collection because Fama is the founder of the efficient-market theory and Shiller at least is one of the critics of it,” said Robert Solow, winner of the Nobel economics prize in 1987 and professor emeritus at theMassachusetts Institute of Technology in Cambridge. Yankees-Red Sox “It’s like giving a prize to the Yankees and the Red Sox,” he said, comparing the competing theories to the rivalry between the New York and Boston baseball teams. “What it suggests is there really isn’t a settled doctrine” in finance. The award comes five years after a financial crisis that

drove the U.S. and world economies into their deepest recession since the Great Depression. Fama, 74, has dismissed criticism that the turmoil undercut his thesis that markets are efficient, arguing that it was triggered by developments in the economy, including a fall in house prices and the onset of a recession. In the mid-1960s, he propounded theories arguing that stock-price movements are unpredictable and follow a “random walk,” making it impossible for any investor, even a professional, to gain an advantage. He also showed in later work that so-called value and small-cap stocks have higher returns than growth stocks, and he rejected the notion that markets often produced bubbles. Beating Market “Fama’s research at the end of the 1960s and the beginning of the 1970s showed how incredibly difficult it is to beat the market, and how incredibly difficult it is to predict how share prices will develop in a day’s or a week’s time,” said Peter Englund, professor in banking at the Stockholm School of Economics and secretary of the committee that awards the Nobel Prize in Economic Sciences. “That shows that there is no point for the common person to get involved in share analysis. It’s much better to invest in a broadly composed portfolio of shares.” Fama said he learned of the award while preparing for a class on portfolio theory and asset pricing. A native of Boston, Fama earned a bachelor of arts degree at Tufts University in Medford, Massachusetts, in 1960, and went on to the University of Chicago, where he received a master of business administration degree in 1963 and a doctorate in 1964. Housing Bubbles Since 1981, Shiller has been at the vanguard of economists chipping away at the theory of efficient markets.

Phone Call Born in Detroit in 1946, Shiller earned his Ph.D. in economics from the Massachusetts Institute of Technology in 1972. He told reporters that he learned of the award while “getting out of the shower this morning. I wasn’t properly dressed, but I didn’t want to miss the phone call.” Shiller said the 2008 financial crisis “reflected mistakes and imperfections in our financial system that we are already working on correcting. I think there’s much more to be done. I think it will take decades. But we’ve been through financial crises many times in history and we generally learn from them.” The study of housing prices has been a long-standing interest of Shiller’s. Dissatisfied with existing data, he and Karl Case created the S&P/Case-Shiller home price indexes. These captured U.S. home prices doubling from 2000 to mid-2006, then plunging 35 percent amid the worst financial crisis since the Great Depression. “Shiller’s research showed episodes when assets were overvalued,” said Englund. When information technology shares rose in the 1990s, Shiller argued “that this is not sustainable in the long-term, which he was right about,” Englund said. “He also warned for many years about a housing bubble in the U.S. He was right there too.” Dynamic Models Hansen, 60, is one of the co-founders of the Becker Friedman Institute at the University of Chicago, which builds on the legacy of Milton Friedman. His work explores the implications of dynamic economic models in which decision makers face uncertain environments. He is perhaps best known as the developer of a statistical technique called the generalized method of moments, which broadens the assumptions that researchers can count on, allowing them to focus on other suppositions and linkages in their work. “The choice of having Hansen complement the two extremes of efficient markets and inefficient markets is the perfect balance between the two,” said Andrew Lo, a professor finance at MIT’s Sloan School of Management. Hansen’s development of econometric techniques for analyzing data and asset prices allows economists to test the various theories on what drives markets, he said.

‘True Giant’ “Lars is a true giant in both economics and finance,” Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said in an e-mail. Hansen was Kocherlakota’s Ph.D. adviser at the University of Chicago. Hansen’s “remarkably general empirical methods free researchers from the need to make a range of empirically implausible statistical assumptions about the data that they are studying,” Kocherlakota added. “By doing so, Lars’s methods allow economists to assess the core economic implications of their models and theories relative to the data of interest.” Born in Champaign, Illinois, Hansen received his Ph.D. in economics at the University of Minnesota in 1978 and his bachelor’s degree in mathematics and political science from Utah State University, Logan, Utah. Hansen told reporters that he learned of the award after walking his dog and while getting ready to go out and exercise with his personal trainer. Shows Irony Lo said the Nobel committee’s decision in giving the award to Fama and Shiller “definitely shows a certain flair for irony.” The message, he added is that “financial markets can be efficient most of the time but every once in a while they break down and then we need to develop better analytics to be able to understand them.” James Poterba, president of the National Bureau of Economic Research, which is responsible for dating the beginnings and endings of recessions, praised the committee for recognizing the work being done in the finance field “without waiting in some sense for the complete resolution of these different views.” “It may be a long time before we get there,” said Poterba, who is also a professor of economics at MIT. The Nobel economics prize has in the past helped laureates achieve recognition for their theories outside academic circles, often bringing them closer to policy making. Past winners include Paul Krugman, Amartya Sen and James Tobin. First Woman Last year’s prize was awarded to U.S. economists Alvin E. Roth and Lloyd S. Shapley for their exploration of how to make markets work more efficiently by better matching supply with demand. In 2009, Elinor Ostrom became the first woman to win when she received the prize together with Oliver Williamson for investigating the limits of markets and how organizations work. Annual prizes for achievements in physics, chemistry, medicine, peace and literature were established in the will of Alfred Nobel, the Swedish inventor of dynamite who died in 1896, and the first prizes were handed out in 1901. The economics award was set up by Sweden’s central bank in 1968. The official name is The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. The money, 8 million kronor ($1.2 million), a gold medal and a diploma, will be presented to the laureates at a ceremony in Stockholm on Dec. 10, the anniversary of Nobel’s death. Today’s announcement of the economics prize marks the final award for this year. bloomberg

Bank of America eliminates up to 1,300 mortgage jobs

he number of people from the East Asia and Pacific region living outside their countries of origin has increased by 60% in the last 14 years, to around 35 million people. Remittances are expected to increase to $115 billion in 2013 and $154 billion in 2016, the World Bank forecasts. Ft.com

ank of America Corp (BAC.N) said on Thursday that it was cutting 1,200 to 1,300 mortgage jobs because of declines in refinancing activity and an improvement in its portfolio of delinquent home loans. The employees are based in divisions that handle processing new mortgages and service home loans that are past due, a spokesman said. They received notice this week that their positions were being eliminated. News of the layoffs was first reported by the Wall Street Journal. The newspaper also said Bank of America was looking to cut 3,000 mortgage jobs by the end of the year. The spokesman could not immediately confirm that number. The second-largest U.S. bank laid off more than 9,000 full-time employees in the third quarter. Finance chief Bruce Thompson said on an October 16 conference call with analysts that the reductions were concentrated in the unit that collects payments on current and delinquent home loans, the unit that makes new home loans, and in many of the bank’s branches. Bank of America made $22.6 billion in home loans in the third quarter, down 11 percent from the second quarter. The number of mortgage applications the bank had received but not yet processed fell 60 percent from the end of June to the end of September. Also, mortgage loans that were delinquent by more than 60 days fell by 94,000 to 398,000 in the third quarter. The bank expects a further decline to be-

low 375,000 by the end of 2013. Rising interest rates have curtailed mortgage refinancing since the spring. The interest rate on a 30-year mortgage stood at 4.39 percent in the week that ended Friday, according to the Mortgage Bankers Association, down from a high of 4.80 percent in September but above the 3.59 percent rate in early May. Bank of America expects to make fewer home loans in the fourth quarter and will look to cut more mortgage jobs, Chief Executive Officer Brian Moynihan said on the conference call. The Charlotte, North Carolina-based bank is not the only lender to lay off staff in response to a slowdown in refinancing. Wells Fargo & Co (WFC.N), the largest U.S. mortgage lender, said on October 17 that it was cutting 925 mortgage jobs. That comes on top of the 5,300 Wells Fargo mortgage employees that were notified that they would be laid off in the third quarter. Reuters

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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 15 Gorgasali Exit, 0105 Tbilisi, Georgia Tel: +995 32 291 01 94; +995 32 291 01 95 Fax: +99 532 291 02 70 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

Tbilisi Guide

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 and Nikora

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