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November 04, 2013 #28

November 04, 2013, Issue 28

georgia

The source reports that Kazakh oil returns to BTC

azakh oil returns to Baku-Tbilisi-Ceyhan pipeline, which will increase transit amount to 400 000 tons a month.

Pg. 2

Georgia leads EBRD countries according to best practice introduction into state procurements

caucasian1

Be informed, do business

Georgia Makes One Step forward in Doing Business 2014

Irakli Gharibashvili Prime Minister Candidate for Georgia

Giorgi Kadagidze: Georgians are One of the most Wasteful Nations of the World

eorgia ranked first among EBRD countries according to introduction of electronic system for state procurements. EBRD research on Introduction of State Procurements Best Practice was published at the end of October of the current year. Pg. 3

Tax on Manganese Use will Grow, but not 20.8 times

hairman of Parliament Committee of Environmental Protection and Natural Resources Gia Tsagareishvii stated about it to CBW. Pg. 5

Georgia Ranked 84th in the Well-being Rating

he list, compiled by an international research firm Legatum Institute, contains data on 142 countries. Pg. 7

Interim Administration Entered into “InvestBank “

ccording to President of the National Bank of Georgia [NBG] Giorgi Kadagidze, infringements were discovered in “Investbank”. Pg. 9

Azerbaijan Azerbaijan-Georgia trade nears $1 billion

he trade turnover between Azerbaijan and Georgia reached more than $958 million in the first nine months of 2013. Pg. 10

eorgia has improved Doing Business 2014 ranking in a year and moved from last year’s 9th to 8th position this year. It ranks first among 189 world economies according one of the rating criteria - property registration. Doing Business 2014, made up by World Bank and International Financial Corporation (IFC) was published on October 29 and Georgia is between South Korea (rank 7) and Norway. Georgia is the first among post-communist countries and also precedes neighbor countries - Ar-

Sairme Mineral Waters Director Refuses Latvian Accusations

n Summer 2013 LLC Sairme Mineral Waters product was sent to the local center of BIOR for exploration prior to exports to the Latvian market by the decision of a frontier guard inspector. The laboratory examination has showed mineral water bottled by LLC Sairme Mineral Waters contains arsenic in large amounts. Later, the fact was approved by the EU Rapid Alert System for Food and Feed (RASFF). Pg. 3

cis Russia to invest $1.5bn in Ecuador energy

Sakcable Initiates to Introduce Marking System for Protecting Market from Low-quality Imported Products Pg. 4

Ilia Eloshvili: Strategy For Energy Sector and Electricity Tariffs Pg. 3

Jemal Khakhutaishvili: We Return to the Market With New Vision and New Ideas

Pg. 6

The Importance of Organizational Structures in Achieving Outstanding Results Papuna Toliashvili

Managing director of Synergy Group

Does your organization insufficiently use its employees’ skills and potential?

Pg. 3

“Geocell” has to Stop Working if Georgia Continues Wiretapping Pg. 3

rmenia has palpably improved its positions in Doing Business-2014: Understanding Regulations for Small and Medium-Size Enterprises ranking report. Pg. 11

menia ranks 37th, Russia - 92, Turkey - 69 and Azerbaijan - 70. There are 189 countries in the rating and leaders are Singapore, Hong-Kong and New Zealand. As for evaluation of Georgia according to various categories: it ranks 8 in stating a business category; dealing with construction permits - rank 2, getting electricity - 54, registering property - 1, getting credit - 1, protecting investors - 16, paying taxes - 29, trading across border - 43, enforcing contracts - 33 and resolving insolvency - 88

The Council of Europe’s Human Rights Commissioner:

Armenia According to Doing Business2014 Armenia’s business environment best in CIS

WORLD NEWS China, gold prices & US default threats

Pg. 9

Another Woman Appointed as Security Council Secretary Pg. 2

Do not create organizational structure on your own!

Pg. 4

main events caucasian business week

November 04, 2013 #28

The source reports that Kazakh oil returns to BTC

azakh oil returns to Baku-TbilisiCeyhan pipeline, which will increase transit amount to 400 000 tons a month. Azerbaijani agency abc.az releases this news based on Russian anonymous sources. The source informs that Tengizchevroil (TCO) has already loaded tanker Aktau with the local oil; it should transport the fuel to Baku, from where oil will be transported through Baku-Tbili-

si-Ceyhan pipeline. TCO provides oil transportation through Azerbaijan on the basis of agreement with Cross Caspian Oil and Gas Logistics. Transportation will be provided in three directions: Aktau-BakuBatumi, Aktau-Baku-Kulev and from now on Aktau-Baku-BTC. As Azerbaijani agency states, Tengizchevroil considered BTC pipeline transportation fees as unprofitable.

Another Woman Appointed as Security Council Secretary

P Irina Imerlishvili will be appointed as Security Council Secretary. On Friday Deputy of Majority confirmed media that she got offer of the position and agreed on it. She said that she’ll take office after presidential inauguration, November 17. Imerlishvili says that by her guidance completely new Security Council will be formed. According to amendment in the Law on Security Council, its functions change. The new functions will enable the council to work on defense issues along with president. Irina Imerlishvili will replace Giga Bokeria on the position of Security Council Secretary, which has been working on the position since November 2010. 42-years old Irina Imerlishvili has a rank of General and she is a second woman who’ll become

head of Security Council - Eka Tkeshelashvili occupied this position form December 2008 to November 2010. Irina Imerlishvili was a deputy Minister of Justice in 2000-2003. Currently she is a member of the parliament and heads commission of procedural rules.

Democracy’s Test in Georgia The end of Saakashvili’s reign

EORGIA’S presidential election on October 27th was at once momentous and also rather unexciting. Momentous, because the vote marked the end of the nearly decade-long rule of Mikheil Saakashvili, the outgoing president, and of the country’s presidential system itself. In a switch put in motion by Mr Saakashvili in 2010, the inauguration of his successor will see Georgia switch to a parliamentary system in which much of the power is held by the prime minister. The vote was unexciting, because it was a rare case of an orderly transfer of power in the postSoviet world. Election day passed without serious irregularities or unrest. The candidate from the Georgian Dream coalition, Georgy Margvelashvili, won the presidential election with 62% of the vote. He is the protégé of Bidzina Ivanishvili, the all-powerful prime minister. David Bakradze from Mr Saakashvili’s United National Movement (UNM) came in second, with 22%. Mr Ivanishvili, a tycoon with an estimated fortune of $5.3 billion, has done much to upend Georgian politics since he emerged from behind a veil of seclusion in 2011 to challenge Mr Saakashvili. Georgian Dream, a hotch-potch of political forces ranging from liberals who defected from Mr Saakashvili’s camp to Georgian nationalists, beat Mr Saakashvili’s UNM in elections last year. As he celebrated Mr Margvelashvili’s victory, Mr Ivanishvili promised that “next year will be for calming down”. That promise will be hard to fulfil. Mr Ivanishvili’s year in power has been tumultuous. He came to office with a pledge to undo the reformist machine run by Mr Saakashvili that, in the vigour and stubbornness of its later years, began to tilt towards autocracy. Mr Ivanishvili and his allies may have accomplished that, but they are also overseeing a stall-

ing economy, shrinking foreign investment, and the rising influence of xenophobic Orthodox groups. Observers are growing increasingly worried about a wave of arrests of former ministers and officials close to Mr Saakashvili. Some of them may have committed crimes, but the retributive mood surrounding the investigations skirts close to the “politics of revenge”, as European diplomats visiting Tbilisi put it last month. The immediate future for Mr Saakashvili is unclear. Despite a deflating end to his presidency, he has said he still believes in Georgia’s future. Will he be a part of it? Mr Ivanishvili has said prosecutors are likely to want to question Mr Saakashvili after he leaves office. Yet if Mr Saakashvili either became the victim of a politically motivated prosecution or was forced to flee abroad, it would upset Georgia’s hopes of greater integration with Europe and derail hopes of signing a trade agreement with the European Union later this month. Much confusion remains around Mr Ivanishvili’s own plans. He says he will step down as prime minister and appoint a replacement. The billionaire appears frustrated with the scrutiny and criticism that comes with high office; he may also sense that the honeymoon with Georgian Dream is fading and discontent is growing; better then to bow out. He has, however, said that he wants to influence politics from behind the scenes—according to a mechanism he has kept worryingly secret. For all the uncertainty, Georgia is a functioning, transformed democracy. In spite of his faults and hubris, Mr Saakashvili can claim that as his legacy. The next chapter in Georgia’s history may be about neither him nor Mr Ivanishvili—and, after the duel of their oversize egos, that would be no bad thing. economist.com

BUSINESS WEEK

caucasian The Editorial Board Follows Press Freedom Principles Publisher: LLC Caucasian Business Week - CBW Director: Levan Beglarishvili DISTRIBUTED FREE OF CHARGE Editor-in-chief: Evgeni Mikeladze Mobile phone: 591 013936; 577965577 Commercial Department: Irakli Lekvinadze Email: caucasianbusiness@gmail.com

iorgi Margvelashvili’s victory in Georgia’s presidential election Sunday was the voters’ latest rejection of Mikheil Saakashvili, the leader of the 2003 Rose Revolution. Last October, Mr. Saakashvili’s opponents won control of Parliament and the prime minister’s office. Now one of their candidates will succeed him in the presidency as well. International observers judged the voting and the campaign to be perhaps the fairest since Georgia gained independence in 1991. But there are legitimate concerns that the elections could now be followed by prosecutions of Mr. Saakashvili and his defeated followers. Since Mr. Saakashvili’s opponents won control of Parliament, more than 11 former ministers or top officials of his government have gone on trial or faced charges ranging from theft, bribery and embezzlement to authorizing excessive use of force against demonstrators and prisoners. Former officeholders should be accountable for illegal conduct, but it will be important for the new government to dispel the impression of wholesale prosecution of a defeated political party. These trials must be held in strict accordance with international judicial norms. The European Union, with which Georgia seeks a vitally needed trade agreement, should use its leverage to insist on this. The election was also a victory for Prime Minister Bidzina Ivanishvili, the pro-Russia billionaire

who sponsored Mr. Margvelashvili’s candidacy. Constitutional changes next month will shift many powers from the president to the prime minister. Mr. Ivanishvili, who says he will resign from that post, is expected to handpick his successor, giving him behind-the-scenes control of Georgia’s two top offices. Decentralizing presidential powers to Parliament and the prime minister would make room for a more robust democracy, but not so if real power is exercised by an unaccountable billionaire. Mr. Ivanishvili, who made his fortune doing business in Russia, has a fortune of $5 billion, equal to more than one-third of Georgia’s annual economic output. Mr. Saakashvili was once highly popular, but, over the years, his policies grew increasingly oppressive toward ethnic minorities and political opponents and reckless toward Moscow, leading to a brief and unnecessary war with Russia in 2008. Georgia’s democracy is still fragile. In 22 years of independence, it has been disrupted by two coups, secessionist tensions and that illadvised war. The new government hopes to rebuild relations will Russia while also courting the European Union and NATO. Mr. Ivanishvili has also started a private equity fund that he hopes will attract investment from the Middle East and China. Those are ambitious goals. Political maturity and economic transparency are required to bring them within reach. nytimes.com

The weekly is distributed to top companies, banks, embassies, state sector, Tbilisi and Batumi hotels, Tbilisi, Batumi and Kutaisi Airports. The newspaper will also penetrate Azerbaijan in the near future

business

caucasian business week

November 04, 2013 #28

Georgia Makes One Step forward in Doing Business 2014 From Pg. 1

Sairme Mineral Waters Director Refuses Latvian Accusations

O From Pg. 1

Georgia leads EBRD countries according to best practice introduction into state procurements

eorgia ranked first among EBRD (European bank for Reconstruction and Development) countries according to introduction of electronic system for state procurements. EBRD research on Introduction of State Procurements Best Practice was published at the end of October of the current year. The research, which includes 2012-2013, revealed that electronic system for the state procurements of Georgia experienced considerable progress according to all criteria and ranks first among EBRD client 26 countries. The research also evaluates legislation of the regional countries in terms of state procurements effectiveness, transparency and execution parts. In this respect, Georgia is in the top-3 list along with Hungary and Turkey.

n October 18, 2013 the Eurasia Partnership Foundation published the information on its website Sairme mineral water contains exaggerated volume of arsenic. The information they have obtained says the National Food Agency has issued only a recommendation letter to LLC Sairme Mineral Water. The Foundation representatives say the national food agency should be stricer concerning similar law violations. The Eurasia Partnership Foundation finds it unclear why the national food agency has confined itself with only a recommendation letter to LLC Sairme Mineral Waters and has not taken additional steps to prevent risks to human healthcare.Kakha Sokhadze, a head for the national food agency, says the existing volume of arsenic in Sairme mineral water is within the norm under the Georgian standards, but the European requirements are stricter. “Having received a notification from Latvia, the national food agency started exploring the issue. Namely, under the supervision of the agency’s authorized bodies, representatives of accredited laboratories collected and explored both natural and technologically processed water samples. The exploration results have showed the volume of arsenic was not over the norm. The inspection of LLC Sairme Mineral Waters has shown the excessive volume of arsenic in this concrete exports consignment was supposedly related to the change of technological equipment, that was implemented in the enterprise (in the process of re-equipment and change of filters). As a result,

the process for valuable filtration of the water was hampered”, the National food agency director says. Sokhadze has also added that LLC Sairme Mineral Waters has fulfilled recommendations of the national food agency and the natural mineral water Sairme Mineral Waters satisfies the requirements. The recommendation latter the national food agency has issued to Sairme mineral water manufacturer contains three articles. The third article clearly says “The natural water and finished product are not examined periodically at accredited laboratories for the toxic content, namely, for arsenic. The response letter of LLC Sairme Mineral Waters reads a special filter has been installed in the enterprises that purify the mineral water from arsenic. As a result, the element remains within the acceptable norms. The document says the water is examined every day at the enterprise laboratory. Moreover, research company Gama checks the achieved results systematically at the laboratory. Despite the above changes, LLC Sairme Mineral Waters director Vakhtang Kopaleishvili refuses all violations and casts doubt on accuracy of the Latvian research. “There were no violations. I have no idea what for Latvia has made similar conclusion. It is also questionable whether the water was founded with an excessive volume of arsenic. Even this aspect has not been specified. We have exported the water to Europe– Greece, Poland and Latvia. If there were some problems, we could not continue our exports to these markets”, the company director says.

The Council of Europe’s Human Rights Commissioner: “Geocell” has to Stop Working if Georgia Continues Wiretapping

eorgian special services can listen to citizens’ phones through technology provided to the mobile operator “Geocell” by “Ericsson” concern which is a subsidiary of the Swedish telecommunications company “Telia Sonera” – the Swedish radio reports. The representative of the “Ericsson” Frederick Halston confirms that the Georgian company acquired wiretapping system with which the authorities can deal with crime. The Council of Europe’s Human Rights Commissioner Thomas Hammarberg who is currently a consultant to the Georgian Prime Minister for Human Rights says that mobile phones tapping began in the country in 2005 and it applies not just to fighting crime. “The authorities have used this system against political opponents, just spying on everybody,” – Mr. Hammerberg said in an interview with the Swedish radio. According to him, the other mobile

operators of Georgia also provide the authorities to listen to telephone conversations. Hammarberg notes that “Geocell” should stop working if wiretapping doesn’t stop. As it is known, a few years ago “Telia Sonera” was in the center of the scandal in connection with the phone tapping in Belarus and Azerbaijan - these states also received appropriate equipment from “Ericsson”.

interview

caucasian business week

November 04, 2013 #28

Giorgi Pertaia: Next 3 years will be Successful in Terms of Investment

An interview with the Head of Investment Agency of Georgia Giorgi Pertaia - Georgia has improved its position in Doing Business- 2014 rating and is ranked 8th on the ease of doing business. How expected was this outcome? - It’s certainly nice information. Many countries are trying to improve their position in the ranking, it is especially important for small countries in terms of awareness. For example, China or Russia are in a different situation, Georgia is a small country and we want to attract investment that needs to be recognizable in the world. Of course, we should not assume that some-

one is going to invest money in Georgia only because of the places in the ranking, but this at least stimulates interest from investors. The World Bank, which has a very high reputation in the world, confirms that Georgia simplified taxation, transportation of goods across the border, etc. In this ranking Georgia is ahead of Germany and many developed countries, and it certainly does not mean that our situation is better than in Germany - the rating does not examine such factors as the independence of the judiciary, infrastructure, state of public institutions, but takes into account the customs procedures, tax system, etc. By indicators which are taken into account in the rating, Georgia has really much better position than many European countries. It’s not bloated numbers. In Georgia, you can actually start a business for 1 day. - How detailed the criteria for evaluation are studied? For example, one point says that in Georgia protection of investors is on a high level, but on the whole, topic of rights of businessmen has always been relevant. What is behind this data? - It’s not just statistics, and information received from businessmen working in Georgia. They have a regular contact with the tax and customs systems and other state agencies. As for the methodology, there is some criticism, in particular, China is especially active in this regard. This rating gives data on specific sectors and does not reflect the full picture. Despite this, it is very

important and almost all the countries are trying to improve their position in it. - What business climate is there in Georgia today? What issues arise when businessmen meet with you? - Investors’ questions can be divided into two parts. First - taxes, procedures for land acquisition, etc. Second - common issues, including political ones - how the government of Georgia is ready to continue the liberal tax policy, what are the guarantees in this respect, etc. Partially, these questions have answers – there are low taxes in Georgia, a low level of corruption , low crime - this is confirmed by all international organizations. As for stability, it is the most important issue for businessmen. Each post-Soviet country has problems related to the fact that when there is a change of government, redistribution of business occurs as well as a violation of private property rights, etc. In our case, the parliamentary and presidential elections have clearly shown that the change of political power will not lead to the redistribution of business. There are specific issues that are considered by the court but in general, there is no sense of changing the rules of the game after the election. We go to a situation when the business is not dependent on the state and the political changes. I think the next 3 years will be very good in terms of investment, as another important component will be added to the business climate in Georgia - political stability.

- How will this year end and what will be the 2014? - In the 2nd quarter of 2013 there is a small increase in investment. This is normal, when there are elections in the country investors still try to wait it out. In 2013 over 900 million USD will be made in the country - according to methodology used by Statistics Service which takes into account only the made investments. That is, even if the government signed a contract with the investor, it is not considered. Much of what we are doing today will be counted in 2014. I believe that the second half of 2014 will be very good in terms of investment and economic stability will contribute to this. - Whether foreign investors are interested in cooperation with the Co-investment Fund ? - This is a very interesting topic for them. All investors are asking about the Fund, as its volume is very large for Georgia and its condition - attractive. I know that the fund considers several projects; the work is very active in order to begin their implementation in the near future. - You spoke of the great interest on the part of the Russian capital. Is it true? - The interest of Russian investors has grown significantly, both in terms of large and small projects. This year we had so many Russian tourists and such a number of Russian tourists is associated with the interest in the property from Russian investors. In general, energy is the most attractive field in Georgia for investing.

The importance of Organizational Structures in achieving outstanding results

Interview with Papuna Toliashvili Managing director of Synergy Group | since 1999

- Papuna, you give organizational structures great importance in organizations’ success. Can you explain why it is so important and particularly what does it influence most of all in organization? - Right. Organizational structures are not just painted rectangles on the paper. How correctly they are created influence many things in organization, but I will draw your attention to three main aspects, that organizational structure influences most. First of all, the issues and decisions on which top management members spend their time and attention in everyday life; the second is how efficiently and flawlessly business processes work in organization and the third and crucial I think is, efficiency of use of its employees’ skills and abilities for organization’s success. Moreover, you see, it is considerable, that our 15 years of experience in this field helped us to realize that if the structure is not created in the right way, changes made only in motivation system, strategy, business processes, or etc don’t improve results in the long-term. - Ok. However, how can the top manager guess that he/she should change the structure? What are the most crucial symptoms reporting that organizational structure should be revised? - Fortunately, there exist several symptoms. I will try to pick out most common ones. When

management of the company feels that they are losing many opportunities this should be a signal that their structure is not quite efficient and needs some changes. When decision-making process becomes particularly difficult and takes a lot of time, as well as fulfilling those decisions become quite complicated, that should also be a signal for management. In addition, when almost no initiatives come from lower level management, or the number of it has decreased and top management becomes the idea generator himself is alarming signal that something is improperly designed in the structure. - It is interesting to know what are the most spread mistakes you have revealed based on your experience? - Recent years we particularly research, examine, analyze and work on organizational structures in Georgia as well as abroad. We have accumulated considerable experience about organizational structures of companies operating in different fields. This helps us to find much more interesting decisions and to reveal common mistakes made in organizational structures of various companies.. First and most common mistake is a large number of directly subordinated units to the CEO that in addition to other problems it interferes the CEO to distribute his attention efficiently on

most important issues. Then comes too much hierarchy in the structure - divisional manager, department manager, unit manager, section manager... the line is too long, and it is very common when there is a department manager that has only one unit directly subordinated to him, and the unit manager himself has more than 5 directly subordinates under him. This results in inefficient use of resources and encourages unnecessary bureaucracy in organization. I want to add one more common mistake - usually structures are created and formed according to persons who work in organization instead of creating them according to company’s strategic priorities and main business processes that are crucial. Structures formed that way have too short life cycle. - What should the head of organization do when he understands and decides to change the structure? - I think they should not delay changes. This is most important. Usually top managers wait for something, they procrastinate making changes, and as long they do it, the worst results they get, the difficult and stressful becomes to make changes later. The sooner they start realizing and getting ready for changes the easier the process. In this case, change is less painful and more effective.

Sakcable Initiates to Introduce Marking System for Protecting Market from Low-quality Imported Products

disher Mamaladze, a chairman for the Sakcable supervisory board, says his company faced problems with exports to Armenia, but the Georgian government has interfered in the issue and the problem has been already resolved. “Frontier guards halted my cargo at the border with Armenia and we could not carry out customs clearance for almost a week. They named a lot of reasons, but, in practice, all of them were ungrounded and they could not name real reasons for halting the exports. For assistance I applied to the Georgian Finance and Economy Ministries and to my surprise, our government immediately settled the problem”, Mamaladze noted and expressed his gratitude to the Ministries for their efficient assistance. Edisher Mamaladze says the Georgian government should pay more attention to domestic production, because mainly Georgian companies are major

employers and mainly domestic companies create new job places. To this end, first of all, the Georgian market should be protected from low-quality imported products, Mamaladze said. “First of all, we should protect the domestic market from low-quality imported products. Today our market is open to any products and someone may import any products. If no one sues, the government shows no interest to harmful products. We have initiated and addressed to the Economy Ministry to introduce an obligatory marking system so as our consumers have comprehensive information where the products are produced and what is their quality. We are waiting for the response. This is not difficult. The main thing is that the product must be identified, its manufacturers, the country of production, the date of production. The consumer must have correct information”, Mamaladze noted.

“I do not want the issue to acquire political importance, but, let’s see what is the attitude of our neighboring countries to their markets and how they support the exports. If we had the same attitude to our production, our affairs would be better”, Mamaladze said. For example, the Turkish legislation directly promotes the domestic production and gives to domestic companies the so-called 15% preference compared to imported products when making state purchases. The Georgian government should follow the same principles, Mamaladze noted and added the Economy Ministry is developing a bill on introduction of protection measures in the trading field. Mamaladze welcomes the initiative and says the government should take into account business sector considerations too. He is sure the initiative will accept the mentioned initiative with huge pleasure.

November 04, 2013 #28

business

Q2 Records 62.5% Upturn in Insurance Sector’s Net Profits

tate Service for Insurance Supervision informed that in the 2nd quarter net profit of 13 local insurance companies from life and non-life insurance amounted to 36.4 million lari. The volume is increased by 62.5% quarter-onquarter.

Besides, the companies’ income from investments increased 2.2 times and made up 6.28 million lari. Instead, pension activity resulted in loss of 196,737 lari (growth – 2.06 times). In the reporting quarter, total assets of insurance companies made up 552.26 million lari (quarteron-quarter decline – 7.3%), while total liabilities – 426.85 million lari (decline – 9.3%). Premium, attracted by the companies, totaled to 196.6 million lari (quarter-on-quarter growth – 77.9%), while reinsurance premium – to 15.5 million lari (growth – 2.2 times). In premiums, attracted in direct insurance, share of medical (health) insurance still accounted for the largest share – 71.78% (141.1 million lari, quarter-on-quarter growth – 72.5%).

TBILISI AIRPORT ACCOUNTED FOR 78.7% OF TOTAL PASSENGER TRAFFIC IN Q3

eorgian Civil Aviation Agency reported that as of 9 months of this year, Tbilisi International Airport accounted for 78.7% of total passenger traffic in Georgian airports. If compared with same period of 2012, the showing is increased by 17.29%. Batumi airport accounted for 12.3% of passen-

caucasian business week

gers (year-on-year growth – 29.3%), Kutaisi airport – for 9% (growth – 204 times), while Mestia – for 0.01% (there were no passenger flights in the 3rd quarter). During the reporting period, the passenger traffic (regular and irregular flights) in Georgian airports totaled to 1.4 million persons, increasing by 30.13% year-on-year. In turn, freight shipment of Georgian airports amounted in the reporting period to 13.7 million t, increasing by 15.6% year-on-year. Total number of flights (including cargo ones) made up 9,980, increasing by 15% year-onyear. At that, regular flights accounted for 79.9% (growth – 25.6%), while the rest 20.1% (2,004 flights, decline – 13.9%) were charter ones.

NITROGENOUS FERTILIZERS LEAD IN GEORGIA’S EXPORT TO TURKEY

akstat reported that nitrogenous fertilizers appeared on the 1st position in Georgia’s export to Turkey in the 3rd quarter. Within 9 months, of export this article amounted to $22.5 million (year-on-year growth – 12.9 times). Growth was fixed also in following articles: ferrous or plain steel semi-finished goods – $21.4 million (export was not conducted in the same period of last year), knitted T-shirts – $16.3 million (growth – 69.3%). To note, top three of Georgian export to Turkey in the same period of last year included iron-andsteel scrap, ferroalloys and knitted wear. In the first half of this year, this top three included knitted T-shirts, meat and fish flour, carbon steel rods (so-called armature). In total, Georgian export to Turkey amounted during 9 months of this year to $135.99 million (year-on-year growth – 17.4%). In turn, import from Turkey in the reporting period amounted to $942.5 million (decline – 10.4%).

Growth was fixed in following categories: drugs – $35.9 million (growth – 38.9%), sanitary-hygiene products – $25 million (growth – 30.16%). Decrease was fixed in import of fabricated iron and steel – $24.36 million (decline – 27.4%), plastic pipes – $22.8 million (decline – 32.7%), insulated wires and cables – $20.26 million (decline – 28.1%). In total, 9-month trade turnover with Turkey made up $1.08 billion (year-on-year decline – 7.7%), accounting for 14.2% of Georgia’s total trade turnover ($7.59 billion).

NUMBER OF VEHICLES INCREASED BY 8.2% IN 2012

nterior Ministry reported that number of vehicles increased by 8.2% in 2012, if compared with 2011, reaching 806,323 by the end of the reporting year. Cars accounted for 64.9% of total vehicles’ number, off-roaders – 18.6%, passenger cars – 6.4%, trucks – 9.7% and motorcycles – 0.5%. The above-mentioned number does not include trailers and farming machinery, which number in turn made up 42,833. Number of cars exceeded 500,000 by the end of 2012, increasing by 6.8% year-on-year. In terms of age, cars older than 20 years accounted for 44.2% (growth – 9%) of total number, 1120 years old ones – 46.7% (growth – 8%), 7-10 years – 4.5% (growth – 10%), 4-6 years – 2.7% (decline – 6%) while 1-3 years – 1.9% (growth – 36%).

95.3% of cars has petrol engine, while 4.7% – diesel one. As of 2012, 38% of total car fleet is registered in Tbilisi. Top three of countries, which cars are cleared in Georgian customs, remains the same: Germany – 27,000 cars, the US – 13,500 and Japan – 8,000. The most popular brands are Mercedes – 98,023 (growth – 18%) and Opel – 95,483 (growth – 13%). If compared with 2011, most significant growth was fixed for Honda – 26% (up to 14,335 cars) and Nissan – 21% (up to 12,753). Among new cars, the most demanded price segment is value class ($15,000-25,000), while in premium brands, customers prefer cars cost $50,000-70,000. The most popular premium brands of 2012 were Lexus LX 570, Land Rover Evoque and Mercedes ML.

PASSENGER TRAFFIC ON REGULAR FLIGHTS OF TURKISH AIRLINES INCREASED BY 43.3% YEAR-ON-YEAR Tax on Manganese Use will Next come Ukraine International Airlines – Grow, but not 20.8 times 10.2% (107,585 passengers, growth – 1.9 times),

eorgian Civil Aviation Agency reported that Turkish Airlines accounted for the largest share (18.6%) in total passenger traffic (1.05 million persons), passed by regular flights through Georgian airports during 9 months of this year. The company’s showing (195,334 passengers) is increased by 43.3% yearon-year. The second place is occupied by Georgian Airways with share of 12.2% (128,666 passengers, growth – 2.7%).

Turkish low-budget carrier Pegasus accounts for 7.7% (81,390 passengers, growth – 6.9%), Belorussian Belavia – 5.4% (56,483 passengers, growth – 3.7%), Russian S7 – 5.4% (57,021 passengers, growth – 20%), German Lufthansa – 4.9% (51,919 passengers, decline – 1.8%), Georgian FlyGeorgia – 4.7% (49,895 passengers, was not operating in the same period of 2012). Besides, there were several companies, which started flights to Georgia in this summer: Iraqi Al-Naser Airlines (10,156 passengers, 1% of the local market), Israeli Israir Airlines (6,400 passengers, 0.6%), Ukrainian Air Onix (4,007 passengers, 0.4%). In total, there are 29 companies, operating on Georgian air market this year, instead of 26 ones of the same period of 2012.

NET SALES OF GEOCELL INCREASED BY 10.2% Q-O-Q, BUT DECREASED BY 12.2% Y-O-Y IN Q3

ccording to report for the 3rd quarter, published by TeliaSonera, Scandinavian owner of Georgian mobile operator Geocell, sales of Geocell decreased by 12.2% yearon-year and amounted to 65 million lari (according to current exchange rate). TeliaSonera still explains the mentioned decline with cancelation of the government’s servicing (tender results). At that, if compared with the 2nd quarter of the current year, sales increased by 10.2% (according to current exchange rate). TeliaSonera explains that increase is supported by lowered subsidies and sales commission costs. In the reporting quarter, EBITDA (Earnings Be-

fore Interest, Taxes, Depreciation and Amortization) of Geocell amounted to 28.3 million lari, decreasing by 9.9% year-on-year, but increasing by 6.8% quarter-on-quarter. Instead, EBITDA Margin, making up 43.5% in the reporting quarter, increased by 1.1 percentage points year-on-year, but decreased by 1.4 percentage points quarter-on-quarter. Number of Geocell’s subscribers in the 3rd quarter made up 1.84 million, decreasing by 10.5% year-on-year and increasing by 0.5% quarter-onquarter. At that, share of pre-paid subscribers made up 89.7% (1.65 million), decreasing by 3.8% yearon-year and increasing by 1.2% quarter-onquarter.

hairman of Parliament Committee of Environmental Protection and Natural Resources Gia Tsagareishvii stated about it to GBC. He said that the committee shares initiative of Chiatura deputy about tax increase on manganese usage, although working group will decide for how may percent it’s increased, when the law will be valid and with which term. During next week the working group will discuss initiative along with Ministry of Economy, other stakeholder institutions and investor company Georgian manganese. “Genera principle that the tax should increase is acceptable for us. The sides will agree for how many times - 21, 10, 15 or 8 times it will increase. Situation is catastrophic in terms of ecology in Chiatura. In previous years absolutely deliberately were closed eyes on it. Now this approach will change. The company registered in Florida obtains manganese in Chiatura. Would the businessman do it in Florida? Of course he would not. Everyone should know that our country has strict rules of environmental protection”, - said Gia Tsagareishvili. He also added that currently

there are some problems with investor company (energy-dependence, crisis on the international market), due to which the government is ready to take into account existing situation and take meeting steps. Tsagareishvili says that initiative of the bill triggered discussion of environmental problems in Chiatura and Zestaponi, currently productive dialogue has been started with investor. Reminding that according to existing law, tax on 1-ton manganese with 1% concentration equals to 0,012 GEL. According to proposed draft law, from January 1, 2013 tax should increase to 0,25 GEL. It’s noteworthy that amount of the tax for manganese usage equaled to 0,12 GEL, after which the law was changed and the tax reduced by 10 times. “Tax was reduced specially for the company Stemcor, - says majoritarian deputy of Chiatura Malkhaz Tsereteli. The MP mentions that since 2006 no one has spent money on the compensation of environmental damage. The obtaining is going by open carrier rule, the land has been depleted and 14 villages destroyed.

interview caucasian business week

November 04, 2013 #28

Jemal Khakhutaishvili – We return to the market with new vision and new ideas

“At the moment, hub principle can’t be set in Tbilisi airport” “Airzena leadership had a deal with Saakashvili’s government”

Interview with director general of Georgian International Airlines Jemal Khakhutaishvili - Air Company Georgian International Airlines returns to Georgian air market. After severalyears separation, how has the situation changed? With what new conditions do the company enters to the market? How it will attract clients? Will it be low prices or will you focus on the directions, which are not properly used till now? - First of all, I want to thank Georgian people, each person who came on the elections on October 1, 2012 and expressed political will! It defined that today we, as many other companies and businessmen, returned to Georgian market. As for aviation sphere, there are many problems; many issues need to be solved. Positive changes should also be mentioned. Approach of aviation government officials has sharply changed; the sector gradually leaves the shock, in which it had been during last 9 years. In this situation we return to the air market with principally new vision and ideas. Modern market, Georgian customers need innovative approach. What was the cause that so many Turkish air carriers established on Georgian aviation market? The reason of it is that there are not Georgian air carriers in Georgia, which would offer 5-10 European directions. Foreign airlines take this niche. Priority of the air company Georgian International Airlines will be objective, real prices and many European directions. - Will the air company work for only passenger transportation or wants to participate in the cargo air transits as well? Are you going to participate in the various tenders in this direction? - At the moment the airline will be oriented only to passenger transportation. In 2014 we plan to purchase several cargo airships, despite there will be very serious restrictions imposed on cargo transportation by Russian airplanes from 2015. - Today it’s actively discussed that Tbilisi Airport runway is in the poor condition and probability of plane crash is real. Despite it, official conclusion on this topic remains neutral. Mikheil Saakashvili openly expressed disappointment for TAV, although in fact nothing has been done. New government started negotiations with TAV. To your opinion, what are chances of the government, will existing contract be revised and is it possible that Turkish company makes multi-million investment, reconstruct airport and repair the runway? - I will not evaluate TAV activities positively not because it’s Turkish operator of the airport, but because it owns 2 out of 3 airports of Georgia and works only for moneymaking. I want to tell you that the society has not seen in 2005 if TAV had won tender in Tbilisi. In that period aviation market talked about another Turkish operator, Cheleb, which won the tender and to my mind, offered better service. President also attended presentation. Moreover, he personally symbolically participated in the ceremony of airport construction start. But something happened after that and for some reasons TAV, which had been rejected before, was brought. To my mind, very

serious and anti-Georgian deals were made. As for runway, it’s not in ideal condition, but the case is not as bad as Airzena declares. It is exaggerated evaluation! To my mind, aviation and airport management issues need review and modernization. The operator, which will offer quality service to the carriers (which does not exist now) should come to the airport. The country does not have a plan for aviation development. In 2003 Tbilisi airport served to 300 000 passengers in a year, currently this data is close to 1.300 000. Respectively, it requires development of infrastructure. Who calculated that Tbilisi needed such a small airport? Why did not government interfere in this issue for so long time? When Saakashvili advertised Georgia on CNN, why did not develop airport to receive increased number of tourists? Why did not they require TAV to develop airport infrastructure in accordance to increased number of passengers? The answer is obvious - Saakashvili and his circle had a deal with TAV, they used to get millions; in Turn, TAV sent super profit to Turkey. To swindle society, Saakashvili openly expressed concern about TAV activities many times, but no measures have been taken to improve situation. TAV Georgia has managed Tbilisi airport for many years and here should be mentioned following issues from the enslaving contract signed with Georgian government: 1. Airport fee, which equals to $22 for each passenger and TAV Georgia used to get these amounts 2 years before construction started. 2. Quite inflated and unreasonable fees for so called Ground-handling service, which is $1350 for each flight. 3. Very high value for aircraft technical service and takeoff/landing. Above-mentioned services of TAV Georgia increase airlines’ flight prices in Tbilisi Airport, which is reflected on the high price of the air tickets. I want to pay particular attention to the article from the agreement between government and TAV Georgia, which prohibits construction of the other airport in 150km radius from Tbilisi airport. In addition to others, it is a prerequisite for establishment of monopolist market. Today Georgian air space local companies do not have opportunity to develop. If the situation does not change, about what market freedom is talking about? Negotiations between government and TAV-Georgia are not beneficial for the Turkish operator on this stage. At last they were required to work in real and on the appropriate level! I hope these negotiations will be productive and TAV (if it remains as airport manager) or a new manager will be honest and interested in the development of Tbilisi and Batumi airports. - There has been talks Tbilisi International Airport to become regional and international transportation hub. Do the existing infrastructure and airpark of the airlines enable Tbilisi Airport to become a serious hub and not only the airport for several transit flights? - In the given situation establishment of Hub principle is impossible in Tbilisi airport. The airport does not have a transit space, waiting halls, hotel and so on. TAV arranged lift to get from arrivals to departure hall and called transit to it. So-called “entrance” is a fire stairs. During the airport construction the project did not include transit hall. It’s funny, if it was not sad. It was a target-oriented policy, to prevent national air carriers from transit flights based on hub principle. In the near period our air company will start flights and the state will see what measures need to be taken! - In one of the interviews you say that during Saakashvili’s office

term air companies were restricted, they could not expand. In particular, what was happening during Saakashvili’s rule, how Saakashvili or his government interfered in the air business? - During Saakashvili’s office term, in 2010 our air company was closed when we could bring airplanes FOKKER-100, BOEING-7373-400, SAAB-340. Personally I was arrested. Saakashvili’s regime did not let us to start flights with 8 planes. In parallel with this, Saakashvili and Veronica Kobalia brought Canadian company, which “provided” Tbilisi-Mestia flights and took millions. Currently Mr. Gaiashvili (Airzena) accuses me in banditism and fraud, makes laud statements on my non-admission in the airport. I’m sure that Saakashvili personally participated in the aviation “management” process and gave orders. Air companies were closed in order to give way to Airzena. It may be coincident that later president of Airzena became $5 in the list of ChristianDemocrats! In short, first competitors of Airzena were removed, the strongest one was arrested, and afterwards Gaiashvili became “wallet” of Christian-Democrats! The following fact also demonstrates criminal deal between Saakashvili and Airzena – In 2004 Saakashvili sold 2 YAK42 jets to Airzena for 99 000 GEL to develop Adjara region. In a year leadership of Air Company sold these planes for $6,2 million. Currently investigation is going about illegal closure of our Air Company and I hope that this issue will be solved impartially. - I’ve heard from the representatives of some air companies, that TAV creates unequal conditions for Georgian and foreign companies. You returned to air market after several years pause. Could you tell if discrimination of Georgian air companies is notable and how do you see a way out of this situation? - TAV is a private company and they have right to sell the same service for different prices to different airlines. I think in fact this kind of tariff policy is carried out. We can’t require anything from TAV on this issue; it will always remain as pro-Turkish organization. - Years ago, property of EuroLine (currently Georgian International Airlines) was “assigned” to the state, the case deals too vehicles. After the regime change, did you officially required return of the property and what result did you get? - I do not want to speak about this topic as on unsolved one. I want to tell you that 4 cars used by Ministry of Defense are registered on out name. Total cost of the vehicles exits to $100 000. We have already written 4 letters, but cars have not been returned yet. Criminal Case has been launched and investigation is going. We hope that in the near future, after the elections, Ministry will have time and return our property. - What has happened to air fleet once belonging to your company? - Airplanes ТУ-134 and АН-24 stand in the airport. We refused to Russian technology and made completely European choice. - Soon Georgian International Airlines will start flights to Russia. Although, as it became known after Abashidze-Karasin meeting, along with resumption of regular flights, Russian side also requires paying debts, which had been accumulated before flights cancellation between

Georgia and Russia. The case deals to $0.8 million. The companies, which had flights then, do not exist now. Who should pay this debt? - I’m sure regular flights between Russia and Georgia will resume. Russia is also interested in it! It’s an inevitable process. As for debt, I want to tell you that all companies are responsible only on own liabilities and asking this money from the other, especially from the state is absurd. - Head of youth competitor company Airzena called you an adventurist. He said that chance for access of the undesired persons (your) to the strategically important territory of airport has appeared. In this context, Mr. Gaiashvili recalled example of September 11 2011 US terrorist attack. What’s going on between you and Gaiashvili in real, from where this confrontation originates and what specific facts gives him basis to relate your past to September 11 affairs? - I respect Gaiashvili, as he is my colleague. September 11 and adventures is result of his imagination! He might be joking, but it did not work! Without a joke, I want to recall December 12, 2003, when, before leaving of Tbilisi-Paris flight, law enforcement institutions removed from the board former president of Football Federation Merab Jordania. Law enforcement bodies argued that president of air company Airzena Tamaz Gaiashvili brought Merab Jordania to the plane board bypass border control, by his car. I’m not aware till now why they terminated investigation of this criminal case. Tamaz Gaiashvili still continues to enter to Tbilisi International Airport controlled territory by personal car, bypass inspections procedures regulation. He’s still not fully checked. You can judge who is a threat of strategic importance for the airport – Tamaz Gaiashvili or me. Gaiashvili has been on the market for 18 years, but still thinks that if a serous airline opens in Georgia, he will be prevented at work. But I’m confident that if 3-4 Georgian air carriers will unite, it will be the best solution for our country! I want to advise him to leave competition with old and unjustified methods. I can’t take responsibility that many cheap airlines in Georgia started flights and Georgian air carriers could not develop! Mr. Tamazi is guilty for it! During 18 years I have not had neither financial nor moral opportunity to create a good air company. Nobody got the right for it! Mr. Tamazi is guilty for it! During 18 years he could not (or did not) create a powerful air company! I also did not have opportunity to speak up against the fact, that Turks have converted Tbilisi Airport into such a gateway without prospects! Mr. Tamazi had this opportunity and did (or could) not do it! Mr. Tamazi made serious mistake when, even for some hours, he put on gown of MP and had to leave parliament along with Shevardnadze during Rose Revolution! Later he tried to become a politician again, with Christian-Democrats, but failed again! Mr. Tamazi has one good feature – he always finds “necessary” people, who can do anything for money! Friends, finally the time has come in Georgia when everyone can do their business!

November 04, 2013 #28

business & economy

caucasian business week

GEORGIA-ISRAEL JOINT ECONOMIC COMMISSION TO HOLD FIRST MEETING IN JANUARY NEXT YEAR

Ilia Eloshvili - STRATEGY FOR ENERGY SECTOR AND ELECTRICITY TARIFFS CBW discussed strategy for energy sector and electricity tariffs with Deputy Energy Minister Ilia Eloshvili.

eorgia’s Prime Minister Bidzina Ivanishvili declared that first meeting of joint Georgia-Israel economic commission will be held in January 2014. Negotiations on free trade agreement between Georgia and Israel should be intensified, Ivanishvili also said. Joint economic commission may become exactly that format, within which we will start negotiate in this direction, the Prime Minister said. Georgia’s Foreign Minister Maia Panjikidze re-

ported that visa-free regime will be applied soon to holders of official and diplomatic passports, while negotiations regarding visa-free regime for regular passports will be continued. This is the matter of several months, she noted. In 9 months of this year, number of Israeli visitors to Georgia made up 35,103 (year-on-year growth – 35%). According to 6-month data of Sakstat, volume of FDI from Israel to Georgia made up $5.3 million, increasing 2.2 times year-on-year (9-month data are not published yet).

Georgia Ranked 84th in the Well-being Rating

he list, compiled by an international research firm Legatum Institute, contains data on 142 countries. The rating is topped by Norway, the second is Switzerland, on the 3rd place is Canada, the fourth is Sweden and on the 5th place is New Zealand. The ranking is based on 84 criteria of 8 categories - economy, industry, administration, educa-

tion, security, personal freedom, social capital. From the point of view of economic indicators, Georgia is ranked 99th , industry – 72nd , administration - 44th, education – 67th , health – 92nd , security - 60th , personal freedom - 73rd , social capital - 138th . Russia occupies 61st place , Azerbaijan – 81st , Armenia – 81st among the countries in the region.

Vinograd Company to Develop Factory Design to Be Built in Georgia

The enterprises will be the largest exporter of wine to Russia ommersant” radio station has learnt the company’s name which will build wine processing enterprises in Georgia on the Russian capital. “Vinograd” company based in the Russian capital has already begun the design of one plant, and in total three enterprises are planned to be built. We are talking about a 10 million USD investment. According to the Coor-

dinating Center of International Investment, the enterprise will be located in Kakheti and the construction will be launched as soon as the design is completed. The center representatives claim that “Vinograd” enterprises will become the largest exporter of wine to Russia. The presentation of the enterprises will be held in December. Note: Russian investments will be made in the resort of Menji as well.

- On what stage drafting of strategy for energy sector is and when the document will be presented in its final form? Will it name electricity generation as priority? - Action plan and SWOT analysis are already completed for the strategy, while presentation of SWOT analysis to be held on November 6. USAID commissioned Deloitte Consulting for participation in drafting of the document. In February, preliminary version of the strategy will be ready, and electricity generation will be the starting point. However, we are not going to decay the role of oil and gas, so we consider that studies should be conducted for development of these sectors. - If change of electricity consumer tariff is expected in next few years (2014-2016)? - In 2014, tariffs of EnergoPro Georgia (regional distributor company) will be reviewed. Tariff of TELASI (Tbilisi distributor company) will be in force until 2016, while its size is not specified for later period, being depended on weighted average tariff, etc. In general, change of tariffs is not excluded, as Georgian National Energy and Water Supply Regulatory Commission (GNERC) is working on new methodology. If we will not build new hydroelectric stations and will “hang” on import and heat power plants, tariff will inevitably increase. However, it will increase in any case in long-term perspective. - Energy Ministry declared that tariffs’ reduction was made at the expense of distribution companies. If the Ministry has information about how this influenced the companies’ revenues? During negotiations, we calculated revenue decline first of all. Thus, income of TELASI decreased by about 25 million lari per year, while of EnergoPro Georgia – by about 30 million lari. - It was announced that instead of agreement for tariffs’ reduction, investment liabilities were canceled for the companies. Specifically, what volume of investments was voided? - TELASI had investment liability on construc-

tion of KhramHES (100 MW), which had to be completed in 2014. We extended this liability for 2 years, but maintained a requirement, according to which TELASI should purchase from 2018 energy for 15% of its consumption from local market’s renewable sources. Regarding reinvestment, initially envisaged 80 million lari were decreased to 70 million lari. However, spending will be more efficient now because of imposed strict control. In case of EnergoPro Georgia, no investment liabilities were canceled. Note of Sarke: EnergoPro Georgia itself confirms tariff’s reduction at the expense of capital investments and operational costs. It is known also that the company’s liability on construction of Batumi-Muratli electric transmission line is extended for 2 years, until 2016. - Finally, if the situation regarding energy distribution in Kakheti region became clear? - Kakheti Energy Distribution, being in process of bankruptcy, will be put on auction. Currently, we work on legal issues jointly with the Justice Ministry. Companies, operating in the country, are interested in this issue (in its time, EnergoPro Georgia wanted to purchase this object). Kakheti Energy Distribution will not be assessed at more than 5 million lari, and the company’s debts should be taken into consideration at that.

Volgograd Confectionery Company Interested in Purchasing Georgian Nuts

eorgian nut producing companies plan to enter the Russian market. According to the Nut Growers Association, the negotiations are already underway with the Volgograd confectionery factory. Chairman of the Association Begi Sioridze states that the company also plans to hold meetings in the Ministry of Agricul-

ture in order to clarify the required documentation and payment issues. Sioridze notes, Georgia has a pretty good nut harvest this year and a volume of products has increased by 30-35 % compared to last year. As for the price, one kg of nuts costs 3.65 GEL on the Georgian market, while on the international market its price amounts to 6.5 USD which is identical to last year’s price.

statistics

caucasian business week

November 04, 2013 #28

Georgian Macroeconomic Review

Economy has increased by 1,3% in the 3dr quarter, by 1,7% - in September

conomy of Georgia has increased by 1,7% in September. According to preliminary data of Geostat, compared to the same period 2012, in September 2013 growth of the real GDP equaled to 1,7%> Besides, in the third quarter 2013 GDP growth is 1,3%, real growth of the real GDP in total 9 months - 1,7%. Itâ&#x20AC;&#x2122;s noteworthy that Geostat adjusted the data published in September. In particular, GDP growth in July equaled to 0,9% instead of 0,8%, in August - 1,2% instead of 1,1%. Geostat explains that GDP is calculated according to VAT payer enterprise turnovers, fiscal and monetary data, which is internationally, accepted practice. In the spheres where monthly data are absent (e.g. agriculture, unobserved economic volume), the

assessment is made on the basis of previous period data. Accordingly, real quarterly calculations may be considerably different from preliminary evaluations. Besides, previous months turnovers of VAT-payer enterprises may be corrected every month, which, respectively, causes correction of monthly preliminary evaluation data of the real growth.â&#x20AC;? - Geostat explains.

November 04, 2013 #28

BANKING NEWS caucasian business week

Interim Administration Entered into “InvestBank “

ccording to President of the National Bank of Georgia [NBG] Giorgi Kadagidze, infringements were discovered in “Investbank”, the number and the meaning of which forced the National Bank to introduce a temporary external control, although, at this stage information about violations remains confidential. “The banking system is the most stable and growing sector of the Georgian economy and considering the interests of the development of the financial market, all parties must abide all rules and laws. The National Bank will not allow that any damage to be caused to the confidence towards the banking system. The Interim Administration will work with the shareholders of “Investbank “ in order to remedy the situation , and in the event if the bank complies with all requirements of the law , the management of the

bank will be returned to its owners . Otherwise, it is possible that the bank will be sold”- NBG President states. As it is known , a few months ago the American newspaper Wall Street Journal published an article stating that in Georgia the volume of Iranian investment has dramatically increased in recent years, and this suggests that in this way Iran is trying to circumvent international sanctions. The Georgian government has frozen 150 accounts of legal entities and individuals from Iran under suspicion that they contributed to circumvent the UN sanctions. “InvestBank” owned by Iranian businessmen was also mentioned in the article. The newspaper also notes that the entrepreneurs themselves categorically deny such speculation, saying that they have nothing to do with the current government in Tehran which “ they hate .”

RATES OF MORTGAGE LOANS’ INTEREST DECREASED SLIGHTLY

ational Bank of Georgia reported that as of September 30, mortgage loans, issued in foreign currency, totaled to 3.78 billion lari. This volume increased by 1.3%, if compared with the 2nd quarter and by 3.8%, if compared with the beginning of the year. At that, corporate loans (i.e. issued to legal entities) made up 2.29 billion lari (60.5% of total volume, respective growth – 0.1% and 1%), while retail ones (i.e. issued to private individuals) – 1.49 billion lari (respective growth – 3.1% and 8.5%). Average weighted rate on corporate loans made up 12.6% (in the 2nd quarter – 13%,

while at the beginning of the year – 13.3%). This rate on retail loans made up 13.5% (13.6% and 13.8%, respectively). In their turn, mortgage loans, issued in national currency, totaled in the reporting period to 837.18 million lari (respective growth – 9.1% and 26%). At that, volume of corporate loans made up 527.7 million lari (63% of total volume, respective growth – 8.8% and 18.8%), while of retail ones – 309.44 million lari (respective growth – 9.68% and 40.7%). Average weighted interest rate for corporate loans made up 13.6% (against of respective 14% and 14.6%), while for retail loans – 15.1% (against of 15.6% and 16.8%).

BANKS INCREASED LENDING IN ALL REGIONS

ational Bank of Georgia reported that as of October 1, crediting of the banks (without overdue loans) totaled to 9.3 billion lari (year-onyear growth – 10.86%). Out of total issued loans, Tbilisi accounted for 74.6% (i.e. 6.94 billion lari, year-on-year growth – 5.8%).

Ajara accounted for 6.5% (i.e. 607.6 million lari, growth – 20.8%), Imereti – 5.3% (493.7 million lari, growth – 19.5%), Samegrelo – Zemo Svaneti – 3.2% (298.9 million lari, growth – 24.16%), Kvemo Kartli – 3.09% (286.95 million lari, growth – 42.29%), Kakheti – 3% (283.1 million lari, growth – 59.25%), Shida Kartli – 2.55% (237.3 million lari, growth – 33.7%).

FOR 9 MONTHS, NET PROFIT OF LIBERTY BANK MADE UP 6.5M LARI

iberty Bank reported net profit of 6.5 million lari for 9 months. At that, 5 million lari was share of the 3rd quarter. Profit of the 3rd quarter increased by 853.1% year-on-year, while total profit of 9 months – by 221.2%. As of September 30, the bank’s total assets

amounted to 1.27 billion lari, increasing by 42% year-on-year and by 12.4% – quarter-on-quarter. Net loans totaled to 508.4 million lari (respective growth – 25% and 13.5%). Number of Liberty Express mobile branches made up 103, increasing by 2 ones in the 3rd quarter, number of ATMs – 336 (growth – 4.34%), while of POS terminals – 1,329 (growth – 8.5%).

IN Q3, NET PROFIT OF VTB BANK GEORGIA MADE UP 6.96M LARI VTB

ank Georgia reported net profit of 6.96 million lari as of the 3rd quarter. This volume decreased by 16.7% year-on-year. As of September 30, the bank’s total assets made up 766 million lari (year-on-year growth – 60.9%). Ratio of liquid assets to total assets made up 33.17%, instead of 21.28% in the same period of last year. The bank’s net loans amounted to 443.6 million

lari (year-on-year growth – 43%). Ratio of idle loans to total loans made up 9.61%, against of 12.62% a year ago. The bank’s total liabilities amounted to 690.27 million lari (year-on-year growth – 68%). Demand deposits made up 44.6 million lari (growth – 62.9%), while fixed ones – 158.5 million lari (growth – 65.5%). Main shareholders of VTB Bank Georgia are Russian VTB (96.59%) and Lacarpa Enterprises Limited (1.92%).

President of the National Bank of Georgia: Georgians are One of the most Wasteful Nations of the World

s President of the National Bank of Georgia [NBG] Giorgi Kadagidze states, developed countries are struggling with “a credit trap” by improving education and maximizing awareness of citizens. The Georgians are one of the most profligate nations of the world, - he says. “It starts very easy and simple. A consumer buys an expensive phone in installments, then he takes a credit for one day and goes on summer vacation, then he takes a credit card, then the other in order to pay off the first, and eventually dis-

covers that he has a few credit cards and loans which are very expensive. To solve the problem, a consumer takes a great credit and puts in pledge his real estate. We can call it a credit trap; this phenomenon is common throughout the world. Developed countries are struggling with it by increasing education and awareness. In this sense, I am satisfied with the level of cooperation with banks. On the one hand, banks are required to provide customers with all the information before they make a decision. But on the other hand, consumers should better plan their resources, “ – NBG President states.

NBG VICE-PRESIDENT: STEADINESS OF LARI EXCHANGE RATE TO THE US DOLLAR CONDITIONED BY EXPORT GROWTH, MACROECONOMIC EXPECTATIONS AND LOW ECONOMIC ACTIVITY

rchil Mestvirishvili, vice-president of National Bank of Georgia (NBG), declared that on background of growth of export and decrease of import, inflow of foreign currency compensates the effect of interest rates’ decline. That conditions steadiness of lari exchange rate to the US dollar, he said. Mestvirishvili reported that interest rates are sharply decreased for conventional loans (making up currently 12-13% on average instead of 20% in 2009), as well as for mortgage loans (11% on average instead of 15-16% 1-2 years ago). Besides, said Mestvirishvili, steadiness of lari

rate was supported by macro-economic expectations and low economic activity. Mestvirishvili addressed on the subject to the meeting, held yesterday, where reasons of reduced pace of Georgia’s economic growth in 2013 and respective response actions were discussed. Mestvirishvili declared that in response of slowed rate of economic growth, monetary policy was softened. He pointed that refinancing rate is on record-breaking low level, making up currently only 3.75%. At the same time, NBG vice-president reminded that prices in the country are on “too low level” since 2012.

Azerbaijan caucasian business week

November 04, 2013 #28

Caspian Air Cargo Summit Azerbaijan-Georgia trade draws airline industry majors nears $1 billion

aspian Air Cargo Summit 2013, organized by Silk Way Airlines, is being held in Azerbaijan’s capital Baku on October 29-31 with the participation of airline industry majors. Speaking at the event, Director of Euroavia International Lars-Gunnar Comen said that the summit brought together representatives from 235 leading air cargo companies and airports from 30 countries. He also said the event will have a special focus on commercial and technical innovations in the region, current trends and new business leads for the air commerce industry, as well as prospects for cooperation between Europe and Asia. President of Azerbaijan Airlines Jahangir Asgarov, for his part, emphasized the importance of the summit. He highlighted Azerbaijan’s geographic location, saying the country, which is located between Europe and Asia, is in the center of the trans-Caucasian transport corridor, and it is crossed by many air and sea routes, highways and main lines connecting Europe with the Caucasus and Central Asia. “Thanks to President Ilham Aliyev’s attention, Azerbaijan’s civil aviation is experiencing rapid development and makes its contribution to the modernization of the country’s air transportation system,” Asgarov said. “Azerbaijan Airlines, a giant regional airline in the region, controls flights in an area covering a total of 165,400 square kilometers. The services of the company cover a 8,000 kilometer-long air corridor.” Asgarov also said many airlines prefer to use Azerbaijan’s airspace to fly from Europe to Asia and back. The air transport of Azerbaijan is one of the attractive fields in the region and AZAL has asserted itself as a reliable partner for companies interested in high quality. “AZAL is one of the leaders in terms of the number of airliners both in the region and in CIS,” he said. According to Asgarov, in recent years Azerbaijan’s

main airports, located in Ganja, Nakhchivan, Lankaran and Yevlakh, have been reconstructed, and new airports have been built in Gabala and Zagatala. One of the biggest and most technically advanced cargo terminals in CIS, Baku Cargo Terminal, and a 4,000 meter-long runway have been launched at the Heydar Aliyev International Airport in Baku. Asgarov also said an exercise and training center meeting international standards for Boeing-757, Airbus-319, Airbus-320 and Boeing-767 aircraft, the first such facility in the CIS and Eastern Europe, has been established. Moreover, a new terminal is under construction at the Heydar Aliyev International Airport. The new airport terminal is designed for about 6 million passengers a year. The total usable area of this state-of-the-art terminal is 65,000 square meters. The facility will have air bridges for simultaneous admission of 8 airliners. Asgarov noted that Azerbaijan’s national air carrier has enriched its airliner park with 50 modern aircraft over the past decade. “Over the last period AZAL has purchased more than 30 airliners and nearly 20 helicopters,” he said. President of Silk Way Holding Zaur Akhundov said at the event that the holding comprises 23 companies operating mainly in aviation. “The fleet of the newly established holding includes two Boeing 767-300 and three Boeing 474-400 liners,” he said. “The holding has ordered two new Boeing 474-8 airliners for 2014. Generally, flights are carried out by aircraft of 18 different types. More than 4,000 highly skilled specialists work at the enterprises of the company.” Glenn Wicks, Managing Director at the Wicks Group, said that the Baku summit aims to strengthen mutual ties between cargo transporters and cargo senders, ensure the exchange of practice, as well as develop effective mechanisms for upgrading the aviation business.

Top Azerbaijani bank to boost its authorized capital to $1 bln

he International Bank of Azerbaijan -- a major state-owned bank holding at least 40 percent of all bank assets in the country - will bring its authorized capital up to $1 billion. The authorized capital of the IBA currently amounts to 368 million manats (over $469 million). The decision to up the capital stock by around 500 million manats was made at an extraordinary meeting of IBA shareholders on October 18. The bank said that considering growth dynamics of the bank a four-year capital increase program was adopted during the meeting. According to the outlined program, the shareholders

approved IBA’s capital increase by 200 million manats initially, to be followed by an additional 300 mln manat hike over the following three years (100 million manats each year). The IBA was established in 1992 as a successor of the Azerbaijani branch of Vnesheconombank. The IBA holds a leading position in the domestic banking sector. The main shareholder of the bank is the Azerbaijani government, which holds a 50.2 percent stake, and 49.8 percent is owned by private individuals and legal entities. As of July 1, 2013, the total capital of the IBA amounted to 765.56 million manats, which is 61.4 percent over the figure posted on July 1, 2012.

Azerbaijani oil fund’s assets hit $35.8 bln

udget revenues of Azerbaijan’s state oil fund SOFAZ in January-September 2013 exceeded 10 billion manats, while budget expenditure constituted over 8.7 billion manats, SOFAZ said on October 21. As of October 1, the fund’s assets increased by 4.9 percent and stood at $35.8 billion. According to SOFAZ, revenue worth over 9.77 billion manats was received from the implementation of oil and gas agreements. During the reporting period the revenues from managing the fund’s assets amounted to 311.2 million manats. In January-September 2013, the fund transferred over 8.3 billion manats to the state budget. The spending worth 249.3 million manats was directed to financing the improvement of social conditions of the refugees and internally displaced persons, while 106.4 million manats were spent on financing the reconstruction of the Samur-Absheron irrigation system, 10.9 million manats on financing the construction of the

Baku-Tbilisi-Kars regional railway and 12.4 million manats on financing the state program on the education of Azerbaijan youth abroad in 2007-2015. SOFAZ’s administrative and operational expenses for the reporting period made up 27.8 million manats, while its extrabudgetary expenditures related to the revaluation of foreign exchange totaled 38.7 million manats. The gold reserves purchased by SOFAZ amounted to 26 tons and 442 kg (850,146 ounces) as of October 1. SOFAZ, an entity that accumulates and manages Azerbaijan’s oil and gas revenues, was established in 1999 with assets of $271 million. The main purposes of the fund are the accumulation of funds and placement of assets abroad to minimize the negative impact on the economy, preventing the “Dutch disease”, to ensure savings for future generations, and to maintain the current social and economic standards in the country. According to SOFAZ’s investment strategy, up to five percent of the fund’s total investment portfolio may be invested in stock, up to five percent in real estate, and another five percent in gold.

he trade turnover between Azerbaijan and Georgia reached more than $958 million in the first nine months of 2013. The mentioned figure accounts for 12.6 percent of Georgia’s total foreign trade turnover, GeoStat reported. The Georgian statistics body reported that the trade turnover between the two countries increased by 1.8 percent compared to the same period in 2012.The trade turnover between Azerbaijan and Georgia was over $940 million in the first nine months of 2012. GeoStat also reported that in January to September 2013 Azerbaijan imported about 3.3 million cars worth some $30.3 billion from Georgia. According to the report, Georgian car exports to Azerbaijan during the mentioned period accounted for 57.3 percent of the country’s total exports to Azerbaijan. Azerbaijan’s imports of sedan cars from Georgia increased by 19.48 percent in terms of volume compared

to the same period last year. In January to September 2012, Azerbaijan imported 265,000 sedan cars worth over $25 billion from Georgia. Earlier, Georgia’s Ministry of Economy and Sustainable Development reported that Georgia’s participation in an agreement with the EU on free trade will have no impact on its trade with other countries, including Azerbaijan. Azerbaijan is Georgia’s second largest trading partner after Turkey. In January to June 2013, Georgia exported a total of $332.81 million worth of goods to Azerbaijan. The figure accounted for 26.9 percent of the country’s total exports during the mentioned period. According to GeoStat, Georgia’s exports to Azerbaijan increased by 17.5 percent compared to the same period in 2012. Around $283.23 million worth of Georgian goods was exported to Azerbaijan in the first six months of 2012.

Azerbaijan ups cattle import from Georgia

round 13,700 tons of cattle worth $34.84 million in live weight were exported from Georgia to Azerbaijan in January -September 2013. The Georgian Statistics Agency, GeoStat, reported that the share of this category in the total volume of Georgian exports to Azerbaijan amounted to 6.59 per cent in the reporting period. Exports of cattle from Georgia increased by 18.95 per cent and by 52.19 per cent or 4700 tons in quantitative terms compared to the same period last year. For comparison, around 9010 tons of cattle worth $29.29 million in live weight were exported from Georgia to Azerbaijan in January -September 2012. Goods worth $ 528.9 million were exported from Georgia to Azerbaijan in January -September 2013, or 26.2 per cent of a total volume of the country’s exports during that period. Exports from Georgia to Azerbaijan increased by 12.94 per cent compared to the same period of 2012. For comparison, Georgian goods worth $468.31 million were exported to Azerbaijan in January- September last year.

$6 million to be allocated to startup projects in 2014

ome 5 million manats ($6.3 million) is expected to be allocated to start-up projects in Azerbaijan in the coming year. The Azerbaijan State Fund for Development of Information Technologies will provide the capital for the start-up projects in 2014 from the state budget, Fund Executive Director Elchin Zeynalov said. “The first contest for start-ups is expected to be held in late November, early December,” he said. The contest aims to select the most effective and promising projects in the field of ICT. Banking and nonbanking credit organizations will be involved as authorized agents in financing the IT projects, Zeynalov said. During the contest, preference will be given to projects that envision the creation of innovative products and “green” technologies, as well as projects on the development of the ICT sector and the Internet. The fund is considering giving funds to the banks with minimal interest rates. Financing the production of innovative products, business projects in the field of Internet banking, online trading, and the creation of a new generation of communications technology will be implemented with the assistance of authorized credit institutions. At present, the fund is in the process of selecting authorized credit institutions, and is ready to cooperate with those who are interested in funding projects in the field of ICT. Each Azerbaijani citizen can avail himself of the advantages of the ICT Fund’s financing. The initial capital for 2013 is 15 million manats (over $19 million).

Financing the projects is expected to start in 2014. The maximum grant available is up to 300,000 manats, provided for a period of 36 months. The amount of small grants is designated at 10,000 to 100,000 manats, while medium grants could be from 100,000 to 200,000 manats and large ones could be from 200,000 to 300,000 manats. 2013 was declared the ICT Year in Azerbaijan. The action plan in the ICT Year include the activities of the State Fund for ICT Development, the High Technologies Park, Information Security Center, Virtual Qarabag ICT center, and the IT University. The State Fund was established to implement the state policy on the development and support of small enterprises in scientific and technical fields, and defines three ways of financing: investments, grants, and credits. azernews.az

Azerbaijan ups truck production

he State Statistics Committee reported that around 326 cars were produced in Azerbaijan in January-September 2013, which is equal to the figure of the same period of 2012. According to the committee, about 200 trucks were produced during the reporting period, which exceeds the figure of the first nine months of 2012 by 60 per cent. Despite the increase in production of cars and trucks, there was observed a decline in tractor production.

About 473 tractors were produced in the country during the reporting period, which is by 19.7 per cent less than in January-September 2012. azernews.az

November 04, 2013 #28

Armenia

Armenia to receive EUR 25.5 million within framework of European integration

t’s reflected in the income part of the state budget for the coming year that the Republic of Armenia will receive EUR 13 million unconnected and EUR 12.5 million connected grants within the frame-

work of the European integration. The Deputy Minister of Finance of the Republic of Armenia Pavel Safaryan stated this at the course of the joint session of the Standing Committee on European Integration of the National Assembly of the Republic of Armenia and the Standing Committee on FinancialCredit and Budgetary Affairs of the Republic of Armenia. As reports “Armenpress” among other things the Deputy Minister of Finance of the Republic of Armenia Pavel Safaryan underscored: “The total volume of the aforesaid grant is 21 million and it is distributed in three separate parts consisting of EUR 8,7,6 million.” Armenpress

According to Doing Business2014 Armenia’s business environment best in CIS

rmenia has palpably improved its positions in Doing Business2014: Understanding Regulations for Small and Medium-Size Enterprises ranking report. Armenia’s business environment is considered to be the best in CIS and the second in the region after Georgia. Armenia occupies the 37th position in the report, thus surpassing France and standing right behind Belgium. As reports “Armenpress” the Deputy Minister of Economy of the Republic of Armenia Karine Minasyan stated this at the course of the press conference held on October 29. Among other things the Deputy Minister of Economy of the Republic of Armenia Karine Minasyan underscored: “In comparison with the previous report, Armenia has improved its positions for three levels.” Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprises assesses regulations affecting domestic firms in 189 economies and ranks the economies in 10 areas of business regulation, such as starting a business, resolving insolvency and trading across borders. This year’s report data cover regulations measured from June 2012 through May 2013. The report is the 11th edition of the Doing Business series.

The Doing Business Project provides objective measures of business regulations and their enforcement across 189 economies and selected cities at the subnational and regional level. The Doing Business Project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages countries to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each country. In addition, Doing Business offers detailed subnational reports, which exhaustively cover business regulation and reform in different cities and regions within a nation. These reports provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the country or region and with the 189 economies that Doing Business has ranked. The first Doing Business report, published in 2003, covered 5 indicator sets and 133 economies. This year’s report covers 11 indicator sets and 189 economies. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. Armenpress

Armenia’s state debt considered to reach USD 4.7 billion by end of next year

n accordance with the State Budget of the Republic of Armenia for the next year, the real growth of gross domestic product is considered to reach 5.2 percent, the inflation

caucasian business week

targeting for 12 months is considered to be 4 percent – plus-minus 1 percent, and USD 1 is considered to cost AMD 406.76. The Minister of Finance of the Republic of Armenia Davit Sargsyan stated this in the National Assembly of the Republic of Armenia at the course of the discussions dedicated to the Law “On the State Budget of the Republic of Armenia for 2014.” The Minister of Finance of the Republic of Armenia Davit Sargsyan introduced the macroeconomic predictions the calculations of the rates regarding the State Budget for 2014 are based on. “The total level of the state debt by the end of 2014 is considered to be USD 4.7 billion,” the Minister of Finance of the Republic of Armenia Davit Sargsyan underscored. Armenpress

Survey: more than 65% of Armenia’s citizens have savings, but only 6% of them keep their money in banks

bout 66% of Armenia’s citizens have savings, but only 6% of them keep their money in banks, Armenuhi Mkrtchyan, head of the central bank’s division in charge of protection of customers’ interests, said Thursday while presenting the results of the World Bank’s survey at the final event in the My Financial Month campaign run from October 1 to 31 in Armenia’s capital and ten provinces. “This gives us grounds for thinking that these people don’t understand that keeping money in banks brings profits,” she said. Such campaigns, she said, are planned to be run every year in Ar-

menia. They will enhance public awareness of financial products, financial organizations and ways to use savings more effectively. The program is organized by the Central Bank of Armenia, USAID Finance for Economic Development Project, the Armenian Financial Ombudsman, Armenia’s fund for protection of deposits, bureau of car insurers, the Union of Banks of Armenia, the Association of Insurance Market Participants, Mortgage Market Participants, the Union of Credit Organizations, NASDAQ OMX Armenia stock exchange as well as Germany’s KfW Bank and SBFIC. arka.am

Armenia’s foreign trade in January -September increased by 4.5 % year-on-year to $4. 169.6 billion –NSS

rmenia’s foreign trade in January -September 2013 increased by 4.5 % year-on-year to more than $4.169.6 billion, the National Statistical Service (NSS) said today. The exports in the first 9 months were said to have amounted to $952.2 million and imports to $3.081 billion . As a result, the trade deficit was $1. 992.4 billion. According to preliminary data, the negative trade balance in FOB prices amounted to $1.517.9 billion. According to the NSS , export of mining –related products grew by 6 percent to $310.4 million, export of base metals and related products declined by 6.4 percent to $237.6 million, export of finished foods jumped by 27 percent to $212.3 million, that of precious and semi-precious stones, precious metals and related products upped 9.3 percent to approximately $136.8 million. The import of mining-related products declined by 0.5 percent to $638.2 million, that of machin-

ery and equipment fell by 6.6 percent to about $376.8 million, import of finished foods rose by 9 percent to $262.5 million, that of chemical products grew by 9.2 percent to $257.3 million and the import of land, air and water vehicles dropped by 3.1 percent to $256.3 million. arka.am

Armenian Ameriabank doubles profit in third quarter

rmenian Ameriabank profits in the third quarter of 2013 amounted to 4.7 billion drams, Ameriabank corporate clients’ director Gagik Sahakyan told a news conference today. According to him, the company’s profit before tax amounted to 5.7 billion drams against 5.8 billion drams in the third quarter of 2012. Sahakyan said in the first nine months Ameriabank was the market leader in terms of assets size (296.6 billion drams) and liabilities (257.6 billion drams). By size of capital (38.9 billion drams) and liabilities to customers (159.7 billion drams) the bank was second, he said. He said also the bank has doubled its portfolio of lending to small and medium-sized businesses to $73.3 million at the end of the third quarter from the same time span of 2012. He said the bank issued a total of 260 loans to small and medium-sized companies worth $64 million. He added that lending to this segment is expected to grow to $80 million before the end

of the year. The lending to large businesses did not change from the year before standing at $157.5 million, but the figure is supposed to double by the end of the year, Sahakyan said. Ameriabank is a universal bank providing investment, corporate and retail banking services in the form of a comprehensive package of banking solutions . ($ 1 - 405.30 drams). arka.am

State prices for precious metals set

he State Depository of Precious Metals and Stones Agency of the Ministry of Finance of the Republic of Armenia has set the prices of the state purchase and sale for the period of October 28 to November 3 2013 for one gram of chemically pure metal (state standard bar) in the Armenian drams. The Department for Mass Media and Public Relations of the Ministry of Finance of the Republic of

Armenia informed Armenpress about it. The prices are as follows: purchase price for gold – 15980.35 (+467.28), sale price – 17369.95 (+507.92), purchase price for silver – 268.08 (+10.77)), sale price – 291.39 (+11.71), purchase price for platinum – 17264.76 (+465.16), sale price – 18766.04 (505.61), purchase price for palladium – 8934.81 (+310.62), sale price 9711.75 (+337.63). Armenpress

CIS

caucasian business week

Russia to invest $1.5bn in Ecuador energy

ussia plans to invest up to $1.5 billion into new domestic energy projects in Ecuador, making the South American country a key partner in the region, President Vladimir Putin said at a meeting with Ecuadorian President Rafael Correa in Moscow. The two countries have several ongoing energy projects, including state-owned Gazprom’s alliance with Ecuador’s state-run oil company Petroamazonas. The Latin American country hopes to buy less and less oil and gas from abroad, and to develop its own natural gas reserves and become more energy self-sufficient. The smallest oil producer in the Organization of the Petroleum Exporting Countries (OPEC), has proven oil reserves of 8 billion barrels, about 1 percent of the world’s total. Ecuador exports roughly 500,000 barrels per day. Ecuador will open up its hydrocarbon resources to Russia’s state-owned companies Gazprom and Rosneft in cooperation with Ecuador state run Rosegelogia. Both company’s CEOs were present at the meeting between Correa and Putin at the Kremlin on Tuesday. “Of course we are interested in the participation of Gazprom, as it is the largest gas company in the world,”Correa said. Currently, Russian companies are taking part in other energy projects. Roseximbank, Russia’s state-owned import-export bank ,agreed to loan $195 million to finance a thermoelectric plant which will be built by Russian firm Inter Rao, and is expected to begin operations in 2016. Russian and Ecuador signed another $1.2 billion agreement to finance two hydroelectric plants. In 2011, Ro-

seximbank loaned Ecuador $123 million to build two hydroelectric plants which are due to open in 2015. Correa also said Ecuador is interested in buying Russian military equipment in the form of helicopters and trucks. Ecuador and Russia have been strategic economic partners, and trade between the countries reached a record $1.3 billion in 2012. Russia imported about $1.2 billion in bananas, seafood, and flowers from the country. Ecuador imported roughly $116 million in medical equipment, mineral fertilizers, and paper from Russia. The Ecuadorian President plans to visit Moscow’s Skolkovo start-up hub on Wednesday. While in St. Petersburg on Monday, Correa invited the city’s scientists to visit Ecuador and help contribute to a new science city that will specialize in bio and nanotechnologies, information systems, and textiles. The Ecuadorian president will also stop in Belarus and France. Venezuela’s neighbor Correa has ramped up oil output since 2010, when all joint-venture partners were forced to become service contractors as well. Last year, Ecuador signed a memorandum agreement with Gazprom to explore drilling opportunities in the muddy natural gas field in the Gulf of Guayaquil. The gas giant has also been involved in exploration in the Urumaco blocks, which have reserves of about 100 billion cubic meters. Last year Correa authorized oil drilling in the Amazon rainforest, at Yasuni National Park. Rosneft already has a joint venture with Ecuador’s more much oil rich neighbor Venezuela. Rosneftpartnered with PDVSA, the country’s market dominating national oil company. Russian companies are already involved in 5 oil projects in Venezuela, the world’s fifth largest oil exporter, with proven reserve of almost 300 billion barrels, by BP statistics. CEO Igor Sechin frequently visits Venezuela, and plans to invest $10 billion in oil and gas projects. Rt.com

Lukoil considers oil, gas projects in Iran

ollowing the reduction of tensions between Iran and the international community as a result of the nuclear talks, foreign companies expressed readiness to return to the country if sanctions are lifted. Lukoil Oil Company is considering participation in oil and gas projects in Iran in case of international sanctions relief, senior vice-president of Lukoil Overseas, Gati Saadi Al-Jebouri said at a conference on Energy Intelligence in Moscow, ITAR-TASS reported. “If there are changes, if restrictions and sanctions are lifted, then, of course, we will very cautiously return to the project in Iran,” he said. Lukoil suffered a $63 million loss when it was forced to withdraw from a project in the Aran oilfield. A joint venture between Lukoil and Norway’s Statoil was aimed at developing part of the Anaran block that extends across the Iraqi border. The two companies wrote off the project in 2010 because of the international sanctions imposed on the Iranian banking system. In the same year, the company stopped supplying diesel fuel and gasoline to Iran. Earlier, another Russian company Zarubezhneftegaz announced its readiness to participate in the development of a newly discovered gas field in Iran.

The Russian company signed an MOU with Iran in 2010. The company will soon open an office in Tehran, an official with Zarubezhneftegaz said, adding that it is ready to participate in the exploration, drilling, extraction, and refining sectors of Iran’s oil and gas industry. Iran is one of the world’s biggest oil and gas exporters and its economy is heavily dependent on energy revenues. Crude reserves in Iran are estimated at 155 billion barrels, while gas reserves stand at 33.1 trillion cubic meters. International sanctions have hampered Tehran’s ability to deliver its crude oil to the market and receive payments for its exports. According to the latest Platts survey of OPEC production for November 2012, Iran’s oil production has fallen dramatically from an average of 3.7 million barrels a day in 2011 to 2.7 million. The United States and the European Union imposed sanctions on Iran’s oil and financial sectors with the goal of preventing other countries from purchasing Iranian oil and conducting transactions with the Central Bank of Iran. Iran’s crude oil is subject to a European Union embargo that started on July 1, 2012. The sanctions also bars EU insurance firms from covering Iran’s exports. azernews.az

November 04, 2013 #28

Russian firm starts mining operations in Kazakhstan

ussian EuroChem, one of the world’s largest fertiliser companies, has started drilling and blasting operations at the Kok-Djon phosphate deposit in Kazakhstan. The company reported that the large scale development of the phosphate rock deposit is being carried out by Kazakhstan-based EuroChem-Fertilisers LLP. The initial production capacity will amount to approximately 640,000 tons of phosphate ore per year with the first production expected to come on stream in 2014. The initial phase of the project stipulates investments worth $120 million. The Kok-Djon deposit located in Kazakhstan’s Jambyl Region, is a key part of EuroChem’s upstream raw material strategy. The company is currently 75 per cent self-sufficient in phosphate rock which is the main raw material used in the production of phosphate-based fer-

tilisers and aims to bridge this gap by further increasing its resource base. EuroChem’s commitment to the region is also expected to play centre stage in addressing socio-economic issues in the Zhambyl District. This is particularly the case in the towns of Karatau and Zhanatas where EuroChem plans to promote the development of regional infrastructure by assisting with the upgrade and construction of social facilities. Head of Zhambyl region Kanat Bozumbayev said that EuroChem will contribute to the further development of the region. EuroChem is deeply committed to the Zhambyl region and has already contributed over $10 million to help solve some of the most pressing social issues, General Director of EuroChem Fertilisers LLP Erakulan Muryagaliev said in turn. azernews.az

Kazakh-Polish trade sees over 20 pct increase

he trade turnover between Kazakhstan and Poland exceeded $2 billion in 2012, the Kazakh Foreign Ministry said on October 30. The participants of the fifth meeting of the Polish-Kazakh Intergovernmental Commission on Economic Cooperation highlighted a 23 percent increase in the bilateral trade turnover which reached $2.1 billion in 2012. The meeting held in Warsaw was chaired by Kazakh First Deputy Foreign Minister Rapil Joshybayev and Polish Deputy Prime Minister and Minister of Economy Janusz Piechocinski. According to the Polish side, mechanical engineering, energy, defense industry and mining, transportation and logistics, and agro-processing are among the most promising sectors for expanding bilateral cooperation. “We expect Kazakhstan to become a WTO member in 2014, which will create more stable and transparent conditions for our trade and economic cooperation and the growth of trade turnover and investments,” Piechocinski said. The sides also expressed their readiness to sign an intergovernmental agreement on cooperation in the field of education, and inter-ministerial memorandums of understanding in the areas of standardization and veterinary medicine. Poland’s exports to Kazakhstan amounted to $600 million in 2012, being 20-25 percent higher than the previous years. Poland mainly imports oil from Kazakhstan, and equipment for mining, engineering products, building materials, medicines, fruits and vegetables are exported from Poland to Kazakhstan. Compared to other CIS countries, Kazakhstan is Poland’s third important economic partner after Russia and Ukraine, and its fifth important partner in Asia after China, Japan, India, and Singapore. Earlier Kazakh national agency on export and investment KAZNEX INVEXT reported that HATRANS, Poland’s largest transport-logistics company is looking

for a Kazakh partner to implement a project in logistics. Commercial director of HATRANS Rafal Bobovsky said at the XII industrial exhibition “Europe-Asia. Cooperation without borders” held in Aktobe on October 1-3 that his company intends to find a reliable partner in Kazakhstan and jointly increase the cargo transit from China to Europe and vice versa through Kazakhstan’s territory. “The next step may be the construction of a joint transport terminal in Kazakhstan,” he said. HATRANS has logistics terminals in Poland and China. The company transports 40 rail cars with various cargos from China to Poland every week, sending them to Europe through Kazakhstan. This route is very perspective , as sending goods from China to Europe through Kazakhstan takes 10-12 days, while the alternative route by sea takes about 45 days. Furthermore, two Polish companies, Petrolinvest Oil Company and Polskiego Gornictwo Naftowe i Gazownictwo (PGNIG) State Gas Concern, are active in Kazakhstan’s oil and gas markets. Polish Ambassador to Kazakhstan Jacek Kluczkowski said earlier that Polish companies are interested in working in Kazakhstan’s oil and gas sectors and are open to collaboration with both Kazakh and foreign companies. azernews.az

Turkmenistan to launch direct flight to Paris

IMF Tells Kiev to Raise Domestic Gas Prices, Introduce Floating Exchange Rate

n International Monetary Fund mission visiting Ukraine has urged the government to raise gas prices for domestic consumers and introduce a flexible exchange rate for the national currency, the hryvna, a fund official said Thursday. Jerome Vacher, the IMF’s resident representative in Kiev, told a ratings conference that these were among recommendations made by a fund team that has just ended a 10-day trip to the ex-Soviet republic. “Measures included a flexible exchange rate, strengthening of the banking system, fiscal adjustment, reform of the energy sector [and] substantial improvement of the business environment,” Vacher told the annual Fitch ratings conference. He made clear that by energy reform the IMF meant raising the tariffs for domestic consumers of gas — both industry and households — something long opposed by the government. A previous $15 billion standby IMF program was frozen in early 2011 after Kiev refused to end Soviet-era

subsidies and raise prices in the household gas and heating sector. Raising gas prices at home would be highly unpopular for President Viktor Yanukovych’s government, with a presidential election due in early 2015, and the issue remains a stumbling block in the way of any new loan deal with the IMF. At the same time, Ukraine, which hopes to sign landmark agreements in November with the European Union marking a swing westwards away from Russia, needs new credits to shore up foreign currency reserves and meet big foreign debt repayments next year, including to the fund. The call for a flexible exchange rate has also been made many times by the IMF, which believes it will help narrow the trade gap between exports and imports. But the national bank, through a policy of regular interventions and other regulatory measures, prefers to keep the hryvna pegged at eight to the dollar for political reasons, presenting it as a symbol of stability. themoscowtimes

tarting December 20, Turkmen Hova Yollary will begin to operate regular passenger flights from Ashgabat to Paris and vice versa on Fridays. Turkmenistan is improving its international air transportation infrastructure as part of its national plan for the development of civil aviation, adopted in July 2012. Turkmen Hova Yollary (Turkmenistan Airlines) owns more than 20 comfortable Boeing airliners. Boeing is a major U.S. manufacturer of commercial jetliners. Now more comfortable airplanes of the new generation such as Boeing 737-700 and 737-800 will substitute Boeing 717-200, 737-300, and 757-200. The company is going to start using these aircrafts in the first half of 2014, and their number is expected to reach 39 aircraft in the years ahead. Turkmenistan

Airlines currently carries out flights to 15 cities in 11 countries. Turkmenistan plans to increase the number of purchased planes. This will facilitate opening new aerial routes from Ashgabat to Madrid, Jakarta, Muscat, AlKuwait, Singapore, Sharm el-Sheikh, Hurghada, and Cairo. At present, in addition to domestic flights, Turkmen Hova Yollary operates regular flights to Abu Dhabi, Amritsar, Almaty, Bangkok, Birmingham, Delhi, Dubai, Kiev, London, Moscow, Minsk, Beijing, Istanbul, Moscow, Frankfurt and other cities. In April 1993, Turkmenistan became a full member of the International Civil Aviation Organization (ICAO), a specialized agency of the UN. Work on the accession of Turkmenistan into the International Air Transportation Association (IATA) is currently underway. azernews.az

world news

Bad loans in Europe soar to $1.6 trillion – report

China, gold prices & US default threats

n the very days when a deep split in the US Congress threatened a US government debt default, the gold price should normally jump through the roof, yet the opposite was the case. It is worth a closer look why. Since August 1971, when US President Richard Nixon unilaterally tore up the Bretton Woods Treaty of 1944 and told the world that the Federal Reserve ‘gold window’ was permanently closed, Wall Street banks and US and City of London financial powers have done everything imaginable to prevent gold from again becoming the basis of trust in a currency. On Friday, October 11, when there was no sign of any deal between US Congress members and the Obama White House that would end the government shutdown, the Chicago CME Group, which operates Comex - the Chicago Commodity Exchange, where contracts in gold derivatives are traded - announced that at 8:42am Eastern time the trading was halted for 10 seconds after a safety mechanism was triggered because a 2-millionounce (56.7 million grams) gold futures sell order was executed. Something rotten in gold market The result of that huge paper gold sale was that at just the time when a possible US government debt default would send investors in a panic rush to the safety of buying gold, instead, the price plunged $30 an ounce to a three-month low of $1,259.60 an ounce. Market insiders believe the reason was direct market manipulation. David Govett, head of precious metals at bullion broker Marex Spectron, calls the sudden huge futures sale suspicious. “These moves are becoming more and more prevalent and to my mind have to either be the work of someone attempting to manipulate the market or someone who really shouldn’t be trusted with the sums of money they are throwing around. There are ways of entering and exiting a market so that minimum damage is caused and whoever is entering these orders has no intention of doing that,” Govett said. UBS gold trader Art Cashin echoed the suspicion. “…if that happens once it could be an accident of technology, or it could be a simple error. But when it happens five times over a period of months, it does raise questions. Is it being done purposefully? Is somebody trying to influence the market?” That ‘someone’ market sources believe is the Obama White House, in league with the Federal Reserve and key Wall Street banks that would be ruined were gold to really rise. In March 1988, five months after the worst one-day stock market plunge in history, President Ronald Reagan signed Executive Order 12631. Order 12631 created the Working Group on Financial Markets, known on Wall Street as the ‘Plunge Protection Team’ because its job was to prevent any future unexpected financial market panic selloff or ‘plunge’.

The group is headed by the US Treasury Secretary and includes the chairman of the Federal Reserve, the head of the Securities & Exchange Commission, and the head of the Commodity Futures Trading Commission (CFTC) which is responsible for monitoring derivatives trading on exchanges. Numerous times since 1988, reports have surfaced of secret interventions by the Plunge Protection Team to prevent a market panic selloff that could threaten the role of the US dollar. Former Clinton White House staff chief George Stephanopoulos admitted in 2006 that it was used to support the markets in the 1998 Russia/ LTCM crisis under Bill Clinton, and again after the 9/11 terrorist attacks in 2001. He said, “They have an informal agreement among major banks to come in and start to buy stock if there appears to be a problem.” Clearly stocks are not the only thing the government manipulates. Gold these days is a prime focus. The price of gold in recent years—since the eruption of the US dot.com IT stock bubble in 2000—has exploded from around $300 an ounce to a recent record high above $1,900 in August, 2011. Gold rose an impressive 70 percent from December 2008 to June 2011, after the Lehman Brothers collapse and the start of the Greek crisis in the eurozone. Since then, with no clear reason, gold has reversed and lost more than 31 percent, despite the fact that talk of a unilateral Israeli military strike on Iran and the US financial debacle combined with a euro crisis, and now, threat of US government default, created overall huge demand for investment in gold. This past April 10, the heads of the five largest US banks, the Wall Street ‘Gods of Money’ — JPMorgan Chase, Goldman Sachs, Bank of America and Citigroup — requested a closed door meeting with Obama at the White House. Fifteen days later, on April 25, the largest one-day fall in history in gold took place. Later investigation of trading records at Comex revealed that one bank, JP Morgan Securities, was behind the huge selloff of gold derivatives. Derivatives are pieces of paper or bets on future gold or other commodity prices. To buy gold futures is very inexpensive compared with gold but influence the real physical gold price, largely because the US Congress, under lobby influence from Wall Street, since 2000 and the Commodity Trading Modernization Act, has left gold derivatives unregulated. The President’s Plunge Protection Team was at work now as well, clearly. China smiles & buys In effect a war, a financial war, is underway between the Wall Street giant banks and their close allies, including the major City of London banks and banks like Deutsche Bank on the one side, using paper gold derivatives trading in the unregulated COMEX, with covert support of the US Treasury and Fed. On the other side are real investors and Central Banks who believe that

he number of bad loans in Europe has soared to $1.6 trillion, the Daily Mail writes, citing a PricewaterhouseCoopers report. Loans in default or close to it had more than doubled in four years from $703 billion in 2008, spurred by woes in Italy, Greece, Spain and Ireland, PwC said. UK banks are still sitting on the third highest pile of bad loans, as British lenders held $224 billion of non-performing loans last year, below Spain on $227 billion. Germany tops the pile with $245 billion, but banks there are likely to have written far more loans given the scale of the economy.

the world financial system, especially the dollar system, is teetering on the brink of disaster and that physical gold is the historical best safe haven in such a crisis. Here, the recent buying of gold reserves by several central banks including Russia, Turkey and especially China, are notable. The short-term derivative gold price manipulations by JP Morgan and Goldman Sachs are creating smiles at the Peoples’ Bank of China and the Russian Central Bank among other buyers of physical gold. Since 2006 Russia’s central bank has increased its gold reserves by 300 percent. Now, the Chinese central bank has just revealed data showing that China imported 131 gross tons of gold in the month of August, a 146 percent increase compared to a year prior. August was the second highest gold importing month in its history. More impressively, China has imported more than 2,000 tons of gold in the past two years. According to a 2011 cable made public by WikiLeaks, the Peoples’ Bank of China is quietly seeking to make the renminbi (the yuan) the new goldbacked reserve currency. Hmmmm. According to unofficial calculations, the Peoples’ Bank of China today holds about 3,500 tons of monetary gold, surpassing Germany, to make it number two in the world after the Federal Reserve. And there are grave doubts whether the Federal Reserve actually holds the 8,044 tons of gold it claimsit does. The former International Monetary Fund director, France’s Dominique Straus-Kahn, demanded an independent audit of the Federal Reserve gold after the US refused to deliver to the IMF 191 tons of gold agreed to under the IMF Articles of Agreement signed by the Executive Board in April 1978 to back Special Drawing Rights issuance. Immediately before he could rush back to Paris, he was hit by a bizarre hotel sex scandal and abruptly forced to resign. Straus-Kahn had been shown a secret Russian intelligence report prepared for President Vladimir Putin in which ‘rogue’ CIA agents revealed that the US Federal Reserve had no gold reserves and only lied that it did. The stakes for Washington and Wall Street in depressing the gold price are staggering. Were gold to soar to $10,000 or more, where many believe current demandsupply pressures would find it, there would be a panic selloff of the dollar and of US Treasury bonds. China now holds a record $3.7 trillion of foreign currency reserves and the US Treasury bonds and bills are about half that. That selloff would send US interest rates sky-high, forcing a chain-reaction of corporate and personal bankruptcies that have been avoided since the financial crisis broke in 2007 only owing to record near-zero Federal Reserve interest rates. That selloff, in turn, would be the end of the US as the world’s sole superpower. Little wonder the Obama Administration is manipulating gold. It cannot last very long at this pace, however. Rt.com

US to stop financing foreign coal projects

he US is ending financing the majority of overseas coal projects, reducing the dirtiest carbon emissions, blamed as the number one global warming

driver. The decision actions US President Barack Obama’s June speech directed at following a climate friendly policy. Supported by the World Bank, where the US holds sway, the country is aiming to decrease the influence of climate change drivers. This plan involves the withdrawal of the US government’s support for the construction of power plants abroad, financed by the World Bank and other international development banks. Exceptions may be made for desperately poor countries, which don’t have access to alternative energy sources or to plants that involve new carbon-capture mea-

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sures, the NY Times reports. It’s an “important step” in supporting cleaner energy, Lael Brainard, the Treasury undersecretary for international affairs said. “By encouraging the use of clean energy in multilateral development bank projects, we are furthering US efforts to address the urgent challenges of climate change” The effort is primarily made to limit a 2 degrees Celsius (3.6 Fahrenheit) above preindustrial level lift, in order to cool global warming. The World Coal Association estimates there are 2,300 coal power plants worldwide, with 620 in China alone. Economists forecast inevitable job cuts and rising electricity bills if coal plants decrease. Major economies including India, United States and China are already facing political pressures. Rt.com

6 central banks to share currency access

ix of the world’s leading central banks have agreed to provide each other with ready supplies of their currencies on a standing basis, AP reported. The decision on Thursday extends currency swap arrangements that until now had been considered temporary measures, as the arrangements were set up to steady the global financial system after 2007. The banks include the Fed, the European Central Bank, the Bank of Japan, the Bank of England, the Bank of Canada and the Swiss National Bank. The swap lines enable them to make sure banks in their home countries can always borrow ready cash from them in any of the currencies involved.

Bank of Japan maintains stimulus, raises GDP forecast to 1.5%

he Bank of Japan (BOJ) has said it was on track to reach its target raise inflation to 2 percent in two years and kept in place its massive stimulus launched in April, Reuters reported. However, BOJ stopped short of officially forecasting it could raise inflation to that figure after a review on Thursday. The central bank did revise up its economic growth forecast for the 2014 fiscal year beginning next April to 1.5 percent, as the economy is expected to keep growing despite asales tax increase next year. The BOJ had earlier kept intact its monetary stimulus, under which it aims to double base money via asset purchases.

US budget deficit less than $1 trillion - lowest since 2008

he US government has run a budget deficit below $1 trillion, for the first time in five years, AP reported. The deficit for the 2013 budget year totaled $680.3 billion, down from $1.09 trillion in 2012. That’s the smallest imbalance since 2008, when the government ran a $458.6 billion deficit. The tax revenue rose while spending fell, which narrowed the gap for the budget year that ended on September 30.

US Federal Reserve sticks to $85bn stimulus

he American Federal Reserve says the US economy still needs support from the Fed’s low interest rate policies because it is expanding only at a moderate pace. The Fed said on Wednesday it will keep buying $85 billion a month in bonds to keep long-term interest rates low and encourage more borrowing and spending. The Fed also plans to hold its key short-term rate at near zero for at least as long as the unemployment rate stays above 6.5 percent and the inflation outlook remains mild. However, it made no mention of the 16-day government shutdown. The Fed did not reiterate concern over higher mortgage rates - a subject it voiced last month.

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5 simple facts about US ‘easy money’ After the US managed to avert a default, world financial headlines shifted from “US government shutdown” and “debt ceiling” to another term – “quantitative easing”. RT explains what QE means and why everyday people should care about the Fed’s decision. On October 30, the US Federal Reserve will make its first monetary policy decision since the government shutdown was averted and the final budget decision was postponed until December. After a 16-day partial government shutdown and a batch of tepid economic data, no one expects the Federal Reserve to reduce its stimulus when it meets on Wednesday. Many analysts now predict it will maintain the pace of its bond purchases into next year, AP reported. Many blame the uncertainty surrounding Congress’ budget fight and renewed questions regarding the health of the US economy. After its September meeting, the Fed proved it can still surprise markets, when it unexpectedly decided to keep on $85 billion worth of bonds. What will happen this time around? We’ll see. While US financial policymakers continue to mull over the best solution, RT Business spoke to Natalia Orlova, a chief economist from Alfa-Bank, and Chris Weafer, a senior partner at Macro Advisory, a Moscow-based consulting firm to find out what the mysterious “QE” term means on both a global and individual level.

1. What does quantitative easing mean? What is it primarily aimed at? The so-called policy of “easy money” introduced in the US in 2008 after the financial crisis broke out means simple dollar printing, aimed at filling the gaps in the country’s financial system. An estimated $3.6 trillion has been printed in the last 5 years, and the money was mostly used to buy debt instruments and junk financial instruments from the market to provide the financial system with enough cheap cash. “In theory, businesses, investors and consumers should be able to access cheaper credit with which to invest or purchase,” Weafer explained. 2. Can it help the real economy, or does it just feed financial markets? Theory says it should, while practice shows little success has been achieved. Easier access to credits should provide for better economic activity and again theoretically “such an increase in activity by both investors and consumers will help pull the economy out of the slump and boost growth. Once growth has been re-established, the idea is to then withdraw the quantitative easing program as there should be enough momentum in the economy to then continue growing without the Central Bank’s help,” Weafer added. But Igor Nikolaev, director of the strategic analysis department at PKF, told RT that all the latest economic fundamentals show that massive financial injections

have so far failed to provide fruit for the real economy. GDP growth remains modest , unemployment is still far above the normal level of 5.5 percent - at 7.2 percent in September - and inflation is running well below the Fed’s two percent target. 3. How much scope is there for extending monetary stimulus? Is there any limitation on the amount of dollars the US can print? “There is no technical limit to the amount of money the US can print,” Weafer said. While quantitative easing creates uncertainty and unpredictability in economies, the US will most likely keep switching on its printing press until it becomes sure the economic fundamentals like GDP, unemployment and inflation become sustainable. “On the other hand, an abundant supply of cheap money in the wake of weak economic growth creates risks of new financial bubbles, mainly in real estate and financial markets,” Orlova added. Acting timely is crucial for the success of quantitative easing in the US. “It is a fine balancing act for the Fed and one that the chairman, Ben Bernanke, has been warning off; keeping the program in place too long may undermine confidence and prevent normal market mechanisms from returning. Taking it off too soon may result in a reversal of the fragile recovery seen to date and risk recession. Bernanke has reminded us many

times that this is what happened in the 1930s and led to a quick return to recession and a collapse in the equity market,” Weafer explained. 4. Has any round of the quantitative easing program reached the goals set? Experts agree that certain progress has been achieved, though it may not be sustainable. “The US has been growing at one to two percent in recent years, while the government sharply cut the budget deficit - from 10 percent of GDP in 2010 to four percent this year,” Orlova said. However, “we will not know for sure if the QE measures have worked until they are withdrawn and we then see if the major economies, especially in the US, can sustain and expand the growth trend,” Weafer said. “This is why the Fed and the US government are so ner-

vous about the timing of the easing of the QE program. Neither is very sure as to how strong the underlying economy is. Most likely, the Fed will ease back very, very slowly when it starts the so-called tapering program, just in case,” Weafer concluded. 5. What effects can quantitative easing - its failure or success - have on everyday people? “Easy money” in the US has helped keep interest rates low, which means everyday people pay low amounts for their debts, Orlova said. “The objective of the QE program is to reboot growth in the economy. That means a return to sustainable growth and job creation. That benefits all of the people if successful,” Weafer said. Rt.com

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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

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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, Nikora and smart

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