Caucasian Business Week #29 by Caucasian Business Week

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BUSINESS WEEK November 11, 2013 #29

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November 11, 2013, Issue 29

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BE INFORMED, DO BUSINESS

GEORGIA

TRANSIT’S SHARE IN RAILWAY TRAFFIC SLIGHTLY INCREASED

IMF’S FORECAST FOR GEORGIA: REAL GDP GROWTH IN 2013 – 2.5%, IN 2014 – 5%

s Georgian Railway reported, in the first half of 2013 transit accounted for 64% of total cargo transportation, local shipments – for 15%, import – 12% and export – 9%. Pg. 6

BUSINESSMAN CESAR CHOCHELI PLANS TO CONQUER GEORGIAN COFFEE MARKET

T V

he Georgian businessman Cesar Chocheli is going to occupy 30-40 % of the Georgian coffee market and compete with Pg. 6 well-known foreign brands.

VILLAGE INHABITANTS RESEARCH illage Inhabitants Research The village inhabitants’ research was implemented in the frames of the “R-CSN” project, facilitated by NGO “CiDA”. Pg. 7

AZERBAIJAN OIL FUND’S INVESTMENT RESULTS MADE PUBLIC

bout 48 percent of the total investment volume of the State Oil Fund (SOFAZ) in the first nine months of 2013 was in the U.S. dollars. Pg. 10

ARMENIA JUICE AND NON-ALCOHOL PRODUCTION INCREASES IN ARMENIA

he volumes of the production of juice in Armenia during the months of January- September have increased by 20% in comparison with the same period of the previous year. Pg. 11

CIS GO FOR BROKE: UKRAINE’S RISKY EU TRADE DEAL

ough admission standards could keep Ukraine’s trade integration with the European Union on hold, and if the process is dragged out long enough, it may be forced back into the arms of its exSoviet ally, Russia. Pg. 12

WORLD NEWS AN INDEX OF FINANCIAL SECRECY - LIFTING THE VEIL

VERY two years the Tax Justice Network, a campaigning group, publishes a Financial Secrecy Index, showing which jurisdictions are friendliest towards tax evaders. Pg. 13

MF published report “Fall 2013 Regional Economic Outlook for Caucasus and Central Asia”, according to which real GDP growth in Georgia will be 2.5% in 2013, while in 2014 – 5%. IMF points at negative Consumer Price Index in 2013, making up -0.3%, but forecasted CPI at 4% in 2014. According to the report, deflation, being observed in Georgia since 2012, is caused by delayed effect of exchange rate increase, food prices’ reduction and weakened domestic demand. Besides, the report mentions that the government spends less money from the budget, but this mode should be changed in 2014. As permanent representative of IMF in Georgia Azim Sadikov declared,

while presenting the report today, economic development reduced significantly this year. He said that the decline was caused by several reasons, marking elections’ influence and reduction of investments’ inflow among them. In his turn, Georgia’s Minister of Economy and Sustainable Development Giorgi Kvirikashvili pointed that “nobody has a sense of satisfaction”, as growth rate, which had to be 6% by the end of the year, will make up in fact only 2.5%. Among the reasons, Kvirikashvili named political influence, including “destructive impact from the opposition”. At the same time, the Minister admitted that there was lack of coordination within the government at the initial stage, which is “completely overcame” today.

NO FAIRPLAY Confrontation between Cable Companies Damages Sports Fan

able broadcasting maintains a significant segment in Georgia and we call these companies as cable operators. It should be also noted the market of cable operators is large and profitable and it is an estimated tens of millions of GEL. Thus, it is natural there is much competition between cable operators and the companies follow various strategies to obtain leading positions on the market. Anyway, the market of several millions of GEL has outlined several leading companies and Silknet is one them as it is considered the largest market player. Pg. 3

WHO KEEPS SPAMMING US WITH SMS ADVERTISING? COMPANIES: Alltours, Alta, Amboli, ARAY Tomorrow, Baldi, Bosch, Carrefour, Chic Bebe, City Club, Club 71, Elit Electronics, GASA, Hinterior, KSB Bank, Lotus, MEDI, Megaline, Mnapoleone, Nissan, OK, RAK ceramics, Safilo, Salamander, Samsung, Smiley, Techno Boom, TK – Batumi

Levan Vasadze: A Constitutional onal Monarchy will Bring a Lot of Money to Georgia

Pg. 2

Nodar Khaduri: There is no Reason for Concern USD Exchange Rate will Rise Pg. 2

Keti Bochorishvili: Small Business Support Agency will Transform Any Idea into Commercial Project Levan Pkhakadze: It is Clear that a New Government will not Change the Economic Course Pg. 4 InvestBank: Our Problems are not Related with Iran Director of “ Investbank” IVA SIKHARULIDZE Pg. 4

Having a poor organizational structure is like having a crappy car, that √ √ √

brings you to destination lately; is hazardous to drive; disturbs the passengers.

Pg. 3

New Year Discount at the Special Issue for the 31st of December Congratulate the Coming New Year to Diplomatic and Business Establishment

Do not create organizational structure on your own!

Pg. 4

MAIN EVENTS caucasian business week

NODAR KHADURI: THERE IS NO REASON FOR CONCERN USD EXCHANGE RATE WILL RISE

inance Minister Nodar Khaduri told Palitra TV program “Ema’s Show” the rate increase of the US Dollar with relation to the Lari was no source of concern, adding there were constant consultations with the National Bank of Georgia on the matter. Khaduri called the change a “normal process” and said the Ministry had its hand “on the pulse” in case interference from the National Bank became necessary. The rate of Lari in relation to the Dollar de-

creased to 1.6793, the lowest figure since December 2011. ‘’The rate changed from 1.65 to 1.67. In the second half of Autumn – the months of October and November – less tourists have traveled to Georgia, for natural reasons. They are one of the sources of the Dollar flow into the country. Also, the market has become livelier, which in turn increased demand on import by foreign sources, which – at least for now – cannot purchase products using Lari outside Georgia. This increased demand for the Dollar. But we have constant consultations with the National Bank. I spoke to the President of the Bank yesterday, while my deputies are in contacts with their deputy presidents. There is no source not just for panic, but even for the slightest concern. I can even tell you the budget was calculated for the rate of 1.7 Lari. This is a completely normal process. The rate increased during the summer, with 1.65 almost decreasing to 1.64. Now it has increased slightly, and this is no reason for alarm. We have our hand on the pulse and the National Bank is ready for a possible necessity of interference. This year the currency reserves have been increased greatly and there is no risk of a worsening exchange rate, especially as export is increasing’’, Nodar Khaduri said.

November 11, 2013 #29

NEW CHIEF PROSECUTOR NAMED

rime ministerial nominee Irakli Garibashvili said he will appoint head of investigative service of the Ministry of Finance, Otar Partskhaladze, as new chief prosecutor replacing Archil Kbilashvili. Partskhaladze, 37, served as head of Finance Ministry’s investigative unit in Shida Kartli region last year before becoming deputy head of this service in January 2013; he was then promoted as head of the ministry’s investigative service. Finance Ministry’s investigative service, informally known as financial police, is in charge of probing into financial wrongdoings. “I am sure he [Otar Partskhaladze] will be a very efficient chief prosecutor. He will have efficient team of young and experienced prosecutors,” Garibashvili told journalists on November 8.

Archil Kbilashvili, who before becoming chief prosecutor year ago was a long-time defense lawyer, announced about resignation, effective from November 17, on Thursday citing differences over the pace of reforms in the prosecutor’s office with incoming and outgoing prime ministers. Kbilashvili said that he was in favor of fast-paced reforms. Garibashvili, who is now interior minister, said he has already picked up his replacement on the interior minister’s post, but declined to specify; he said that he has also consulted with outgoing PM Ivanishvili about the nomination and added that the future interior minister “will be young person.” “Other reshuffle [in the cabinet], major changes are not planned,” Garibashvili added.

FRENCH, GEORGIAN DEFENSE MINISTERS MEET IN PARIS

eorgian Defense Minister, Irakli Alasania, who is visiting Paris, met his French counterpart JeanYves Le Drian on November 8. The Georgian MoD said it was “the first ever official meeting” between French and Georgian defense minister. The two ministers “discussed cooperation in military industry sphere,” the Georgian MoD said without specifics. “We discussed Georgia’s NATO aspiration, bilateral cooperation and especially we touched upon our future military-technical relations. It is very important for us to broaden scope of cooperation with France,” Alasania said after the meeting and welcomed, as he put it, “high level of mutual understanding between Georgian and French militaries.” Also on November 8, Georgia’s Foreign Minister

Maia Panjikidze, who is visiting Paris for UNESCO’s General Conference, met France’s European affairs minister Thierry Repentin. Panjikidze said that Georgia’s EU and NATO aspirations, as well as EU Eastern Partnership summit in Vilnius was discussed.

GEORGIA TAKES PART IN WWTG MEETING GEORGIA SEEKING SUPPORT FOR EU INTEGRATION IN BALTICS

peaker of Parliament Davit Usupashvili yesterday finished a one week visit to Lithuania and Latvia. He said Georgia’s friends are ready to support its integration with Europe at the summit of the Eastern Partnership’s in Vilnius November 28-29, and at next year’s NATO summit, about signing and ratifying an Association Agreement with the EU. While summing up his visit, Usupashvili said that both countries want to assist Georgia on the way to Euro-integration. “We see unprecedented assistance from them for Georgia becoming a member of Europe,” he said. “Latvia and Lithuania are the most active members of the EU which support enlargement of the EU.” Usupashvili also said that in the context of Eurointegration Georgia considers plans and discussions in order to find ways to end the occupation. During the visit, the Georgian delegation discussed the recent presidential election, and current political events including the constitutional reform. Speaker of Parliament met with Lithuanian President Dalia Grybauskaite, Foreign Minister Linas Linkevicius. In Latvia, he met with Foreign Minister Edgars Rinkēvičs; Prime Minister Valdis Dombrovskis; Speaker of Parliament Solvita Āboltiņa and President Andris Bērziņš on November 5. The parties discussed bilateral relations and issues of future cooperation. Latvian Foreign Affairs Minister expressed concern about restoration of Stalin monuments in

several Georgian villages after the change of government. He invited to “get acquainted with Latvia’s experience in raising awareness and building knowledge on complex historical issues.” “As the parties discussed Georgia’s domestic policy, Foreign Minister Rinkēvičs emphasised that the European Union was closely following court proceedings against former Georgian officials,” statement of the Foreign Ministry of Latvia on the meeting reads. A meeting with President Grybauskaite of Lithuania dealt with preparations for the Vilnius summit, ongoing reforms and the recent presidential election. The president said it is necessary to implement reforms on the way to seeking visa liberalization with the EU. She said right now the preparations for the meeting in Vilnius are going ‘smoothly.’ “The summit is expected to see the initialization of an Association Agreement with Georgia, including a free trade agreement,” a press release from the meeting reads. The president also said that on the way toward EU, Georgia must ensure that there is no selective justice or abuse of political opponents, and have transparent legal proceedings, fair trial and the rule of law. “The situation of minorities also needs to be improved. Other necessary steps include adoption of anti-discriminatory and data protection laws and fighting corruption,” she said. The parliamentary delegation of Georgia included members of the ruling coalition and the opposition. They will return on Saturday.

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

ational Wine Agency reported that chairman of the Agency Levan Davitashvili participates in annual meeting of World Wine Trade Group (WWTG). The plenary meeting is held on November 6-8 in Washington, DC. At the meeting, signing of document, worked out within WWTG, is planned, which regulates requirements to labeling, such as alcohol content allowable deviation, harvest/vintage, grape vari-

eties and wine regions, the Agency noted. Besides, discussion is scheduled on ways for reaching agreement on limits establishment for pesticides’ use as well as other problems of winemaking. The Agency declared that WWTG meeting-2014 might be held in Georgia. WWTG is informal alliance of Argentina, Australia, Canada, Chile, Georgia, New Zealand, South Africa and the US, aiming trade facilitation between member states.

BUSINESSMAN LEVAN VASADZE: A CONSTITUTIONAL MONARCHY WILL BRING A LOT OF MONEY TO GEORGIA

businessman Levan Vasadze talks about the positive sides of a constitutional monarchy. As Mr. Vasadze says , this system of government will bring progress to Georgia. A constitutional monarchy will bring a lot of money to Georgia, Saakashvili and Eduard Shevardnadze would not be brands, Georgia’s brand will be a democratic constitutional monarchy. The new world’s political culture rejects monarchist culture, so is alien to America. We are not a part of the new world, we are at the crossroads between Europe and Asia. The restoration of our cultural identity for this world, for this investment circle is the brand of the brands. This is another step in the constitutional evolution for our country’s development. According to various sources, Saakashvili took out seven or eight billions from Georgia, where, the investigation will establish, we were the victims of a

colossal corruption in the first post-Soviet years as well as during the Shevardnadze period and now.

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

MAIN TOPIC November 11, 2013 #29

caucasian business week

WHO KEEPS SPAMMING US WITH SMS ADVERTISING? companies from which TI Georgia staff has received unsolicited SMS advertising without any prior consent (we seek to not include companies that send out messages after you signed up for their customer loyalty programs). If you received spam SMS from other companies recently, you can post them in the forum below.

number of companies continue sending unsolicited SMS advertising to mobile phones, violating the Georgian law on personal data protection. To convince these companies that they should respect not only the law but also peoples’ privacy, we start collecting and publishing the names of companies who fail to comply. The law (Article 5 and 8) obliges the sender of direct advertising messages to obtain the recipient’s personal data (name, address, telephone and fax numbers, email) only with the person’s consent (unless the data was retrieved from “public sources” – a term that is not defined by the law). In any case, the consumer has to be notified on his right to opt out from receiving messages. In most cases, companies that send mass advertising SMS do not comply with these rules. Soon after her appointment in July, Tamar Kaldani, Georgia’s first personal data protection inspector, who is tasked with ensuring that all entities act in accordance with the law when using personal information, warned companies about these legal provisions and even offered consultations. Despite Kaldani’s warning, private companies continue bombarding us with unsolicited mobile ads every day. These advertisers are taking advantage of the fact that the inspector can currently only issue warnings but is not empowered to inspect cases and impose sanctions on violators until 2016. Only then, the law on personal data protection will be fully enforced, and the inspector will be allowed to fine violators. Until then, we appeal to these companies’ sense of social responsibility as well as their intrinsic interest to not upset and annoy their potential customers – and on the behavior of consumers who can voice their discontent with the behavior of these enterprises. Below we start listing

COMPANY: Alltours, Alta, Amboli, ARAY Tomorrow, Baldi, Bosch, Carrefour, Chic Bebe, City Club, Club 71, Elit Electronics, GASA, Hinterior, KSB Bank, Lotus, MEDI, Megaline, Mnapoleone, Nissan, OK, RAK ceramics, Safilo, Salamander, Samsung, Smiley, Techno Boom, TK – Batumi

GEORGIA’S THREE NEIGHBORS ARE RECORDED AMONG THE WORLD’S MOST MILITARIZED COUNTRIES Global Militarization: Top Ten

he Global Militarization Index (GMI) depicts the relative weight and importance of the military apparatus of one state in relation to its society as a whole. For this, the GMI records a number of indicators to represent the degree of militarization of a country: • the comparison of military expenditures with its gross domestic product (GDP) and its health expenditure (as share of its GDP); • the contrast between the total number of (para) military forces and the number of physicians and the overall population; • the ratio of the number of heavy weapons available and the number of the overall population.1 The fact that Israel, Syria, Jordan and Kuwait, four countries in the Middle East, are among the Top 10 countries on the GMI reflects the high level of militarization in this region, which is so rich in conflicts. Furthermore, all the other states in the region,

with the exception of Qatar, are listed among the GMI’s Top 40. This high level of militarization together with general rearmament projects involving arms imports from all over the world (cf. below) is contributing to a further destabilization of the area and can lead to the use of violent means to resolve internal as well as external conflicts, as in Syria. Yet, certain European countries such as Russia and Cyprus also continue to assert their positions in the TOP 10. Cyprus’s regular place in the top set is due primarily to the conflict between the island’s Greek and Turkish population groups, which has continued unresolved for decades. Whereas Azerbaijan has already ranked high in previous years, Armenia3 is a new entrant this year. The rapid buildup of military capacities in the Caucasus is accompanied by heated diplomatic rhetoric and the risk of rekindling the longterm military conflict over Nagorny Karabach. reliefweb.int

Where mobile marketing companies receive the phone numbers and data on consumers from remains unclear. Mobile phone operators have told Transparency International Georgia that they are not selling or sharing the numbers of their clients. TI Georgia interviewed GeoSMS’s and Paradox Georgia’s representatives – companies that offer bulk sms advertising services – who confirmed that they are in possession of large databases of Georgian mobile phone numbers and other data points connected with these numbers, however neither company wanted to describe how they received the data, arguing that Georgian legislation does not require them to disclose the sources of their datasets and that sending tens of thousands of unsolicited advertising SMS is not in violation of the law. Transparency International Georgia welcomes the data protection inspector’s attempt to address mobile spam issue through warnings, but we also call on the office to issue specific guidelines for the private sector on how to conduct mobile marketing in line with the law. transparency.ge

NO FAIRPLAY

CONFRONTATION BETWEEN CABLE COMPANIES DAMAGES SPORTS FAN

lobal Media Group roup (GMG) appeared on the television market in 2010. Initially, it was owned by Georgian Ambassador to China Mamuka Gamkrelidze. Currently, New Media Group is co-owner of GMG. A 100% stake in NMG is owned by Levan Kurashvili, the former director general for Georgian Public Broadcaster. GMG that broadcasts six television channels through cable companies disrupted relations with Super TV, a Georgia’s one of the major cable operators (the former Ayety TV) under the pretext of debts of several months. Super TV defense lawyer Sopo Nemsadze refuses the existence of indebtedness and says the GMG management requested such an amount that was not affordable to even larger companies. The relation was not ceased because of debts, Sopo Nemsadze says. Starting September 1, 2013 a total of six channels were turned off to Super TV subscribers. GMG has disrupted relations with not only Super TV. The issue is that the very GMG owns exclusive rights for broadcasting the world’s most important football matches and various sports tournaments on the territory of Georgia. The English Premier League is a similar one GMG was broad-

casting to Super TV and other cable operators, MagtiSAT MagtiSAT, Caucasus Caucasus, Silknet and other cable operators. On September 1 GMG ceased the right for broadcasting the Premier League matches to all cable operators and concluded a long-term contract with only Silknet. Silknet obtained exclusive rights for broadcasting Premier League matches from Integral company, while Integral created a new channel Silk SportHD specially for Silknet. Only Silknet has got rights for broadcasting the channel, but all subscribers cannot receive this channel. Only those subscribers who pay additional 3 GEL to the monthly fee are able to watch the new channel, or use a 60 GEL package. Foreign companies have set only several cents on similar channels. Over 85 000 subscribers received Silk TV services and they pay 15 to 60 GEL a month and additional 3 GEL considerably grows monthly revenues of Silknet. All sports fans would agree that broadcasting of Premier League and other leagues football matches does not require much expenditure. We have asked other cable operators to make comments on the issue, but they refused to make comments. Only Sopo Nemsadze, a defense lawyer for Super TV agreed to make comments and she said they ceased relations with GMG a year

before. At the same time, Sopo Nemsadze refused to name reasons for disruption of the contract. contract The information is confidential and it refers to only these two companies, Nemsadze said. Moreover, the complicated situation on Georgia’s cable operators market is not confined with only this problem. The market of Georgian cable operators is very profitable and the high competition makes the companies confront with each other and this is war without rules. Therefore, all companies are trying to win the war or lead the situation on the market. MagtiSAT is one of them that having lost the rights for broadcasting the English Premier League matches has obtained exclusive rights for broadcasting Italian Championship. At the same time, Setanta Sports has ceased signal to Silknet. Silknet has offered three various variants to Setanta and offered 100% higher payment compared to the old tariff, but the Setanta management refused all variants. This fact may lead us to think Setanta may become a new cable operator, while Silknet plans to do its best to get back Setanta Sports. The current situation on the Georgina market of cable operators clearly shows that the interest of subscribers is ignored and Georgian cable operators pay no attention to the consumer interests, as Georgian customers have to subscribe to several operators to get all sports

and cognitive channels. The fact is that the confrontation between Georgian cable operators damages customer interests most of all. Paata Bairakhtari

INTERVIEW November 11, 2013 #29

caucasian business week

KETI BOCHORISHVILI: SMALL BUSINESS SUPPORT AGENCY WILL TRANSFORM ANY IDEA INTO COMMERCIAL PROJECT

An interview with Deputy Economy Minister KETI BOCHORISHVILI - Why did the Economy Ministry decide to create an Agency supporting small businesses, whether problematic issues faced by small and mediumsized businesses were originally studied?

- The economic development envisages a support of small and medium-sized businesses as well as the development of start-up businesses and expansion of existing businesses. In this regard there are a lot of reasons to start work and create the Agency. If we look at the statistics, we can see that a share of small and medium business in the business sector is 17 percent, which is quite low. This figure should be minimum 60-70 percent of the total turnover of the business. The statistics of start-up business lifecycle is also important which is quite low. The World Bank study showed that out of 42 000 businesses registered in 2012 only 2 000 may remain. Firstly, this indicates that there is no support mechanisms for the extension this cycle for start-up businesses in order to transfer it to the next stage. Productivity of small and medium-sized businesses is relatively low as well. In a word, there are a lot of reasons which showed that it is necessary to work in this regard. - The main problem is a problem of access to finance, legislation gaps and the overall business environment in the country which do not contribute to the development of small and medium-sized businesses? What will be a purpose of this agency; in what direction will it work? - Despite the economic growth, small and mediumsized businesses have lagged behind economic growth and the national industrial sector fails to meet the increased demand. As a result, the import-

ed products exceeded exports by almost 78 percent. The statistics are pretty low in terms of the prolongation of start-up business survival. There are no tools in order to stimulate small and medium-sized businesses as well as to promote the initiative and development of start-up businesses. The Agency will serve as an incubator for the lender, it will develop the private sector and prepare them for the financial instruments which will be on the market. Any idea will be developed into a commercial project in this agency which is essential. Then, an access to finance is important, the financial instruments, such as grants or loans and so on. All this will have the financial resources and will be a successful business formula. - When will the Agency be enacted and when will its director be selected? - The Agency will be launched in the first quarter of the next year. From the outset the primary services will be offered to our entrepreneurs. These are: an information center, consulting, business projects and also some financial instruments which are important to promote small and medium-sized businesses. The Agency’s Chairman is not yet selected. Perhaps, the competition will be announced in the near future. The Agency will be subordinate to the Ministry of Economy. - Will it be mobilized in the regions or in Tbilisi? - One of the main goals is a regional diversification so that the share of small and medium-sized busi-

nesses to be represented in regions and not to be concentrated only in Tbilisi. - Is a work on the Agency’s action plan completed and when can the first results be felt ? - The main indicators, the main target groups have already been selected and Economy Minister will hold consultations with experts on this issue in the near future. Its presentation will be held. The results will be felt in two or three years. We plan to achieve a rate in 3 - 5 years. Projects are expected to start next year. - Are business representatives ready to cooperate with such agencies? - It was decided to create the Agency on the basis of one- year consultations with a business sector, experts , small and medium-sized businesses. Therefore, all of these tools are important for the development of this sector. The Advisory Council will be actively involved in the work of the Agency, in which the private sector will be involved. This agency will be very mobile and will provide coordination between the government, the private sector and donors in all activities that will be planned in this direction . - If you conducted consultations with banks and how do they look at this issue? - The Agency does not mange financial instruments. It will be a combination of financial institutions. We hope that we’ll actively cooperate with the banking sector and other financial institutions.

LEVAN PKHAKADZE: IT IS CLEAR THAT A NEW GOVERNMENT WILL NOT CHANGE THE ECONOMIC COURSE

An interview with Deputy Chairman of the Supervisory Board of “Wissol Group” company LEVAN PKHAKADZE - What are your expectations from the new Prime Minister ? Whether he will be a guarantor for business in terms of freedom? - It is clear that the course taken by the new government will not change. It will apply to a new Prime Minister as well. We understand that the country’s economy should develop. The biggest problems

we have are economic and I am sure that everyone understands this very well. So, we do not expect the change in the course, we believe that it will be maintained, the support of business will continue and we’ll have greater results. It is very important that the “Co-investment Fund “ was created. More than 6 billion USD are accumulated in this fund that should be invested in the economy of Georgia. This will lead to the creation of new businesses, expansion of existing businesses and attraction of more investments in the country. - How successful was the economic team’s activity during this year? The country cannot reach a scheduled economic growth rate and positive calculations are done for the next year. How can the steps taken by the economic team be a guarantor of this ? - A fact that I meet too many people, businessmen every day, gives me a reason for optimism. We all have to remember that it’s very difficult to develop business in one day and one month. It takes some time. This year was a preparatory period and we’ll get a result a little later. - Your company has been operating in the market for a long and has established strong positions. As for new companies or investors who thinks to invest in certain sectors. If there is a stable environ-

ment for them to take this step? - I think that Georgia still has a lot of resources and a lot of opportunity to develop the business in different directions. We have no fierce competition yet. Any person who intends to invest in Georgia should think in order to properly invest, to create the proper management and develop in the right direction. I do not see any other risks, but he should think. Currently there are no political risks in the country. I think that all other risks are minimized. - Whether you will apply to the “Co-investment Fund”? There are talks that the Fund will face a problem of a lack of modern projects, what do you feel about it? - It is very important that such a Fund was set up in the country. 6 billion USD is a large sum for the country’s economy. I am sure that there will be projects in Georgia. I do not exclude the possibility that our company will collaborate with the Foundation. This will surely bring results. - Whether the government will become the private sector’s competitor through this Fund? - As far as I know, the government will not participate in the work of the Fund. The government is not a fund investor; private investors are involved in it. As for the possible competition with the Georgian banking system, it will not be bad if even greater

competition is created in the banking system and I don’t think our bankers are looking at this fact with fear. However, I cannot consider it a rival. This Fund will not issue credits. They will directly invest in different areas of the economy as well as in companies. - Certain decisions taken by the government have become the subject of criticism from business. I mean amendments that must be made to the “Labor Code”, gambling business and so on. How do you think, is there a sufficient communication between government and business today? - The Labor Code we have took a very long period of time. Business Association was involved that means that businessmen were actively involved in the discussion. So we cannot say that the “Labor Code” was adopted by the government without consultations with business. Many things have changed, which are also in line with business requirements. - So, are you satisfied with the communication with the government? - We’ve never felt from the government that they have no desire for it. Various ministers are frequentguests in our business association and there is a permanent discussion between us. So communication is absolutely sufficient. I really do not see the confrontation between business and government.

INVESTBANK: OUR PROBLEMS ARE NOT RELATED WITH IRAN

Director of “ Investbank” IVA SIKHARULIDZE

- A few days ago the interim administration entered into the “ InvestBank “ because of the discovered violations. What violations are we talking about? - It’s about several types of violations, as President of the National Bank said, but information about them is confidential. At this stage, we are working together to improve the situation. In all other respects, including work with clients, we do not have any problems. We have several interesting projects that we intend to implement, and from this point of view, the bank has no problem. I hope that all will end well. - That is, violations are not of a financial nature? - No. If you look at the financial records of the bank, then you can see that from this point of view there is no problem. On the contrary, we go forward, we develop , implement modern technology , we enter into various international systems, etc. In this issue, we always feel the support of the National Bank. - What are the terms of the temporary administra-

tion in your bank? - According to the standard, 2 months. We hope that the problems will be solved during this period. - What was the cause of this decision? - There was a routine check, after which it was decided to introduce external control of the bank. We did not try to protest because it is a collaboration and it’s not in our interest to oppose it .It’s a normalprocess. - So you partially recognize the validity of claims of the National Bank to you? - It is hard to say so clearly. We look at this issue from both sides, so we try to sidestep this theme , or the wrong conclusions may be made. We are trying to avoid it. - In June, an influential American newspaper “The Wall Street Journal” published an article about the fact that 150 Iranian companies are operating in Georgia, the purpose of which is avoiding international sanctions against Iran. “InvestBank “ was also mentioned in the article. Is not there any con-

nection between these processes? - No, that’s another topic - I then made a statement in response to the article. In reality, the situation was quite different as it was written in that article. This topic has been closed. - However, after the publication Georgian banks have stopped serving Iranian businessmen and say they have done so at the request of the government? What is the situation in this regard?Do you serve Iranian customers? - Of course, no. The Georgian banking system is very well developed, and it’s merit of both NBG and commercial banks. The financial system of the country is very transparent and it is impossible to get around the new law, such violations are monitored on-line. - You said that your customers would be able to receive services without any difficulty, how is it really? - As I said, the bank has no financial problems, on this basis, nothing has changed for our customers.

ECONOMY November 11, 2013 #29

caucasian business week

RUSSIAN MEDIA: ARMENIAN GOVERNMENT INTENDS TO START NEGOTIATIONS WITH GEORGIA ON RESTORING ABKHAZIAN RAILWAY

rmenia hopes that the new government of Georgia will show sober judgment regarding the Abkhazian railway, the Russian Politrus informs. According to Politrus, the Armenian government intends to launch negotiations on restoration of Abkhazian railroad. These issues will be dominating in the negotiations between the new government of Georgia and Armenia. “Armenia has been in a transportation blockade for 20 years now. We’ve been searching for transportation options. The time has come to solve the problem of restoring the GeorgianAbkhazian section of the railroad and this must be solved politically”, the co-chairperson of Armenian-Russian inter-parliamentary commission Niokolay Rizhkov said.

He declares that the customs union will assist restoring railroad transport and if this happens, the situation will be significantly changed. Following the Politrus, restoring the 80km. section of the railroad, will benefit Georgia too, as wagons loaded with export will be sent from Georgia to Russia and a lot of Russian tourists will arrive from Russia, who can’t have a holiday in Georgia due to the costly air tickets now. According to the edition, railway transport will also benefit Abkhazia, as there will be additional work places. “The new work places will be very important for the Abkhazian population, most of which go to the Krasnodar district to work. Abkhazia’s budget which is subsidized by Russia will be able to be on its own”, - Politrus informs.

ZURAB MELIKISHVILI: WE SUPPOSE AVERAGED REAL GROWTH RATE WILL NOT EXCEED 2.2%

ember of the parliamentary minority Zurab Melikishvili declared “We can assume that the average rate of real (GDP) growth not to exceed 2.2%”. As of 9 months, real GDP growth made up 1.7%, at that 1.3% was fixed in the 3rd quarter, which “is catastrophically, by 6%, less than in the same period of 2012” (when the rate made up 7.3%), MP pointed at the press conference today. As the reason of such drop, Melikishvili named wrong economic policy, pursued by the government, which affected implementation of the budget also.

Melikishvili forecasted that plan of tax revenues, making up 6.92 billion lari for 2013 (year-onyear growth – 9.6%), will not be fulfilled. In 10 months, annual plan is implemented by 73% only, and collection of taxes of 1.859 billion lari in remained 2 months is impossible, considering economic opportunities of Georgia, the MP pointed. Moreover, Melikishvili said that even implementation of last year’s factual figures of revenue (6.311 million lari) is in danger, because “it is hard to imagine mobilization of 625 million lari on average in the remained months on background of factual dynamics”.

A T

TI Georgia noted. Program budget describes governmental expenditures as distributed among specific programs and not among ministries, so that cause-effect relation between allocations for specific activities and obtained results is more obvious, IT Georgia pointed. According to the organization’s estimation, quality of program budget deteriorates each year, in

particular, information regarding programs and sub-programs’ activities reduced, there are no indicators for intermediate and final results’ measuring, etc. Not to impose responsibility to executives seriously hinders development of performance-oriented budgeting system and directly encourages perfunctorily creation of program budget, TI Georgia said.

DOUBLE TAXATION PREVENTION AGREEMENT CONCLUDED WITH SWEDEN

eorgian Finance Ministry informed that an agreement on double taxation avoidance and tax evasion suppression was signed today between Georgian and Swedish

governments. According to 6-month data of Sakstat, direct Swedish investments amounted to $5.27 million, against of negative $2.4 million in the same pe-

INFLATION FIXED IN OCTOBER

akstat reported that compared with the previous month, inflation made up 1.5% in October. If compared with the same month of 2012, inflation made up 0.2%. Biggest month-on-month growth of prices, making up 10.1%, was fixed in healthcare. Annual inflation was impacted significantly by price changes in alcoholic beverages and tobacco (growth – 8.3%), healthcare (growth – 3.2%), transport group (decline – 3.5%).

ISET RESEARCH INSTITUTE: CCI INCREASED IN SEPTEMBER

to Russia, Ukraine, Belarus, Moldova, Armenia and Azerbaijan . But as “Banking and finance” newspaper writes, the reality is somewhat different - the collection of citrus has already begun, but collected tangerines and oranges cannot be sold in sufficient quantity so far and they are rotting. Apart from that, citrus fruits collected in November may spoil by December. Local people express strong dissatisfaction, believing that they received less attention than thewinegrowers in the region of Kakheti, where the government has taken a decision to continue subsidizing of viticulture.

TI GEORGIA: PROGRAM BUDGET MUST BE APPROVED TOGETHER WITH STATE ONE AND MUST HAVE FORCE OF LAW

I Georgia, Georgian branch of Transparency International, declared that program budget must be approved jointly with state one and must have force of law. It is already 3 years that Georgia has formally passed to program budget, but Georgian Parliament approves state budget this year, the same way as in previous year, without program budget,

ational Bank of Georgia (NBG) expects that GDP gap (deviation of actual GDP from its potential level) will be closed gradually within the next 6 quarters. Increasing economic activity was indicated in the 3rd quarter, but GDP gap still remains negative at this stage, affecting price level in the direction of reduction, NBG pointed. Closing of GDP gap will promote inflation to get closer to the target level (6%), NBG noted. According to NBG’s forecast, annual inflation will remain low during the next period and will reach the target level by the end of 2014.

SET Research Institute said that after 2-months decline, Consumer Confidence Index (CCI) has increased in September, making up -7.9%. In July and August, CCI made up -9.4% and -13.3%, respectively. Consumer expectations showing reached -4.4%, being at -7.5% and -12.2% in July and August, respectively. While explaining such a growth, ISET points partially at seasonal factors, such as the vintage, but notes also big annual growth. In September, CCI increased by 4 percentage points year-on-year, making biggest jump after May. ISET calculates CCI, based on results of telephone poll, which is conducting in the 3rd week of each month among 300-400 randomly selected respondents.

CITRUS EXPORTS IN ACHARA FACES PROBLEMS

ccording to the Government of Adjara , the first batch of citrus fruits collected in the region , will be exported to Russia in early December. A permission from the authorities of the Russian Federation has already been received, but exports will not begin before the crop is fully collected. The Ministry states that the purchase price of citrus fruits will almost double and reach 0.50-0.80 GEL per kilogram depending on the quality of the product. This year a record harvest of 110 000 tones is expected in Adjara. Adjara citrus will be exported

NBG: GDP GAP IS EXPECTED TO CLOSE GRADUALLY WITHIN NEXT 6 QUARTERS

riod of 2012. According to Finance Ministry, Georgia has as of today effective agreements on double taxation avoidance and tax evasion suppression with 45 countries. The Ministry told Sarke that several more such agreements require ratification, but found difficulty in specifying, how many agreements will enter into force by the end of the year.

GEORGIAN DELEGATION PARTICIPATES IN ANNUAL LONDON INTERNATIONAL TOURIST EXHIBITION AND TRADE FAIR

ational Tourism Administration declared that Georgia is represented at WTM-2013, Word Travel Market, held annually in London. Georgia participates in this international tourist exhibition and trade fair since 2004. According to the Administration, Georgian stand represents Ajara Department of Tourism and Resorts, National Agency for Protected Areas, 5 tourist companies (Caucasus Travel, Visit Georgia, Georgica Travel, Explore Georgia, Geoplay Travel) and Tbilisi hotel Holliday Inn. The Administration pointed that new promotional materials, being represented at the exhibition this year, contain information about tourist potential of Georgia, which is thematically divided: culture, wine and kitchen, hiking, winter, summer, etc. To note, according to Interior Ministry’s data of 9 months, 12,786 visitors from Great Britain have visited Georgia this year, increasing in number by 13% year-on-year.

BUSINESS caucasian business week

TRANSIT’S SHARE IN RAILWAY TRAFFIC SLIGHTLY INCREASED

s Georgian Railway reported, in the first half of 2013 transit accounted for 64% of total cargo transportation, local shipments – for 15%, import – 12% and export

– 9%. To compare, in the same period of 2012, these shares were respectively, 61%, 16%, 15% and 8%. In the reporting period, 10 customers accounted for 72.4% of total cargos (i.e. for 6.34 million t). At that, Georgian Transit was a leader with

58.9%, LLC Saktsementi accounted for 11.1%, while Pace Georgia – for 10.1%. In the same period of 2012, shares of the mentioned companies were as follow: Georgian Transit – 56%, Saktsementi – 11%, Pace Georgia – 10%. In terms of freight origin, Georgia accounted for the most share (more than 20%), being followed by Kazakhstan and Azerbaijan. In terms of freight destination, leader was Europe (30%), while Georgia occupied the second place.

REVENUES OF GEORGIAN RAILWAY DECREASED

ccording to unaudited consolidated data of JSC Georgian Railway, the JSC completed the first 6 months of the year with net profit of 41.85 million lari. This showing has decreased by 41.14% year-on-year. Revenues of Georgian Railway made up 214.91 million lari, decreasing by 4.53% year-on-year. Out of total revenues, 165.77 million lari (77.13%) is received form cargo transportation,

being increased by 1% year-on-year. Revenue from cars’ leasing amounted to 14.99 million lari (6.97% of total revenues), increasing by 40.62% year-on-year. Revenues, received from passenger transportation, amounted to 7 million lari, decreasing by 6.53% year-on-year. Other revenues of Georgian Railway decreased by 55.89% year-on-year and made up 5.43 million lari in the reporting period.

GEORGIAN RAILWAY TO SPEND $15M TO CONSTRUCT 3 INTERMODAL STATIONS JSC

eorgian Railway is going to build intermodal stations (i.e. ones, allowing change of different transport means while shipping freights) in Batumi, Poti and Vale. According to the JSC report, construction of each station will require $5 million and about 6

months. Whole cost of the project will be paid by Georgian Railway itself. Construction works in Batumi are already started. Management of the company supposes that launch of the new stations will allow to attract additional 400,000-500,000 t of cargos.

November 11, 2013 #29

UNITED WATER SUPPLY COMPANY TO HAVE A NEW OFFICE IN 2016

he United Water Supply Company of Georgia LLC (UWSCG) will have a new head office in 2016. The company has already announced an international tender. According to the tender, the contractor should build a 10 -storey building in the form of a water drop. Ministry of Infrastructure and Regional Development explains that the Asian Development Bank [ADB] has allocated money for the construction of the company’s head office as well as developed a building design. According to the tender conditions, a 10 -storey office with the area of about 5 000 m2 should be completed in 540 days after the start of construction while construction works should start in 2014. The United Water Supply Company of Georgia explains that Georgia has received a loan from the Asian Development Bank (ADB) in order to ensure a value of the Urban Services Investment Program (I tranche). A part of this loan will be used for the construction of the company’s head-

quarters. An annual construction turnover of an applicant should be minimum 6,700,000.00 USD in the last 3 years.

BUSINESSMAN CESAR CHOCHELI PLANS TO CONQUER GEORGIAN COFFEE MARKET

he Georgian businessman Cesar Chocheli is going to occupy 30-40 % of the Georgian coffee market and compete with well-known foreign brands. The businessman explains to commersant.ge that he plans to construct an entirely new venture which will be built in the settlement of refugees. By this time, the businessman is holding talks with potential partners. According to Chocheli, his enterprise will start coffee production in 2015 and will compete with such brands as Pele and Chibo , however, he is not going to fully replace the imported coffee and explains that his company will occupy only 40 % of the Georgian market because in another case, they will be considered a monopolist when the antitrust law is launched. “We will not only focus on the Georgian market,

we plan to export our products to various countries of the world, “ - says Chocheli . In his words, the company, which will be built in one of the refugee settlements, will be equipped with ultra- modern technology and only raw materials for the production of the soluble coffee will come from abroad. Note: The businessman Cesar Chocheli plans to launch four new projects , including chips, coffee and construction materials production. Cesar Chocheli plans to invest 100 million in the projects. Whether soluble coffee made in Georgia will be able to compete with global brands? A market researcher Niko Tevdorashvili says that Cesar Chocheli is an experienced businessman and in the case of right marketing calculations, it will not be difficult to compete with “Pele” and “Chibo”.

GEORGIA HARVESTED ITS FIRST RICE CROP

griculture Ministry declared that LLC Agro Zana harvested first ever rice crop in Georgia. The company gathered 8 t of rice on 11 ha in Abasha district (Samegrelo region). The company plans to use crop as seed stock and is going to expand crop area up to 200 ha, the Ministry noted. The Ministry reported that the company has purchased special rice harvester this year, while next year it plans to buy rice-processing equipment. No volume of investment was named.

NET SALES OF GEOCELL INCREASED IN THE III QUARTER

n the III quarter of the current year net sales of Geocell increased in comparison with previous quarter, although decline in comparison with July-September of last year. As financial report published by Geocell owner company Teliasonera indicates, in July-September of the current year Geocell sales equaled to 63,701 million GEL (244 million Swedish Krona), in the previous quarter - 57 057 GEL (222 million Krona). In the third quarter of last year net sales of Geocell equaled to 71,794 million GEL (275 million Krona). During this year sales of cellular operator were increasing although they were less than data of the analogic quarters of last year. In the first quarter of the year net sales of Geocell equaled to 55.087 million GEL (211 million Krona).

SALES OF ENERGY DRINKS GROWING ON THE MARKET

nergy drinks market players speak about sales growth. According to “Redbull” importing company “Gagra plus”, sales of energy drinks have increased by about 30 % compared with last year. The company explains the increase in demand by an increased distribution network. “Gagra Plus” representative notes that they supply “Redbull” to all major supermarkets and small stores and

a selling price is 3 GEL. Energy drink is sold on the Georgian market since 2004. “Pepsi” company that is a distributor of “Adrenalin Rush”, recently appeared in the sale drink, states that sales exceeded the scheduled by 130 %. The company’s representative explains that “Adrenalin Rush” is considered top class energy drink in many countries and users are already familiar with it. A selling price of the drink in 330 ml jar makes 2.5 GEL.

“MANGO” ADDS CHILDREN’S CLOTHING LINE

lothing chain “Mango” will open another store next year where the children’s line will be presented. “Mango” management explains commersamt.ge that the store location and opening date is not specified yet, however, they say that in Georgia “Mango” will be presented in all directions like in other countries of the world. The store management says that sales have increased by 20% compared with the same period of last year and on the Georgian market only

“Zara» store is considered as the competitor of “Mango” chain. “Mango” does not agree with the newly opened “Orsey” which names “Mango” its competitor.

RESEARCH November 11, 2013 #29

caucasian business week

VILLAGE INHABITANTS RESEARCH

Village Inhabitants Research The village inhabitants’ research was implemented in the frames of the “R-CSN” project, facilitated by NGO “CiDA”, supported by East-West Management Institute program G-PAC and financed by USAID. RESEARCH PRECONDITION The key aim of the aforementioned research was to study Georgian villages’ inhabitants’ needs and possibilities. In January-February, 2013 in the frames of R-CSN project a research was conducted that considered the problems existing in Georgian regions (except Tbilisi) to be unveiled and identified with those activities, which were implemented by local civil organizations. The research made it clear that the situation in regional centers and in villages differed. This difference was much vivid if considering the problem-solving issue in villages and cities. Thus considering all these, the research conducted in June-July, 2013 aimed to describe the problems and resources the villages inhabitants faced in Georgian regions. The research objectives were following: 1. Describing the family structure of the village inhabitants 2. Studying the existing, private and the general property existing in the villages 3. Studying the outcome and income of the village inhabitants 4. The local governance cognition and civil activities evaluation by the village inhabitants’ 5. Describing the implementation of the spread justice model 6. Identifying the villages inhabitants relationships towards various civic unities 7. Recognizing the infrastructural projects effectiveness by the villages inhabitants 8. Studying migration processes. RESEARCH METHOD To achieve the aim and solve the research objectives the research team selected the quantitative methodology. The research tool was a structural application form. The research issues were established as a result of quantitative and qualitative research conducted in the winter of 2013. This simplified the research tool selection process. SELECTION METHOD During the selection process the village inhabitants’ census and NGO “CiDA” database regarding the village inhabitants’ quantity were used. Considering the research peculiarity itself we conceived it would be better to poll similar number of respondents in every region (150 respondents in each region). As for inside the villages considering the number of inhabitants in each, we divided them in three categories such as: small village – 50-200 inhabitants, medium village – 200-1000 inhabitants, big village – 1000 and more inhabitants. As the diagram below shows the most popular villages are those having inhabitants - 200-500. Diagram 1. The villages according to the number of inhabitants

To get so called representative selection and to receive better picture regarding the village inhabitants access towards municipal services, we thought it would be better to select 2 the biggest municipalities (municipalities having the biggest number of inhabitants living in them). In each municipalities three villages with the inhabitants 50 and more were randomly selected In each village the respondents were polled considering the number of inhabitants in general. Such methodology enabled us to involve all types of villages’ inhabitants including small and big in the research. Totally 1496 respondents were interviewed in the frames of the research. KEY RESULTS Economy and Property The research showed that village inhabitants’ everyday income on each inhabitant totals GEL 5.5. It is noteworthy that small villages inhabitants everyday expense (GEL 5.7) is slightly more compared with the medium villages inhabitants expense (GEL 5.6) and big villages inhabitants expenses (GEL 5.3). 59.3% of the respondents have detached houses including 65.4% registered one. 90% own land, including 62.8 registered. The dwelling places are the property for 96.4% of the respondents. The majority of the houses of the respondents have utilities (electricity and drinking water). Internet access in the villages still remains much low percentage and only 15% of the respondents have the internet access at home. Out of the polled villages’ inhabitants, they own from 0,1hectare to 15 hectares lands in average. The bulk of the respondents - 68.2% own poultry, 54% own cow in milk. According to the regions, the inhabitants of Samtskhe-Javaktehi have the biggest number of cattle, the smallest number – in Adjara, Kakheti and Mtskheta-Mtianeti (30% of respondents). SERVICE ACCESS Out of the polled villages, more than half of 14 villages (approximately 23.3% of totally polled 60 villages) inhabitants’ answer that is no cattle-run in their villages. Such villages mainly are in Guria and Adjara. According to the 14% of the respondents their village has shared cattle-run with the neighboring village. In those villages where there are cattle-runs the half of the respondents reckon them to be inaccessible. The cattle-run accessibility on a 4-grade scale averagely received – 2.42 points. Undivided lands in the villages are either abandoned or leased and a leaser living in/or outside the village pays leasing money to the state. More than half of the respondents think that the municipal resources existing in the region are unfairly distributed. Receiving agricultural cards were much significant for the respondents. The importance of getting cards on a 5-grade scale received 4.7 points. Receiving cards appeared to be the most significant for the small villages – 4.82 points. The lowest points were detected in big villages – 4.62 points. The difference is important from the statistics viewpoint. Only 3.4% failed to evaluate. According to the majority of the respondents the agricultural cards redeeming process was not a problem. It became vivid that the villages are lack of agricultural tools shops, farmers serving centers, clubs, chemistries’, libraries and professional-educational institutions. LOCAL GOVERNANCE PERCEPTION According to the respondents the local governance bod-

ies have either poor influence (24.8%) over their everyday life or do not have influence at all (34.6%). Only 7.7% think that the local government seriously influences on their everyday life. Despite this in case of any problems regarding various services first of all the locals address the president’s representative in the certain village and then governor. 40.1% of the respondents think that the local governance bodies are responsible to solve the local problems, 37.1% reckons that besides the local governance bodies the community members should also be involved in the problems settlement process. In the most frequent cases the villages’ inhabitants name the president’s representative and the governor to be responsible on various problems existing in the villages. As for assisting the economic growth it is considered to be the central government’s job. It is noteworthy that the locals’ liability appears to be just taking care of cemeteries. According to the majority of the respondents assisting socially insecure people should be top issue for the local governance bodies. The irrigation system and comfortable accommodation share 2nd and 3rd places. The smallest number of the respondents thinks that the local governance bodies should take care of libraries, storm cannels and cemeteries. The majority of the respondents think that the local governance bodies are more or less effective, though approximately 10% negatively evaluate their work. 88% of the respondents reckon that the president’s representatives should be elected by the people (small villages inhabitants approve this idea the most). The respondents are less enthusiastic regarding their participation in settling local problems. Just a small group of respondents are self-confident considering the same issue. The villages’ dwellers’ civil activity is pretty low; they are rarely involved in solving certain issues together with the local governance bodies. They seldom attend meetings, participate in volunteer activities etc. On a 4-grade scale their self-evaluation regarding the activeness totals just – 1.37 points, which seems to be less than average. The most active are the medium villages. The respondents are much passive in cooperation with the local governance. In case of any problems they mainly get in touch with the president’s representative (14.2%) or governor (11.4%). The medium villages’ inhabitants in the most frequent cases address the president’s representative or governor, as for the big villages’ dwellers, they address the head of council. 75% of the respondents think that it is desirable and even important a certain kind of unity/council staffed by the village inhabitants to be established. The majority of the respondents reckon that the abovementioned unity together with the local advisory should be a decision-maker body.

According to 69% of the respondents the council staffed by the locals should gather for discussing various issues connected with the village welfare. The road rehabilitation and the irrigation system optimization share second and third places. The cattle-run issue appeared less important as it received the smallest number of votes. The majority of the respondents are ready to be involved in the village council/unity to arrange existing problems. 21% of the respondents are less enthusiastic regarding the issue though 14.3% of polled people found difficult to answer the question. Out of those who are ready to be involved in the council activities, only 10.7% will be available weekly, 38.4% will be available once a month and 30% will be available on a quarterly bases. 54% of the respondents think that the village council membership should be a must for every registered dweller in the village; 32% does not agree with this. According to 53.3% of the respondents every person who owns a property in the village should have right to become a part of the village council; 38% thinks that only those people who are registered in the village must be allowed in the council. We asked the respondent to evaluate the Ministry of Agriculture initiation regarding the cooperation promotion. It appeared that 68.2% had no information about it at all. 61% of the respondents found difficult to answer either he/she would join similar kind of cooperation or not; 23% gave negative answer and only 16% expressed readiness to join it. 39% of the respondents have no idea who is their majoritarian MP; 42% has no information about their MP’s activities in the parliament. 52.6% of the respondent met with their majoritarian MPs only in pre-elections period; 39% did not meet him/her at all. After the elections only 13.8% of the respondents met the majoritarian MP during post-elections meetings, 4% - on meetings initiated by the village dwellers itself. 56% of the respondents have no idea where their majoritarian MP’s bureau is located.

INVESTMENT caucasian business week

November 11, 2013 #29

THE INDIANA JONES OF INVESTING LIKES A TINY COUNTRY STRADDLING THE BORDER BETWEEN EUROPE AND ASIA Mark Mobius is the authority on frontier markets, the “emerging markets of the future.” As executive chairman of Templeton Emerging Markets Group, Mobius spends 250 - 300 days a year traveling to economic final frontier. He’s the Indiana Jones of investing. Business Insider caught up with Mobius while he was out in Georgia, a tiny country that connects Western Asia and Eastern Europe. We asked him what he looks for in a frontier or emerging market investment, and what he learned from his visit to Georgia. - What are the best sign that an investment will do well in an emerging market or frontier market?

- The first and foremost sign is growth. Economic growth drives company growth and profitability, and that is thus what we want to see when

investing. We look for well managed companies who are capable of taking advantage of the country’s economic growth. - What’s on your must-do list when you visit a country for the purposes of analyzing it as an investment? - The must-do list includes first visiting the companies in which we are interested and meeting the management. Then we want to talk to the companies’ customers and competitors. Lastly, we speak with government officials who are involved in regulating and monitoring the businesses in which we intend to invest. - What are the big red flags that give you pause? - High turnover of top personnel of a company is usually not a good sign, particularly if there is a departure of the Finance Director. Also a high debt situation with cash flow being used more and more to pay debt and interest. Then sales growth is important, and if sales are not rising then that is a bad sign. - What’s one question you ask every dignitary or politician you meet when you visit a new country?

MM: What reforms are you undertaking to reduce corruption? What plans do you have to grow the economy and reduce taxation while making government more efficient? - What drew you to Georgia? - The fact that the country has undergone a transformation towards a modern and fair society where citizens are treated properly by their government. - Could you give us an example of something you learned speaking to locals in Georgia? - The most impressive point I learned was how much the old ways had been discarded and the government had become more efficient. Most important has been the reduction of corruption. - What risks should investors be aware of when considering Georgia? - Like in any country there are revisionists in Georgia who want to go back to the old ways. Also, like other countries there still is corruption. So these are problems we should be aware of. In addition, we must watch relations with Russia to ensure they remain on an even keel. businessinsider

SLOVAKIAN J&T GROUP IS INTERESTED IN INVESTING IN GEORGIA

GEORGIAN-AMERICAN UNIVERSITY TO BE PLACED IN THE PRESIDENT’S RESIDENCE

lovak investors expressed interest in investing in Georgia, - Ministry of Economy and Sustainable Development stated. With invitation of the ministry chairman of supervision board of one of the largest Eastern European Mountain resort tourism group J&T Group Peter Korbaka, along with manager group is visiting Georgia. Company representatives have already visited Likani and Bakuraini. In the framework

Georgia’s president elect Giorgi Margvelashvili declared that Georgian-American University will be placed from next year in the president’s Tbilisi residence. Margvelashvili said that he is not supporter of so huge residence of the president. “I think that entire amount, which was spent from the budget for such fashionable building’s construction, should be returned to people and be used for students”, he declared. To remind, current residence was built in Tbilisi area Avlabar in 2004-2009. Now, members of the Parliament majority declare that the building will host Technological University. Regarding Batumi building intended for Technological University, Minister of Economy and Sustainable Development Giorgi Kvirikashvili told Sarke that prime cost of this object is so high

of the visit, the largest investment group will be introduced to Gudauri infrastructure and development opportunities. Slovak businessmen expressed interest towards Georgia after representatives of Ministry of Economy and Sustainable Development of Georgia and Gudauri Development Agency introduced resort potential and mountainous regions development concept. After the visit to Gudauri the guests also plan arrival to Kazbegi and Kakheti regions.

VAZIANI COMPANY PLANS TO LAUNCH VINEYARD ON 200 HA

ne of the Vaziani Company founders Irakli Iashvili told Sarke that they plan to launch vineyard of 200 ha in Kakheti region. The company has built a factory recently, spending for that end 3 million EUR in total, Iashvili said. Out of total sum, $1.55 million was borrowed from VTB Bank Georgia, including loan of $600,000, issued within preferential agrolending program. Iashvili declared that Vaziani Company processed 1,500 t of grapes this year, while total out-

put made up 1.5 million bottles of wine. Traditional markets that the company primarily supplies are Kazakhstan, China, Tajikistan, Ukraine, while currently, about one-third of the company’s production is exported to Russia, Iashvili declared. In China, the company supplies wine to 2 provinces, while contract with one more province is near to be signed, he pointed. Iashvili said that price of the company’s wine on Russian market varies within $8-12 per bottle, being near to one on other countries’ markets, “slightly higher in China, while slightly less in Ukraine”. To note, Vaziani Company was separated from JSC Vaziani in last July, merging with LLC Telavi-Wine in December. Currently, stakes in the company are distributed as following: Irakli Iashvili – 54.568%, Nugzar Chichinadze – 17.872%, Mikheil Iashvili – 12.53%, Barbale Iashvili – 7.17% and Leila Kumsiashvili – 3.57%.

AMCHAM DELEGATION TO ACQUAINT AMERICAN POLITICAL ELITE WITH CURRENT PROCESSES IN GEORGIA

he American Chamber of Commerce in Georgia (AmCham) informed that its delegation will meet leading politicians in Washington, DC on November 12-14. The meeting aims to

acquaint American policy-makers with current economic and democratic processes in Georgia. Among topics, planned to consider at the meeting, there are support to foreign investments, energy security, regional trade and transportation, macroeconomic indicators, rule of law, court system and other issues, related to economics and investment, AmCham pointed. AmCham president Sarah Williamson will head the delegation, composing of Andrew Coxshall (KPMG), Neil Dunn (BP), Nino Suknidze (DLA Piper), Cliff Isaak (BDO) and Giorgi Chirakadze (Georgian Business Association).

that it cannot be sold. To remind, chairman of Ajara government Archil Khabadze declared earlier that more than 78 million lari is already spent on that building, while additional 12 million lari is needed for completion of construction.

REGISTRATION OF REAL ESTATE DECREASED Y-O-Y, BUT INCREASED Q-O-Q

ublic Registry reported that number of real estate registrations in the 1st quarter made up 125,257. The number is decreased by 67.8% year-onyear, while slightly increased by 1.3% quarter-on-quarter. At that, primary registrations

made up 22,960 in number, decreasing by 88.6% year-on-year and by 5.6% – quarter-on-quarter. As for secondary market, 102,297 transactions were registered in the reporting period. The number decreased by 45.6% year-on-year, while increased by 3% quarter-on-quarter.

SILK ROAD GROUP LOOKS FOR INVESTOR FOR TRUMP TOWER PROJECTS

ilk Road Group will publicize every agreement with potential investors for Trump Tower funding. Head of Silk Road Group Supervision Board George Ramishvili states that currently negotiations are going with American, European and Russian business groups. Ramishvili informs that he intensively works for fundraising fro the financial institutions and the society will be aware about every detail, like in the case of construction of 3-star Park Inn in the former Post-Telegraph building, when VTB approved credit line of 15 million. Ramishvili states that after 1-year time-out works have been resumed on all projects, among them hotel construction in Tsinandali, which is carried out in partnership with Co-investment Fund and structural works are over. Ramishvili distinguished small power station build on Bakhvist-

skali among the successful projects. Reminding that company of the American billionaire Donald Trump - Trump Organization sold right to construct buildings named as Trump Tower in Batumi and Tbilisi (Sakanela Street) to Silk Road Group.

BANKING NEWS November 11, 2013 #29

caucasian business week

ASSETS OF PASHA BANK GEORGIA INCREASED BY 4% IN Q3, LIABILITIES – 8.44 TIMES

Bank of Georgia OFFERS EXPRESS INSTALLMENT

ccording to report of Pasha Bank Georgia, total assets of the bank reached 35.8 million lari as of end of September. The volume increased by 4% quarter-on-quarter. Net loans amounted to 3.1 million lari, increasing 4.5 times quarter-on-quarter. Ratio of liquid assets to total assets made up 71.37%, instead of 76.09% in the 2nd quarter. In the reporting quarter, total liabilities of Pasha Bank Georgia increased 8.44 times and amounted to 2.57 million lari. At that, sum on clients’ current accounts made up 885,152 lari (growth – 7.6 times). The bank completed 9 months of the year with losses of 1.77 million lari, which volume increased by 83.16% quarter-on-quarter. Single owner of Pasha Bank Georgia, registered in September 2012, is Azerbaijan’s Pasha Bank.

ank of Georgi announced about availability of Express installment for holders of the bank’s debit cards. Loan volume varies within 150-300 lari, while its duration is up to 12 months. Activation of installment is possible within one month after receiving one-time code. The bank does not specify rate of interest, pointing that each customer will receive information about the rates individually.

BTA BANK COMPLETED 9 MONTHS WITH LOSSES OF 3.19M LARI

TA Bank reported losses of 3.19 million lari for 9 months of the year. In the same period of last year, the bank’s losses made up 3.6 million lari (therefore, year-onyear decline made up 12.19%). As of September, the bank’s total assets amounted to 128.83 million lari, decreasing by 2.93% year-on-year. Net loans made up 55 million lari (decline – 28.84%), while loan loss reserves – 8.98 million lari (growth – 4.68%). Ratio of idle loans to total loans made up 26.84% (against of 17.19% in the same period of 2012). Total liabilities reached 103.54 million lari (growth – 1.19%). At that, sum on clients’ current accounts made up 13.66 million lari (growth – 2.1 times), demand deposits – 6.96 million lari (growth – 5.1%) and fixed deposits – 22.38 million lari (growth – 12.22%). Ratio of sum on clients’ current accounts and demand deposits to total assets made up 16.27% (instead of 10.04%). Return on assets (ROA) and return on equity (ROE) made up negative 3.4% (instead of negative 3.89% a year ago) and negative 17.24% (instead of negative 15.93%), respectively. Structure of the bank’s shareholders remains unchanged: LLC Silk Road Group holds 50.99% of the bank’s shares, while Kazakhstan’s BTA Bank – 49%.

PREFERENTIAL AGRO CREDIT PORTFOLIO OF VTB IS 31,5 MILLION GEL

referential agro credit portfolio of VTB is 31,5 million GEL. The bank informs that they participate in all components. Loan portfolio for the second component has the highest amount, which equals to 14,5 million GEL. Through this component loans for working capital and basic means are funded, with annual rate of 8%. With the Third component (for building of the new enterprises) $4,6 million is issued, with up to 3% interest rates. With the 5th component (funding for vintage) loan of 9,5 million GEL is issued. “We positively evaluate participation of the bank in the agro credit project. VTB got involved in the campaign from the first day. At first we expected investment of 25 million GEL, also currently we have exceeded by 6 million GEL to this mark”, - retail business director of the bank Valery Gabunia stated.

NATIONAL BANK SAYS FINANCIAL STABILITY OF THE COUNTRY IS NOT IN DANGER

ational Bank says financial stability of the country is not in danger According to the National Bank of Georgia, the financial stability of the country is not in any danger. According to Archil Mestvirishvili, the Vice President of the National Bank , instability of the GEL rate is a usual event and this will not cause any special change at the market.

‘I want to tell you that nothing special is happening at the market. The GEL rate is always changing and it will happen in the future too. It happens in other countries too. The financial stability of our country is not in danger’, the National Bank Vice President said. GEL rate has decreased to 1.6793. The national currency has been weakening this week. This is the lowest rate since December 2011.

MONETARY POLICY RATE REMAINED UNCHANGED

ational Bank of Georgia (NBG) reported that Monetary Policy Committee decided today to maintain refinancing rate unchanged. Respectively, rate of monetary policy still makes up 3.75%. NBG explained the decision with the fact that recent softening of monetary policy is not fully reflected on real economics yet. NBG noted that as the result of eased monetary policy, bank’s credit activity is in revitalization process, however, demand on loans is still low,

hampering reflection of policy change on economics. Besides depressed demand, inflation is affected towards decline by temporary factors as well (base effect, change of regulated prices, etc.), NBG pointed. NBG expects that on background of positive tendencies in foreign sector, deficit of current account might be improved, which should additionally support a combined demand. The next meeting of the Monetary Policy Committee will be held on December 25.

PROGRESS BANK COMPLETED 9 MONTHS WITH 180 816 GEL PROFIT

SC Progress Bank completed 9 months 2013 with 180 416 GEL profit (II quarter - 236 175 GEL). By October 1 deposit portfolio of the bans is 34,4 million GEL (II quarter - 23 million), loans - 33,4 million GEL (II quarter 25,8 million), overall obligations equaled to 35 million (II quarter - 25,8 million GEL). Since the beginning of the year deposit portfolio has increased by 30 million (747%), loans - 17,4

million GEL (109%). Bank’s actives equal to 50,3 million GEL, market share - 0,3% (II quarter - 29,8 million, 0,3%). Ratio of the liquid actives to overall actives is 26,26% (II quarter - 26,1%), Return on Actives (ROA) - 0,6%, Return on Equity (ROE) - 1,6% (1,38%, 3,08%). 78$ of the bank’s stocks belongs to Kakha Kaladze, 22% - Bidzina Ivanishvili. Stock capital of Progress Bank is 15,3 million GEL

FIREBIRD REPUBLICS FUND AND FIREBIRD AVRORA FUND SOLD SMALL STAKES OF BANK OF GEORGIA HOLDINGS

ank of Georgia Holdings (BGH, the UK-registered holding company of Bank of Georgia reported that Firebird Republics Fund and Firebird Avrora Fund have sold small stakes of BGH’s ordinary shares in September. In the name of the mentioned funds, the shares were sold by director of BGH Ian Hague, who is

also managing director of both of these funds. Namely, Firebird Republics Fund sold 35,000 ordinary shares, priced within 18.42-19.38 GBP, while Firebird Avrora Fund – 15,802 ordinary shares, priced within 18.42-19.29 GBP. Despite selling the stakes (50,802 shares in total), group of Firebird funds still holds 6.83% of BGH, owning more than 2.453 million shares.

CAUCASUS DEVELOPMENT BANK – GEORGIA COMPLETED 9 MONTHS WITH NET PROFIT OF 58,130 LARI

aucasus Development Bank – Georgia reported net profit of 58,130 lari for 9 months of the year. In the same period of 2012, the bank had loss of 483,769 lari. As of September 30, the bank’s total assets amounted to 17.6 million lari, increasing by 16.12% year-on-year. Net loans made up 5.38 million lari (growth – 99.8%), while loan loss reserve -1.33 million lari (growth – 24.72%). Ratio of idle loans to total credits made up 19.44% (instead of 43.73% in the same period of 2012). In the reporting period, total liabilities amounted

to 2.72 million lari, increasing by 59.31% yearon-year. At that, sum on clients’ current accounts made up 1.41 million lari (growth – 2.33 times), while fixed deposits – 860,397 lari (growth – 7.83 times). The bank has no demand deposits. Ratio of sum on clients’ current accounts and demand deposits to total assets made up 8.06% (instead of 4.01% a year ago). Return on assets (ROA) and return on equity (ROE), respectively, made up 0.47% (instead of -4.48%) and 0.52% (instead of -4.82%). Single owner of the bank is Azerbaijan’s Caucasus Development Bank.

PRIVATBANK REPORTED PROFIT

rivatBank reported net profit of 26 million lari for 9 months of the year. In the 2nd quarter, the bank has loss of 2.46 million lari, while in the 3rd quarter of 2012, the loss amounted to 6.14 million lari. To note, retained profit of the bank as of June 30 made up 60.47 million lari, while as of September 30, the volume has decreased to 32.16 million lari. In the reporting period, total assets of the bank reached 486.41 million lari, decreasing by 1.88% year-on-year. The volume of net loans amounted to 225.92 million lari (year-on-year growth – 16.13%), while loan loss reserves – 27.2 million lari (decline – 40%). Ratio of idle loans to total loans made up 11.89% (instead of 27.11% in the same period of 2012). As of September, total liabilities of PrivatBank amounted to 421.1 million lari (decline – 6.13%). At that, sum on clients’ current accounts made up 70.45 million lari (decline – 48.56%), demand deposits – 12.11 million lari (growth – 74.26%), while fixed deposits – 165.71 million lari (growth 2 times). Ratio of current and demand deposits to total assets amounted to 16.98% (instead of 29.03%). Return on assets (ROA) and return on equity (ROE) respectively made up 7.48% (instead of negative 1.7%) and 84.75% (instead of negative 15.27%). Shareholders of Georgian PrivatBank are Ukrainian PrivatBank – 62.62%, Unimain Holding Limited – 32.38%, Bogdan Lesiuk – 2.7% and Aleksandre Chochia – 1.3%.

SHARE OF AGRO LOANS IN THE LOAN PORTFOLIO OF PROCREDIT BANK WILL NOT BE LESS THAN 10% BY THE END OF THE YEAR

hare of agro loans in the loan portfolio of Procredit Bank will not be less than 10% by the end of the year. Director general of the bank Sasha Terrens states that this direction has always been priority of Procredit Bank, since all financial institutions could not risk issuing credits for agriculture, despite its role in the country’s economic development. He informs that currently agro portfolio equals to 60 million GEL and among them 20-25 million is preferential agro-credit, 8-9 million was issued for construction of the new enterprises (III component). Head of Agricultural Progects Management Agency George Chkeidze mentioned that Procredit bank was one of the first involved in the preferential agro credits project and its share in the total portfolio (135 million GEL) is considerable.

10 AZERBAIJAN`S TRADE TURNOVER REACHES $32.7 BLN

AZERBAIJAN AZERBAIJAN TO COMPETE WITH WTO MEMBERS

he State Statistical Committee reported that Azerbaijan`s foreign trade turnover totaled $32.7 billion in January-September, AzerTag state news agency reported. The share of state sector in export operations reached $24.6 bln, while import operations made up $8.1 bln respectively. The committee said a positive balance on import and export operations for January-September amounted to $16.5 bln, up by 4.5 times from 2012. Exports of non-oil products made up $135.8 bln. Azerbaijan conducted trade operations with 144 countries in January-September, the committee said.

AZERBAIJANI BUSINESSMEN INVITED TO UAE EXHIBITION

n international exhibition entitled “Made in Asia” will take place in Abu Dhabi, the capital of the United Arab Emirates, Azerbaijan Export and Investment Promotion Fund (AZPROMO) reported. AZPROMO reported that the Azerbaijani entrepreneurs are invited to participate at the event. The event that will take place on April 21-23 is aimed at the development of business, trade and investment relations in the region’s countries by taking into consideration the economic processes in Asia. According to Azerbaijan’s State Customs Committee, the commodity turnover between Azerbaijan and the UAE amounts to $81.34 million. The volume of Azerbaijan’s exports to the UAE amounted to $5.71 million. About $75.63 million worth of products was imported from this country to Azerbaijan during the reporting period.

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zerbaijani entrepreneurs must be ready to compete with WTO member states after the country’s accession to the organization, Azerbaijani Finance Minister said

on November 6. Samir Sharifov made the remarks at the discussion session of the draft state budget for 2014. “I disagree with the opinion that the long process of Azerbaijan’s accession to the World Trade Organization (WTO) creates obstacles for the development of domestic business, export growth, and so on,” he said. According to Sharifov, all WTO members are looking for new markets and Azerbaijan is a great market for them. “We have to be ready to compete with them, so that at the end of the day we’re not faced with a situation where imports replace domestic products and local businesses do not grow. Russia and Ukraine are members of the WTO. Look at the trade wars they engaged in with each other,” he said. Azerbaijan has been in talks with the WTO since

2004 to join the organization. Azerbaijan’s accession to the WTO is expected to help increase the country’s non-oil exports. The next round of negotiations on Azerbaijan’s accession to the organization was postponed to the first quarter of 2014. The delay is related to the organization’s preoccupation with countries that are in the very last stage of their accession to the WTO. Meanwhile, the Azerbaijani side has prepared all the necessary documents. Talks are also being held at bilateral and multilateral levels with WTO member states. Work is underway to bring Azerbaijani laws in line with the WTO regulations. The number of WTO member states seeking to start bilateral talks with Azerbaijan is growing. Azerbaijan held consultations with 12 countries in bilateral meetings, including Argentina, Indonesia, and other countries of the region.

OIL FUND’S INVESTMENT RESULTS MADE PUBLIC bout 48 percent of the total investment volume of the State Oil Fund (SOFAZ) in the first nine months of 2013 was in the U.S. dollars, the Fund reported on November 4. The mentioned figure is over $17.05 billion. The SOFAZ’s foreign currency assets by September 30, 2013 amounted to $35.809 billion, compared to $34.129 billion at the beginning of the year. Around 40.1 percent of the investment portfolio is concentrated in euros (over 10.553 billion euros), 5.2 percent in British pounds sterling (over 1.146 billion pounds sterling), 1.2 percent in Turkish Lira, 0.5 percent in Australian dollars, and 1.8 percent in Russian rubles. The rest of the portfolio, 3.2 percent, is concen-

trated in gold with amount of 850.146 troy ounces (26.44 tons). Furthermore, 85.4 percent of SOFAZ’s portfolio is concentrated in fixed income, 3.2 percent in gold, 1.8 percent in real estate, 3.6 percent in equities, and 6 percent in deposits and money market instruments. Some 29.7 percent of the bonds in SOFAZ’s investment portfolio are classified in AAA, 17.8 percent in AA, 31.1 percent in A, 20.2 percent in BBB, and 1.2 percent in other credit ratings. Some 58.89 percent of SOFAZ’s investment portfolio is concentrated in Europe, 16.88 percent in North America, 5.02 percent in South America, 9.95 percent in Asia/Pacific, 1.45 percent in the Middle East, 0.01 percent in Africa, and 7.8 percent in international financial organizations.

Furthermore, 76.5 percent of SOFAZ’s investment is invested in developed countries, 15.7 percent in the emerging countries, and 7.8 percent in international financial organizations. SOFAZ, an entity that accumulates and manages Azerbaijan’s oil and gas revenues, was established in 1999 with of $271 million in assets. The main purposes of the Fund are the accumulation of funds and assets placement abroad in order to minimize any negative impact on the economy, preventing the “Dutch disease”, ensuring savings for future generations, and maintaining 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.

AZERBAIJAN’S CORPORATE SECURITIES MARKET GROWS

SOUTHERN GAS CORRIDOR AMONG MAIN TOPICS OF AZERBAIJAN INVESTS $380 CASPIAN FORUM he Southern Gas Corridor will be one of the main topics of discussion at the Caspian Forum to be held in Istanbul on December 4-5. The Caspian Forum 2013 is organized by the Caspian Strategy Institute. The Caspian Forum is a platform that explores the economic, political, and strategic potential of the Caspian region and defines areas of collaboration and partnership in the spirit of the win-win principle. The Forum aims to create a space for multilateral cooperation and to avoid geopolitical rivalry. The Forum is a unique setting to promote a shared vision on the issues of security, economy and energy of the broader Caspian region. The event will be attended by government officials, representatives from academia, business, policy making circles, NGOs from all over the world, according to the Caspian Forum’s official website. “The Caspian region and Eurasia have become a center of attraction with critical energy reserves and large transportation corridors. This region has historically been significant in terms ofencounters of civilizations, economic interactions and rich natural energy reserves. Within the balance of the changing priorities of global politics and economy, it is once again on the agenda,” the forum’s website reported. The Forum considers energy and transportation, among others, as two main pillars of defining the Caspian region. It will examine the region’s energy resources, economic diversification, transportation projects, and security issues.

November 11, 2013 #29

caucasian business week

he total turnover of transactions on all instruments on the Baku Stock Exchange (BSE) in January-October 2013 totaled 5.782 billion manat, or by 30 percent less compared to the same period of 2012. BSE reported that such a decrease in stock market in the country caused by decrease in the state securities market by 36.6 percent, while the corporate securities market increased by 43.5 percent. According to the statement, the volume of the state securities market exceeded 4.795 billion manat in January-October and the volume of corporate securities reached to 986.91 million manat.

MILLION IN ALTERNATIVE ENERGY

ome 300 million manats (about $380 million) have been invested in the development of alternative and renewable energy sources in Azerbaijan, Head of the State Agency for Alternative Energy Sources Akim Badalov said on November 1. “70 million manats (over $89 million) of the total investments are state investments, and the rest are private investments,” Badalov told journalists. The strategy for the development of alternative and renewable energy sources by 2020 will be presented to the Presidential Administration in the near future, he added. Badalov said that the process of negotiating the strategy with the relevant state agencies has been completed, and it will be submitted to the administration in the near future. Also, it is planned to increase the share of alternative energy sources to 20 percent in total volume of energy consumption in Azerbaijan by 2020, which presupposes around 7 billion manats ($8.9 billion) investments. According to the agency representative Jamil Melikov, the potential capacity of solar energy, wind energy, biomass, geothermal energy, and small hydro power stations in Azerbaijan has reached 5,000 MW, 4,500 MW, 1,500 MW, 800 MW, and 350 MW respectively. The share of solar energy in the total volume of alternative energy in Azerbaijan is estimated to reach 40 percent, while the wind power will hit 28 percent by 2020. There is a great potential for hybrid power stations in Azerbaijan, and the alternative energy company plans to have hybrid power plants in the majority of Azerbaijan cities by 2020. The capacity of the Gobustan hybrid power station, which opened in 2011, is expected to increase from the current 5.5 megawatt to 8 megawatt by 2015, which will provide electricity not only to the Gobustan city, but to the entire Gobustan region.

Abbreviations: - GB - government bonds, - GS - government securities, - CB - corporate bonds - CSC- corporate securities The official exchange rate on Nov.7 is 0.7843 AZN/USD. azernews.az

ARMENIA November 11, 2013 #29

caucasian business week

ARMENIAN CARPET WEAVING TO DISCUSS IN YEREVAN

he Ministry of Culture of the Republic of Armenia on November 20-22 will hold an international conference entitled “Armenian Loop: traditions of carpet weaving” in Yerevan

which is devoted to the issues on the study of the Armenian carpet weaving culture. Armenpress was informed from the Ministry of Culture that within the conference the participants will touch upon the issues on the study and typology of the Armenian carpet weaving culture, traditional and modern carpets, modern technologies for carpet repair and other subjects. Prominent experts from the U.S., France, Germany, Italy, Great Britain, Poland, Austria, Lebanon, Armenia and Nagorno- Karabakh Republic will participate in the conference. Operating companies in carpet weaving will also be present at the conference.

ORANGE ARMENIA INVESTS 268 MILLION EUROS IN ARMENIA

ince its inception in Armenia in 2009 November Orange Armenia has invested €268 million in development of its network, including more than 51 million euros paid for the license to operate in Armenia, Orange Armenia CEO Francis Gelibter said in an interview with ARKA. “Each year, the company invests 10-13 million

euros into the development of the network. We have planned to invest as much next year, when the main focus will be on increasing the capacity of the network in view of growing number of customers and traffic,” he said. He said some of the funds will also be used to increase the coverage and install new IT systems and platforms enabling creation of new services and offers for customers. He said the company will invest a little les sin promoting its commercial chain. Orange Armenia is a 100 % subsidiary France Telecom (trading as Orange). It arrived in Armenia in 2009 November. Now it provides about 100 percent coverage and access to mobile networks and Internet in 600 rural and urban communities of the country. Arka

ARMENIA AND IRAQ DISCUSS YEREVAN-BAGHDAD DIRECT FLIGHT

or the development of the ArmenianIraqi commercial and economic relations it is important to form a transport communication between the two countries and implement the Yerevan-Baghdad direct flights. At the joint Armenian-Iraqi forum the Deputy Prime Minister of the Republic of Armenia Armen Gevorgyan stated that the commercial and economic

relations between Armenia and Iraq during the recent years have been impressive.“We greatly value the development of the commercial and economic relations with Iraq and the creation of favorable business conditions for the nations of the two countries”, - said Armen Gevorgyan, Armenpress reports. The Iraqi Co-Chair of the Armenian-Iraqi Intergovernmental Commission, the Deputy Prime Minister of the Republic of Iraq Rowsch Nuri Shaways also highlighted the implementation of the Yerevan-Baghdad direct flights. “The economic relations between our countries register quite a rapid growth and it is time to think about the direct transport communication”, - said Rowsch Nuri Shaways. Since 2011 the Armenian-Iraqi relations have begun intensively developing. An intergovernmental commission was established, the first session of which was held in 2012 in Baghdad.

IDA AND EBRD ALLOCATE $72 MILLION TO ARMENIAN GOVERNMENT

he Government of the Republic of Armenia approved the credit agreement for $72 million to be signed with the International Development Association and the European Bank for Reconstruction and Development. At the session of the Government the Minister of Finance of Armenia David Sargsyan

stated that with the credit the Government will implement different structural reforms. “We will carry out also fiscal, environmental, family benefits programs targeting improvements”, - said the Minister of Finance. Armenpress reports that David Sargsyan noted that the agreement will get the approval of the World Bank Council on November 8.

WATCH PRODUCTION INCREASES IN ARMENIA

he volumes of production of the domestic watches in the Republic of Armenia have increased during the months of January-September 2013 by 25,9% in compari-

son with the same period of the previous year making 13,009 pieces. According to the data provided by the National Statistical Service of Armenia, during the first nine months of 2012 10,333 domestic watches were produced in our country. Armenpress reports that in 2012 15,188 domestic watches were produced in Armenia.

ARMENIAN WINE AND COGNAC TO EXHIBIT IN RUSSIA AND CHINA

asting exhibitions of Armenian wine and cognac will be held in Russia and China at the end of the current year. Armenpress informs that the head of the Armenian Development Agency Robert Harutyunyan told it in a conversation with the journalists. Two markets are designed for this area with “the strategy of industrial policy directed to the exportation in the Republic of Armenia”. These are Russia and China. The tasting of wine and cognac will be carried out in Russia within the frames of Yerevan days in Moscow. 9 Armenian companies will participate in the great exhibition to be held in Shanghai at the end of November. The companies will represent their product to the commercial companies of China.

JUICE AND NON-ALCOHOL PRODUCTION INCREASES IN ARMENIA

he volumes of the production of juice in Armenia during the months of January- September have increased by 20% in comparison with the same period of the previous year and made 12 million 392 thousand 100 liters. According to the data provided by the National Statistical Service of Armenia, during the nine months of the last year 10 million 323 thousand 100 liters of juice were produced in our country. Armenpress reports that the volumes of the production of non-alcohol drinks and mineral waters have increased in comparison with the same period of 2012 by 40% and 25% correspondingly. During the nine months 41 million 607 thousand 700 liters of non-alcohol drinks and 26 million 269 thousand 300 liters of mineral waters were produced in Armenia.

VEGETABLE OIL PRODUCTION DOUBLES IN ARMENIA

he volumes of the production of the vegetable oil in the Republic of Armenia during the months of JanuarySeptember have increased by 2,3 times in comparison with the same period of the previous year and the volumes of the animal fat have decreased by 13%. According to the data provided by the National Statistical Service of Armenia, during the first nine months of the current year 3 thousand 256,2 tons of vegetable oil has been produced in our country in comparison with the 1390,2 tons of 2012. Armenpress reports that during the months of January-September 401,6 tons of animal fat was produced in Armenia in comparison with the 461,7 tons of the previous year.

POPULARITY OF VEGAN DIETS IN ARMENIA PARTIALLY CONNECTED WITH WORLD TRENDS

opularity of vegan diets in Armenia is partially connected with healthy lifestyle promotion in the world, Vardanush Petrosyan, a dietitian at Balneology and Physical Medicine Research Institute of the Armenian Health Ministry, said Friday at a news conference dedicated to the World Vegetarian Day. “Promotion of vegetarianism and healthy lifestyle by celebrities has certain impacts also on the Armenian society,” she said. “I can’t indicate particular figures, but I know for sure that the number of vegetarians in our country is growing every year.” In her opinion, vegetarianism is closely connected with mentality and traditions and produce both positive and negative effects. “If many generations are stuck to vegetarianism, then certain necessary vitamins appear in their

bodies, while those people taking a sudden twist toward vegetarianism may face unpleasant consequences,” Petrosyan said. “It is very important to eat healthy meals and to limit fats. Healthy nourishment is one of the factors preventing diabetes, tumors, obesity and cardiovascular diseases.”

CIS caucasian business week

November 11, 2013 #29

GO FOR BROKE: UKRAINE’S RISKY EU TRADE DEAL

Russia. European Union ministers will meet on November 18 ahead of the Vilnius summit and decide if Kiev has met enough criteria to sign the dotted line on its trade association agreement. The Ukrainian government approved their draft resolution on September 18 and the agreement will either get a ‘yes’ or ‘no’ at the Eastern Partnership Summit in Lithuania on November 28-29. If European Union officials reject Ukraine from their trade association, Kiev will need to reconsider Moscow’s proposal to join the Russia-led Eurasian Customs Union. Russian President Vladimir Putin has tirelessly tried to convince Ukraine to join Russia, Belarus, Kazakhstan, and other former Soviet nations in a trade bloc that will rival the EU. Russia, Ukraine’s main source of energy, loans, and trade, wants to dissuade its geographical partnerfrom making a ‘suicidal’ move towards Europe and sacrifice the option of joining Putin’s customs union. Ukraine, resource-rich and in need of a serious IMF loan, sees more economic opportunity in Europe, and hopes to act as a ‘bridge’ between Russia and the EU, President Viktor Yanukovich, 61, has said. Russia has made it clear there will be no ‘bridge’ if Ukraine steps West; they will give up their ‘exclusive relationship’ with Russia, Prime Minister Dmitry Medvedev said on Friday. “Uncertainty remains as to whether or not Ukraine will sign an association agreement with the EU,”Standard & Poor’s rating agency said in a November 1 credit report that downgraded the country’s long-term sovereign credit rating to B-, the same junk level as Greece. CAUGHT BETWEEN TWO STOOLS Ukraine is facing its most important economic crossroads since the collapse of the Soviet Union. It iscaught between two stools - it wants to move towards integration with the west, but doing so is irritating Russia, which imports nearly 25 percent of Ukraine’s export goods. Ukrainian exporters will save nearly $490 million over 10 years, as 95 percent of goods will have zero customs duties, according to the European Commission. Russia claims Ukraine’s choice to team up with Europe will come at a cost of 35 billion euros worth of Ukrainian goods. This will force it to default on its sovereign debt, of which Russia owns a great portion.

Ukraine, Europe’s second largest country by land mass, a nation of 45 million people, has a gross domestic product of $176 billion, less than 10 percent of Russia’s $2 trillion GDP. Ukraine’s depreciating currency reserves and massive deficit prompted Moody’s rating agency to cut its Caa1 rating to Caa1 from B3 in September putting them at “very high default risk” and say there is a one-in-three chance they will be downgraded again in the next year. If the EU-Ukraine pact is signed, and the Kremlin does retaliate, the EU has plans in place to supply Ukraine with natural gas, as well as arrangements with the IMF for emergency financing. Russia’s reaction could be a trade blockade, which could cost cash-strapped Ukraine as much as $2.5 billion in 2013. Putin’s economic aide, Sergey Glazyev, argues signing the contract would be a breach of Russia and Ukraine’s Treaty of Friendship. Medvedev says Russia “isn’t jealous” of Ukraine’s decision to join the EU and joked that their neighbor is welcome to enter the throngs of Europe’s deep recession, and develop along the lines of Greece or Cyprus. “Signing the agreement would be positive for Ukraine’s trade over the long term, but there could be short-tomedium-term negative implications largely related to Russia’s reaction,” Dmitry Trenin, Director of the Carnegie Moscow Center, told RT in an email sent on Friday. Whether Ukraine is successful at Vilinus or not, Putin will ramp up efforts against Yanukovich, who faces reelection in 15 months. “If there is no deal in Nov 2013, Putin will have won a resounding psychological victory – most everyone in the EU would want to prevent that, and Yanukovych counts on it,” Trenin said. “Russia has set sights on the 2015 elections in Ukraine and intends to help a pro-Russian leader to power. Ironically, however, the more pressure Russia applies on Ukraine, the less likely it will succeed. Even more ironically, this will be in Russia’s own best interest – the last thing it should want is Ukraine in the Customs Union,” Trenin said. The EU and the International Monetary Fund will likely need to finance a $12 billion loan to Ukraine, according to a May 2013 estimate by The Goldman Sachs Group. In Ukraine, bonds have hit fresh lows, currency reserves are almost nonexistent, and there’s more than $60 billion in debt, roughly a third of the country’s GDP, due by July 2014, according to central bank data from July 2013. The EU trade deal may not be able to prevent the grivnya, Ukraine’s currency, from going bust before elections, which could open up political capital for Russia. FREE JULIA If Yanukovich doesn’t grant former Prime Minister Julia Tymoshenko a pardon by November 18, European ministers may delay Ukraine’s ratification until 2014. “The refusal to release and free Tymoshenko threatens to disrupt the signing of the agreement,” Polish Foreign Minister Radoslaw SIkorski was quoted saying on the Polish television program, Polsat News on Oct 31. He urged the Ukrainians ‘not to waste time’ with Tymoshenko’s release. Tymoshenko was jailed for a gas deal she brokered with Russia in 2009. Her imprisonment is seen by European ministers as political persecution. She was also charged

with murder, an accusation that was later dropped. Her release would be symbolic and show that Ukraine is ready to jettison corruption, hold fair elections, and most importantly for EU ministers, end ‘selective justice’. Tymoshenko, 52, has requested she be allowed to travel to Germany to receive medical treatment for spinal problems. Yanukovich has dismissed the idea of a pardon, but said he will sign any draft law that lets her take a ‘prison break’ to receive medical treatment abroad. “The bill is still in the in the preliminary stages but if it is enacted, it will be seen positively by the EU and have significant influence for Ukraine’s acceptance. It’s a temporary alternative for an amnesty act,”Aleksey Zorin, an attorney at ARMADUM lawyers, a Kievbased international law firm, told RT by email on Saturday. Since the Orange Revolution in 2004, the country has been gravitating towards integration with Europe, becoming more disillusioned with its greatest economic benefactor, Russia. DRIFTING EAST AND RUSSIA’S CUSTOMS UNION Putin has been rounding up ex-Soviet states to join Russia in a Eurasian block with promises of lower gas prices and other trade perks. Russia, Belarus, and Kazakhstan met in Minsk on October 24 to discuss the formation of a Eurasian Union in 2015, a political and economic alliance which will incorporate other Commonwealth of Independent States (CIS) like Armenia, Tajikistan, and Kyrgyzstan. 50 percent of Ukranians, 57 percent of Armenians, and 59 percent of Georgians want to join Russia’s Customs Union, according to a Eurasian Development Bank survey published on September 24, 2013. Membership in the EAU entails uniting economies, legal systems, and customs services - and military coordination with Russia. In order for the ambitious plan to work, Russia needs to lure strategically important nations like Ukraine into the trade circle. Other Soviet satellite states have chosen to instead hang their hat with Europe. Poland, Ukraine’s co-host for the 2012 EuroCup, entered the EU in 2004, and like Ukraine, was seen as a ‘swing’ state, as their membership wasn’t a sure thing. Romania and Bulgaria have been EU members since 2007, and Croatia joined this year. Armenia, Poland, Moldova, and Azerbaijan will join Ukraine at the Eastern Summit in Vilnius on November 28-29. They also face the decision of joining Russia’s trade bloc, which the EU sees as ‘incompatible’ and grounds of rejection for EU membership. Armenia said it would join Russia in the Customs Union, as well as engage in the Eurasian integration process, instead of negotiating a free trade agreement. Ukraine’s ascension to EU membership could be another 15-20 years down the road, and might be derailed by a number of factors- a pro-Russia president taking power in 2015 or even discord from within the EU, as some ministers doubt expansion is a sound strategy during economic recession. Turkey’s progress towards EU membership has been at a stand-still since it first applied in 1987 and still hasn’t made much headway even after signing a free trade agreement with the EU in 1995. Turkey is now considering joining the Customs Union. If Ukraine’s ratification follows a similar trajectory, Ukraine’s Russian-leaning crowd, centered mostly in Kiev, Crimea, and eastern Ukraine, could make a case for going back to its historic trade partner.

counts if it joins the Customs Union, but Ukraine wants to rid itself of its dependence on Russian energy. Gazprom and Kiev’s Naftogas have a rocky payment and pricing history, and most recently, Gazprom demanded Ukraine urgently pay a $1 billion overdue gas bill. “Ukraine has an extensive non-payment credit history for Russian gas, mounting debt, and restructuring,”Aleksey Grivach, deputy director of Gas Projects at Russia’s National Energy Security Fund, told RT in an email Friday. “The situation is itself dangerous - Ukraine is poorly prepared for the winter season,” Grivach told RT. Earlier in October Naftogaz said it had 17 billion cubic meters of gas stored up, which they believe will be enough to heat Ukraine through the winter. The gas debt payment request is not connected to Ukraine’s possible associated membership with the EU, Putin’s press secretary, Dmitry Peskov, told reporters on Tuesday. Russia and Ukraine waged two gas wars over prices in the winters of 2006 and 2009 (which lasted 3 weeks) over a similar claim Ukraine was late on a payment. If another gas war erupts over the current pricing tiff and Russia turns off the gas, EU officials said they will help with supplies to Ukraine. This strategy would burden neighboring European states, as a supply crunch would bump up prices. It is also only palpable for a few weeks. Under the leadership of Tymoshenko, the Ukrainian gas company signed a 2009 ‘pre-pay’ contract with Gazprom. Yanukovich, who has complained about the ‘unfair’ prices, has scaled down Gazprom imports 40 percent year-on year, and is instead seeking other energy suppliers. After the collapse of the Soviet Union, Ukraine became a natural hub for transporting Russian gas to European and Turkish markets, but Gazprom, Russia’s stateowned gas giant, is building a maze of new pipelines to circumvent their western neighbor in transit logistics. Gazprom, Russia’s largest natural gas company, ships half of its European gas through Ukraine. Transit through Ukraine stood at 61 billion cubic meters in the first nine months of 2013, while in FY 2012 the figure was at 84.2 billion cubic meters. Rt.com

GAS BILL - $1 BILLION OVERDUE! Russia told Ukraine it could save $10 billion in gas dis-

BELARUS, TURKMENISTAN MULL COOPERATION

elarus and Turkmenistan mulled a wide range of issues of mutual interest, and agreed on deepening bilateral cooperation. The decision was made during a two-day official visit by Belarusian President Alexander Lukashenko to Turkmenistan on November 4-5. During the talks, the two leaders discussed a wide range of issues of bilateral cooperation as well as cooperation in the international arena. Turkmenistan’s President Gurbanguli Berdymukhamedov underlined the significant role of trade and economic relations in the development of the TurkmenBelarusian multi-aspect dialogue. Berdymukhamedov urged his Belarusian partner to consider the opportunity of opening a training and production center for Belarusian transport enterprises in Turkmenistan. The Belarusian president pointed to the fruitful development of trade and economic cooperation between the two countries, saying that Belarus intended to set up a service center in Turkmenistan. According to him, the center would serve all the Belarusian vehicles supplied to Turkmenistan. The center will possibly open up branches in the country’s regions in future. “We understand that if we come to the country, we should open service centers. We will address the issue

in the near future,” the Belarusian president said. Lukashenko also said that cooperation in humanitarian fields strengthened mutual understanding and friendly relations between the nations. The parties agreed on the exchange of Culture Days of Belarus and Turkmenistan in 2014-2015. Belarusian president said that his country planned to start the production of unmanned aerial vehicles in Turkmenistan. The parties also stressed the increase in joint scientific and technological efforts in the last few years. “Negotiations are now underway on supplying the Turkmen side with multipurpose unmanned aerial systems developed by the National Academy of Sciences of Belarus, and their consequent joint production in Turkmenistan,” Lukashenko said. He went on to say that the academies of sciences of the two countries were preparing a program for cooperation in the field of science and technologies. The program includes 21 joint projects, and the first session of the relevant intergovernmental commission is expected to take place in Minsk soon. Lukashenko also said that it was a top priority for Belarus to fulfill the agreement on the construction of the Garlyk mining and processing factory in Turkmenistan. “We have agreed that in the near future a group of specialists led by the Prime Minister will arrive in Turkmenistan to settle all the issues related to the construc-

tion of Garlyk factory. The group will also report the final timetable for commissioning the factory,” Lukashenko said. Following the talks, Lukashenko and Berdymukhamedov issued a joint statement, calling for the expansion of friendly ties and cooperation between the two countries. The heads of the two states praised the pace of interstate political dialogue and expressed satisfaction with the current state of Belarus-Turkmenistan relations. They said that the two countries had similar stances on key International issues, and confirmed their intentions to deepen mutually beneficial cooperation in the international arena. The two leaders deemed it necessary to ramp up bilateral and multilateral efforts to enhance regional security and stability. Their joint statement also stressed that it was necessary to intensify political dialogue at the highest level, and to step up cooperation in trade, economy, energy sector, finances, transport industry, science and engineering, culture, humanitarian field, and other areas. The presidents announced plans to expand and diversify bilateral trade, come up with long-term means of economic cooperation, and increase mutual investments on the basis of generally accepted rules and requirements of international trade. The presidents emphasized the importance of closer ties in

agricultural and humanitarian fields, and agreed to boost cooperation in healthcare, medicine, sports, and tourism. They also confirmed their commitment to stepping up efforts to combat terrorism, political and religious extremism, drug trafficking, illegal migration, cross-border organized crime, and illegal arms trade. Furthermore, the two countries signed several documents, including an agreement on the regulation of mutual commitments and financial claims, an agreement on cooperation between Belarusian National Bank and Turkmenistan’s Central Bank, a Memorandum of Cooperation in healthcare, medical (pharmaceutical) science, education, and the provision of medical services to citizens of both countries, a program of cooperation for 2014-2015 between the Foreign Ministries of Belarus and Turkmenistan, a program of cooperation in physical education and sports for 2014-2015, a program in the tourism sector, a program on cooperation between the national academies of sciences of the two countries in science and technology, and an agreement on sci-tech cooperation among many others. In 2012, the trade turnover between the two states reached $400 million. Belarusian major exports to Turkmenistan include tractors, trucks, construction and agricultural machines, bicycles, lift trucks, tires, medications, chemical fibers, woodworking industry products, and food. azernews.az

WORLD NEWS November 11, 2013 #29

caucasian business week

An index of financial secrecy

LIFTING THE VEIL

VERY two years the Tax Justice Network, a campaigning group, publishes a Financial Secrecy Index (FSI), showing which jurisdictions are friendliest towards tax evaders, money launderers and other financial ne’er-dowells. Countries are ranked according to a combination of a secrecy score (based on 15 indicators, including banking secrecy, transparency of corporate ownership and international judicial co-operation) and a weighting that reflects the size of their financial sector. The latest FSI, released on November 7th, shows Switzerland once again at the top of the list, with a score little changed from 2011 (Zurich is pictured above). Though the Swiss have made some concessions, especially to America, these appear so far to have put only small dents in their overall financial-secrecy framework. Meanwhile, they have been striving to block or delay multilateral transparency initiatives. The government did recently agree to sign an OECD tax convention, but this calls only for “on request” (not automatic) exchange of information. Still, it would bring down the Alpine country’s secrecy score a bit, if ratified. The index shows that the biggest player in the world of offshore secrecy is Britain, if it is lumped together with its island dependencies in the English Channel, the Caribbean and elsewhere. Britain itself is only in 21st place, but two of its satellites—Jersey and the Cayman Islands—are in the top ten, with Bermuda and Guernsey not far behind. Together they account for between a third and a half of the global market in offshore financial and corporate services. Much of the money they collect is funnelled through the City of London.

These islands have become a bit more open as international pressure on tax havens has intensified: most have seen their secrecy score drop since 2011, with the most dramatic fall in the British Virgin Islands, home to hundreds of thousands of offshore shell companies (see chart). All of them have signed new international tax agree-

make a clear enough distinction between legitimate client confidentiality and crime-concealing secrecy.) The ranking also confirms the continued rise of Hong Kong and Singapore as secrecy jurisdictions. Hong Kong is a growing force in offshore capital markets and company formation. Singa-

he European Central Bank cut interest rates to a new record low on Thursday. The ECB cut its main refinancing rate to 0.25 percent, while it held the deposit rate it pays on bank deposits at 0.0 percent and cut its marginal lending facility to 0.75 percent from 1.00 percent, Reuters reported. The ECB’s 23-member Governing Council made the decision after a shock slump in eurozone inflation to 0.7 percent in October – far below the ECB target of just under 2 percent. Government ministers and industry calls for the ECB to loosen policy to help bring down the euro’s exchange rate had also put pressure on the bank.

NOVARTIS PLANS TO CUT 440 JOBS IN BRITAIN

ments that allow for some degree of information exchange, or announced their intention to do so. But although some have curbed their secrecy offerings, others have expanded them. Earlier this year, for instance, Guernsey added foundations (the civil-law equivalent of trusts, which are common-law arrangements) to its stable of offerings. That helped to push up its secrecy score, though it remains one of the less opaque offshore financial centres. In September David Cameron, the British prime minister, told the House of Commons that: “I do not think it is fair any longer to refer to any of [Britain’s] overseas territories or crown dependencies as tax havens. They have taken action to ensure that they have fair and open tax systems.” As the table above shows, Mr Cameron’s comments may be somewhat premature: the British-linked jurisdictions all continue to score badly on the majority of the indicators tracked by the TJN. (Those jurisdictions argue that the index’s compilers don’t

pore is snapping at Swiss heels in wealth management and a rising star in trusts. Both have benefited as some European and North American offshore activity has been displaced eastwards, looking for places that are under less immediate pressure from western capitals to clean up their act. That said, they have had to make some concessions: in Singapore, for instance, tax evaders can now be prosecuted for money laundering, at least in theory. The overall message of the index is that while there has been progress on international tax transparency, it has been more modest than tax haven-bashing politicians would have us believe. The good news is that automatic exchange of information has a good chance of developing, over time, into a global standard—helped not least by America’s powerful Foreign Account Tax Compliance Act, or FATCA. The bad news is that financial secrecy is still very much alive and well. economist.com

HISTORIC TRADE DEAL WITH EUROPE MOVES FORWARD, DESPITE US SNOOPING he US –EU transatlantic trade deal, will go to a second round of talks in mid- November, but could hit a stumbling block over Germany’s demand for data protection as a condition to signing the treaty. The EU and US policymakers agreed to hold two more rounds of trade negotiations over the next two months, The Wall Street Journal reports. The first round will take place in Brussels on November 11-15 and cover investment and energy sector trade, as well as address regulatory issues. In December officials will congregate in Washington DC for another round of talks. After learning about the NSA special surveillance program on more than 80 embassies and consulates worldwide, including German government offices and Chancellor Angela Merkel’s personal cell phone, Germany has pushed for tough data protection goals before the free trade pact is finalized. US still hasn’t provided any guarantees it will curb spying on its allies. First talks were held on July 8 in Washington DC. Originally the second round of talks were sched-

EUROPEAN CENTRAL BANK CUTS INTEREST RATES TO RECORDLOW 0.25%

uled for October 7-11 in Brussels, but were delayed due to the US government shutdown. The Transatlantic Trade and Investment Partnership (TTIP), which has the potential to boost economic growth by $100 billion per year in reduced tariffs, was agreed on at the G8 summit in Northern Ireland in June. Shortly after, NSA whistleblower Edward Snowden leaked information showing the extent of USespionage on allies abroad. In response, France and other EU members said there could be no trade negotiation unless the US could guarantee it would halt spying operation on EU allies. The “once in a generation prize” could add as much as about $157 billion to the EU economy, over $125 billion to the US economy and as much as around US$ 133 billion to the rest of the world, UK Prime Minister David Cameron said at the G8 summit. Over 98 percent of EU tariffs would be eliminated under the accord. President Obama said the ‘economic NATO’, which would be the world’s largest trade agreement, is a priority for his administration and will hopefully be signed by the end of 2013. EU diplomats traveled to Washington to discuss the NSA spy fallout, but weren’t satisfied with the

answers they received, which failed to justify the eavesdropping on EU leaders by the US. The trade deal could be a vital economic turnaround for the 28 EU members, which are just starting to emerge from recession. In 2012, the EU’s economy was $17 trillion, according to Eurostat. In the aftermath of extending bilateral trade ties, the deal is due to cover about 50 percent of global economic output, 30 percent of global trade and 20 percent of global foreign direct investment. On November 1, Germany and Brazil submitted a new draft resolution to the UN General Assembly which calls for an end to excessive electronic surveillance, data collection, and other snooping techniques.

ovartis has said it aims to slash more than 440 jobs in Britain, to adapt to “a challenging healthcare marketplace.” The Swiss pharmaceuticals giant is considering closing its manufacturing site in Horsham, West Sussex, which would lead to the evaporation of 371 jobs, the company told AFP. The decision is still subject to consultations with employees and final approval by its UK board. Cuts at Novartis’ UK pharmaceuticals division in Frimley, Surrey, could impact another 72 jobs.

US PIPELINE SAFETY OFFICE TO FINE EXXON $2.7MN FOR ARKANSAS SPILL

obil Pipeline Co faces a fine of nearly $2.7 million for a pipeline spill of thousands of barrels of crude oil in an Arkansas suburb last spring, according to the US pipeline safety office. The Pipeline and Hazardous Materials Safety Administration (PHMSA) found nine probable violations of safety rules in the rupture of the nearly 70-year-old Pegasus pipeline, Reuters reported. The incident forced residents to evacuate their homes, and the 95,000 barrels-perday pipeline has been shut since March 29 after spilling about 5,000 barrels in Mayflower, Arkansas. Exxon did not adequately account for risks on the pipeline, the agency said.

KIEV STARTS TO REPAY GAS DEBT, WITH LESS THAN 10% SO FAR GAZPROM

kraine has started to pay off its $882-million debt for Russian gas, Gazprom has said. “Some payments are coming in, but these are so far drops in the ocean,” the gas giant’s spokesman, Sergey Kupriyanov, told Interfax. Ukrainian oil and gas company Naftogaz had paid $50 million on October 30, $9 million on October 31, $10 million on November 1 and $6.2 million on November 4. The $6.2 million was still on its way, and more is expected soon. The payments started on Monday, Eduard Stavitsky, the Ukrainian Minister of Energy and Coal Industry, said, adding that “there are enough funds to settle the debt.”

WORLD NEWS caucasian business week

November 11, 2013 #29

TWITTER ABUZZ: SHARES SURGE 81% AFTER HITTING NYC FLOORS

WTR’ rose from $26 dollars per share to $50 just minutes after trading on the stock began for the first time, making its founders instant billionaires. The price later stabilized at around $45 per share. Big energy and enormous trade transactions flooded the New York Stock Exchange (NYSE) early Thursday morning as Twitter Inc., a company that isn’t even profitable yet but is valued by its IPO at $14.1 billion, nearly doubled share prices in the opening minutes of public trading. Trading throughout the day could remain volatile, as the San Francisco-based micro blogging

company started bidding high- with a set price of $26.00 for 70 million shares. The NYSE has live coverage of the opening on its website. Journalists outnumbered traders on the floors at the third largest IPO in the US this year, after a nine-year old girl (who herself has a Twitter account) a member of the Boston Police Department, and actor Patrick Stewart from Star Trek, rang the opening bell. Twitter will rely on investor desire to buy into the hot social media which has promising revenue, but is too heavily reliant on advertising, isn’t yet profitable, and at any moment, could be eclipsed

by ‘the next big thing’. CEO Dick Costolo, Twitter’s third CEO in 3 years, said he ‘wouldn’t change anything’ about the IPO process which took an ‘anti-Facebook’ approach, and avoided its predecessors’ mistakes of too much hype and overestimation. The initial public offering was priced at $26.00, higher than the original pitch of $17.00, and even higher than the final anticipated range of $23.00$25.00. The $26.00 share price decision raised $1.82 billion in the initial public offering, giving the company a value of $18.3 billion. To avoid a similar slip-up at Facebook’s IPO, when a technical glitch caused delays, the NYSE did a test run for Twitter, predicting trading scenarios to make sure systems could withstand heavy investor traffic. Its third quarter revenue was $422.2 million. In 2012 revenue almost tripled and reached $317 million. The company filing predicts sales will hit $1 billion in the next year. If all shares are sold, there will still be 554.7 million outstanding, as well as 10.5 million shares the underwriters have an option to buy later. That will give it a basic market capitalization of about $14.4 billion. The eight-year-old service only gave potential investors a first peek into its financial records when

it released its prospectus in a Security Exchange Commission (SEC) filing on October 3 2013, nearly a month after Twitter announced it confidentially filed for in IPO on September 12. The IPO will transform top shareholders into stock-portfolio billionaires. Jack Dorsey, the co-founder and chairman holds 4.9 percent or 23.4 million shares in the company. Other shareholders include Evan Williams, cofounder with 12 percent, or a 59.6m share stake, Peter Fenton, a Benchmark Capital partner with 6.7 percent, and CEO Costolo with 1.6 percent. All capital raised on Thursday will go straight back into the company, Costolo said. IPO money will be used for blazing international expansion. About 77 percent of users are international, yet the firm still makes 75 percent of its revenue inside the US. Ad space ‘per timeline view’ inside the US costs $2.58, and internationally, only $0.36. Twitter was launched by CEO Jack Dorsey on March 21, 2006 with just 24 characters, when he tweeted, “just setting up my twttr.” It has so far attracted more than 230 million users worldwide and become one of the most popular ways to share information online. It has become a uniquely live way to share information that newsrooms, protestors, and public figures use to transmit information in real time. Katy Perry has the most ‘Twitter capital’ - with 46.5 million followers, 7 million more than President Obama, Goldman Sachs was listed as the main underwriter, along with Morgan Stanley, JPMorgan Chase & C., Bank of America Corp., Deutsche Bank, AG, Allen & Co., and Code Advisors. Rt.com

TBILISI GUIDE November 11, 2013 #29

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

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

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

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

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

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

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

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

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

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

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

PUBLICITY caucasian business week

November 11, 2013 #29