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BUSINESS WEEK November 25, 2013 #31

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November 25, 2013, Issue 31

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BE INFORMED, DO BUSINESS

FITCH AFFIRMS GEORGIA’S BBRATING, OUTLOOK STABLE

GEORGIA

FOREIGN TRADE TURNOVER GROWS BY 1% IN JANUARY TO OCTOBER

ccording to Sakstat preliminary data, in January - October 2013, foreign trade turnover amounted to 8,5 billion USD, which is 1% more than in the same period in 2012. Pg. 7

Minister of Economy Admits a 650 - million Gap in the Budget

GEORGIAN RAILWAY’S NET PROFITS RISE BY 30%

et profit and gross income of the JSC Georgian Railway has increased by 30% in the annual expression in 9 months 2013. Pg. 6

LUXEMBOURG AIRLINE LUXAVIATION BEGINS TO OPERATE IN GEORGIA

Pg. 7

uxembourg airline Luxaviation will open a representative office in Georgia on January 15, 2014, where it will be engaged in air transportation. Pg. 6

AZERBAIJAN AZERBAIJAN CONTINUES DEVELOPMENT OF ALTERNATIVE ENERGY SOURCES

roduction of solar cells in Azerbaijan cheapens the process of developing alternative energy sources in the country. Pg. 10

ARMENIA ARMENIAN DOORS OPEN BEFORE CARREFOUR: FRENCH AMBASSADOR

he negotiations on the establishment of the French Carrefour retail network continue in Armenia preserving the principle of secrecy. Pg. 11

CIS PUTIN VICTORIOUS AS UKRAINE POSTPONES ‘TRADE SUICIDE’, HALTS TALKS WITH EU

acing its most important economic crosswords since the collapse of the Soviet Union, Kiev has aligned itself closer to Russia, and has suspended preparations to sign an EU trade deal. Pg. 12

WORLD NEWS US COULD ‘DERAIL’ ECONOMIC RECOVERY – OECD

he most immediate threat to the global economy is coming from the US and its debt ceiling, warns the Organization for Economic Cooperation and Development. Pg. 13

Margvelashvili: Georgia Sticks with its ‘Ambitious Plan’ to Sign AA with EU Next Year Pg. 2

ating agency Fitch has affirmed Georgia’s long-term rating at “BB-” level, outlook Stable. The country ceiling has been affirmed at “BB” and the short-term foreign currency at “B”. Press release of the agency states that institutional progress has been reached, but political risks remain. “The completion of the electoral cycle has demonstrated that Georgia’s institutions can channel political change. However, the political scene is still relatively fragmented and the current coalition’s cohesion will be tested following the resignation of Mr. Ivanishvili from the post of prime minister. Judicial proceedings against members of the previous administration could sour the political climate.” - says the press release.

It also indicates that GDP growth fell to 1.7% in 9 months of the current year, due to the steep reduction in public investment as the government was reviewing some of its public contracts. Electoral and policy uncertainty was also a hindrance to investment and weak domestic demand acted as a drag on GDP growth and further dampened inflation. However, a pick-up in public and private investment is expected in 2014, supporting an acceleration of GDP growth to 5%, closer to the average for 2010-12. The agency positively mentions renewal of bilateral relations with Russia, as a result of which export to Russia has increased in the second quarter of the current year and the agency expects growth of this data in 2014-2015.

BANK SECTOR’S PROFITS RISE BY 203% Y-O-Y

anking sector completed 10 months 2013 with 308,8 million GEL profit (III quarter - 275 million, II quarter - 153 million, I quarter - 65,3 million GEL). Profit of 10 months of the last year equaled to 101,808 million GEL. Annual growth is 203%. 16 banks are profitable, other 5 are unprofitable. In the same period of last year 12 banks out of 19 were profitable. For the reporting period own capital of the banking sector (stock capital) equaled to 2,799 billion

Samsung Unveils the First Service Plaza in Georgia

Pg. 5

THE FIRST GEORGIAN MARKETING EVENT IN TBILISI

Pg. 5

GEL (01/11/12-2,294 billion GEL). Supervisory capital is 2,823 billion GEL (01/11/12- 2,433 billion GEL), capital adequacy coefficient - 17,7%, it’s reduced by 0,3% in comparison with previous month (01/11/12-16,7%). For the reporting period Return on Equity (ROE) is 14,2%, Return on Actives (ROA) - 2,5% (01/11/12 - respectively 5,3%, 0,9%). Consolidated data includes results of 21 commercial banks. In August of the current year former micro-finance organization FINCA got banking license.

David Sergeenko: Healthcare cannot Obey Market Laws Pg. 4

Maya Sidamonidze: Smoothed Visa Regime will Develop Tourism Sector Pg. 7 Cesar Chocheli: Processes that Unfold around us Hamper the Development of Pg. 8 Business “Rakia–Georgia”: “Rakia” wanted to leave the country An interview with “ Rakia Georgia” Director GUGA TSANAVA Pg. 4

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

MAIN EVENTS caucasian business week

November 25, 2013 #31

MARGVELASHVILI: GEORGIA STICKS GEORGIAN, RUSSIAN DIPLOMATS WITH ITS ‘AMBITIOUS PLAN’ TO SIGN MEET IN PRAGUE eorgian PM’s special envoy for relations with Russia, Zurab AA WITH EU NEXT YEAR

o matter of difficulties that country may face, Georgia will remain committed to its “ambitious plan” to sign the Association Agreement with the EU within a year after it will be initialed at the Eastern Partnership summit in Vilnius next week, President Margvelashvili said on November 22. “The Georgian society, the Georgian political spectrum are united that Georgia is a member of the European family. We have explicitly stressed that this is an issue over which the Georgian society is consolidated, therefore we will together overcome any difficulty or challenge that we may face and the ambitious plan that we have – to sign the Association Agreement within a year after initialing – remains the main strategy of our government,” Margvelashvili told journalists while visiting a military base in Vaziani outside Tbilisi. Margvelashvili, who will lead the Georgian delegation at the Vilnius summit, also said: “We are going to this summit with extremely good results, because we held exemplary, European-type of [presidential] election… We believe that Georgia is integral part of Europe and we have good evidence of that stemming from the recent political developments. So we will focus on that and focus on future plans that will follow after the initialling of the agreement up until its signing.” New secretary of National Security Council, Irina Imerlishvili, said after initialing of the Association Agreement Georgia will “cooperate intensively” with Western partners to have this

agreement signed within a year. Deputy Foreign Minister, Davit Zalkaliani, said Ukraine’s decision to suspend preparations for Association Agreement with the EU will not affect Georgia’s choice. “I want to express my hope that the issue of signing Association Agreement is not closed for Ukraine and to express hope that sooner or later it will happen anyway. It is important for us to make right conclusions about what has happened in respect of Ukraine,” Zalkaliani said. “Difficult and important period lies ahead of us after the Vilnius summit, because we are moving into the phase when we should get ready for signing of the Association Agreement.” “I also want to express hope that the European Union will also make adequate conclusions,” he added. GD lawmaker Irakli Sesiashvili, who chairs parliamentary committee for defense and security, said that Ukraine’s decision means that Russia has prevailed. He, however, also said that it might have some positive implications for Georgia and called on the EU to speed up integration process with those Eastern Partnership countries, which have “unwavering aspiration towards the West.” “Of course that [decision of Ukraine] is bad, but it may have some positive aspects for us as well in a sense that the Europe should at last appreciate our unwavering aspiration towards the West,” Sesiashvili said. “The West should think that if it wants this process to continue it should... speed up processes in respect of those countries, which want to be part of the Europe.” Commenting on Ukraine’s decision, Georgian State Minister for European and Euro-Atlantic Integration, Alexi Petriashvili, said “of course it’s preferable” to have as many countries of Eastern Partnership as possible on the path of association with the EU, “but every country has its own choice.” “We have chosen our path and it has been chosen by the majority of the Georgian people and the government will spare no effort to fulfill this goal, therefore no obstacle whatsoever will hinder Georgia on this path of achieving this goal,” Petriashvili told the Georgian public TV on November 22.

Abashidze, and Russia’s Deputy Foreign Minister Grigory Karasin met in Prague on November 21 for the fifth time since the launch of this format of negotiations almost a year ago. The format was launched in December, 2012 to address issues related mainly with trade, economy, humanitarian and cultural aspects of bilateral relations. For the first time since the launch of this negotiating format, the two diplomats made a joint appearance before journalists after the meeting on November 21. “First of all today we noted that the epoch of maniacal enmity, instilled by the previous leadership of Georgia, is left behind,” Karasin told journalists. “We hope constructive period of interaction and joint search for solutions lies ahead of us, which will be based on mutual respect of interests of the two countries,” he said. “But there should be no inflated expectations about what we have already done and what we have to do in the future – illusions are the most dangerous for the relations,” Karasin said, adding that over-inflated expectations may cause disillusionment and “freezing of relations.” “That’s exactly what we don’t want to happen,” he said. “We want everything to develop perhaps not so fast, but reliably.” Karasin also said that Moscow was watching closely Georgia’s presidential campaign and election. “We think that elections were held calmly, probably even too calmly, which represents a sound indicator for the Georgian society. Those statements which were made by Georgia’s new president were perceived positively by us,” Karasin said. Zurab Abashidze said that Georgia’s new president Giorgi Margvelashvili and new PM

Irakli Garibashvili support continuation of this dialogue. He also reiterated that this format of negotiations do not touch upon issues representing “red lines” – Georgia territorial integrity and Georgia’s freedom of choice in foreign policy affairs. After the meeting the two sides have also released separate written statements both of them noting positive dynamic in talks. Abashidze said in his statement that with reopening of the Russian market for the Georgian products and positive trends in humanitarian, peopleto-people contacts, most of the agenda items, laid out upon the launch of talks about a year ago, have already been addressed. Abashidze also said that ideas were exchanged at the meeting about issues that can be address “at the next stage” of this dialogue. The two diplomats have agreed to hold next meeting either in March or February, 2014. The Russian Foreign Ministry said in its statement: “In overall, constructive and amicable atmosphere of these meetings, held since December 2012, allows successful resolution of practical issues.” The Russian Foreign Ministry also said that Moscow uses “flexible approach” in issuing visas to the Georgian citizens, which, it said, led to 40% year-to-year increase in number of visas granted to Georgians in 2013.

GEORGIA TO TAKE PART IN EU CRISIS MANAGEMENT OPERATIONS

U’s Foreign Affairs Council has agreed to sign and conclude an agreement establishing a framework for the participation of Georgia in EU’s crisis management operations. According to the Ministry of Foreign Affairs of Georgia document called Framework Agreement on the Participation of Georgia in EU Crisis Management Operations is to be signed on November 28, in the margins of the Eastern Partnership Vilnius Summit. The Agreement will allow Georgia to participate in EU-led civilian missions and military operations and contribute to the EU’s efforts in the crisis management worldwide. The Agreement represents a step forward more structured cooperation between Georgia and the EU in the security field, said in the MFA. The Council also decided to sign and conclude an agreement enabling the Republic of Chile to participate in EU’s crisis management operations. Catherine Ashton, High Representative of the Union for Foreign Affairs and Security Policy, who chaired the meeting of the council in Brussels, in November 2012 suggested that the government should start negotiations about an agreement which would lead to participation in EU

crisis management operations. In March 2013, Defense Minister Irakli Alasania said that Georgia would participate in EU’s operation in Mali. His advisor then told DF Watch that this was about consulting. The minister said that Georgia agrees to accept a proposal from European partners and the details were still being discussed. Norway and 16 EU countries currently take part in the EU-led Mali mission. Details of the new agreement about engaging in EU crisis management operations are yet unknown. Philip Dimitrov, EU’s Ambassador to Georgia, said on Wednesday that this is proof that EU considers Georgia a reliable partner. Georgia’s foreign minister said her country is becoming an international player under the auspices of the EU as well and trust in Georgia will increase with participation in such operations. Georgia has experience with participating in international missions. From 1999 to 2008 Georgian soldiers participated in the UN mission in Kosovo. Georgia has also participated in Iraq and is currently participating in the NATO-led ISAF operation in Afghanistan.

GEORGIA AND ISRAEL AGREE ON VISA RULES

eorgia and Israel have formed an agreement which allows Georgian citizens to stay in Israel for 90 days without a visa. Acting Interior Minister Irakli Gharibashvili and Israel’s Deputy Interior Minister Faina Kirshenbaum on Monday signed an agreement which seals the new deal about visa free travel. Agreement allows Georgian citizens to stay in Israel for 90 days during six months.

Georgia has established visa free rules for Israeli and now the government works to establish bilateral visa free rules. Two weeks ago delegation of Israeli visited Georgia and stated that the agreement about visa free rules is achieved and it must finish in several months. Agreement signed on Monday is part of this agreement. On Monday Irakli Gharibashvili also signed agreement with Yuval Fuchs, Ambassador of Israeli to Georgia about cooperation in fighting against fight and public security between the states.

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GOVERNMENT November 25, 2013 #31

caucasian business week

NEW PM WINS CONFIDENCE VOTE

rakli Garibashvili was confirmed by the Parliament on November 20 as Georgia’s new Prime Minister with 93 votes to 19. The vote marked the end of Bidzina Ivanishvili’s tenure as PM; he has voluntarily departed from office after serving for one year and twenty five days. Ivanishvili’s long-time close associate Garibashvili became holder of the most powerful political office in the country as the new constitution shifted power from president to PM and the government. The only newcomer in the government is Alexandre Tchikaidze, 28, who will replace Garibashvili on the post of interior minister. OTHER MINISTERS RETAINED THEIR POSTS: Minister of Finance – Nodar Khaduri; Minister of Economy and Sustainable Development – Giorgi Kvirikashvili; Minister for Labor, Healthcare and Social Affairs – Davit Sergeenko Minister for Infrastructure and Regional Development – Davit Narmania; Energy Minister – Kakha Kaladze; Minister of Justice – Tea Tsulukiani; Minister of Foreign Affairs – Maia Panjikidze; Education Minister – Tamar Sanikidze (she replaced previous education minister Giorgi Margvelashvili, who is now the president, in July 2013); Minister in charge of IDPs issues – Davit Darakhvelidze; Minister of Environmental Protection – Khatuna Gogoladze; Minister of Defense – Irakli Alasania; Minister of Agriculture – Shalva Pipia (he replaced previous minister Davit Kirvalidze in spring, 2013); Minister in charge of penitentiary system – Sozar Subari; Minister of Culture and Monument Protection – Guram Odisharia; Minister of Sports and Youth Affairs – Levan Kipiani; State Minister for European and EuroAtlantic Integration – Alexi Petriashvili; State Minister for Reintegration – Paata Zakareishvili; State Minister on the Diaspora Issues – Kote Surguladze; Garibashvili started his speech at the parliamentary session before the vote by thanking Ivanishvili for “playing an important role in Georgia’s political life and for peaceful change of government through elections” and for “carrying out fundamental changes in the country.”

“Batoni Bidzina has kept his word: he set the country free from regime and has quit the politics in dignity,” Garibashvili said. Ivanishvili made his last public appearance in his capacity of prime minister on November 20 when he attended jointly with Tbilisi Mayor Gigi Ugulava opening of a monument of a Georgian actor Ramaz Chkikvadze in the capital city. On November 24 Georgian Dream-Democratic Georgia, party founded by Ivanishvili will hold a congress, which is expected to elect Garibashvili as its chairman. “He quit the post, but he has not quit the politics – these are [President] Margvelashvili’s words; we should pursue policies in a way that will not make him go into opposition, otherwise we have all seen very well what does it mean when he’s in the opposition,” MP Davit Saganelidze, the leader of the Georgian Dream parliamentary majority group, said in his speech during cabinet confirmation hearing. Parliamentary chairman, Davit Usupashvili, said that departure of Ivanishvili from the PM’s post means increased responsibilities for GD coalition and each cabinet member. “From now on we are assuming special responsibility, because we – parliamentary majority members and each cabinet member – are assuming responsibility before the people actually from today,” Usupashvili said. UNM lawmakers, who voted against, said the

government is “self-satisfied, although it has no reason for that” because of shortfall in tax revenues and economic slowdown. Before the vote and debates, question and answer session was held, which was different from what was a day before when Garibashvili appeared before UNM parliamentary minority group, when the hearing turned into heated debate dominated by mutual accusations. UNM lawmakers were asking without even voicing any criticism very specific, issue-based questions from government’s program, which Garibashvili read out in his presentation at the parliamentary session. But in his answers Garibashvili was often pointing finger at UNM, accusing, although not as sharply as a day earlier, previous government of various misdeeds. Most of the questions asked by UNM lawmakers were about economy, among them about main challenges to microeconomic stability; what should be share of government spending in overall GDP to achieve government’s declared goal of having “small and efficient government”; what specific legislative amendments the government plans to introduce to “improve investment climate” as stated in the program; what state assets government plans to privatize and how much it plans to receive from privatization in next few years; what might be Georgia’s comparative advantage in regional and global economy. Garibashvili started responding to these questions by saying: “As far as your alarm and concern about ‘economic decline’ is concerned, I think that we don’t have any disastrous situation. IMF… assessed that there is revitalization in economy in recent months, so there is no disastrous situation.” “I am not here to criticize you,” he told UNM lawmakers, “but I remember very well how you were saying that crime is on rise and everything is being ruined, but in fact there is nothing disastrous. There was certain slowdown in economy, but it is easily rectifiable.” “Our team is so efficient that we will resolve these problems very easily,” he said, adding that one of the main reasons of economic slowdown was tense political cohabitation. He then called on UNM lawmakers “not to scare off investors” by portraying situation in a negative light. “There was a slight downward [trend], but it is rectifiable. Situation was much worse after and before [the August, 2008] war, but you were borrowing external debt, whether through Eurobonds or other means, but we are not talking about it now, we do not want to be focused on the past, we want to think about the future; we do not want to permanently criticize you. Now you are in a very uncomfortable situation, because whatever you ask we can give you a comprehensive answer,” Garibashvili told UNM lawmakers. He said that while the previous government was delaying bilateral investment protection treaty with about 30 countries, the current one is in the process of signing those agreements. He said that questions about specifics and details of laws “are not serious.” He said if such specific questions aim at testing his knowledge of details of certain laws, “it’s not serious.” On share of government spending in overall economy, Garibashvili said it should not exceed 30%. On a question which country he thinks might be a model for Georgia’s economic development, he

said: “There are many countries whose examples might be followed, but we are not going to go down the Singaporization path.” Asked by UNM about his stance over Parliament’s decision suspending sale of agriculture land to foreign nationals till the end of 2014, Garibashvili responded that this moratorium would soon be removed. UNM MP Petre Tsiskarishvili asked about the foreign policy in the context of Russia’s “pressure and blackmail” on Ukraine ahead of the Eastern Partnership summit in Vilnius. He said that after Georgia initials the Association Agreement at the summit next week, Russia is expected to mount its pressure on Georgia to force Tbilisi to give up its European aspiration. Garibashvili responded: “Our foreign policy course is a choice of our people… We believe that it is the only right path and Georgia future is only in the EU and NATO aspiration. Of course it might not happen today or tomorrow, but we should move towards this goal consistently... We should strengthen democratic institutions and prove to the civilized world that we really deserve to be EU and NATO member country.” “I do not see any risks. You mentioned example of Ukraine and Moldova. They depend on Russia more than we do... But I have to remind you once again that it would have been better if you had been more critical towards your own team in its time, when you were selling lots of strategic facilities to Russian companies,” Garibashvili said. “So there is no change in the foreign policy and we will firmly continue moving towards the EU and NATO.” During the debates senior UNM lawmaker Giorgi Gabashvili said that Garibashvili’s “self-opinionated” stance, downplaying obvious problems and blaming everything on predecessors is a way into “spiral of unsuccessfulness.” “You will fail to be successful with such stance; you remain hostages of myths created by you and fail to face the truth, claiming that everything is

ok; not everything is ok,” he added. In his speech parliamentary chairman, Davit Usupashvili, stressed about the need of keeping the government under parliament’s scrutiny. He also spoke about the need of unity within the society regardless of political views. Referring to the UNM party, Usupashvili told GD parliamentary majority: “We should get rid of an opinion that it is our duty to educate someone and to put someone on the right track. That’s mission impossible. That’s not the right task. But on the other hand just look how much progress has been made in one year; I think our colleagues [from the UNM parliamentary minority group] are sincere when saying that the opposition rights should not be violated, that it is inadmissible to terrorize business, that media and the judiciary should be free. This is enough progress and do not expect more.” “If we promised to the people that we will be unifying [force] for the nation, then we should also agree that unity means union of both those who are ‘right’ and those who are ‘wrong’ – depending from where you look. The nation is one whole and if we start unifying only those whom we think are right that will mean going down the same wrong path, which we want to avoid. The right criteria are: rule of law, irreversibility of punishment [for crimes] and presumption of innocence. By observing these principles we will be able to unite and also to tackle all the problems,” Usupashvili said. But in his speech GD parliamentary majority leader, Davit Saganelidze, struck his usual radical tone by telling parliament speaker it was early to speak about progress in respect of UNM. “I do not want to speak about the past, but before you [referring to UNM MPs] don’t bow your head before the society and don’t apologize before the society for what you have done over the past nine years, we will probably have to speak about the past often,” MP Saganelidze said. Civil.ge

INTERVIEW caucasian business week

HEALTH MINISTER: HEALTHCARE CANNOT OBEY MARKET LAWS

uring the past year, the Cabinet has worked very effectively - the Minister of Health of Georgia David Sergeenko says in an interview with newspaper “Kviris palitra”. “Unfortunately, in recent years the term “effectively” acquired a negative connotation , so I will explain that I have in mind the result and not just posing in front of a TV camera. What will the government be after Ivanishvili? I think the names change a little, the main thing is to reach our goal, “ - the Minister notes. According to him, society should control the government, but at the same time, it should not rely on handouts from it. On the question of what is a major problem faced by the public healthcare, Sergeenko says that under the previous government, as a whole, an approach to the health care was wrong. “Health care, as a system, created by the union between communications and regulations does not exist. We have a diffuser structure, parts of which are charged separately and have no co-ordination between them. All this creates a greater risk for patients. A huge problem was the fact that a principle of the free market is working in the medicine, which is not working in this system. Our opponents say a state control over medicine is not needed, and the market will regulate the process, but it is a big mistake. Market principles

work for example when buying a TV set, when you can calculate your capacity, consult with friends, go shopping , etc. And in the medical field - things are very different - the patient has only a general idea of what is happening to him - something hurts him or a high temperature, etc. The patient goes to the doctor and he has to decide what will be the cure – he can assign treatment more expensive and inadequate to the state of the patient and sometimes vice versa. Therefore, we cannot remain only in the hope of honesty and decency of doctors. This is a fundamental difference between medicine and the principles of the free market. Therefore, in any case medicine cannot be left alone at the mercy of market principles. The state, in any case, should keep the levers of influence on the situation. We have been trying to put the industry on its feet for the whole year, and the results will be no earlier than in the beginning of 2015 , “ - the Minister notes. “We will create all the infrastructure that will meet the needs of patients by the time, we will have personnel that will be able in the presence of modern equipment to provide the necessary services for patients. For example, children are now being taken abroad for stem cell transplantation, but we will solve this problem soon. Over the next three years we will also solve the problem of availability of oncology treatment in Georgia, again without having to travel abroad. Another problem is the fact that insurance companies own clinics, pharmaceutical companies and ambulance services - in such a situation, it is easier to take the patient to the clinic which is moreconvenient for them. We are solving this problem - the patient should be placed in the hospital which suits him and not the insurance company, “- Sergeenko adds.

FOREIGN TRADE TURNOVER INCREASED

oreign trade turnover of Georgia in 10 months of the current year increased by 1% in the annual expression. Geostat published preliminary data of the foreign trade turnover of 10 months of the current year. According to official statistic, in January-October 2013 foreign trade turnover in Georgia (without unorganized trade) equaled to $8,591 billion, which is 1% more than data of the previous year. In a year export amount increased by 16%, to $2.396 million. In the same period import has reduced by 4%, to $6.285 billion. Negative trade balance in January-October 2013

equaled to $3979 million and 46% of the foreign trade turnover. It’s noteworthy that in October of the current year, in comparison with September, amount of both import and export has increased. In October turnover equaled to $1,005 billion. Among them export was $287,1 million, import $718,6 million, which exceeds to September data respectively by 28,8 million and 31,5 million. It’s noteworthy that export and import data, as well as turnover have reached to maximal indicators of the year. Adjusted data of the foreign trade will be published on November 25.

November 25, 2013 #31

“RAKIA–GEORGIA”: “RAKIA” WANTED TO LEAVE THE COUNTRY An interview with “ Rakia - Georgia” Director GUGA TSANAVA - The rehabilitation of “Sheraton” hotel started last year , but due to certain events it was delayed. When will a full-scale work begin and when will the rehabilitation be completed? - “Sheraton” hotel has not been rehabilitated since its opening , there were some drafts , but the project did not start. As for yesterday’s meeting and guests we hosted, we discussed the launch of the first phase which includes a comprehensive rehabilitation of the architectural part. Several international architectural companies have arrived. It’s not just a cosmetic reconstruction but the reconstruction of rooms as well as interior and exterior reconstruction. A restaurant of the international level will also be added and so on. This was a direct reference and desire of His Excellency Sheikh Saad . - The new government and the business environment do not cause certain doubts among investors and there is a firm belief that the taken course will be the guarantor of the country’s development? - Yes . I want to say with full responsibility that “Rakia “ even wanted to exit the country for some objective reasons . Active investment activity was stopped. Only after the election they became convinced that Georgia has a unique environment to conduct business without any pressure. - Was there not, in general, a friendly business environment in Georgia or the previous government’s attitude was not appropriate in order businesspeople , in particular “ Rakia “, to think about large projects ? - I am a businessman, not a politician , so I do not want to make political statements. But I will say that “Rakia” and “ Rakeen “ , as well as His Excellency, faced problems here. Due to this fact, they even wanted to leave the country. - How long will the reconstruction of “Sheraton” hotel last and will the hotel operate or be closed? - It all depends on when the final version of the project is ready. Whereas 4 different companies are involved (architects, designers, engineers , and so on ). We believe that the project is expected to be ready in April. As for the construction, we were told at yesterday’s meeting that the total reconstruction should not last more than 18 months. As for the last question, we decided that the hotel would not be stopped and a phased reconstruction will be carried out. - According to the announcements, your group thinks to invest in the energy sector as well. If you’ve chosen specific directions and will this project be carried out independently or through the Co-investment Fund, a donors of which “ Rakia” is?

- We are actively working with the Ministry of Energy and government agencies, Today we have some outline of what we want. I think that in 2014 we will be more focused on specific projects. “Rakia “ has extensive experience in energy field in various countries. As for the Co-investment Fund, the decision is taken by our central office, which is its founder directly bypassing the Georgian subsidiary. Therefore, we have 3 directions. The first- business we have in Georgia. The second - new sectors and the third - the projects that are to be implemented along with the Co-investment Fund in which our headquarters will directly participate. - How satisfied are you with Poti free industrial zone? - We are unhappy with the results of the Poti FIZ , given the simple reason that “ Rakia “ has a great experience. The world is full of such industrial zones, and FIZ which is in our control should not work with such poor results. Poti FIZ has a great potential that is used at a minimum level. - There was talk about a hotel construction in Vardzia, and what’s happening in the Poti airport, will these projects be implemented? - At this point we have 3 projects in the portfolio. These are “ Sheraton” hotel, Poti Free Industrial Zone and Tbilisi Mall .We will continue to work in these direction and invest millions in these projects. - Or is Poti airport and other projects your future projects? - Yes . We’ve identified priorities in all projects. I do not rule out that the alienation of certain assets.

BUSINESS REGISTRATION GROWS BY 28% Y-O-Y

n October 28% more business subjects have been registered compared to last year. According to the data of the Public Registry, in October 2013 number of business subjects registered in the country equaled to 1 025 units, which is 69% less than in September, but 28% more than data of October 2012. 96,7% of the registered business subjects are commercial subjects (individual entrepreneur, Joint liability company, limited liability company, joint stock company, comandic company, cooperative, branches of foreign legal entities), 3,3% - non-commercial subjects (non-profit legal entities, branch of the foreign non-profit legal entities, Public legal entity). It’s noteworthy that in October 2013, compared to previous month, number of commercial sub-

jects declined by 7,4%, number of non-commercial subjects increased by 10.7%. Different trend was mentioned in comparison with the same month of previous year: 27,1% increase in the number of commercial subjects and 61.4% increase in the number of on-commercial subjects. In October of the current year majority of business subjects registered as individual entrepreneur (2 391 units of 59,6% of the registered business subjects) and LTD (1470 units or 36,6% of the registered business subjects). As it seems, 96,2% of the business subjects give preference to this legal statuses. In the same month 134 non-profit legal entities, 1- branches of the foreign commercial legal entity, 8 cooperatives and 2 JSC were registered in the country.

OCTOBER RECORDS GROWTH IN GOVERNMENT’S FOREIGN DEBTS, DECLINE IN NATIONAL BANK’S DEBTS

inistry of Finance published official statistic of the foreign debt on the website. According to statistic, overall foreign debt of Georgia is $4 205 261 000 (7 025 729 000 GEL), which is $72,455 million more than September data.

In October of the current year, compared to September, amount of the governmental debt increased by $76,369 million, to $4 057 301 000. As for liabilities of the National Bank, its amount reduced by $3,915 million, to $147 959 000. It’s noteworthy that compared to January of the current year, in October foreign debt to Georgia has reduced by 181,054 million.

EVENTS November 25, 2013 #31

caucasian business week

SAMSUNG UNVEILS THE FIRST SERVICE PLAZA IN GEORGIA

amsung has unveiled the first top class service center Service Plaza in Tbilisi. Sang Pil Chin, a director for the Samsung Electronics Office in the Caucasus, Cheonhee Cho, a head for the Samsung services strategic development and Nathalie Yanchuk, a Samsung marketing manager in Georgia, cut the red-ribbon. The center is located at Pkhovi Street no 2, on Orbeliani Square, Tbilisi. The company management says the service center will offer top class services to clients. Service Plaza offers simplified procedures of services to the consumer. The center operators will meet clients at the hall to provide consultations. After the diagnostics of products, the Service Plaza engineers will make orders for products for 24 hours. The service

includes guaranteed and non-guaranteed repair services for all official products of Samsung with hologram. Service Plaza offers repair works for all products, including software and components, provides any recommendations and consultations. Clients will have access to a wide range of accessories. Service Plaza will offer an innovation – products will be repaired immediately before clients, Sandro Khocholava, a Service Plaza director, noted. Clients will receive the world standard services and full comfort at the Service Plaza – professional specialists, friendly staff, comfortable environment, a children room and a parking place for 12 vehicles. Service Plaza engineers have passed special

trainings to obtain the Samsung world level qualifications, the management says. Samsung Electronics representatives have visited Georgia and have held trainings for engineers for each products. “Samsung is being developed quickly in Georgia. The company has unveiled the first brand store in Georgia and new stores will also open in regions. Now we will open the Service Plaza and in the future we will offer many innovations to the clients. Georgia is among the world’s leading countries and all new models appear in Georgia like all other developed countries. We have taken a decision for opening the Plaza in behalf of our consumers. We want our clients to have top class services like Samsung head office in Korea. The

customer will have all comfort here’, Nathalie Yanchuk noted. “We do our best to offer best services to our clients. We promise to continue our work and offer the newest technologies and high level products to our clients”, Sang Pil Chin said. As to the working hours, the service center will work from Monday to Friday from 10 o’clock to 18 o’clock and on Saturday from 11 o’clock to 17 o’clock. The Samsung Plaza hotline is 0 800 555555 and the phone call from any regions is free. In the Future Samsung will open a new Service Plaza in Batumi too. Samsung was founded in 1938 and today the company represents the world’s major manufacturer of electronic products.

THE FIRST GEORGIAN MARKETING EVENT IN TBILISI On December 20 Tbilisi is hosting the first Georgian marketing event named “Spotlight”, which is organized by Georgian online magazine on business – Marketer.ge. Given the fact that the event is somehow unique in Georgian reality, it has aroused a lot of interest among marketers. That is why we have decided to interview the project manager of Spotlight NINO AKHALAIA.

- Nino, why have you decided to organize such an event and what is the goal of your project? - The reason why Marketer has come up with the idea of organizing “Spotlight” is because we saw the need for such events in Georgia. In our view, Georgian marketing field is lacking such possibilities of introducing something new and different. That is why we decided to give Georgian marketers such an opportunity. The aim of the project is to contribute to the progress of Georgian business and marketing fields. Besides, our goal is to create a new space where country’s top marketers will share their knowledge and experience with their colleagues and other interested people. - And still, what is so special about Spotlight? - Well, to begin with, the framework of the event is rather unusual. Despite the fact that 14 speakers are expected to deliver their speeches, this will be neither a lecture nor a seminar. Rather, “Spotlight” offers 14 different 13-minute stories which, I am sure, can change a lot in one’s career. Speakers are expected to talk about their own work experience, covering all the

difficulties and achievements in their career. What is more important, the uniqueness of each story, makes “Spotlight” something more than a lecture or a textbook on marketing, it really is something beyond. - Who are the speakers and why have you chosen specifically them? - It must be also mentioned that the speaker list is rather impressive. We have invited the most qualified and successful representatives of the Georgian marketing field. These are the people who are considered to be top professionals in our country and that is why we have decided to engage them in this event. Representatives of the following companies will make their unique presentations at “Spotlight”: Oto Peradze (OTO|DEV), Ioseb Galumashvili, (GEPRA), George Popiashvili (JWT METRO), Lasha Gogua (Bank Constanta),Teona Bagdavadze (Beeline), Tornike Guruli (Bank Of Georgia), Giga Khatiashvili (919), Vato Kavtaradze (WindFor’s), Marika Darchia (Palitra Media), Levan Lepsveridze (Leavingstone), Levan Bakhia (Sarke AD studio), Nino Jibladze (Gulf). However, we do not think that only the abovementioned speakers are the best professionals of our country. The list of such people is rather long, but unfortunately, the scope of the event does not let us embrace all of them at once. We plan to

introduce different successful marketers step by step, in the framework of future events. - Speaking about the content, what are the topics that will be discussed at the event? - All the 14 titles of the Spotlight presentations are already known to the public from our web site. It is indisputable that all of them sound extremely interesting. The speakers will talk about different interesting cases from their own work experience. Obviously I can not go into details of the content, but what I can do is to assure everyone that these presentations will have nothing in common with typical boring speeches. You just have to wait until December 20 to know what I mean. - What about the attendance? Is the event open for everyone? - In order to ensure the presence of people who work in this field, majority of the guests will receive special invitations. However, we also provide an authorized registered access to the event. The registration process will be launched on December 1 on our official website. This will enable the first and the fastest 50 people to get tickets for the event. Considering all the above mentioned, it is obvious that “Spotlight”, planned on December 20, 2013, is promising to be a very interesting and unprecedented marketing event in Georgian reality. It means that our country is moving forward in this field, giving Georgian marketers more possibilities for carrying out their job. The golden sponsor of the event is Tbilisi Mall. General sponsor - Veritas Brown Caucasus. Technological partner Huawei. Of-

ficial partner - OTO|DEV. Supporter: Gepra. Internet Television – Focus TV. Media partners: Radio Palitra, Kviris Palitra, Gza magazine, Forbes, EGO, Bpn.ge, Palitratv. ge, Ipn.ge. Caucasian Business Week, pink. ge, Marketer.ge. For additional information you can visit the following website: www.spotlight.ge

BUSINESS caucasian business week

November 25, 2013 #31

GEORGIAN RAILWAY’S NET PROFITS RISE BY 30%

et profit and gross income of the JSC Georgian Railway has increased by 30% in the annual expression in 9 months 2013. According to financial report published on the official website of Georgian Railway, in January-September 2013 the company got net revenue of 76,872 million GEL while this figure equaled to 59,073 million GEL in the same period 2012. According to non-audited report, in 9 months Georgian Railway got income of 349,89 million GEL (351,351 million in 2012). Over 88% of the total revenue - 309,47 million GEL is got from freight transportation (298,26 million GEL in 2012). Overall income from the rent of freight wagons equaled to 24,555 million GEL, while this figure exceeded to 35,4 million GEL last year.

Georgian Railway got revenue of over 14 million GEL through passenger transportation. Other income equaled to 1,8 million GEL. Georgian Railway informs that in the third quarter 2013 average monthly freight turnover has increased by 10,4% in comparison with the same figure in the second quarter, by 20,1% - in October. In comparison with the second quarter Operational profit (EBITDA) has increased by 65% in the third quarter. EBITDA Margin has considerably improved in the second quarter, which equaled to 54%, while this figure equaled to 41% in the second quarter. This profitability data equaled to 50,7% in the third quarter 2012. Reminding that according to data of 6 months of the current year, compared to the same period of last year, net profit and gross income of Georgian Railway had reduced by 41,1%.

“FLY GEORGIA” CEO RESIGNS

ly Georgia” CEO has resigned. The company confirms the resignation of Director General and explains that the company will make the announcement about the reasons for the resignation of the Director General, his successor as well as future plans in a few days . Recently, it was reported that the airline temporarily suspended flights. The airline “Fly Georgia” came on the market in 2011, and since 2012 has started flights.

LUXEMBOURG AIRLINE LUXAVIATION BEGINS TO OPERATE IN GEORGIA

L BAKU-TBILISI-KARS RAILWAY PROJECT TO BE COMPLETED BY 2014

he project on construction of the Baku-Tbilisi-Kars (BTK) railway will be completed at least by late 2014 - Turkish Transport, Maritime and Communications Minister, Binali Yildirim said, “Trend” news agency reports. According to the minister, the construction works are currently continuing as part of the BTK railway project. Earlier Binali Yildirim said the Baku-Tbilisi-Kars railway project has revived the historic Silk Road. It is planned to build a new 105-kilometer long

branch of the railway line as part of the BakuTbilisi-Kars project. Aside from that, MarabdaAkhalkalaki-Tbilisi railway section will be reconstructed in Georgia and this will increase the railway’s capacity to 15 million tons of cargo a year. It is planned to build a post in Akhalkalaki for transition of trains from the existing tracks in Georgia to the European ones. The BTK railway will have a direct access to the European rail network and it is expected that 30 million tons of cargos will be transported each year via the railway.

ARAB RAKIA STARTS NEW INVESTMENTS PROJECT IN GEORGIA

ommersant” radio station reports that the Arabic holding company “Rakia” is launching in Georgia a major investment project in the amount of 20-25 million USD. In particular, according to the CEO of the company Gigi Tsanava, it is a full-scale reconstruction of Tbilisi “Sheraton” owned by “Rakia”. “The hotel has not been renovated since the opening , but we have already started work on a master plan for the reconstruction. Management

focuses on the original design, luxury - class restaurants, night clubs and a fitness center. Wellknown architectural and design companies will be involved in the project, in particular, the company “ Starwood “, - says Director. “Rakia - Georgia” is the owner of a major shopping center in Tbilisi “Tbilisi Mall” and manages the Poti free industrial zone [FIZ]. From 2014, the holding company plans investments in energy. “Rakia is also a co-founder of the Co-investment Fund.

IDS BORJOMI TO BOTTLE MITARBI MINERAL WATER

orjomi producer IDS Borjomi Beverages Company purchased 25yers long license for utilization of Mitarbi deposit. Starting price of the deposit located

in Borjomi municipality was 903 892 GEL on the auction. Due to competition the price considerably increased and the company paid 2 802 065 for it. Amount of the fossil is 50 114,5 cubic meters in a year, among them category A - 38 434,5 cubic meters in a year, C1 - 11 680 cubic meters. According to auction terms, the license owner should: provide transportation of the water between Mitarbi deposit and water bottling enterprise with the pipeline connecting only them; meanwhile provide improvement/construction of the pipeline system.

uxembourg airline Luxaviation will open a representative office in Georgia on January 15, 2014, where it will be engaged in air transportation. According to available information, three aircrafts of the company will be based in Tbilisi airport. Luxaviation will be the first airline in Georgia , which will be engaged in business transportation - currently no air operator is represented in this segment of the market in the country. The representatives of the Luxembourg company state that the decision was taken due to the existing demand in the market, particularly with regard to air traffic in Europe and the Middle East, as well

as due to the improvement of relations between Georgia and Russia. “Apparently, the Georgian government is interested in the development of this segment and strongly supports our initiatives,” – Luxaviation official statement reads. According to the head of the company Patrick Hansen, in terms of geographical location and economic potential, Georgia is an attractive country for Luxaviation. Analysts also believe that the beginning of cargo transportation in Georgia is registered due to the demand on the part of big business. Luxaviation was established in 2008. The company has 17 aircrafts.

RUSSIAN EXPERTS TO DISCUSS ISSUE ON PERSIMMON AND GREENS EXPORTS FROM GEORGIA

osselkhoznadzor” delegation paying a visit to Georgia will arrive in Adjara Autonomous Republic today. According to the National Food Agency, Russian experts together with the representatives of the National Food Agency will observe the process of the formation of citrus export batches in Adjara.

The inspection will be conducted by the representatives of the regional service of the National Food Agency, “Rosselkhoznadzor” five specialists will stay in Adjara until December 10 to conduct monitoring. “Rosselkhoznadzor” delegation will also discuss the issue on persimmon and greens exports to Russia after the familiarization with the situation.

IMPORTERS ACCUSE “BIO-BIO” OF USING DUMPING PRICES

he appearance of “Bio - Bio “ company on the markethas led to the disappearance of local products fromrefrigerators– “Kant” company which carries out a distribution of “Fazenda” products in Georgia states. Note: Commersant.ge was told at “Bio - Bio “ that they competed with foreign products on the market, namely , “Fazenda” and “ Sadia “ products and their products were not genetically modified, do not contain any hormone additives and were much more accessible for a consumer at the price and the quality. Chicken importer “Kant” does not recognize superiority of “Bio - Bio” products and according to marketing manager Nika Peradze, “Bio - Bio” holds dumping prices with respect to domestic products and its appearance has increased the competition, but Peradze notes that it can’t compete with “Fazenda “ frozen chickens because “Fazenda” chickens are of much higher quality and a majority of Georgian consumers give a preference to this product. We have nothing against “Bio - Bio”. However,

if their products were of the same high quality as “Fazenda” chickens, we would perform their distribution,”- says Peradze In his words, there is a high demand for the Brazilian chickens all over the world and it is also proved by the statistics , the food products produced in Brazil and imported by local producers are a guarantor of quality. In addition, Nika Peradze explains that as a result of the appearance of “Bio - Bio” on the market, sales in their company have not decreased, as a consumer, which tasted both products, prefer “Fazenda” chickens due to quality. Note : “Bio - Bio” appeared on the market in September. The company will sell its products in brand trade booths in the near future.

ECONOMY November 25, 2013 #31

caucasian business week

IMF TO DISCUSS ECONOMIC POLICY WITH NEW GOVERNMENT

he acting Georgian finance minister on Wednesday met with representatives of the International Monetary Fund (IMF) to discuss priorities in next year’s budget and the country’s macroeconomic indicators. Mark Griffiths, head of the IMF mission, said that Georgia’s economic growth was 2.5 percent this year, and in the last months the situation has

improved. He said that the IMF expects 5 percent growth next year, but this will require political stability and an improved business environment. The government’s expectation is more optimistic – according to Nodar Khaduri growth will be 7 percent next year. Both predictions are better than the real figures for 2013. In February, Khaduri said the government expected 6 % growth in 2013, low inflation and reduced state debts. In March, the IMF gave Georgia a new USD 387 million loan to implement a two-year plan aimed at increasing fiscal reserves, balancing the budgets, and restoring market confidence. Khaduri said the IMF likes the new government’s economic strategy and shared its views, which gives him hope that Georgia will be able to achieve its larger economic goals in terms of growth, employment and prices, often referred to as macroeconomic indicators by experts.

MINISTER OF ECONOMY ADMITS A 650 - MILLION GAP IN THE BUDGET

t is not pleasant when the budget is not fulfilled and there is a 650- million gap, “ - the Minister of Economy and Sustainable Development of Georgia Giorgi Kvirikashvili says in Rustavi 2 TV program “Business Courier”. At the same time, the Minister claims that this situation will not affect social programs, but adds, of course, will be reflected “in capital expenditures”. According to Kvirikshvili, “ the entire economy was oligopolized and monopolized and now the process of transition to a free economy is ongoing.” This process is “more painful than we thought, “ - he says. As the minister notes, the 2012 GDP amounted to 15.82 billion USD but “in the case, if we achieve a 2 % increase in 2013, which is probably realistic, we will have a GDP of 16.2 billion USD , which does not correspond to the drop .”

ENERGY ACADEMY: RUSSIAN HAS MAYA SIDAMONIDZE: SMOOTHED NO LEVERAGE TO MAKE INFLUENCE VISA REGIME WILL DEVELOP ON GEORGIA TOURISM SECTOR ussia has no levers of power influ- winter, but there are market rates and there are no

ence on Georgia - President of the Academy of Energy of Georgia Revaz Arveladze states commenting on the risks associated with the plans of the country’s leaders to sign an association agreement with the EU. “Ukraine receives Russian gas at preferential prices, in addition, uses other privileges on the Russian market. With Georgia things are different - we do not get gas from Russia, some of the oil products come from Russia, but finding a replacement is very easy. The only thing that remains - is to import electricity from Russia in the

benefits “ – says the expert. The parliamentary committee on foreign policy cannot unequivocally predict – whether there will be pressure from Russia. According to Committee member George Volsky, the country must prepare variants for all occasions and foreign policy should not be based on rhetoric. Vilnius summit will take place on 28-29 November. During it, Georgia will initial an agreement on free trade and association with the European Union, officially the agreement with the EU will be signed in 2014 .

CHINESE COMPANY REGISTERED IN POTI FIZ

oti Free Industrial Zone [FIZ] is interested in Chinese investment. This week the first Chinese company was registered in the industrial zone which mainly deals in plastic products im-

port - export. However, the scale and the amount of investment have not yet been specified. FIZ Executive Director explains that it was a step forward to attract Chinese investment. He says next week the company will start to operate in the active.

ill the tightening of visa regime reduce the number of tourists in Georgia? Today, the citizens of 118 countries of the world can enter Georgia without visa and stay here for 360 days. Those, who are in need of a visa, can obtain it rather easily at the border. However, according to the draft amendments, the law does not include a list of countries whose citizens will be allowed to enter Georgia without a visa, and these countries will be determined by the government resolution. According to the former Head of the National Tourism Agency, the liberalization of the visa regime is a prerequisite for the development of tourism. Maya Sidamonidze states “Commersant “ that she is not aware of a list of specific countries in respect of which an approach will be tightened, but notes that a few years ago the World Tourism Organization developed a strategy which was aimed at the liberalization of the visa regime. In addition, Sidamonidze adds that visa policy should not be contrary to the external policy of the country and a balance must be maintained.

FOREIGN TRADE TURNOVER GROWS BY 1% IN JANUARY TO OCTOBER

ccording to Sakstat preliminary data, in January - October 2013, foreign trade turnover amounted to 8,5 billion USD, which is 1% more than in the same period in 2012. Exports valued at 2,3 billion USD (+16%), import – 6.2 billion (-4%). The negative trade balance for this period will be 3.9 billion and 46% of the total turnover. Revised figures will be published on November 25.

BUSINESS & ECONOMY caucasian business week

UNION OF OIL PRODUCTS IMPORTERS RULES OUT FUEL SHORTAGES IN GEORGIA

hairman of the Union of Oil Products Importers rules out a fuel shortages in Georgia. As it is known, Azerbaijan has suspended exports of gasoline due to a shortage. At this stage “SOCAR” meets only a domestic demand due to an increased consumption of gasoline in the country by 10.2% compared with last year and no longer has exportable supplies. The state company’s divisions , which operate outside the country, are buying fuel at the international markets. However, the Chairman of the Union sees no reason for the shortage of oil products in Georgia. Vano Mtvralashvili explains to “Commersant” that “SOCAR” carries out gasoline imports in Georgia from Europe in the last 2 years. Accordingly, there is no danger of shortage. Azerbaijan is the second-largest supplier of oil products to Georgia. For 10 months of 2013, 173.7 thousand tons of fuel came from the neighboring country, which is 26% of the total import.

LERI BARNABISHVILI APPOINTED AS INVESTIGATION SERVICE HEAD

eri Barnabishvili will be head of the Investigation Service of the Ministry of Finance. Investigation Service informs that Irakli Garibashvili appointed Barnabishvili on this position, with recommendation of Minister of Finance Nodar Khaduri. Barnabishvili started working as a head of Investigation

Service eon November 22. Leri Barnabishvili has worked on the responsible positions in the Ministry of Finance since 2004. Before this position he was a deputy head of investigation service. In 2009-2013 he worked as a deputy head of investigation department of investigation service. Before that he was head of third division of Tbilisi Main department, investigation department. In 2008-2009 he served as a head of third division of Tbilisi main department of the investigation service, Ministry of Finance; as a deputy of the first decision of the same division of Tbilisi main department. In 2001-2007 he was a deputy head of the first division of Tbilisi main department of the financial police investigation department, Ministry of Finance. Leri Barnabishvili is a lawyer, alumni of Tbilisi State University faculty of law. Leri Barnabishvili replaced Otar Partskhaladze on the position of the head of investigation service, who was appointed as a prosecutor general of Georgia.

CDC – MICRO-ENTREPRENEURSHIP AS A TOOL FOR FIGHTING POVERTY

n 2013, NGO Community Development Centre (CDC) together with Centre for Training and Consultancy (CTC) and Georgian Small and Medium Enterprises Association (GSMEA) studied micro-entrepreneurship programs implemented in Georgia over recent years and prepared a special report. The report comprises the analysis of existing experience of Georgian and International organizations and on its basis presents the recommendations to the state bodies on development of state supported micro-entrepreneurship programs. The study was made within the framework of project “Micro-entrepreneurship as a Tool for Fighting Poverty”. The project is supported by USAID program “Development of Public Policy, Advocating and Civil Society in Georgia” (GPAC) implemented by East-West Management Institute (EWMI). Initiation of the project by the organizers was conditioned by three main reasons: urgency of poverty issue, low effectiveness of state poverty reduction and employment programs, manifestation of interest by the new government towards the micro-entrepreneurship, as one of the instruments for reducing poverty in the context when there are extensive number of Georgian and international NGOs having experience in implementing programs on micro-entrepreneurship in Georgia. Respectively, comprehension, analyses and dissemination of different experiences was considered to be useful for stimulating and effective implementation of similar state run programs. In the process of the study ten organizations

implementing programs on supporting microentrepreneurship were identified. In-depth interviews were conducted with their representatives. Group of researchers working on the report also used the focus group method with direct beneficiaries of some programs (micro-entrepreneurs). Furthermore, international experience was analyzed as well. As a result, extensive report was prepared to be presented to various stakeholders. Below main findings and recommendations are outlined. Authors hope that this report will assist to reflect on existing experience and help state agencies to focus their activities in this direction more effectively. It has been identified that startup grants supporting micro-entrepreneurship in Georgia is an effective instrument for self-employment and growth of income for socially vulnerable groups. Despite the positive effect of programs of this type, implementing organizations and beneficiaries note certain constraints as well. In particular, around half of financed projects come across problems from the point of view of sustainability in long term perspective and very often financed business-projects do not change over the time and are developing slowly. Despite those challenges micro entrepreneurship programs prove to be effective for empowering people to overcome poverty and get better integrated in the society. Therefore apart to civil society initiatives it is important to scale up the programs by state intervention. Set of recommendations are elaborated for state institutions to take concrete measures to encourage microentrepreneurship.

November 25, 2013 #31

BUSINESSMAN CESAR CHOCHELI: PROCESSES THAT UNFOLD AROUND US HAMPER THE DEVELOPMENT OF BUSINESS

rocesses that unfold around us prevent us from doing business. A businessman Cezar Chocheli states. He says that at a time when business needs loans, working capital , relationships with partners, in this case, they don’t care what part of the property is seized. He notes that in the “Barambo” case the land where a new chips factory had to be built is seized. A similar situation is in “Zedazeni “ factory . According to Revenue Service representative Khatia Moistsrapishvili, “Zedazeni “ and “Barambo” are not seized. Only real estate in the enterprises was seized which means that nothing prevents the functioning of business. Materials, equipment and so on necessary for conducting business are not seized. As Moistsrapishvili says, it is also important that this property was not seized at the request of the Revenue Service. it was a requirement of the court in order to ensure payment of the debt. “ At this stage the preliminary hearings are competed and the main hearing is scheduled for December 10-11. We don’t interfere with the functioning of the business, “ - says Moistsrapishvili. As for a plant of reinforced concrete sleepers, as Cesar Chocheli says, the factory is in a dire financial situation. Production is stopped and goods worth about 4-5 million are stored in the yard. “Areason for which we are accused is that this plant had to be sold for 19 million but was sold for 12 million. Equipment, which was purchased in 1999, was worth 1.4 million USD, these new machines are today worth 1.6 million USD. Bureau of Expertise has evaluated them at 5.1 million GEL. What is the logic of this? Has the cost of the equipment produced in 1999 increased so ? “ – Chocheli notes. In his words, the land was estimated at a price as in the central

districts. According to President of the “Association of Young Financiers and Businessmen” Nodar Chichinadze, during the purchase of the plant of reinforced concrete sleepers, the buyer was not able to influencethe value of the enterprise. “A former Minister of Economy Vera Kobalia visited the factory before the privatization and it was reported that the plant’s privatization was planned. Why do we argue against the buyer if the price was set by the state ? Before the end of the investigation this process should not hinder the operation of the separate enterprises, “- Chichinadze notes. In his words, the seizure creates a barrier between financial institutions and contractors. “ ”Such a move regard to the local production is unacceptable in a country with a negative trade balance, “ - says Chichinadze.

TBILISI CITY HALL TO CUT EXPENDITURES FOR NEW YEAR DECORATIONS

ity of Light will again decorate Tbilisi this year. Tbilisi city gall will spend about 229 thousand GEL less for decoration of the capital this year. The city hall already signed contract of 567 200 GEL value with the municipal company City of Light. The company should provide installation and dismantling of various illuminations, 6 New Year trees, composition on the St. George Statue and other accessories. New Year lights will be switched in the city on

December 20 and continue till February 1, after that illuminations and accessories should be uninstalled till March 1. It’s noteworthy that in the current year 119 200 GEL will be spent to renovate New Year illuminations and accessories purchased in 2006-2011. Company GDM Company will provide renovation of the accessories. Reminding that last New Year company City of Lights decorate Tbilisi and got 796 000 GEL from Tbilisi budget.

BATUMI SEAPORT FREIGHT TURNOVER GROWS BY 13% Y-O-Y

anager company of the port informs that in 10 months of the current year turnover of dry freights equaled to 1,485 tons, which exceeds to the data of the same period past year by 178 thousand tons (13,6%). Besides, industrial plan is fulfilled by 100,4%. Leader positions in the port’s turnover take raw sugar (29,63%), bulk freights (28,82%) and ammonium nitrate (18,11%). Overfulfillment of the pan is mentioned in the raw sugar - by 93 thousand tons, liquid freights - by 32 thousand tons (33%), also big-bags - by 19 thousand tons (44%). Several freight categories are a little behind the plan - nitrogen fertilizers (-4%), bulk freights (-5%) and wheat (-4%). During 10 months 2014 loading amount of the following freights have been increased in comparison with the same period last year: Big-bags (675%), raw sugar (4,5%), ammonium nitrate (3,5%), bulk (43,1%), bottling (41,8%).

Transit freights remain on the leader position, which constitutes 39% of the total freight turnover of the port. Import freights rank second with 36% During 0 months 2013 totally 610 ships have been processed by the port, which is 16 units more in comparison with the data of the same period last year.

BANKING NEWS November 25, 2013 #31

caucasian business week

PROCREDIT COMPLETED 10 MONTHS WITH 13,98 MILLION GEL PROFIT

TBC WILL AWARD 10 000 GEL BONUS FOR EVERY 4TH AND SUBSEQUENT CHILD TO ITS EMPLOYEES

SC ProCredit Bank completed 10 months of 2013 with 13,98 million GEL profit (III quarter - 12,32 million GEL). Deposits equaled to 544,2 million GEL (III quarter - 529,2 million GEL), credit portfolio - 673,6 million GEL (III quarter - 673,2 million GEL), overall liabilities - 880,6 million GEL (III quarter - 870 million GEL). By November 1, bank’s actives equal to 1,014 billion GEL (III quarter - 1,002 billion GEL). JSC Procredit Bank is a member of international banking group, operates in Georgia since 1999. It’s mainly oriented on the crediting of small and medium-size businesses. 100% of the bank stocks belong to Procredit Holding (ProCredit Holding AG &Co. KGaA). Out of 9 beneficiaries, more than 10% belongs to: IPC (17,88%), KFW (13,74%), DOEN Foundation (13,44%), IFC (10,39%). Stock capital of the bank equals to 133,3 million GEL (III quarter - 132 million GEL).

BANK REPUBLIC OFFERED A NEW AUTO INSTALLMENT

uring the promo to December 31, purchase of a new or second-hand car will be available with low interest rate. Short-term installment is interest free; 2-years rate during purchase of the new car starts from 5%, for second-hand car - 12,5%; for 3 years - respectively 8,5% and 13,5%. Loan is available in GEL, USD and EURO for up to 3 years term. Borrower’s contribution is 20%. Installment has also present package; 6-months GPI insurance; fuel of 500 GEL and discount card from Gulf. The buyer will get 7-Tetri discount on all kinds of fuel during a year. The bank states that installment is approved in 15 minutes.

BANK OF GEORGIA INCULCATED VISA PAYWAVE IN MCDONALD’S

cDonald’s, VISA and Bank of Georgia announced about inculcation of non-cash payment in the network. Bank of Georgia reports that McDonalds offers payment with a modern contactless VISA payWave along with other bankcards. During the introduction of non-cash payment special attention was paid to the consumer service speed improvement and meanwhile, providing security of the customers, which was not possible till 2013. “Through the introduction of simple, modern product of VISA and new generation terminals of the Bank of Georgia payments are now available with innovative method - approaching to NFC smartphone terminal”, - the bank stated. Preferences of they payment with VISA payWave in the McDonald’s restaurants are: payment processing time 8 seconds; card holder will make payment without cashier.

INVEST BANK COMPLETED 10 MONTHS WITH 2,2 MILLION GEL LOSS

SC Invest Bank completed 10 months with 2,2 million GEL loss (III quarter - 1,9 million II quarter - 0,8 million GEL). By November 1 deposits (without banks’ deposits) equal to 9 million GEL (III quarter 11,8 million; II quarter - 11 million GEL), credit portfolio - 8,8 million GEL (III quarter - 8,8 million GEL; II quarter - 8,2 million GEL), overall obligations - 14,9 million GEL (III quarter - 29,8 million GEL, II quarter - 17,8 million GEL). Banks actives equal to 27,6 million GEL (III quarter 30.9 million GEL, II quarter - 31,9 million GEL), market share - 0,17%. NBG temporary administration is in the bank. Entrance of NBG on November 1 for 2 months is linked to the unfulfilled requirement of supervisory capital. By III quarter coefficient of the supervisory capital of the bank is 11,826% and is slightly behind the norm (12%). Invest Bank operates since 2003. After the changes is stockholders’ structure this year, 70% of the bank’s stocks belongs to legal company Dimitry Alexisdze and Vladimer Gabrielashvili, 30% - to TRENDFOR HOLDING LTD. Gabrielashvili and Alexidze own 35-35% of the stocks, Brenda Patricia Cocksage - 30%. Stock capital of the bank is 12,7 million GEL (III quarter - 13 million GEL).

DELEGATION OF THE CENTRAL BANK OF ZAMBIA VISITED NBG TO SHARE EXPERIENCE

elegation of the Central Bank of Zambia visited NBG to share experience. Zambia is 4th African state after Ethiopia, Botswana and Malawi hosted by NBG. The experience-sharing visit was planned with recommendation of Mortran. High-technologic payment systems, which provide quick and safe transfers, gained special interest of the guests. Zambian specialists will be introduced to the information about the tax and securities systems, Real Time Gross Settlement (TRGS) system. They will visit to cash center of NBG. “It’s ninth central bank sharing NBG experience. Today we discuss a model how they are going to develop tax systems in the country. They will talk about cash operations as well”, - NBG executive director George Melashvili stated. “Main purpose of the visit in NBG is to introduce the systems on the place, which we are going to

inculcate in Zambia. We are introducing a new RTGS system, in which company Montran provides assistance. This system is already launched in the National Bank of Georgia and we arrived to study how to introduce this system. We thank management of the National Bank of Georgia and we hope that our relations will continue and it will not be limited with RTGS system”, - said representative of the Tax System Department of the Central Bank of Zambia Lazarus Kamang. In the framework of the visit the guests will meet representatives of National Bank of Georgia and commercial banks, also in the Ministry of Finance of Georgia. Delegations of the central banks of Afghanistan, Moldova, Kirgizstan, Tajikistan, Botswana, Malawi, Surinam and Ethiopia have already visited National bank of Georgia to share experience. Majority of them arrived Georgia with recommendation of World Bank.

LIBERTY BANK COMPLETED 10 MONTHS WITH 25,7 MILLION GEL PROFIT

SC Liberty Bank completed 10 months with 25,7 million GEL profit (III quarter - 18,7 million GEL). By November 1, 2013 deposits (nonbanking) equal to 1,2 billion GEL (III quarter - 1,1 billion GEL), credit portfolio - 596,3 million GEL (III quarter - 561,3 million GEL), overall obligations - 1,2 billion GEL (III quarter - 1,2 billion GEL).

Bank’s actives equal to 1,363 billion GEL (III quarter - 1,3 billion GEL), market share - 8,6% (III quarter - 8,3%). Direct and indirect owner beneficiaries of the Liberty Bank stocks are Dan Cortache Patriciu (73,1%), Lado Gurgenidze (8%) and BNY (NOMINEES) LIMITED (11,3%). Stock capital of the bank equals to 139,6 million GEL (III quarter - 133 million GEL).

ONLINE TRANSACTIONS INCREASED BY 19% IN A YEAR

I B

n October Amount of the internet-operations has increased by 5,5 million in comparison with previous month. According to National Bank’s (NBG) statistic, in October 2013 online payments equaled to 36,891 million GEL (09/13-31,429

million GEL). Compared to the same period last year, growth is 19% (5,8 million GEL). In October of last year 65% growth was mentioned (10/1231,049 million, 10/11 -18,8 million GEL). In the reporting period 950 125 transactions have been made (10/12- 684 400, 10/11-403 146).

RATING OF UNPROFITABLE BANKS y November 1 of the current year, 5 banks out of 21 operating ones are unprofitable, with total loss of 8,2 million GEL. Comapred to September, there is about 1 million GEL growth, 2,3 million reduction was mentioned in August. By October 1 loss of 5 banks equaled to 7,3

Rating of unprofitable banks:

million, by September 1 loss of 7 banks equaled to 9,7 million GEL. Loss in the 10 months of last year reached to 89,3 million GEL, 92% of which (82,4 million GEL) came on the loss of 1 bank out of 7 - Cartu. Net profit of the banking sector in 10 months equals to 308,8 million GEL (01/10/13 -275 million, 01/11/12 -101,8 million GEL).

BC founded a “Club of TBC employees with many children”, which will award bonus of 10 000 GEL for every 4th and subsequent child to the employee. In addition to one-time bonuses, Internal social program considers exclusive package for the families with 3 and more children, special discounts in various trade or amusement centers. The new initiative is a high social responsibility project of TBC Bank. One of the interesting projects “TBC employees for TBC employees” was launched 4 years ago. All employees of the bank transfer 1% of the monthly income in the special fund, from where their colleague or family member will be funded in the case of health problems and high costs of treatment.

TBC REMAINS THE LEADER OF INDIVIDUALS DEPOSIT MARKET

SC TBC Bank remained as a leader of individuals’’ deposit market in October. The bank informs that by November 1, TBC market share equaled to 32,5% (II quarter 33,3%). For the reporting period individuals’ deposit portfolio of TBC Bank equals to 1,448 billion GEL (II quarter - 1,42 billion GEL). Total portfolio of the TBC client deposits is 2,51 billion GEL (II quarter r- 2,464 billion GEL).

KSB BANK COMPLETED JANUARY-OCTOBER WITH 5,992 MILLION GEL PROFIT

SC KSB Bank completed January-October with 5,992 million GEL profit (III quarter - 5,4 million GEL, II quarter - 3,5 million, I quarter - 1,6 million GEL). By November 1, 2013 non-banking deposit portfolio equaled to 285,05 million GEL (III quarter 275,7 million, II quarter - 260 million, I quarter - 235 million GEL), loan portfolio - 246,01 million GEL (III quarter - 246,02 million, II quarter - 230 million, I quarter - 223 million GEL). Overall obligations equal to 371 million GEL (III quarter - 360,4 million, II quarter - 326 million, I quarter - 306 million GEL). Bank’s actives equal to 462,7 million GEL (III quarter - 451,5 million, II quarter - 416 million, I quarter - 393 million GEL), market share 2,9% (III quarter - 2,9%, 451,5 million GEL). Bank’s stockholders are sheikhs of the UAE.

HALYK BANK NO LONGER BUYS BTA

econd largest bank of Kazakhstan Halyk bank stated about expected profit increase on Monday and also amounted that they are no longer going to purchase BTA. Based on the bank, Reuter’s reports that in 9 months of the current year, compared to the same period of last year, net profit of Halyk Bank has increased to $366,7 million. Bank’s actives increased by 3,9% in the reporting period. In 2012 Halyk Bank’s profit increased by 77%, to $464 million. They stated that they would increase this data to $490 million this year. The bank stated that they officially terminate negotiations about purchase of BTA. Largest stockholder of the bank is the company belonging of the president Nursultan Nazarbaev’s daughter Dinara and her businessman husband Timur Kulibaev. BY January 1, 2013 their holding company Almex owned 68,2% of Halyk Bank.

VTB INTRODUCED A NEW MORTGAGE LOAN WITH 8,25%

TB Bank offers customers new loans attached to monetary (refinancing) rate of the National Bank. Press release of the bank states that interest rate of the bank is calculated with the following formula: loan % = refinancing rate of the National Bank + bank’s interest marge. National bank determines refinancing rate 8 times a year and it’s main instrument for monetary-credit policy. It changes periodically, depending on the aims of monetary policy. Current refinancing rate is 3,75% and its renewal is planned on December 18. The bank informs that the loan is issued only in GEL, to purchase, construct or renovate a real estate. Interest rate equals to 8,25%. Maximal term of the loan is 15 years. The credit is issued for 400 000 GEL and minimal income of the borrower should equal 800 GEL.

10 AZERBAIJAN’S FOREIGN TRADE SURPLUS EXCEEDS $11BLN

AZERBAIJAN caucasian business week

EU SAYS CONDITIONS IN FAVOR OF TRANS-CASPIAN PIPELINE

he Azerbaijani State Customs Committee announced an increase in the volume of foreign trade operations by 5.1 per cent in January-October 2013 compared to the same period of last year, the committee said. Azerbaijan’s foreign trade partners for this period numbered 147 countries. According to the report, the total trade turnover of Azerbaijan was estimated at $28.8 billion. Black ink exceeded $11 billion as a result of foreign trade operations. According to the report, about 6332 legal and physical entities were involved in foreign economic activities during this period, 3616 being legal entities and 2716 individuals. Export operations reached $19.92 billion in January-October which is 0.93 per cent more than the same period of 2012. The public sector share in export operations was estimated at $18.6 billion (93.35 per cent), the private sector share - $1.157 billion (5.8 per cent) and individuals share- $167.94 million (0.84 per cent). Imports were estimated at $8.88 billion in January-October which is 15.83 per cent more compared to the same period of 2012. The public sector share in import operations was estimated at $2.22 billion (30.73 per cent), private sector share- $5.72 billion (64.44 per cent) and physical entities share - $424.01 million (2.1 per cent). About 1,915 different kinds of goods were exported and 5,960 imported to Azerbaijan in January-October.

SOCAR UPS PRODUCTION IN CASPIAN SEA

uring an increase of production at the shallow part of the Guneshli field, State Oil Company of Azerbaijan (SOCAR) plans to drill some 20 new wells, a message posted on the official website of the State Oil Company said. According to the message, six out of the total number of wells planned for drilling have already been commissioned and currently five are being drilled. Construction and installation work are being carried out for drilling of the remaining wells. Work at the Guneshli field is carried out within SOCAR’s plan for stabilization and increase of production volumes in 2013-2015 at the fields being developed by the company independently. The deep-water part of the Guneshli field is being developed by SOCAR jointly with foreign companies at Azer-Chirag-Guneshli oil and gas fields’ block. SOCAR includes Azneft (companies producing oil and gas on land and sea), Azerkimya (chemical industry) and Azerigas (gas distribution) production associations. The State Oil Company also includes a number of processing and service enterprises, as well as institutions engaged in geophysical and drilling activities.

AZERBAIJAN PROPERTY OWNERSHIP INCREASES IN 2013

wnership of over 127,000 properties was registered in Azerbaijan from January to September of this year, a message from the State Committee on Property Issues said on November 18. According to the message, over 35,000 properties were registered for the first time, while about 92,000 properties were re-registered. In the same time period, a technical inventory of more than 113,000 properties was carried out and registration documents were compiled. “Nearly 100,000 inquiries on limitation were issued for legal entities and individuals from the state registry and more than 17,000 certificates of different content were issued to the general public,” Hasanov said.

November 25, 2013 #31

avorable conditions have been created for concluding an agreement on the construction of the Trans-Caspian Gas Pipeline from Turkmenistan to Azerbaijan. The news was announced by Denis Daniilidis, the European Union’s (EU) Charge d’Affaires ad interim in Turkmenistan on November 20. “The Trans-Caspian pipeline is important, and the European Union (EU) believes that the most favorable conditions exist now for reaching agreements and beginning the construction,” he said at the Oil and Gas Conference, held in Turkmenistan’s capital Ashgabat on November 19-21. “During the negotiations we need to resolve a few remaining issues, and the first pipeline may be built before the completion of the Southern

Gas Corridor,” he said. According to Daniilidis, the EU and Turkmenistan are in the final stage of negotiations. The EU representative also noted that the Southern Gas Corridor, which includes the TransCaspian Gas Pipeline project, remains a priority for the EU, and this was confirmed by the EU summit held in May 2013, during which key infrastructure energy projects for 2014-2020 were approved. Both Azerbaijan and Turkmenistan, two Caspian littoral countries, are interested in the use of alternative routes for the transportation of energy resources from the resource-rich Caspian region to European markets. The Trans-Caspian Gas Pipeline running around 300 kilometers will be laid from the Turkmen coast of the Caspian Sea to Azerbaijan, where it will be linked to the Southern Gas Corridor. The pipeline’s capacity is 30-40 billion cubic meters of gas per year. Talks on the construction of the Trans-Caspian Gas Pipeline between Turkmenistan, the EU, and other countries have been held since late 1990s. The negotiation process intensified after the EU issued a mandate to start negotiations on the preparation of an agreement between the EU, Azerbaijan, and Turkmenistan on the Trans-Caspian project in September 2011. Ashgabat believes that the agreement between Turkmenistan and Azerbaijan, the territories of which are covered by the project, is sufficient

for laying a pipe under the Caspian Sea. Baku has expressed readiness to provide its territory, transit opportunities, and infrastructure for its implementation, as reported by representatives of Azerbaijan’s state energy company SOCAR. Azerbaijani Energy Minister Natig Aliyev said earlier that drafting two documents under the Trans-Caspian gas pipeline project is drawing to a close and they must be signed by Azerbaijan and Turkmenistan’s Presidents, head of the European Commission, and the governments of the two littoral countries. The first document will feature the support given to the project by the three sides, while the second one will be signed between the Azerbaijani and Turkmen governments. The minister noted that Turkmenistan has expressed its support for the implementation of the project, meaning that the Turkmen side is ready to deliver around 30 billion cubic meters of gas for the project. In turn, Azerbaijan is ready to ensure all suitable conditions for the transportation of Turkmen gas. Azerbaijan will only also benefit from transportation of gas through the Trans-Caspian gas pipeline as the implementation of this project will make Azerbaijan not only a supplier of gas, but also a transit country. However there are no direct arrangements yet for the implementation of the Trans-Caspian gas pipeline project aimed at supplying gas to the European market.

AZERBAIJAN CONTINUES DEVELOPMENT OF ALTERNATIVE ENERGY SOURCES

roduction of solar cells in Azerbaijan cheapens the process of developing alternative energy sources in the country. The news was announced by Head of the State Agency for Alternative Energy Sources Akim Badalov said on November 20. The establishment of solar cell production in Sumgait means lower prices and reducing dependence on foreign producers, along with additional job opportunities, Badalov said. According to Badalov, work on the development of alternative energy sources in the country continues. In particular, work is underway on the construction project of Samukh agro -an energy complex that will expand the possibilities of using agricultural waste in electricity production. The state has allocated 10 million manat (over $12 million) for these purposes, and it will be possible to see the results of implementing this major project in the coming years, he said. He also said that work continues on the development of the landfill on alternative sources of energy in the Gobustan region of the country. In the long run, Azerbaijan expects a boom in the use of electric vehicles, and their refueling will be a relevant question. The effective method for refueling these electric vehicles may be the use of solar technology, Badalov said. Baku hosted the second meeting of the expert group on alternative energy sources of the Economic Cooperation Organization (ECO) on November 20. According to Badalov, Azerbaijan has achieved great success in the development of alternative energy in recent years and opportunities in this

area allow it to participate in the implementation of relevant projects abroad. Currently, the share of alternative energy sources in the total energy production, including small hydro power plants in the country, is two percent. The aim of development of this area is not just figures, but providing the country’s population with qualitative and uninterrupted electricity, Badalov said. According to Chief Power Engineer of the State Agency Tahir Jafarov, over $500 million was invested in the development of alternative and renewable energy sources in Azerbaijan from 2010 to 2013. A draft national strategy for the development of alternative and renewable energy sources until 2020, which is currently being agreed on, was worked out for the development of alternative energy in the country, he said. The strategy envisages the identification of the main directions of thermal energy production from renewable energy sources (RES), the creation of a legal framework in this sphere, the arrangingment of events on the use of renewable energy sources, and the use of renewable energy sources in economic spheres. In addition, Jafarov stressed that within the alternative energy development, Azerbaijan has largescale plans for the creation of generating facilities all over the country. Hybrid power plants are planned to be created in almost every region of Azerbaijan. Such events are expected to allow the country to solve issues arising in the process of energy production, and ensure energy efficiency by reducing

energy loss in the production and transportation of electricity and socio-economic development of the regions. The share of alternative energy sources is planned to reach 20 percent in Azerbaijan’s total volume of energy consumption by 2020, which presupposes around 7 billion manats ($8.9 billion) investments. 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 also 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.

AZAL CUTS PRICES FOR SEVERAL FLIGHTS

zerbaijani Airlines, AZAL, has cut prices for flights to the Ukrainian cities of Lviv and Simferopol, the company said on November 20. The ticket price for Baku-LvovBaku and Baku-Simferopol-Baku flights is from 346 euros and 352 euros respectively. AZAL, the biggest Azerbaijani airline and national flag carrier, offers passenger flights to Europe, the CIS, Middle East and Asia. After purchasing new Boeing aircraft for long-haul flights in 2014, the airline plans to open regular flights to destinations in North America and Southeast Asia. The company is a regional and CIS leader for

the number of new aircraft. Its fleet currently consists of modern aircraft meeting all safety requirements, including Boeing 757-200, Airbus А319, ATR 42, ATR 72, Airbus А320 and Boeing 767-300. It cooperates with about 60 airlines to provide its passengers with the opportunity to travel freely around the world. AZAL was certified by IATA Operational Safety Audit, a program that is an internationally recognized evaluation system designed to assess the operational management and control systems of an airline. azernews.az

ARMENIA November 25, 2013 #31

caucasian business week

ARMENIAN WATCHES MUCH IN DEMAND IN U.S., EUROPE, AND ASIA

rmenia has rich watchmaking traditions, which continues till now introducing the Armenian brand production throughout the world. If previously the Armenian production was mainly spread in the Soviet Union, today the watches made in Armenia are much in demand in Japan, Greece, the United States, and Italy. “Armenpress” News Agency had a conversation with the Deputy Chairman of AWI (Armenian watch industry) Company Ourak Krikorian regarding the achievements of the Armenian watchmaking. Watchmaking as a major branch of economy

There are five companies in Armenia, which are engaged in the production of watches. The watchmaking development program, which was confirmed on July 2013, states that the major manufacturers of the realm are Yerevan Jewellery Plant “Gnomon”, AWI (Armenian watch industry), I. G. O. R. companies, and Frank Muller Armenian representation. The Armenian production is chiefly considered to be among the precious watches. At the course of 2011 the Republic of Armenia exported watches with the total cost of about USD 8 million. 85 percents of the watches were exported to the United States

ARMENIAN DOORS OPEN BEFORE CARREFOUR: FRENCH AMBASSADOR

he negotiations on the establishment of the French Carrefour retail network continue in Armenia preserving the principle of secrecy. The Ambassador Extraordinary and Plenipotentiary of France to the Republic of Armenia Henri Reynaud stated about it at the press conference on November 15. “Quite intensive works are being carried out with the corresponding companies but the business

is a field where the secrecy principle should be preserved and taking into account that fact, the steps of Carrefour are not yet announced or visible. Carrefour intends to come to establish in Armenia, where the doors are already open”, - said Henri Reynaud, Armenpress reports. Carrefour is the second biggest retail network in the world after Wal-Mart. The considerable package of shares of Carrefour group belongs to the well-known French businessman Bernard Arnault. The Company has about 15,000 hypermarkets, supermarkets and small shops in 32 countries of the world. In 2012 Carrefour opened its first hypermarket in the region, in Tbilisi. In 2009 Carrefour opened two supermarkets in Russia (Krasnodar and Moscow), although the next year it left the Russian market. In 2012 Carrefour announced about its withdrawal from the Greek market as well.

NO BROWN ROT DISEASE OF POTATOES FOUND IN ARMENIA

he State Food Security Service of the Republic of Armenia rejects the information spread by the Georgian media that the potatoes exported from Armenia to Georgia were returned from the border because of the disease of the potatoes brown rot. The Press Secretary of the State Food Security Service Armine Sukiasyan

told Armenpress that on this moment there are 14 trucks with potatoes standing on the ArmenianGeorgian checkpoint waiting for the results of the laboratory examination. “By this moment we have not had any cars with potatoes returned to Armenia. As a reminder, our Service states that the disease of the potatoes brown rot has not been discovered in Armenia”, - she said.

TURKEY INCREASED RAW FUR IMPORT FROM ARMENIA

he volumes of the cattle ragged fur exported from the Republic of Armenia during the months of JanuarySeptember have increased by 19% in comparison with the same period of the previous year reaching 117,700 pieces. The average customs value of one fur, though, has dropped by 14,5%, making $8,89 from $10,4. About 85% of the exported cattle ragged fur was

purchased by Turkey, which has increased the import from Armenia by 41%. Armenpress reports that during the nine months of the current year the volumes of the sheep and lamb fur have decreased by 11% in comparison with the same period of the previous year making 54,200 pieces, the total customs value of which made $68,8 thousand. About 70% of the sheep and lamb fur was purchased by Turkey.

AIR FRANCE INCREASES FLIGHTS TO ARMENIA

ARMENIA INCREASES EXPORT OF BOTTLES

he volumes of the export of bottles, jars, ampoules and other glass containers from the Republic of Armenia during the months of JanuarySeptember 2013 have increased by 55,64% in comparison with the same period of the previous year reaching 69 million 540 thousand 900 pieces. The total customs value of the abovementioned production exceeded $12 million. According to the data provided by the State Revenue Committee of the Government of the Re-

public of Armenia, during the first nine months of 2012 44 million 680 thousand 600 pieces of glass containers were exported from Armenia. Armenpress reports that during the months of January-September the entire volume of the glass production was exported to Georgia (more than 68 million pieces). At the same time the volumes of the production of bottles, jars, ampoules and other glass containers in the Republic of Armenia have increased by 46,8% in comparison with the same period of the previous year reaching 120,8 million pieces.

ECONOMIC ACTIVITY INCREASED IN ARMENIA

he indicator of the economic activity of Armenia by the months of January-October has exceeded the indicator of the same period of the previous year by 3,4%. The National Statistical Service of the Republic of Armenia informed Armenpress that the growth has been registered nearly in all the spheres, except for the fields of construction and electric energy production. In comparison with the months of January-October of 2012 during the first nine months of 2013 the volumes of the ser-

vices have increased by 2,8% and the volume of the gross agricultural output – by 5,9%. The trade turnover has grown by 1,8%. The volume of the industrial production has increased by 7,8%. The volume of the construction has made 8,8%. The electric energy production has decreased by 3,9% and the average monthly salary has increased by 4,3%. The volumes of the foreign trade turnover have grown in comparison with the months of January-October of 2012 by 4,5%. The export has increased by 8,7% and the import – by 3,2%.

CUCUMBER EXPORT INCREASED IN ARMENIA

he volumes of the fresh or chilled cucumber exported from the Republic of Armenia have increased 18 times during the months of January-September 2013 in comparison with the same period of the previous year and reached 1121,9 tons. The total customs value of the exported cucumber exceeded $2 million. Armenpress reports that according to the data provided by the State Revenue Committee of the Government of the Republic of Armenia, the entire volume of the cucumber exported from our country was purchased by the Russian Federation (1092,4 tons).

In 2012 231,2 tons of cucumber and 87,8 tons of carrot, turnip, beet and celery was exported from Armenia.

ARMENIA EXPORTS CRAYFISH TO LUXEMBOURG

he volumes of the export of crayfish from the Republic of Armenia during the months of January-September have increased by 2,8 times in comparison with the same period of the previous year making 3 thousand 264,4 tons. The total customs value of the exported crayfish exceeded $11 million. According to the data provided by the State Revenue Committee of the Re-

public of Armenia, in 2011 1159 tons of crayfish was exported from our country during the first nine months. Armenpress reports that 90% of the exported crayfish was purchased by Russia. Armenia exported crayfish also to Ukraine, France, Italy, Belgium, Germany, Georgia, Luxembourg, etc. In 2012 1735,1 tons of crayfish was exported from Armenia in comparison with 1120,3 tons in 2011.

ARMENIAN COGNAC TO TASTE IN VIENNA AND LONDON

he biggest French Air Company Air France will make the number of its Paris-Yerevan and Yerevan-Paris flights six per week in the summer of 2014. The President and the CoOwner of the Executive Travel Company Levon Baghdasaryan stated about it at the press conference on November 21. “Air France decided to implement six flights instead of the former four flights since May 2014. In July-August the Air

Company will implement the flights everyday”, said Baghdasaryan, Armenpress reports. The Ambassador Extraordinary and Plenipotentiary of France to the Republic of Armenia Henri Reynaud expressed a wish that Levon Baghdasaryan persuades the Air France to implement the flights everyday not only in July-August but also during the other months as well. The Ambassador promised to open champagne if it happens.

he performance hall of the hotel “Hotel de France” in Vienna held a tasting ceremony of “Ararat” cognac. The organizers were the Embassy of the Republic of Armenia to Austria and “Ararat” cognac factory of Yerevan with the support of the company of Austrian Wine Brotherhood and Wine Knights. “Armenpress” was informed from the Department for Mass Media and Public Relations of the Ministry of Foreign Affairs of the Republic of Armenia that the Ambassador of the Republic of Armenia

to Austria Arman Kirakosyan made an opening speech at the course of the ceremony. The director of “Ararat” cognac factory of Yerevan Ara Grigoryan welcomed the participants. The initiation and development history of cognac production in Armenia, the current variety of products, as well as some delicacies of tasting were introduced to the guests of the ceremony. The tasting ceremony was accompanied by live jazz music of the Lebanese-Armenian wellknown jazz pianist Hovhannes Jibian. armenpress.am

CIS 12 PUTIN VICTORIOUS AS UKRAINE POSTPONES ‘TRADE SUICIDE’, HALTS TALKS WITH EU

November 25, 2013 #31

caucasian business week

acing its most important economic crosswords since the collapse of the Soviet Union, Kiev has aligned itself closer to Russia, and has suspended preparations to sign an EU trade deal. Russia has warned a step west towards Europe would be “trade suicide” and result in billions in losttrade revenue and that joining the Russia-led Customs Union is more beneficial. Ukraine will “restore an active dialogue” with the Customs Union and the CIS, and economic and foreign ministers proposed Ukraine, Russia, and the EU create a tri-party commission to improve and strengthen trade relations. Putin’s spokesman Dmitry Peskov said Russia welcomed Ukraine’s decision to actively develop ties with Moscow, and Putin added he wasn’t completely against Ukraine’s association with EU. Putin said he supports the idea of trilateral trade talks, but only up until Ukraine signs an associa-

tion agreement with the EU. “We favor this, but only before decisions are made. How can we hold negotiations on issues that have already been agreed upon and endorsed? What is our role in such negotiations? It’s equal to zero, but we are surely prepared for such a discussion if it is substantial,” Putin said Thursday in Moscow. The EU has responded to Ukraine’s decision calling it “a disappointment not just for the Union, but for the people of Ukraine.” EU foreign policy chief Catherine Ashton said the signing of the pact “would have provided a unique opportunity to reverse the recent discouraging trend of decreasing foreign direct investment in Ukraine and would have given momentum to negotiations on a new standby arrangement with the IMF.” However, President Yanukovich said he still had his eye on integration with the EU. “We still have a bit to go to the top. We do not fear difficulties and are confident that we will continue towards European integration,” Yanukovich said on Thursday. “If there is no deal in November, Putin will have won a resounding psychological victory – most everyone in the EU would want to prevent that, and Yanukovych counts on it,” Dimitry Trenin told RT ahead of the decision. PRISON BREAK DEADLINE The deadline for Ukraine to meet all criteria necessary to join the EU trade association was initially set for November 18, and then was later moved to November 21. Initially, the signing of the Association Agreement between Ukraine and EU was scheduled to take place at the Vilnius summit on November 28, but on November 21 the parliament rejected a bill that would allow former Prime Minister Yulia Tymoshenko to travel abroad for treatment. Eu-

rope is unlikely to approve the deal as long as Yulia remains in prison. Ukraine hopes to act as a “bridge” between Russia and the EU, but Russia has made it clear there will be no “bridge” if Ukraine steps west; they would have to give up their “exclusive relationship” with Russia. An EU envoy has been in Kiev all of November preparing conditions for Ukraine to enter the EU trade association at the Eastern Partnership Summit in Vilnius, Tymoshenko was jailed in 2011 for a gas deal she brokered with Gazprom in 2009, a charge seen as politically motivated by the EU. PUTIN’S CUSTOMS UNION Ukraine’s sizable economy (about $155 billion) and resource-rich land have both Moscow and Brussels pining for exclusive trade deals. If Kiev chooses to pursue EU membership, it will foil Russian President Vladimir Putin’s great plan to create a trade block to rival the EU, which so far includes Belarus and Kazakhstan. Armenia has also expressed its intentions to join Russia’s trade orbit. Both deals are appealing. By siding with Russia, Ukraine continues to foster good relations with its neighbor that imports nearly 25 percent of Ukraine’s exports. Moving west to Europe would save Ukrainian exporters nearly $490 million over 10 years, as 95 percent of goods would have zero customs duties, according to the European Commission. Europe has been courting Ukraine into an associate trade membership for the past four years, which has created a geopolitical battle with Russia. Much political brinkmanship has been executed leading up to the trade deal. Ukraine threatened tostop buying Russian gas, and Moscow stoked speculation there would be another gas war between the two neighbors, which would leave Ukraine without enough heat to last the winter. GAS Over the last decade Ukraine and Russia have both been trying to sever their complicated gas relationship. Gazprom has been building a maze

TAX HIKE FOR ALCOHOL, TOBACCO AND PROPERTY IN KAZAKHSTAN

he Kazakh Senate (parliament’s lower chamber) passed a law increasing taxes on luxury goods, transport and property as well as excise taxes on tobacco and alcohol, Novosti-Kazakhstan reported on November 21. The controversial law has roused urgent discussions in Kazakh forums. “We have too big gap between the rich and the poor. Maybe this measure will bring them closer to each other,” one guest user said at the Tengrinews.kz website. “You are right, Nursultan Abishevich (Nazarbayev). Millionaires should pay more,” another user wrote. However not all citizens support the initiative. “The law is uncompromising and will create a base for tax evasion and thriving corruption,” one of the website’s users believes. The opinions on the increase of excise taxes on tobacco and alcohol are also divided. “Let’s increase the excise taxes on alcohol. Maybe we will drink less,” one of Tengrinews.kz website’s users proposes. “I am for a fivefold increase in alcohol prices. The government acts rightly, to stop ruining your health,” another user said. “It is a sin to drink alcohol,” one more user added. Opponents of the new law contend that high excise taxes on alcohol will entail an increase in counterfeit alcohol production. The excise rates for strong alcoholic beverages will be increased from 500 tenges ($3.3) to 1000 tenges ($6.6) in 2014, up to 1200 tenges ($7.8) in 2015 and up to 1600 tenges ($10.5) in 2016. The

issue of increasing the rates on low alcohol products is proposed for consideration in 2014. The rate of excise duty on cigarettes will be increased from 3000 tenges (about $20) to 3900 tenges ($25.5) in 2015 and up to 5000 tenges ($32.7) in 2016. With regard to the tax on luxury properties, the tax on real property worth over $1 million will be increased threefold. The tax rate for cars with a 4000-5000 cubic centimeter engine capacity will be increased from 117 to 130 monthly indexes (one monthly index = 1731 tenge or $11). The tax rate for cars with an engine capacity exceeding 5000 cubic centimeters will reach 200 monthly indexes. The new tax rate will be applied to vehicles purchased after January 1, 2014. According to Kazakhstan’s official statements, a gradual increase in excise taxes on strong alcohol and tobacco products is envisaged in order to discourage consumption of these socially harmful goods. Meanwhile taxes on luxury goods will swell the budget income and make the rich people direct their wealth towards the country’s development. The documents are being submitted to Kazakh President Nursul-

tan Nazarbayev for signing. The tax increases were proposed by the president himself. “It is necessary to impose indirect taxes on luxury goods, expensive cars and all sorts of evil passions such as alcohol and cigarettes and so on,” the president said at the XV Congress of the Nur Otan Party, on October 18. “We have created a class of wealthy citizens. This is good as it was our goal, deliberate policy. Now as the wealthy class expands, they can and should contribute towards social responsibility. This is common practice all over the world. Meanwhile in our country a millionaire and a worker pay the same 10 per cent income tax. We should think about it,” he said. azernews.az

of pipelines to circumvent Ukraine to deliver gas to Europe, and Ukraine has been wooing foreign companies in joint ventures in shale and offshore reserves. After Naftogas, Ukraine’s state-owned oil and gas company, said it was cutting ties with Gazprom, Yanukovych contradicted the statement saying he “hoped for a comprise” with Russia. Former Ukraine Prime Minister Yulia Tymoshenko signed a ‘pre-pay’ contract with Gazprom in 2009 and was later jailed on charges of abuse of power. Since the pre-pay contract was established, Ukraine has complained about expensive gas prices, which average around $400 per 1,000 cubic meters, one of the highest in Europe. Ukraine currently imports more than half of its gas from Russia, but both countries are making efforts to cut down on business. Russia and Ukraine waged two gas wars over prices in the winters of 2006 and 2009 (which lasted 3 weeks) over a claim Ukraine was late in paying. DEBT AND DOWNGRADES Ukraine’s depreciating currency reserves and massive deficit have put it close to economic collapse, and an IMF bailout of between $10-15 billion could be needed in the near future. Russia holds a significant portion of Ukraine’s sovereign national debt. The at-risk currency has prompted the big three rating agencies to downgrade their outlook on Ukraine. Fitch downgraded Ukraine’s long-term foreign local currency issuer default rating to ‘B-‘ from ‘B’ following S&P’s downgrade of its debt rating to ‘B-‘ to the same junk level as Greece and Cyprus. Moody’s cut its rating to Caa1 from B3 in September putting them at “very high default risk.” Ukraine’s government reserves are so depleted they may no longer be able to keep Naftogaz afloat, and may be forced to find a foreign buyer. US money manager Franklin Templeton picked up $5 billion of Ukraine’s international debt, nearly a fifth, in August. Rt.com

IRAN EAGER TO BOOST TRADE WITH TURKMENISTAN

he managing director of the Trade Promotion Organisation of Iran (TPOI) has said that the necessary infrastructures for boosting trade ties with Turkmenistan should be provided, IRIB reported on November 18. There are some bottlenecks in Iran-Turkmenistan trade, TPOI head Valiollah Afkhami said, adding that Turkmenistan has notable potential to increase the volume of trade. Iran mainly exports cement, potatoes and apples, types of flour and pipe fittings to Turkmenistan. In July, the IRNA news agency reported that Iranian and Turkmen merchants plan to boost trade turnover by 100 per cent reaching $10 billion. Iranian-Turkmen trade turnover reached some $5billion in the last solar year (end on March 21). According to the Iran Custom Administration report, Turkmenistan exported some $244 million worth of gas during first three months of the current solar year. The value of imports was some $15 million in the same period. Iran imported 4.5 billion cubic meters of gas worth $3.5 billion from Turkmenistan in the last solar year. This indicates a 50 per cent decrease compared to the previous solar year. Iran is Turkmenistan’s second largest trade partner after Russia, the report said. Iran’s highest foreign trade balance was with Iraq, Afghanistan, Turkmenistan and Egypt during the first quarter of the current solar year. azernews.az

WORLD NEWS November 25, 2013 #31

caucasian business week

PRESSURED PRESS: FORBES UP FOR SALE, EXPECTS $400MN

orbes Media says the 96 year old family-owned magazine is up for sale. The deal follows a broader trend of publishers selling struggling print media brands that have failed to stay afloat in the ‘digital era’. President and CEO Mike Perlis sent out an internal company letter on Sunday saying “we’re organizing a process to test the waters regarding a sale of Forbes Media.” The note also said the media outlet has hired Deutsche Bank to broker the sale and there are already a number of interested buyers. Forbes is hoping to raise at least $400 million, but half of that sum looks much more realistic, Bloomberg says citing its sources. In 2004, the family received a $400 million buyout offer from fashion publisher Conde Nast Inc., but little is known about the identity of the future “numerous suitors.” The profit dipping trophy bi-weekly investment magazine has been in print since 1917 and is famous for its ‘World’s Richest’ lists and brands itself as America’s “leading business magazine”. Weekly circulation is more than 930,000. The family operated magazine was founded by B.C. Forbes and later, his son, Malcolm Forbes, published the weekly. Malcolm was well-known for his lavish spending- hot air balloons, Faberge eggs, Victorian art, real-estate in Colorado and Normandy and a motorcycle collection were among a few of the prized possessions that were later sold off. PRINT ON SALE The Boston Globe, The Washington Post, and Newsweek changed hands in August 2013. Shortly after this wave of sales rumors started

circulating that The New York Times was also up for sale, which the paper denied. Amazon founder and CEO Jeff Bezos bought the Washington Post, also family-owned for decades, for $250 million. Boston Red Sox owner John Henry picked up the Boston Globe for $70 million. Both prices were thought to be under valuations, demonstrating in the print news industry it’s a buyers, not a seller market. Businessweek, founded in 1929, was sold to Bloomberg LP in 2009, and Maxim, a men’s health journal, was sold to Darden Media Group in September 2013. Digital era The rise of the digital era has killed print ad sales, which before were a main source of revenue for media outlets like The New York Times, The Washington Post, and Forbes. Print ads have fallen 34 percent since 2008, and advertising sales in 2012 were $275 million. In recent years, Forbes has been making a concerted effort to take steps away from its print publication and ramp up efforts on its digit projects. Its online edition has grown tremendously, from about 12 million unique monthly visitors in 2010 up to 26 million, according to data from ComScore. Forbes has been pushing its international sales and has expanded online content across Asia, Europe, and Latin America. Digital advertising accounts for 55 percent of total advertising revenue. A recent PricewaterhouseCoopers report predicts online spending will more than double to $5.9 billion in 2017, up from $2.3 billion in 2012. In an interview with The New York Times this week, a Forbes spokesperson projected online advertising revenue would increase by 35 percent through 2013.

US COULD ‘DERAIL’ ECONOMIC RECOVERY – OECD

he most immediate threat to the global economy is coming from the US and its debt ceiling, warns the Organization for Economic Cooperation and Development (OECD), marking a major shift in concern from the eurozone to the world’s biggest economy. The Paris-based research organization released its bi-annual Economic Outlook report, which placed a heavy focus on the risk of a “binding” debt ceiling. “Brinkmanship over fiscal policy in the United States remains a key risk and uncertainty,” Angel Gurria said at the news conference in Paris on Tuesday.

DOLLAR CAP: CHINA LIMITS WORLD’S HIGHEST FOREIGN CURRENCY RESERVES

“The exit from non-conventional monetary policy will be challenging, but so will action to prevent another flare-up in the euro area and to ensure that Japan’s growth prospects and fiscal targets are achieved,” the report said. Emerging markets are experiencing what the OECD calls “global spillover” – slowdown from the financial crisis. Because BRICS countries make up more and more of World GDP, their lack of growth is having a more far-reaching effect. “There is also a risk that tapering of asset purchases by the US Federal Reserve could bring a renewed bout of instability,” the report said. Despite the turbulence, the OECD recommends the US begin to taper 85 billion per-month bond buying program next year, saying it has to begin sometime, despite spillover market effects. “The continuous affair of discussing debt every few months is simply detrimental to confidence levels and therefore growth,” Padoan said. In 2012, the OECD issued a similar warning to the US that they need to gradually reduce their massive federal budget deficit. ‘SIZABLE RISKS’

hina’s central bank has said it no longer sees any benefit in increasing its $3.66 trillion foreign currency reserves – already the world’s largest. China will cap its purchases of US dollars in an effort to limit the depreciation of the yuan. “It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Bloomberg quoted Yi Gang, a deputy governor at the central bank as saying Tuesday. Decreasing the influence of the dollar and other currencies is a step closer to reaching China’s 2015 goal to “float” its currency and according to the People’s Bank of China will help the everyday Chinese citizen. Between July and September 2013 China’s increased its foreign – currency holdings by $166 billion, boosting it to the world’s highest of $3.66 trillion. This is also more that the Gross domestic product of Germany – the Europe’s biggest economy, Bloomberg reports. This will “basically” end the interference of foreign currency in the Chinese market, and widen the yuan’s daily trading range. The move also provides a buffer to China from future US Federal Reserve stimulus tapering,

which, even just as it looms, has had severe ripple effects on emerging market currencies in Brazil and India. Tuesday minutes from the Fed’s policy meeting said it could start tapering its monthly $85 billion bonds purchases in the “coming months”, if the job market improves further. Fed members also weighed the possibility of slowing the purchases even without clear evidence of a strengthening job market. The news sent Asian stocks lower on Thursday, Japan an exception. Hong Kong’s Hang Seng shed 0.7 percent to 23,539.83 and China’s Shanghai Composite decreased 1.1 percent to 2,183.50. Once the yuan is set to free float, international transactions will be carried out in the Chinese currency, and it will become common in global trade, in league with the euro and dollar. The Chinese yuan currently is the 13th mostused currency in the world for international payments. The yuan has been dubbed a “hermit currency”, isolating itself from foreign investment and setting its own rules, but is now slowly entering world currency markets. Rt.com

The debt ceiling should be abolished, and replaced by “a credible long-term budgetary consolidation plan with solid political support,” the OECD said. The group sets out a goal of lowering the budget deficit by 3.3 percent to prevent major “spill over effects” into other markets and economies. If the US keeps on extending its borrowing limit, it will continue to muddle through its financial reality, which will have adverse effects on the global economy. The report runs four separate macroeconomic scenarios looking at what happens if the US keeps up their big spending. The scenarios look at varying falls in the budget deficit from between 4 and 6.5 percent. A budget deficit decrease would send the economy into varying degrees of recession, and the shock would spread globally. “These events underline the prominence of negative scenarios and risks that the recovery could again be derailed,” OECD chief economist Pier Carlo Padoan said. If the US reduced their budget deficit by 6.5 percent of GDP, all 34 member states of the OECD would be in recession.

Other “sizable risks” include the unstable Japanese fiscal situation and “lagging and uneven” growth in the eurozone. Fragile public finance, uncertain political situations, and weak balance bank sheets pose a threat to eurozone recovery. Growth in the UK acerbated to 0.8 percent in 3Q, Japan’s growth slowed but increased 0.5 percent, and German growth slowed to 0.3 percent. Overall, global recovery is real, but slow, and there “may be turbulence on the horizon” according to Gurria. Global GDP grew by 0.5 percent in the third quarter of 2013, unchanged from the previous quarter. Growth is projected to gradually gain momentum in 2014 and 2015, but recovery will remain modest. In the 34-member OECD GDP growth is expected to accelerate to 2.3 percent in 2014 and 2.7 in 2015, up from 1.2 percent in 2013, according to simulations. Outside of the OECD group, the world economy will grow faster- at 2.7 percent in 2013, 3.6 percent in 2014, and 3.9 percent in 2015. The forecast is weaker than its last report in May.

DP Growth - Third Quarter 2013, Quarterly National Accounts, OECD. Graph from oecd.org

WORLD NEWS 14 BUBBLE FEARS AS US STOCKS BREAK RECORDS caucasian business week

arkets have left milestones for dust. US stock prices are enjoying their best year since 1997, with investors apparently untroubled by the backdrop of a lacklustre economy and high unemployment. The S&P 500 has barrelled through three century marks this year alone, from below 1,500 to this week’s intraday peak of 1,802 for a year-to-date gain of 25 per cent. The Dow Jones Industrial Average has finally breached the 16,000 threshold, after rising through 15,000 in October, while the Nasdaq Composite is looking to revisit 4,000 after an absence of 13 years since the dotcom bust of 2000. As the Fed’s balance sheet approaches $4tn, its expansion in recent years neatly matches the rise in the S&P 500, creating unease that an equity bubble is surely inflating as was the case in 2007 and 1999. Not so according to Janet Yellen, Federal Reserve chair-designate, who told Congress last week that the central bank does not see a bubble in equities based on the metrics of equity risk premium and price to earnings ratios. Ms Yellen also said there is no federal rule to support the stock market. But in the absence of a strong economic recovery matched by rising incomes, this year’s rapid rise in equity prices is also seen reflecting the activist role of the Fed as it buys $85bn of bonds each month, suppressing interest rates and forcing investors to buy shares, corporate bonds and real estate. While some investors argue the stock market has not reached a valuation tipping point, the concern is that unless the broad economy and incomes accelerate soon, the prospect of a major correction in equity prices looms. “Even the most bullish investor would admit that sluggish economic growth, a lacklustre labour market, and political discord are hardly the logical bedfellows of a stock market at new highs,” says Nicholas Colas, chief market strategist at ConvergEx.

“The current market action of a year end melt-upcoming after five years of truly solid returns for US stocks, seems at first blush to be irrational performance-chasing. And who knows, it may end up being exactly that.” Certainly the return of money into US stocks after outflows in 2011 and 2012 has been one catalyst for outsized performance. According to Lipper, investors have pumped a net $285bn into US equity mutual funds and exchange traded funds in 2013, the best year for the market since their records began in 1992. Among the winners, FedEx, Google, Amazon and Microsoft have rallied 40 per cent or more, while companies such as IBM and Apple are modestly negative in 2013. Countering the concern of a bubble forming, barometers of the economy such as transport and small-cap stock benchmarks are up more 30 per cent this year, reflecting a general consensus of accelerating growth in 2014. Richard Madigan, chief investment officer at JPMorgan Private Bank, says the current forward P/E multiple on the S&P 500 at about 15 times is well below the reading of 24 times seen in 1999 at the tail-end of a major bull run. “From a historical perspective, that is roughly what we consider to be fair value. Looking ahead, animal spirits still seem ambitious, but neither

hubris nor complacency has currently taken over investor behaviour.” At the very least, with the Fed set to taper in the coming months, there is a concern that the market’s hefty gains in 2013 have borrowed from the future, particularly as revenues are expanding modestly for many companies. “The current rally has robbed a bit of next year’s performance,” says Michael Kastner, managing principal at Halyard Asset Management. Mr Madigan says: “Investing is going to get more complicated as most of the easy overweight investments have just about played themselves out.” A looming question is whether some investors will take the opportunity to lighten equity expo-

November 25, 2013 #31

sure ahead of the taper and fiscal battles in Washington. Tobias Levkovich, US chief equity strategist at Citi, still believes in the secular bull market, but says: “The market is vulnerable to a pullback here; if profit-taking sets in, no one wants to be the last one out of the door.” As the equity market looks to chalk up more milestones in 2013, the worry remains that the new peaks could become a millstone for late bull run arrivals. Mr Kastner says: “We seem to have moved from investing under sensible valuations to one of the greater fool theory, hoping there is another buyer willing to pay a higher price at these extended levels.”

TBILISI GUIDE November 25, 2013 #31

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 25, 2013 #31