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BUSINESS WEEK December 16, 2013 #34

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December 16, 2013, Issue 34

GEORGIA

EU GRANTS €27M TO GEORGIA UNDER ‘MORE FOR MORE’ PRINCIPLE

he European Union will allocate EUR 27 million to Georgia to help improve management of the job market and linkage between education and market needs. Pg. 3

THIRD QUARTER RECORDS 42% GROWTH IN HOTELS TURNOVER

urnover of private enterprises increased by 826 million GEL in the third quarter of 2013 compared to the second quarter and made 10 billion 676 million GEL. Pg. 6

caucasian1 Finance Minister Expects no Growth in Prices

BE INFORMED, DO BUSINESS

KHADURI AND KVIRIKASHVILI SEE NOTHING ALARMING IN GEL DEVALUATION

inisters of economic team state that devaluation of GEL rate is not alarming. “Our strategy is to strengthen national industry and improve import-export balance. In this case it’s the only strategy to change the balance. There is no alarming situation, rate indentation is going due to periodic seasonal changes in the economy”. - Minister of Economy and Sustainable Development George Kvirikashvili stated.

Minister of Finance said that resource of National Bank is enough to maintain GEL rate safe. “Nothing threats to GEL rate, we work together, Ministry of Finance, economic team and National Bank of Georgia, among them with international organization. National Bank has respective resource to protect GEL rate. You can see that in this period currency course changes in other countries except Belorussia exactly like GEL to USD”, - Minister of Finance Nodar Khaduri stated.

AIRZENA TO LAUNCH FLIGHTS TO SOCHI DUE TO HIGH DEMAND

he airline “Georgian Airways” ( “Airzena “) launches flights in Tbilisi - Sochi direction due to high demand. Pg. 8

zerbaijani and Saudi Arabian businessmen came together for a joint business forum in Baku on December 10. Pg. 10

2014 STATE BUDGET APPROVED

WORLD NEWS NEW ERA FOR WALL STREET? US PASSES LANDMARK RULE TO LIMIT RISKY TRADING

ollowing 3 years of negotiations, five US regulators have approved the Volcker rule, which seeks to protect American taxpayers from the losses of ‘too big to fail’ banks. Pg. 13

Ilya Eloshvili: All Successful Countries Fully Use Hydro Resources Pg. 4

AFBA president: Implementation of Large Projects like Khudoni HPP and Anaklia Seaport is Necessary

he volumes of the production of meat in the Republic of Armenia during the months of January-October have increased by 5,1%. Pg. 11

ussia is going to write off 90 percent of Cuba’s $32 billion Soviet-era debt as part of a deal to end a 20-year dispute, according to diplomatic sources cited by Reuters. Pg. 12

Pg. 3

Pg. 4

ARMENIA ARMENIA ACTIVATES MEAT AND SAUSAGE PRODUCTION

RUSSIA TO CANCEL CUBA’S $29 BILLION OF SOVIET DEBT

Irakli Kovzanadze sees nothing alarming in GEL rate change

Levan Kalandadze: Georgia will Sink in Darkness in 10 Years if We Reject to Construct Khudoni oni HPP

AZERBAIJAN SAUDI ARABIAN FIRMS INVEST $368 MILLION IN AZERBAIJAN’S ECONOMY

CIS

Pg. 2

Pg. 3

NBG LOWERS 2013 ECONOMIC GROWTH FORECAST TO 2.5%

ational Bank of Georgia (NBG) reduces economic growth forecasted indicator for the second time, t0 2,5% (it was reduced from 6% to 4% this spring). According to basic scenario, economic growth prognosis for 2014 is expected around 5%. Risks are manly created by attitudes of investors and businessmen. Economic growth of trade partners

Comenius Ltd: THE FIRST HOSPITALITY SERVICE COMPANY ON THE GEORGIAN MARKET Pg. 6

is also important, which is reflected on the net foreign demand. “In addition to net export, influence of global macroeconomic environment over Georgian economy through money transfers and foreign investments. In the case of realization of these risks, economic growth will be less than basic scenario. According to alternative scenario, economic growth of next year is around 3.0%”, says Inflation Review of the National Bank.

Pg. 4

Levan Davitashvili: We do not Have the Opportunity to Influence Prices” Pg. 8 Parliament Adopts Statement on Ukraine

Pg. 8

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

December 16, 2013 #34

PRIME MINISTER NAMES NEW GOVERNORS

rime Minister Irakli Garibashvili presented new governors on Friday. Kvemo Kartli – George Mgebrishvili, Racha-Lechkumi and Kvemo Svanebti – Parmen Nargvelidze, SamtskheJavakheti – Akaki Machutadze, Samegrelo-Zemo Svaneti – Levan Shotia, Imereti – Zaza Meparishvili, Kakheti – Irakli Shiolashvili, MtsjetaMtianeti – Nugzar Kipiani, Shida Kartli – Zurab Rusishvili and Guria – George Chkhaidze. According to initiative of the new government,

Prime Minister was authorized to appoint governors. Before that changes made last year in the Loa on Authorization of Georgian Government Structure and Activity Rule”, president appointed governors in the regions. Irakli Garibashvili presented Akaki Chkhenkeli as a new head of the department of the governmental chancellery in relation to regions and local self-governing units. Chkenkeli worked as deputy head of general inspection, when Irakli Garibashvili was a Minsiter of Interior.

FINANCE MINISTER EXPECTS NO GROWTH IN PRICES

growth in demand for GEL was registered due to objective reasons. The Finance Minister Nodar Khaduri states. “There is nothing unusual in exchange rate fluctuations. If we look at the neighboring countries’ currencies, we’ll see that they change as well and this is a common phenomenon in the economy. So, there is nothing alarming ,” – says the Minister of Finance. He suggests that the increase in prices is not expected, because the market is pretty saturated.

Note: The official exchange rate of GEL against USD fell by a record figure yesterday, 134 points, andreached 1.7196. Such a low rate of GEL was last recorded in March 2011. From November up to date Georgian national currency has depreciated by 2.8% while from thebeginning of the year – by 3.4%. However, most seriously the national currency devalued against Euro by 243 points and reached atwo-year maximum of 2.3632. The rate of GEL against Euro has fallen by 4% since November while from the beginning of the year - by 7.5%.

SEVEN NEW AMBASSADORS APPOINTED

resident Giorgi Margvelashvili has appointed new ambassadors to seven countries, including Bulgaria, China, Germany, Iran, Japan, Jordan and Uzbekistan, the Georgian Foreign Ministry said on Tuesday. Lado Chanturia has been appointed as Georgian ambassador to Germany. Chanturia, a visiting professor at the University to Kiel, Institute for Eastern European Law, was Justice Minister in 1998-1999 and served as Chairman of Supreme Court in 1999-2004; he also was Georgian President’s adviser till 2007. Ioseb Chakhvashvili became Georgian ambassador to Iran. He served as ambassador to Turkmenistan and Afghanistan since 2009. Davit Aptsiauri has been appointed as Georgia’s ambassador to China; he was Georgian ambassador to the Baltic states in 2004-2007. Levan Tsintsadze has been appointed as ambas-

sadorial to Japan; previously he served as the director of the Foreign Ministry’s Department for International Economic Relations. Konstantine Zhgenti, who served as Georgian ambassador to Austria in 2004-2005, has been appointed as ambassador to Uzbekistan. Zurab Beridze has been appointed as Georgian ambassador to Bulgaria; he served as ambassador to Romania and Moldova during four years before 2008. Grigol Tabatadze has been appointed as ambassador to Jordan; this appointment will be affective from February, 2014. In 2009-2010 he was Georgian ambassador to Armenia. After the new constitution went into force on November 17, President has the right to appoint or dismiss ambassadors upon nomination by the government; approval from the parliament is no longer required.

EU GRANTS €27M TO GEORGIA UNDER ‘MORE FOR MORE’ PRINCIPLE

he European Union will allocate EUR 27 million to Georgia to help improve management of the job market and linkage between education and market needs. Funding was made available under Eastern Partnership Integration and Cooperation (EaPIC) programme, which was launched in 2012 to provide additional funding, on top of already committed, to those Eastern Partnership countries which make more democratic reform efforts. Under this program Moldova and Armenia re-

ceived EUR 35 million and EUR 25 million, respectively. Last year Moldova was granted EUR 28 million, Georgia – EUR 22 million and Armenia EUR 15 million. “This year three Eastern partners were rewarded for their efforts in democratic transition and their commitment to fundamental values. We hope that this group will grow bigger in the future,” Štefan Füle, Commissioner for Enlargement and European Neighbourhood Policy, said on December 12.

PARLIAMENT ADOPTS STATEMENT ON UKRAINE

he Georgian Parliament adopted on December 11 a statement on developments in Ukraine, which expresses “deep concern” over use of force against peaceful demonstrators and says that “Russia, or any other country, has no right to interfere” in Eastern Partnership states’ European integration process. The statement, which was drafted by GD parliamentary majority group, was passed with 68 votes; UNM lawmakers were not present at the time of the vote as they staged a walkout in protest against a scuffle that erupted in the chamber earlier on December 11. Consultations on the text of statement were ongoing between GD and UNM lawmakers prior to the vote. UNM MPs were not happy with the text, saying that its wording was not strong and straightforward enough in respect of Russia’s role. It was the second attempt by the Parliament to adopt a statement on developments in Ukraine. The first attempt two weeks ago failed as GD lawmakers voted down UNM-proposed text, which was expressing “concern over political and economic pressure and blackmail exerted by the Russian Federation against the Ukrainian authorities” aimed at forcing the latter to reject signing of the Association Agreement with the EU. The text, which was proposed by UNM two weeks ago, was also condemning “doctrine of Russia’s sphere of influence” GD MP Victor Dolidze, who chairs parliamentary committee on European integration and who was involved in drafting of the text, said on December 11 that UNM’s rejection to join the statement was “regrettable and surprising.” “Russia’s factor is explicitly stressed in the statement; it clearly states that neither Russia nor any other country has the right to meddle into the process,” MP Dolidze said. But senior lawmaker from UNM, Giorgi Gabashvili, said that the text was failing to “explicitly state that Russia is a problem.” “So we can’t be part of that... I do not think that the Georgian Parliament should adopt a statement from a position of being scared and with its head bowed [before Russia],” MP Gabashvili said. “There is no other country but Russia and [it’s President Vladimir] Putin, which hinders Ukraine’s European path and it is very regrettable if the Georgian Parliament fails to explicitly state it.” TEXT OF STATEMENT The statement adopted by the Parliament on December 11 reads: “Expressing full solidarity to the Ukrainian people, which fights for the freedom of choice, the Parliament of Georgia expresses deep

concern over the recent developments and use of force against peaceful citizens.” “The Parliament of Georgia supports the will of the Ukrainian people to become a full-fledged member of the European and Euro-Atlantic family and believes that despite the existing problems, both Georgia and Ukraine will take a dignified place in the international democratic community.” “The Parliament of Georgia welcomes the efforts by the international community and democratic world aimed at supporting Eastern Partnership countries and protecting their sovereignty and declares that in the process of European integration these countries should have the freedom in making an inviolable choice and Russia, or any other country, has no right to interfere in this process.” “The Parliament of Georgia also welcomes the efforts by the European Union and Ukraine to resume negotiations between the sides on signing the Association Agreement and Deep and Comprehensive Free Trade Area with the purpose to timely resolve problems in this respect.” “We believe that Ukraine’s political leaders will find a dignified, peaceful solution, which will be in benefit of the people,” Georgian Parliament’s statement says. EUROMAIDAN SOLIDARITY RALLY IN TBILISI Meanwhile in Tbilisi, few hundred people rallied on December 11 in solidarity to demonstrators at Independence Square in Kiev, who are protesting against the government of President Viktor Yanukovych for more than two weeks after the authorities suspended preparation for signing of the Association Agreement with the EU. Participants of the rally in Tbilisi marched down the capital city’s main thoroughfare, Rustaveli Avenue, and gathered outside the Tbilisi City Hall, which was lit up in colors of the Ukrainian flag, organized by the Tbilisi municipality. Tbilisi Mayor, Gigi Ugulava, and some other UNM party representatives made speeches at the rally; among them was UNM MP Giorgi Baramidze, who earlier on December 11 was in the center of a scuffle in the Parliament in Kutaisi. Ex-president Mikheil Saakashvili posted on his Facebook page on December 11 that he had met members of U.S. Senate and the House of Representatives to brief them about Ukraine, which Saakashvili visited last week, when he addressed pro-Europe protesters in Kiev on December 7; Saakashvili, who has not been in Georgia since mid-November, formally remains chairman of the UNM party. Civil.ge

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MAIN December 16, 2013 #34

caucasian business week

IRAKLI KOVZANADZE SEES NOTHING ALARMING IN GEL RATE CHANGE

xecutive director of Partnership Fund Irakli Kovzanadze sees nothing alarming in GEK rate change. He says that appearance of the market demand on USD was determined

by increase of expenditures of the Ministry of Finance, besides National Bank has all leverages to prevent problems caused by national currency evaluation in the country. “If we observe trend of last 2 years, GEL rate fluctuation was only in the framework of 1%. Some demand appeared on USD because Minister of Finance started spending. At the end of the year traditional demand on GEL increases and I do not exclude changes for GEL strengthening. There is no alarming problem in this respect. We can calmly look at the process, because Georgian state, in particular National bank has all leverages and huge currency reserves to prevent significant problems through GEL rate weakening in the country”, - Irakli Kovzanadze stated in Ratio Freedom. Irakli Kovzanadze also mentioned that due to saturation of Georgian market with imported products, prices impact rate change.

DEVELOPING ASIA GROWTH OUTLOOK STEADY AS INDUSTRIAL ECONOMIES FIRM

n improving growth outlook in Japan and the United States paired with stronger-than-expected performance in the People’s Republic of China (PRC) support a steady growth outlook for developing Asia, says a new Asian Development Bank (ADB) report. The Asian Development Outlook Supplement, released today, forecasts growth of 6.0% in 2013 for ADB’s 45 developing member countries, improving to 6.2% in 2014. The forecasts are unchanged from the Asian Development Outlook Update issued in October. “Despite uncertainties in the global economic environment, developing Asian economies remain resilient. The region has performed well in 2013 and is now poised to benefit from the further signs of growth momentum in the advanced economies,” said ADB Chief Economist Changyong Rhee.

A slight moderation is forecast in Southeast Asia. The subregion is expected to post growth of 4.8% in 2013 and 5.2% in 2014; both forecasts are revised down 0.1 percentage points from October. The moderation stems from the impact of tensions in Thailand on consumption and tourism. The devastating impact of Typhoon Haiyan is tempering the Philippines’ 2013 growth, but reconstruction is expected to boost growth as it ramps up in 2014. Growth in Central Asia is gradually recovering, with aggregate projections for the subregion revised up from October forecasts: to 5.7% from 5.4% for 2013 and to 6.1% from 6.0% for 2014. The revisions reflect stronger performance in Kazakhstan and Turkmenistan. Pacific economies are expected to slow from 7.1% growth in 2012 to 5.0% in 2013 before bouncing back to 5.4% in 2014. The projections are 0.2 percentage points lower than in October

Advanced economies of the US, euro area and Japan are on track to meet the October forecast of 0.9% growth in 2013. ADB expects 1.9% growth in these economies in 2014, up 0.1 percentage points from the October forecast. The outlook for PRC growth is increased by 0.1 percentage points to 7.7% in 2013 and 7.5% in 2014 on the back of rising infrastructure investment. This boosts the average East Asian forecast by the same magnitude to 6.7% for both 2013 and 2014 as indicators in other economies in the subregion are generally in line with October assumptions. South Asia is on track to meet growth expectations of 4.7% in 2013 and 5.5% in 2014. After bottoming out in the first fiscal quarter, India’s economy appears to have recovered on the back of a rebound in exports and higher industrial and agricultural outputs. India is anticipated to grow at 4.7% in fiscal year 2013 (ending 31 March 2014) and 5.7% in fiscal year 2014, unchanged from the October forecast.

for 2013 and 0.1 percentage points lower for 2014 as weak international commodity prices are adversely affecting agriculture, mineral, and forestry export earnings of some of the larger Pacific economies such as Papua New Guinea and Solomon Islands. Expected average inflation in developing Asia remains as forecast in October: 3.6% in 2013 and 3.7% in 2014. The Asian Development Outlook is ADB’s main economic forecasting product. It is published each April with an Update published in October and brief Supplements published in July and December. All materials are available at www.adb. org/data/publications/main. ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth and regional integration. Established in 1966, it is owned by 67 members – 48 from the region. In 2012, ADB assistance totaled $21.6 billion, including cofinancing of $8.3 billion.

GOVERNMENT’S ECONOMIC TEAM DEVELOPING CONSTRUCTION CODE BY IGNORING DEVELOPERS’ OPINION

evelopers Association does not have information about the group created by Prime Minister and working on the Construction Code. It is known that Prime Minister Irakli Garibashvili will be directly involved in the development of the Building Code who is interested in the quality of construction and expressed a desire to improve the institutional mechanisms of quality control. Chairman of the Developers Association and “Arci” CEO Tornike

Abuladze states “Commersant “ that any member of Prime Minister’s Economic Advisory Council has not applied to the Association of Developers or any construction company regarding the Code. Abuladze considers incredible the resolution of the current problems in the construction sector without considering the opinion of specialists. “Arci” Executive Director does not have information for the solution of what particular problems in the construction sector it was decided to adopt the new code.

EMERGENCY BUSINESS WILL BE COMPLETELY STATE

ne institution will provide management of emergency service throughout the country. For this aim, a new Public Legal Entity will be established, which will be subordinated to Ministry of Healthcare. Minister of Healthcare David Sergeenko presented the issue on the government session on Thursday. According to government’s decision, emergency services managed by private insurance companies will return to the state rule. New technologies will be introduced to emergency service and call outs will be made according to geographic accessibility, also training of emergency doctors and drivers will be provided. Tender has already announced on purchase of 220 off-road emergency cars. For this aim the ministry

already announced tender of 10 714 000 GEL assumed value. Tender proposal submission starts on December 15 and ends on December 10. “As a result of polyhedral analyses we made a conclusion that it’s necessary, unlike stationary infrastructure because this system needs united coordination. The budget already includes amount for renovation of auto-park throughout the country; negotiations with private insurance companies are going to the end among them with Aldagi and I think by the end of the year this issue will be solved by renewed auto-park, united management and by reaching that patient will not be carried fro hospital to hospital, but to provide a professional service in the shortest term”, - David Sergeenko stated on the press conference in October

2014 STATE BUDGET APPROVED

arliament approved on December 11 state budget for next year, setting revenues at almost GEL 7.32 billion and expenditures at GEL 7.22 billion. Targeted tax revenues have been set at 6.82 billion; the figure is GEL 100 million less than targeted this year. In 2013 income from tax revenues is falling short of the target. Government forecasts 5% economic growth next year. The government has revised downward 2013 growth forecast from initial 6% to 2.5%; according to the state statistics office real GDP grew 1.9% year-on-year in the first ten months of this year. UNM lawmakers, who have strongly criticized the document, were not present during the discussion of the 2014 state budget as they staged a walkout in protest against a scuffle that erupted in the chamber on December 11. One of the issues criticized by the opposition MPs about the budget is government’s plans to issue next year GEL 600 million worth securities. GEL 400 million of this debt, according to the government, will be used for covering budgetary expenses and repaying parts of state debt. GEL 200 million, according to the government, will be placed as a deposit in commercial banks to make it available for long-term business loans in national currency. Government estimates that total debt will amount 35.3% of GDP next year. Breakdown of funding per ministry, according to the 2014 budget, is as follows: • Ministry of Healthcare and Social Protection – GEL 2.65 billion (2013 – GEL 2.345 billion; 2012 – GEL 1.821 billion); • Ministry of Regional Development and Infrastructure – GEL 875 million (2013 – GEL 928.5 million); • Ministry of Education and Science – GEL 754.3 million (2013 – GEL 673.2 million); • Ministry of Agriculture - GEL 263.5 million (2013 – GEL 241 million); • Defense Ministry – GEL 660 million (same as in 2013; figure stood at GEL 730.6 million in 2012 and at GEL 711 million in 2011); • Interior Ministry – GEL 570 million (2013 – GEL 570 million; 2012 – GEL 587.8 million; 2011 – GEL 568 million); • Ministry of Energy – GEL 114.6 million

(2013 – GEL 118.7 million); • Finance Ministry – GEL 96 million (2013 GEL 100 million ); • Ministry of Economy and Sustainable Development – GEL 87 million (2013 - GEL 55 million); • Justice Ministry - GEL 60.5 million (2013 – GEL 71.4 million); • Prison system ministry – GEL 157 million (2013 – GEL 174.3 mln); • Foreign Ministry - GEL 90 million (2013 – GEL 80 mln); • Ministry of Culture and Protection of Monuments – GEL 80 million (same as in 2013); • Ministry of Sport and Youth Affairs - GEL 53.9 million (2013 – GEL 47.2 million); • Ministry of Environment Protection - GEL 31 million (2013 – GEL 25.9 million); • Ministry of IDPs from the Occupied Territories, Accommodation and Refugees - GEL 48 million (same in 2013); • State Ministry for Reintegration – GEL 1.3 million (same in 2013); • State Ministry for European and Euro-Atlantic Integration – GEL 2.8 million (2013 – GEL 2.3 million); • State Ministry for Diaspora Issues – GEL 900,000 (2013 – GEL 850 thousand). Funding of the government’s administration will be GEL 20 million; President’s administration will receive GEL 9 million that is by GEL 20,000 more compared to this year’s funding. Funding of Parliament is set at GEL 52 million. Next year the President’s discretionary reserve fund will be halved to GEL 5 million, while the government’s similar fund will remain unchanged at GEL 50 million. Funding of courts will be increased to cover planned increase of salaries for judges; funding of the Constitutional Court will stand at GEL 3.3 million (2013 – GEL 2.6 million); Supreme Court – GEL 6.6 million (2013 – GEL 5.5 million); common courts – GEL 47.4 million (2013 – GEL 34.9 million). Funding of Geostat, state statistics office, will significantly increase from 2013’s GEL 4.5 to GEL 14.6 million with GEL 8.8 million to be spent on population census planned in 2014. State funding for the Georgian Orthodox Church remains unchanged at GEL 25 million next year.

POWER SYSTEM caucasian business week

December 16, 2013 #34

DEPUTY ENERGY MINISTER: ALL SUCCESSFUL COUNTRIES FULLY USE HYDRO RESOURCES An interview with Deputy Energy Minister Ilya Eloshvili

- On the background of a permanent decline in exports of electricity, experts say that it can cause an increase in tariffs. Do you agree with

this approach? - Partially agree. If we do not create new sources of energy, do not use water resources, naturally, the rate will grow. So it is possible that the companieswill require a rate increase. - The Ministry of Energy is doing everything in order to create these new sources of energy - for example, we went to the liberalization of the legislation, a memorandum on the construction of hydroelectric power of 500 MW was signed as well as a tender for the construction of five HPPs with total capacity of 300 MW was announced , in which several companies are participating, this is a positive precedent when competitors take part in the tender. - Based on this, we do our best to create new capacity and keep the rate at its current level. In addition, we continue all projects started by the previous authority , except for some which have their own internal problems . However we are still trying to resolve issues with them. The main thing is that everyone in the country knew how important major infrastructure projects are for the development of the country. - Is the construction of hydroelectric power sta-

LEVAN KALANDADZE: GEORGIA WILL SINK IN DARKNESS IN 10 YEARS IF WE REJECT TO CONSTRUCT KHUDONI HPP

f we reject to construct Khudoni HPP, Georgia will sink in darkness in 10 years”, economic expert Levan Kalandadze, one of the heads of Georgian Infrastructure Projects Initiative NGO says.

“Today we have to choose the future way. On the one hand, we can build Khudoni HPP and Georgia will make focus on development, progress. This implied we should choose economic and business development, create new enterprises and draw foreign investments, create new job places and new production potential, make the country attractive for business activities. All these need respective energy supply and support, new energy power and maximal use of the current unused potential. On the other hand, we can reject Khudoni HPP construction idea and we, all Georgia, will freeze on one place and Georgia will step by step turn into a country with unused and unimplemented potential. I assure you in the latter case it will take only 10 years and Georgia will sink again in darkness and the country will return to the 1990s energy crisis”, Levan Kalandadze noted.

IN NOVEMBER GEORGIA TRADED ELECTRICITY ONLY WITH RUSSIA

n November Georgia imported and exported electricity only from Russia. JSC Electricity System Commercial Operator “ESCO” informs that in November the country purchased 84 952 310 KW/ hour electricity. In the same period supplied 10 150 KW/hour electricity to Russia. It’s noteworthy that in January-November Georgia has purchased 366,28 million KW/hour electricity from Russia; in the same period exported 370,6 million KW/Hour electricity to Russia. In the current year Russian Federation is main partner of Georgia in electricity export-import.

This year ESCO also traded with Armenia and Azerbaijan, but with less mounts. It’s noteworthy that last week Minsiter of Energy commented about electricity purchase with Russia. Kakha Kaladze mentioned that Russia and Georgia cooperate well in this direction and he does not expect export limitation from the Russian government to Georgia. Kaladze said that electricity is purchased from Russia due to low price. If Russia decides not to supply electricity to Georgia, then the country will start purchase from alternative sellers with relatively higher price.

tions the only way out or is there the opportunity to revise the tariff on imports of electricity? - We have three sources of electricity - HPPs, thermal power plants and imports. Thermal power plants depend on gas prices, which is unlikely to decrease. Imports will not also become cheaper, if not more expensive. So the only real option is a focus on local water resources and the construction of major projects, including Khudoni HPP. It is an objective reality. - When it comes to large HPPs, NGOs oppose arguing that the giant projects will harm the environment, etc. Whether investment in large HPPs can harm nature so that the damage will be greater than the benefits from them? - No. We’re not doing anything new, everything has already been done and tested. There is no single successful country, which would not fully use its hydropower potential. We also need to do this. We do our best to make it so that the harm caused to the environment was minimal, although, of course, it cannot be done without any harm at all. Any construction harms ecology - transmission lines, pipelines, and everything else. That’s why we cannot stop the process only because of the

harm caused to the environment, it is necessary to do so that a damage was minimal. - You have already talked about the possibility of higher electricity tariffs. Have companies already applied to the Energy Regulatory Commission requesting a review of the tariff, and when they have such a right ? - “Energo Pro” has no right to raise the issue of growth rates until September 2014, although after September it’s unlikely growth in rates will be required, rather the opposite. With regard to the Tbilisi electricity distribution company “Telasi”, we signed a memorandum with it until 2027 In general, the situation is controlled and at this stage there is no danger of growth in rates. - When Georgia may become volatile country? - Georgia can never be completely volatile, and no one should have such illusions. 75% of the energy we get from abroad, so the first thing we need to do is to diversify sources of energy, the second - to create our own reserves, and the third – to fully use our water resources. All this will eventually lead us to a greater degree of energy independence.

TRANS ELECTRICA WILL GIVE ALL DOCUMENTS ABOUT KHUDON-HESI TO BUSINESS OMBUDSMAN

ompany Trans Electrica, implementer of Khudon-hesi project will meet business ombudsman George Gakharia on Friday and present all information in details dealing to construction of this strategic object. As representatives of the company Trans Electrica state, they are ready to cooperate with any interested organization. In addition to business ombudsman, Trans Electrical will also meet ombudsman Ucha Nanuashvili and give 3000-page documentation. The meeting is scheduled on Thursday. The ombudsman expressed readiness to meet the company and listen their arguments to all issues, among them human rights. Reminding that ombudsman’s administration also starts to study Khudon-hesi issue. As Ucha Nanuashvili stated, his main task is to protect human rights and they’ll study the case in this respect: “It’s important for me to find out in details,

construction of Khudon-hesi and how subsequent changes impact human rights. It’s fact that many issues are to be prepared and the government should prepare for them well”, - Ucha Nanuashvili stated.

AFBA PRESIDENT: IMPLEMENTATION OF LARGE PROJECTS LIKE KHUDONI HPP AND ANAKLIA SEAPORT IS NECESSARY

cheduled 6% economic growth is likely to reduce to 2-3%, president of non-governmental organization The Association for Young Financiers and Businessmen Nodar Chichinadze considers recently reduced infrastructural projects as its cause. “Last years mostly large infrastructural projects determined economic growth. For example, Parliament Building, Avlabari Residence of the President, Justice House and so on, construction of which frequently was funded from the state budget. Although in some cases various projects were funded by private sector. As a result of direct or indirect pressure of the government, private companies frequently invested in the non-profitable projects. When government was changed, pressure on businessmen was seized. Respectively, they restrain from investing in the unprofitable spheres. Reduction of state infrastructural projects added to it, which also impacted GDP growth. “In this situation I consider that it’s necessary implementation of the large projects, such as Khudon-hesi, Anaklya port and others in order to

invest amounts in the economy. On one hand, it will promote employment; on the other hand it will stimulate economy. Besides, it’s noteworthy that such projects will make contributions in the country economy after the construction, unlike Parliament Building and President Residency, which only give economic profit only during the construction process”, - president of AFBA Nodar Chichinadze states.

INSURANCE & IMPORT December 16, 2013 #34

caucasian business week

HEALTH INSURANCE PORTFOLIO RANKS FIRST IN JANUARY TO SEPTEMBER 2013 ALDAGI RANKS FIRST IN TERMS OF INSURANCE PREMIUM

ccording to the statistics for the last three quarters of 2013, “Aldagi” has attracted the largest volume of premiums on the insurance market - 120 943 371 GEL. Second place goes to “GPI Holding” – 70 288 196 GEL and “ Archimedes Georgia” – 68 521 519 GEL. Indicators of other companies look as follows- “ Irao “ 41894159 GEL “IC Group” – 36 29 73 GEL, “Alfa” – 17 166 823 GEL , “ Ardi “ – 16 598 226 GEL, “ Cartu “ - 11 696 640 , “ PSP”- insurance” - 8 443 182 , “Unison” – 5 930 141 GEL. The total volume of attracted premiums amounted to 406 316 170 GEL. 78% fall on health insurance (317 million GEL), followed by transport insurance - 28 million , and property - 22 ,7 million GEL. Rating of the insurance companies by a volume of attracted premium not given state programs

is as follows - “ALDAGI “ – 70 339 336 , “ GPI Holding” – 46 862 993 “ IRAO “- 17 358 052 GEL, “ Ardi “- 16 598 226 GEL, “IC Group” – 10 152 360 GEL, “ Cartu “ – 8 583 848 GEL, “PSP - insurance” – 8 443 182 GEL, “Unison” - 5 930 141 GEL, “ Tao “ – 4 773 164 GEL , “Alfa” – 4 320 207 GEL . According to the President of the Insurance Institute Giorgi Gigolashvili, statistics show that competition in the insurance market increases, and at the same time, car and property insurance rose by25%. As for premiums without government programs, in his opinion, active state intervention has led to the fact that many companies have weakened their interest in attracting customers to other services, andonly those companies that do not participate in government programs work in these market segments.

INSURANCE SECTOR GOT OVER 51,3% OF THE BONUSES FROM THE STATE INSURANCE PROGRAMS

ver 51,3% of the insurance sector bonuses are got from the state insurance programs. According to statistic of the State Insurance Supervision Service, in 9 months 2013 total amount of the bonuses of 13 insurance companies, without state insurance programs equal to 198 million GEL, while bonuses attracted by the sectors including state programs exceeds to 406,3 million GEL. Without state program, in January-September Aldagi has attracted bonus of 70,33 million GEL, including programs - 121 million GEL. Total portfolio of the GPI Holding bonuses is 70,3 million GEL, without programs - 46,8 million. Beyond state programs, company Irao has

attracted 17,35 million GEL, including program - 41,8 million. According to the total portfolio of the bonuses - with 68,5 million GEL bonuses, Archimedes Global Georgia is in the top-3 list. Excluding state programs, the company has attracted only 1,4 million and is only ahead of Branch of Chartis Georgia. It’s noteworthy that PSP Insurance - total bonus of 8,44 million GEL has attracted from the private insurance. Standard Insurance, Branch of Chartis Georgia, Unison, Tao, also Ardi Group has filled portfolio from the private insurance. Excluding state programs, statistic data is made up according to the contracts of the companies despite the fact whether bonus is paid to the insurer.

nsurance companies attracted the highest amount of bonuses in the health insurance in 9 months 2013. According to official statistic, 13 existing insurance companies attracted medical (heath) bonuses of 316 629 724 GEL in JanuarySeptember, which is 77,9% of the market. Share of the sector in comparison data of 6 months has increased by 62%. Compared to the same period 2012 it’s increased by 1,5%. Land transport insurance rates second with 6,9%. Insurance companies got bonus of 28 million GEL from this sector. Property insurance sphere ranks third. Amount of

the bonuses attracted from this segment exceeded to 22,7 million GEL. 5,6% of the total bonus comes on it. Life insurance rates 4th with 9 million GEL. It’s share in the total structure equals to 2,24%. Civil responsibility insurance completes top-5 list with 6,63 million GEL and 1,63% market share. It’s noteworthy that in the reporting period insurance companies have not got bonuses from the railway transport insurance, sailing vehicles and legal expenditures insurance sectors. Total bonuses of insurance companies equaled to 406,316 million GEL in 9 months.

IMPORTS COMPANY: FALL IN EXCHANGE RATE WILL AFFECT PRICES An interview with a member of the Supervisory Board of “ GP Holding” Uta Maziashvili - The official exchange rate of GEL is falling. Such alow rate of the national currency was last recorded at the end of March 2011 . Finance and Economy Ministers say that there is no reason for concern, price hike is not expected on New Year’ holidays. What is your prediction, what could be theconsequences of the current situation? - This is not a fluctuation, it means that GEL is gradually depreciating. This means that investors have lost confidence in the national currency and a demand for the national currency has increased on thelocal market. - How dangerous is it? - This is a very undesirable and bad phenomenon. The important thing is how long this process will last. It is very important to know national bank’s actions, whether or not it takes part in the trade. If the National Bank takes part in trading, imple-

ments transactions to stabilize fluctuations , and despite this, such an increase is still happening , it’s a very bad trend. If the National Bank does not intervene, then this can be attributed to a seasonal factor. As for the fact the Finance Minister was talking about, I mean ademand for imports, it was in November. Now, on the contrary , an increase in local consumption is being observed. Accordingly, in December a demand for GEL should increase. Given this, we’ll find out whether this is a seasonal change or the fundamental economic problem. - Whether should we wait for revision of the prices of imported products? - This will be reflected, the change is usually time consuming. But it will definitely happen. It will be reflected on the locally produced goods because most of the local products are made of foreign raw materials.

ARDI NAMES STATE SECTOR WORKERS AS THE MOST IRRESPONSIBLE DRIVERS

he most undisciplined drivers in Georgia work in government agencies , the most disciplined - in private business - such conclusions were made by the insurance company “ Ardi “ on the basis of statistical data for the past 3 years. Experience in the past three years has shown that state cars get in an accident most often, and often the reason is carelessness and negligence of drivers. At the same time annual risk in private business does not exceed 18% , and the most decent drivers are just in this sector. “In private business the risk of job loss is always greater, so drivers behave on the road more decently and they have less cases of damage to cars. Individuals who are afraid to damage their cars are relatively disciplined as well, “ - Director of Retail Sales of “Ardi “ Giorgi Lomidze says. “Ardi “ offers 4

types of auto insurance to consumers. The first policy - “economy” is characterized by a low rate (3, 9 %) - the lowest rate in the insurance market in Georgia. At the same time services provided under this policy do not differ from that offered by other companies having a significantly higher rate . Policy “Standard” is designed for law-abiding drivers and also focused on the lowest rate . It also includes insurance against all types of disasters, including earthquakes and hail. Policy “Extra” is an innovative product on the market that provides almost services on everything that can happen to a driver. Polis “Absolute” - the most comfortable kind of auto insurance in the Georgian market, which does not include unpaid minimum and provides compensation for the risks related to force majeure.

SALES OF PHARMACEUTICAL COMPANIES GREW BY 12-20 % 2013 was successful for the largest pharmacy chains. “PSP” founder states “Commersant “ that the sales rate exceeded the scheduled in the beginning of the year and about 20 % growth was observed. According to Kakha Okriashvili, the export growth was within 20 % in 2013. The businessman considers equating of certain services in “PSP” hospitals to European standards a signifi-

cant event. 2013 was a successful year for another largest pharmaceutical chain “GPC” . Director of the company says that the sales rate increased by about 12%. David Kiladze names the so-called economy - packaging project initiated by “GPC” that envisages tablet sales as a result of which the cost of the medications fell by 20-30 % the most important event of the year.

NOVEMBER RECORDS GROWTH IN OIL PRODUCTS IMPORTS

nion of OilProducs Importers reports that import of oil products (petroleum and diesel) in Georgia equaled to 82,3 thousand tons, which is 10,5 thousand tons more than in October. Among them, petroleum import equaled to 40,0 thousand tons, diesel import 42,3 thousand tons. In 11 months of the current year oil products (petroleum and diesel) import to Georgia equals to 750,9 thousand tons, which is 2,3% less than in the same period last year (767,9 thousand tons). According to countries, in 2013 highest amount of diesel and petroleum was imported from Romania - 259 thousand tons (among them, petroleum - 197,2 thousand tons and diesel 0 61,8 thousand tons), which is 34,5% of the total import. Than follows Azerbaijan - 193,3 thousand tons (among them 22,7 thousand tons of petroleum and 170,6 tons of diesel) - 25,7%; Bulgaria - 121,9 thousand tons (among them 88,9 tons of petroleum

and 33,0 tons of diesel) - 16,2%; Russia - 105,9 thousand tons (only diesel) - 14,1%. In the same period, highest amount of petroleum import according to countries was made from Romania, then follows Bulgaria, Azerbaijan, Italy, Greece. As for import according to fuel categories: in November 73% of the imported fuel to Georgia was A-91 regular petroleum, 25% - premium petroleum; 2% - Super petroleum. 69% of the diesel import comes on L-62 diesel; 31% - Euro diesel. Meanwhile, during 11 months of the current year 66,7 thousand tons oil oil bitumen was imported to Georgia, great part of which - 98,9% was imported from Iran. In January-November 2013 Jet import equaled to 78,8 thousand tons, among them major part 71,7% was made from Azerbaijan, then follows Turkmenistan (17,6%), Israel (7,5%), Greece (3%). Import of lubricants equaled to 13,6 thousand tons.

BUSINESS caucasian business week

THIRD QUARTER RECORDS 42% GROWTH IN HOTELS TURNOVER

urnover of private enterprises increased by 826 million GEL [8.4%] in the third quarter of 2013 compared to the second quarter and made 10 billion 676 million

GEL. The highest turnover, as always, was in the field of trade and repair of household items, which increased by 7.8% compared with the second quarter and reached 5 billion 577 million GEL. A 14.7% growth was observed in the processing industry (1 billion 597 million GEL) , a 15.6 % - growth in the transport and communication ( 1 billion 270 million GEL) . According to the growth, leads the hotel sector, which turnover increased by GEL 84 million [41.6 %] compared to the second quarter , a decline is registered in the fishing where turnover reduced by 31.6 % to 3.5 million GEL. A turnover in the education sector decreased by 28.2 % (39 million) , while in the mining industry – by 19.4 % (64 million).

NEGOTIATIONS ON ENTRANCE OF THE FOREIGN PHARMACEUTICAL COMPANIES ON GEORGIAN MARKET ARE ALMOST OVER

egotiations on entrance of the foreign pharmaceutical companies on Georgian market are almost over. As Minister of Healthcare David Sergeenko stated before government session, entrance of the foreign companies depends on enact of the medicines quality control system. “Now it depends on us how effectively we manage to enact quality control system to open market and these companies enter. The case deals to the pharmaceutical companies of Great Britain, Germany, Hungary and Israel”, - David Sergeenko stated. Reminding that Minister of Healthcare considers that due to absence or imperfect existence of medicines quality control, local pharmaceutical products are oppressed. After the quality of locally produced medicines are affirmed or rejected, they will be able to participate in the state procurements. The government plans to cover whole chain of medicines quality control, which means quality control from the moment of crossing border until the patient gets it.

VARTSIKHE GOES FOR 2.01 MILLION GE

he government sold the company Vartsikhe for 670 thousand more than starting price. The Dugladzes Wine Company bought the company. 100% share of the Alcohol drinks producer company was sold on auction for 2 010 000GEL. 2 candidates wanted to purchase the company, during strained competition 67 bids were made on the auction. Creditor debt of the enterprise (By November 22, 2013) is 269 989 GEL, capital - 1 317 800 GEL, data of tax comparison act (by October 21, 2013) - remaining - 20.626.71 GEL, fine - 40 305.36 GEL. According to conditions, the buyer should maintain enterprise profile during next 25 years. Meanwhile, in 24 months after the purchase they should invest at least 1 million GEL for it development. The company owns an enterprise, lands and buildings in Bagdati municipality.

December 16, 2013 #34

Comenius Ltd:

THE FIRST HOSPITALITY SERVICE COMPANY ON THE GEORGIAN MARKET

omenius is a hospitality service company and has an extensive proven track record in a number of Central and East European countries including the Czech Republic, Russia, Kazakhstan, Slovakia, Poland, Turkey, Croatia and also Georgia. FOUNDER AND CEO DICK R. BLIEK Born in the Netherlands and based in the Czech Republic. Dick Bliek worked for more than ten years in the photography business before switching his interest completely and starting his own private travel agency and, within two years opening his own two hotels in Czech Republic. During that time, he discovered his fascination for hospitality industry. In the 90 ‘s, he established Comenius Ltd, a hospitality consultancy company advising and operating prestigious hotels in Prague, Warsaw, Budapest, Ostrava, Bielsko Biala, Sochi, Moscow, Bratislava and, last but not least, a group of 11 hotels with over 1000 rooms + 25 F&B outlets in Croatia. In 2008 Dick Bliek started with his hospitality seminars “Spirit of Communication” and “The Quality Hotel Lab” and since then he has trained over 1500 managers and other hospitality employees in twelve different countries. Comenius combines forces with qualified and successful international partners in order to secure the best possible solutions for their hospitality clients. Comenius is offering the following services: HOSPITALITY CONSULTANCY Comenius is focused on privat owned hotels, identifying efficient operations, streamline the sales, advising on the correct approach to guests and implementing quality assurance, all with the aim of increasing revenue and profitability. Very often private business owners believe that the hotels of the big chains are running their big businesses with smooth operations, a lot of staff and a lot of brand attention and the small players are possibly intimidated! Private hotels don’t have the same marketing budget or the same reach, and it’s harder for them to market the business and to compete in hospitality. Also it will be far too expensive for them to hire a big consultancy company in the case that they need professional advice. But, private business owners have a lot of advantages that the big chains can’t compete with. They have the ability to do much better simply by focusing on the strengths that comes with being private! Comenius Ltd offers tailor - made hotel consultancy for private owned hotels. They have been working in this market for more than 20 years and are aware of the challenges and the pitfalls. Moreover, we are affordable for hotels of this size and we can help the hotel owner to define the best strategy for his property and assist in the design and implementation of a complete business plan. HOTEL MANAGEMENT A hotel management agreement is a form of cooperation between an owner/investor and a hotel operating company. The hotel owner pays a management fee to the hotel operator for management services and, in return, the owner transfers the full responsibility of the daily operations of the property to the operator. The operator offers a range of hotel management capabilities which include branding the properties, expertise in sales and marketing, cost efficiency etc. A contract term is usually stipulated in the agreement and a fee structure is agreed upon by both parties. Comenius Ltd believes that only those hotels which enjoy professional management will be able to survive at high level of profitability in the hospitality market of the future. The bottom line for owners is increased occupancy and higher room revenues with lower operation costs - in short, greater profits. Our goal is a win-win situation in which the owner’s needs are balanced with the management company Comenius’s desire to expand.

DICK R. BLIEK

HOTEL INTERIM MANAGEMENT There are several situations for hotel owners where Interim Management could be the perfect solution: • In case of underdeveloped properties, the bank (being owner) or hotel owner can decide to opt for interim management (before selling the asset) to bring the property back to a positive bottom line and increase asset value. • In case of the temporary/longer term unavailability of the managing owner. • In case the owner is looking for a “total rebranding model” where the specialized interim management consultants will oversee the total hotel concept, the marketing approach, the daily operations and staff performance for a limited period of time. PROJECT MANAGEMENT (turn key projects) Private investors without experience in the hotel business are inviting Comenius for managing the entire hotel development. These turn-key project includes the total overview of construction, architectural design, interior design, procurement, staff selection, staff training, implementing of standards & procedures, pre-opening, sales & marketing actions and grand-opening. Comenius will/can operate the hotel for minimum three months till one year and after will hand over the key and operational responsibility to the owner/ investor. PROCUREMENT Comenius is the exclusive partner for Georgia of the best worldwide procurement company, PiD. Whether you are a hotel owner, hotel investor, an interior designer, an architect or procurement professional, Comenius can assist you in meeting the individual requirements of your project. PiD have a proven track record as the best “one-stop” supplier of FF&E (furniture and equipment) and OS&E (small hotel items) for the hotel Industry. Also Mariott, Hyatt, Fairmont, Mamaison, Kempinsky, Nato, Marks & Spencer and many privat hotel owners found their way to PiD! PiD is offering two concepts: Design & Procure (a unique turnkey method in which the design and procurement services are delivered by PiD) and Procurement service only (fulfilling all the clients sourcing and procurement requirements). Design & Procure. How does it work? 1) Developer/investor appoints PiD to design and procure all FF&E and OS&E for their hotel project for a fixed price. 2) After the “concept brief meeting”, PiD will take care of a full interior design package. 3) Once the design is completed and signed off by the client, PiD will proceed to build a free mock-up room. 4) Once the mock-up room is signed off by the client, PiD will proceed with the production In fact PiD is responsible for all aspects of the design and supply chain network with fixed costs, dates and deliveries. As a result the developer/investor has only one

contact to discuss design and deliveries and this will minimize the risk for the project owner and it will reduce the delivery schedule by overlapping the design phase and the procurement phase. It also leads to considerable cost savings for a client to combine the two most important deliverables. This unique combination of Design & Procure has the following advantages: - Free interior design project - Free mock-up room(s) - Free technical, operational and functionality advise from the PiD hospitality experts - Substantial cost savings (often achieving over 20%) - Substantial time savings (often 33.5% faster!) - Guaranteed price before the start of the design - Guaranteed delivery dates before the start of the design - Implementation of PiD stringent QA/QC policy & procedures - All manufactures comply to ISO9001 or ISO14001 - Reduced contractual disagreements - Considerable reduction of consultants/procurement agent fees TRAINING & SEMINARS Frequent staff training in the hospitality industry is a must because of the continuous evolution in the hotel business. The behavior and expectations of today’s guest have completely changed and each guest has his own preferences, demands, and characteristics. The challenge for hotels is to understand these requirements and to act upon them. What hotel owners have to achieve is to get everybody in the organization to understand how they can meet the needs of the future guests. Hotels should develop a model of “service variety” and revitalize their operations. To achieve this: “hotels should train their staff”! The big hotel chains do organize regular trainings for their employees in order to secure the best possible service for their guests. Smaller organizations do not have those possibilities or hotel owners are still not aware of the necessity. Comenius Ltd offers the possibility for smaller organizations to have their teams trained. All Comenius seminars are interactive and take one full day. In a relaxed atmosphere, all participants are part of the presentation and are challenged to express themselves. The goal of the seminar is to install enthusiasm into the participants, to improve communication, to develop teamwork, to provoke the right mind-set, to give them confidence, to stimulate them and to give them a different view on the job they do. At the end of the day they will understand that there is a big difference between “good” and “excellent” and that hotels offering excellent service will be not only a more pleasant place to work but also far more successful than before. Contact Comenius CEO Dick R. Bliek Phone: 00420 736750170 Mail: info@comenius-ltd.com Web: www.comenius-ltd.com

BUSINESS December 16, 2013 #34

caucasian business week

GEORGIAN BUSINESS EVALUATES GOVERNMENT’S ACTIVITY IN 2013

usinessmen speak about the government’s main achievements in 2013 in a conversation with “Commersant”. Director General of the canning factory “Kula” explains that that it is difficult to remember the specific initiatives in this or that sector , but the most important thing that has been done , is a release from the pressure and fear. No one interferes in the business and it is able to develop. Vano Goglidze says that it will be good if the government thinks of the promotion of

agriculture and industry, sets preferential tariffs for gas and water. In his words, the government should also encourage businesses to find new markets. “Margebeli Tskali” [Healthy Water] founder says that the government has increased a fee for “Borjomi” and “Nabeglavi” causing a rise in price of the product, and this step cannot be evaluated positively. ZazaSvimonishvili adds that the rapprochement with the EU was a positive development that encouragesexport-oriented companies and helps them to reach new markets.

RETAIL TRADE SECTOR FACES UNCONTROLLED SITUATION IN REGIONS

n contrast to the capital , in the regions of Georgia, the situation with the retail trade remains virtually unregulated - producers operating in the regions state “Commersant”. According to them, unaccounted goods take 80-90 % of the market, which creates great problems for local producers who cannot compete with cheaper imported goods. “This harms those who trade in compliance with all regulations. We are in unfair competition because someone sells «left” products “- say entre-

preneurs. In addition, there is a problem of artisanal production, as well as the lack of cash registers in many shopping sites. “It’s profitable to sell unaccounted goods in the shops – you have not to pay VAT, and this makes it possible to reduce prices, “ - say businessmen. However, they say that in some regions , artisanal and illegal enterprises play the lottery , without having the proper authorization , while a legal lottery license costs 15 000 GEL.

GEORGIAN-HUNGARIAN BUSINESS FORUM WAS HELD IN BUDAPEST

rimary session of joint intergovernmental session of Georgian-Hungarian economic cooperation and Georgian-Hungarian business forum was held in Budapest. National Investment Agency of Georgia releases this information. Hungarian and Georgian Chambers of Commerce, Hungarian Investments and Trade Agency (HITA) and National Investment Agency of Georgia are forum organizers. In the framework of Primary session of joint

SEED BREEDERS ASSOCIATION OF GEORGIA TALKS ABOUT THE LACK OF POTATO

ue to unfavorable weather conditions in Georgia, Seed Breeders Association talks about the deficit of potato. According to the Association, a wholesale price has nearly doubled from September in Samtskhe – Javakheti region which is the main potato growing area and reached 1.20 GEL per one kg. They say that a low crop was harvested in the neighboring countries, including Turkey and Iran: many people who want to buy potatoes arrive from Azerbaijan, but there is not enough potatoe

2013 WAS AN UNPRECEDENTED YEAR FOR GEORGIAN TOURISM

he number of visitors amounted to 5 million this year The National Tourism Administration sums up a work performed in 2013 in a conversation with “Com-

mersant”. Advisor to the Chairman of the Administration Siko Gegiadze states that this year was very important for the development of Georgia’s image as a country of tourism. The number of visitors amounted to 5 million this year that is unprecedented for the country.

According to Gegiadze , the number of tourists increased by 57 % compared with last year. Tourists from Russia, Ukraine and the Baltic states were especially active this year. In their words, the winter tourist season is going well in terms of tourists inflow, Gudauri and Bakuriani resorts are working at almost 100 % capacity and the National Tourism Administration is currently working on the popularization of Mestia resort. Next year, the Tourism Administration expects 6 million tourists in the country.

intergovernmental session of Georgian-Hungarian economic cooperation National Investment Agency of Georgia and Hungarian Investment and Trade Agency sighed memorandum of understanding. The memorandum provides enhancement of economic relations between two countries, arrangement of various business activities and investment forums and experience sharing on investment projects. Representatives of Hungarian government, also private companies from various sectors participated in the business forum from Hungarian side.

in the region. Another reason for the lack is a strict phytosanitary border control, resulting in a smaller number of vegetables imported in the country. For example, a month ago, 500 tons of diseased potatoes exported from Armenia were returned back. According to “Sakstat” data, potato imports decreased 5 times compared with last year and made 1 million 137 thousand USD in January - October. However, some farmers welcome the stricter food safety policy of the Georgian government and say that it was difficult for them to compete with cheap imports.

“ALGORITHM” SALES REDUCED BY 60 %, THE COMPANY CLOSED 4 STORES

he development of digital technology has led to a reduction in demand for personal computers and notebooks. “Algorithm” Director states “Commersant”. According to Giorgi Korokhashvili, products sales decreased by 60 % compared with last year. The management explains this fact by the tendency of transition to the tablets, on the one hand, and on the other hand, by the political changes taking place in the country during the year .

“Algorithm” Director says that they had to close 4 stores due to a decline in sales. The onlymanufacturer of computer hardware in the South Caucasus “Algorithm” is currently represented by twoshops on the market.

BUSINESS December 16, 2013 #34

caucasian business week

AIRZENA TO LAUNCH FLIGHTS TO SOCHI DUE TO HIGH DEMAND

he airline “Georgian Airways” ( “Airzena “) launches flights in Tbilisi - Sochi direction due to high demand . According to “Airzena” Director-General Iase Zautashvili,

a number of people wishing to go to the Sochi Olympics is growing every day which is why the company has made such a decision. Zautashvili explains that the biggest demand is observed from athletes who will go to Sochi, for example from the Netherlands . “ Given that there are no direct flights from the Netherlands to Sochi, the athletes will get to Sochi from Europe by charter flight , “ - Zautashvili says. According to him, the people who are willing to travel to Moscow will also use the flight. Zautashvili notes that the company will perform flights to Sochi from February 4 till May. Recall that he first flight from the capital will be performed on February 4, 2014. The flights will be performed on Tuesdays and Thursdays . In accordance with the written schedule, flight from Tbilisi International Airport will be performed at 10 AM and from Sochi at 12 AM the same day. The flight duration is 1 hour. One way ticket costs 159 Euro.

NATIONAL WINE AGENCY DIRECTOR EXPECTS HIKE IN WINE PRICES AFTER INCREASED DEMAND FOR GEORGIAN WINES “We do not Have the Opportunity to Influence Prices”

he National Wine Agency is not going to interfere with the companies’ decisions on the expected price hike. As Director of the Agency states “Commersant ‘’ , they do not have the opportunity to influence legislation . Levan Davitashvili says that the market will regulate situation and companies will continue to increase prices until the market allows this. Davitashvili explains a decision on wine price increase by the increasing demand for wine but notes that up to 80 manufacturers are operating in the market, including those who will meet the market demand with a relatively lower price. ”Georgian Wine House’’ and “ Schuchmann Wines “ have already announced about price hike for Georgian wine on the domestic and international market since 2014.

LOYAL CAPITAL PROPERTY HAS BEEN DECLARED BANKRUPT

he company, which had to build Park Hayat on the place of Restaurant Aragvi, Tbilisi, appealed court to start insolvency case on June 7, 2013. Creditors also supported bankruptcy of Loyal Capital bankruptcy, debt to which equaled to 11 157 836 GEL. Company creditors were foreign companies, namely: Boulevard International Incs and Projectwid Ventures, Languor Managements. Because company creditors have not appealed to

court, the court decided: to declare Loyal Capital Property bankrupt and cancel registration in the Business Registry. As representative of Loyal Capital Properties Mindia Gadaev stated to GBC in July, decision on the closure of the company was made because of suspension of the hotel Park Hayat construction project. What project will be implemented instead of Park Hayat, Gadaev can’t specify. It’s likely that trade center will be built on the place of the restaurant Aragvi.

BUSINESSMEN WERE ARRESTED FOR COUNTERFEITED ADIDAS

nvestigation service officers of the Ministry of Finance of Georgia accused following citizens for criminal charges for illegal usage of the trademark of the great amount: Polikarpe Arveladze, Avtandil Okropiridze and Eduard Akofov. The investigation revealed that these citizens, with preliminary agreement, in group hand-made and sold great number of sport clothes with Adidas trademark, without official producer authorization, in the garment factory near Mtskheta. Investigation is going based on the part 3 of the article 196, Criminal Code, which considers imprisonment from 3 to 5 years.

OLD TIFLIS HOTEL OPENS IN TBILISI

bilisi city hall informs that OLD TIFLIS is another construction investment of Georgian-Kazakh Company Tiflis Development, made by investor in Tbilisi. It’s located on the right bank of the river Mtkvari. 17-room, boutique-type hotel corresponds to old Tbilisi architecture and fully meets international

standards. 15 persons are employed in the hotel, which have had special raining course. Hotel service in the historical district of the capital is intended for foreign tourists, also high-rank guests. Tbilisi mayor visited newly opened hotel on Monday.

SUBWAY CARRIAGE MODERNIZATION TENDER FAILED

bilisi city hall had announced tender of 8,5 million GEL value for modernization of subway carriages and traction engines, although no one companies participated in the tender. The city gall plans to modernize 14 units of head and interim carriages, also 14 traction engines. The winner company had to modernize the carriages till December 31, 2013 with the following schedule: 2 units - 1 head, 1 interim - no later that

31.05.2014, 4 units - 2 heads and 2 interim - no alter than 31.08.2014; 4 units - 2 head and 2 interim - no later than 30.11.2014; 4 units - 2 heads and 2 interim - no later than 31.12.2014; 14 traction engines - no later than 31.12.2014. It’s noteworthy than in 2012 and 2013 company “Tbilisi Branch of Train Repair Factory” modernized carriage modernization In both cases the company signed contracts of 8,99 million and 8,99 million GEL value.

GEORGIAN EXPORTERS OF NUTS NOT INTERESTED IN RUSSIAN MARKET

eorgian producers of nuts do not intend to use the possibility of direct and unhindered access to the Russian market and prefer to get into Russia as before – by round-

about ways. Representatives of nut companies explain to “Commersant” that direct export to Russia is subject to 20% customs duty , whereas in Europe - 0% .Accordingly, it’s much more profitable for exporters to sell nuts in Europe and in Russia through Kazakhstan and Belarus which, as members of the Customs Union [CU], have privileges for export to Russia. “The European market for us is much more beneficial. Why should we pay a customs duty of 20 % if we can export the products without any

fees? Also in Europe, the purchase price is higher than in Russia, “ - state exporters. It should be noted that the nuts are on the list of Georgian goods that may be exported to the EU duty-free under GSP + trade regime signed in 2006 in the framework of the European Neighborhood program.

RUSSIAN EXPERTS EXAMINED GEORGIAN CITRUS FRUITS FOR EXPORT

osselkhoznadzor” experts have completed their visit to Georgia. According to the Ministry of Agriculture of Adjara Autonomous Republic, the main goal of the visit of Russian experts was to check citruses and to issue a relevant act. Zaur Putkaradze says that in Iran and Turkey citrus fruits are infected with pest, so one of the reasons for the experts’ arrival was checking the quality of the Georgian citrus . In his words, Georgian citrus are not infected and experts have not blocked any exporting party.

“Rosselkhoznadzor” experts will return to Russia today, while Georgian specialists will continue toexamine citrus fruits batches.

CAUCASUS AUTO IMPORT EXPECTS NO PROBLEMS FROM ARMENIA’S MERGER WITH CUSTOM’S UNION

hether Armenia’s entry into the Customs Union of Russia - Kazakhstan - Belarus will create problems for Georgian company engaged in the

re-export? As we reported, the used-car importer “ IA Motors” expects a negative impact on sales and a heavy blow from Armenia’s joining the Customs Union. However, the biggest importer of used cars «Caucasus Auto Import” says that car business engaged in the re-export will not suffer as a result of Armenia’s joining the Customs Union.

They say that the entry into the Customs Union does not involve customs rules change and this process will last about 2 years. According to the company, during this period a rate of vehicles selling to Armenia by re - exporter companies will might considerably increase, possibly 10 times , because Armenia will take care of supplying vehicles after entering the Customs Union in order to export them to Russia. “Caucasus Auto Import” notes that 20 % of the imported used cars are exported to Armenia and before it enters the Customs Union, the alternative markets will emerge and re - exports will not suffer.

BANKING & INVESTMENT December 16, 2013 #34

caucasian business week

NOVEMBER RECORDS TBC BANK AS LEADER ON INDIVIDUAL DEPOSITS MARKET

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SC TBC Bank remained a leader on the individuals’ deposit market in November. The bank informs that by December 1, 2013 market share of TBC Bank equaled to 32,4% (Q3 - 32,3; Q2 - 33,3%).

For the reporting period individuals deposit portfolio is 1,469 billion GEL (Q3 - 1,426 billion; Q2 - 1,42 billion GEL). Total portfolio of TBC Bank’s clients is 2,527 billion GEL (Q3 - 2,5 billion, Q2 - 2,464 billion GEL).

INVEST BANK COMPLETED 11 MONTHS WITH LOSS SC Invest bank completed 11 months 2013 with 2,6 million GEL loss (Q3 - 1,9 million, Q2 - 0,8 million GEL). By December 1 deposits (without banks’ deposits) equal to 9,4 million GEL (Q3 11,8 million; Q2 - 8,2 million GEL). Overall obligations equal to 12,5 million GEL (Q3 - 29,8 million; Q2 - 17,8 million GEL). Bank’s actives are 24,9 million GEL (Q3 - 30,9 million; Q2 - 31,9 million GEL), market share - 0,2%. NBG temporary administration is in the bank. On November 1, entrance of NBG in the

bank with 2-months term is related to failure to meet supervisory capital requirement. Coefficient is 11,826% and respectively is a little behind (12%). Invest Bank operates since 2003. As a result of the changes in the stockholders’ structure this year, 70% of the bank’s stocks belong to Legal Company Dimitri Alexidze and Vladimer Gabrielashvili, 30% - to TRENDFOR HOLDING LTD. By December 1 Stock capital of the bank is 12,4 million GEL (Q3 - 15,3 million GEL).

LIBERTY BANK INTRODUCES 13% INTEREST RATE DEPOSIT AS PART OF NEW YEAR PROMO CAMPAIGN

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ne year Deposits made till January 13 will get Annual rate of 13%. Deposit is made from 100 GEL. Standard rate for 1-year deposit is 12% (6,5% in USD), for 2-year

deposit - 12,5% (7,5% in USD). Liberty Bank has 3 kinds of fixed-term deposit: fixed-term, M7 and deposit Positive. Annual rate of M7 is changeable and equals to maximal rate on 12-months deposits of the 7 largest banks +0.1%.

BASIS BANK COMPLETED 11 MONTHS WITH 8,7 MILLION GEL PROFIT SC Basis Bank completed 11 months 2013 with 8,7 million GEL net profit (Q3 - 6,5 million; Q2 - 4,34 million, Q1 - 3,348 million GEL). By December 1, deposit portfolio of Basis Bank (without banks’ deposits) is 217,5 million GEL (Q3 - 179,2 million, Q2 - 183 million; Q1 - 117 million GEL), loans - 179 million GEL (Q3 - 166 million; Q2 141,4 million GEL; Q1 - 114 million GEL).

Overall obligations equal to 284,3 million GEL (Q3 - 240 million; Q2 - 237 million; Q1 - 162 million GEL); Bank’s actives are 395 million GEL (Q3 - 348 million GEL). Main stockholder (95,6%) of Basis Bank is Chinese Hualing Group. Stock capital is 110,4 million GEL (Q3 - 108,2 million; Q2 - 106 million; Q1 - 56 million GEL).

10 TURKEY’S SHARE IN TANAP CAN BE INCREASED: SOCAR

urkey’s share in the Trans-Anatolian gas pipeline (TANAP) project can be increased in future, head of Azerbaijan’s state energy company SOCAR Rovnag Abdullayev told journalists on December 10. “Currently the issue is being discussed,” he explained. Turkey owns a 20-percent share in the project, while the rest of the shares belong to Azerbaijan. Abdullayev said Ankara’s share may be increased through the shares previously offered to Statoil and Total. The TANAP project, jointly developed by Azerbaijan’s SOCAR, Turkish state pipeline company Botas, and energy company TPAO, will deliver gas from Azerbaijan’s giant Shah Deniz field to the Turkish-Greek border via eastern Turkey. The initial capacity of the pipeline will be 16 billion cubic meters of gas a year. TANAP will connect to the Trans Adriatic Pipeline (TAP) on the Turkish-Greek border. Azerbaijani state energy company SOCAR has started choosing a location for the construction of TANAP. The process is done in collaboration with the Turkish Botas Company specialists. Abdullayev also noted that SOCAR plans to sign 39 documents in regards to the second phase of Shah Deniz gas condensate field’s development plan on December 17. He said the specialists of partner companies are concluding the process of preparing necessary documents. Two offshore platforms will be installed and more than 20 underwater wells will be drilled in order to produce an additional 16 billion cubic meters of gas per year as part of the Shah Deniz-2 project. According to forecasts, gas production can be brought up to 24 billion cubic meters per year as part of the second phase of the development project. The gas condensate reserves of the Shah Deniz field are estimated at 1.2 trillion cubic meters.

AZERBAIJAN COMPLETES RENOVATION OF RAILWAY WITHIN BTK PROJECT

zerbaijan Railways JSC has finished work on the modernization and renovation of the 317 km Baku-Boyuk Kesik section under the Baku-Tbilisi-Kars railway project in accordance with the schedule. Complete overhaul of the Baku-Boyuk Kesik section was implemented under the State Program on development of the railway system in Azerbaijan for 2010-2014 out of proceeds of credit of $215 million allocated by the Czech Exim Bank. Specialized railway departments of “Demiryolservis” JSC participated in the renovation work, which started from 97 kilometer of Agstafachay - Tatli railway section on June 10, 2011. Moreover, reconstruction work will be carried out on the Akhalkalaki-Tbilisi-Marabda railway in Georgia, which will increase its capacity to 15 million tons of cargo per year. It is envisioned to build a center in Akhalkalaki for the transition of trains from the existing train tracks in Georgia to the European ones. The Baku-Tbilisi-Kars railway is being built in accordance with an inter-governmental agreement reached by Azerbaijan, Georgia and Turkey. The railway will increase the flow of containers and other types of cargo from Asia to Europe. Azerbaijan has allocated a $775 million loan for the construction of the Georgian section of the railway. Funding for the project from Azerbaijan’s State Oil Fund is carried out in accordance with the 2007 presidential decree on taking measures within the Baku-Tbilisi-Kars railway project. Around 30 million tons of cargo a year are to be transported via the Baku-Tbilisi-Kars railway line, which will become a direct route to the European rail network.

AZERBAIJAN caucasian business week

December 16, 2013 #34

SAUDI ARABIAN FIRMS INVEST $368 MILLION IN AZERBAIJAN’S ECONOMY

zerbaijani and Saudi Arabian businessmen came together for a joint business forum in Baku on December 10. The forum aimed at exploring new areas of cooperation. Head of Saudi Arabian General Investment Authority Abdullatif Al Othman and Azerbaijani Minister of Economy and Industry Shahin Mustafayev, as well as the government representatives and heads of leading companies from both countries attended the event. Addressing the forum, Al Othman said Saudi Arabia is ready to invest in Azerbaijan’s petrochemical and refining industry. He also said that Azerbaijan is an economically developed country and there is high potential for the expansion of cooperation in many spheres including tourism and socially oriented projects. Al Othman further said that all the sectors of Azerbaijan’s economy are attractive for Saudi entrepreneurs and stressed that holding such business forums greatly contribute to the expansion

of bilateral relations. “Our delegation includes representatives of both the public and private sectors. We should not confine ourselves only to economic relations. Today we are bound by ties in the sphere of religion, education and many others. Therefore we also intend to develop relations in the social sphere,” Al Othman said. The Saudi official also said that the two countries’ trade turnover is currently not so high. However, he believes that Saudi Arabia is determined to bring the figure to the level of the potential of the two countries. Azerbaijani Minister of Economy and Industry Mustafayev, for his part, said that Baku and Riyadh plan to sign an agreement on the avoidance of double taxation on income and property, and tax evasion. Mustafayev said the two sides have agreed on the details and the documents are ready to be signed. “Today, Azerbaijan and Saudi Arabia are closely cooperating in international organizations. Trade relations play an important role in the development of bilateral relations between the two countries,” Mustafayev said, adding that the bilateral trade of Baku and Riyadh has been on the rise in the first 10 months of 2013. He said that six companies from Saudi Arabia carry out investment activities in Azerbaijan in the insurance, banking, industry, and services sectors. The Azerbaijani official also said the total vol-

ume of investments made by these companies in Azerbaijan’s economy amounts to $368 million. “Currently there is a great potential for expansion of relations in the sphere of trade and investments, and the business forum held in Baku creates a good opportunity for materializing the goal,” Mustafayev said. He said the intergovernmental commission plays an important role in the development of bilateral relations. The official also added that during the third meeting of the intergovernmental commission to be held on December 11 in Baku, the two sides are expected to sign a protocol that envisages the development of cooperation in the spheres of economy, trade, energy, banking , agriculture, tourism, construction, and healthcare. Mustafayev also said that the total volume of investments in Azerbaijan’s economy exceeds $156 billion. He said around a half of the investments are made by foreign countries. Mustafayev went on to say that the private sector’s share in Azerbaijan’s GDP is 85 percent. He also said in general, Azerbaijan’s GDP has increased 3.4 times, while GDP per capita has grown threefold in the last 10 years. He also said the state budget revenues for the mentioned period have increased by 19 times and the foreign trade turnover has increased nine-fold in the past decade. “The poverty level declined eight times, reaching 5.5 percent in the past 10 years,” the minister said. “Currently Azerbaijan’s economy accounts for more than 70 percent of the entire economy of the South Caucasus,” he said. “The country continues diversifying the economy and the bulk of the gross domestic product is generated in the non-oil sector,” Mustafayev said. He also said the country’s external debt is only 8.3 percent of the GDP, while strategic currency reserves exceed an external debt up to ten times.

AZERBAIJAN, KAZAKHSTAN SEEK TO BOOST ENERGY CO-OP

NATIG ALIYEV

zerbaijan and Kazakhstan plan to expand bilateral relations especially in the energy field, Azerbaijani Energy Minister Natig Aliyev said on December 10. He made the remarks after a meeting of the Azerbaijan-Kazakhstan intergovernmental commission on economic cooperation. “We discussed the development of cooperation which literally covers all spheres. The economic and trade relations between our countries also demonstrate growth. The bilateral trade turnover grew by 42 percent in a year despite observed negative dynamics resulted from the global economic crisis in 2012,” Aliyev said. “Energy is one of the important fields of cooperation between Kazakhstan and Azerbaijan,” the minister highlighted. “As is known, the Kazakh oil is transported via Baku-Tbilisi-Ceyhan (BTC) pipeline. The heads of the two countries pursue a correlated energy policy. No energy project in the Caspian Sea region is implemented without participation of our countries. We actively work on the development of interactions in the energy sphere. Azerbaijan is looking forward to the commissioning of the largest Kazakh field Kashagan. It will be possible to deliver the product of the field to world markets via BTC and other Azerbaijani pipelines,” Aliyev said. The official went on to note that Azerbaijan and Kazakhstan also intend to take measures for the

development of cooperation in the fields of culture and tourism. “Furthermore, there is also a great potential for the development of Azerbaijani-Kazakh relations in tourism,” he explained. Kazakhstan’s Deputy Oil and Gas Minister Magzum Mirzagaliyev, for his part, said that the current level of trade turnover between Azerbaijan and Kazakhstan does not meet the two countries’ potential. “Today, the trade turnover between our countries amounts to $360 million. It is obvious that given the potential of both Azerbaijan and Kazakhstan the figure should rise,” he said. The Kazakh official further named the engineering industry as a promising field for cooperation. “We are ready to work in this direction and assist the export of Azerbaijani products to the Kazakh markets,” Mirzagaliyev said. He also said establishment of new production facilities in Kazakhstan is another priority for cooperation. “If Azerbaijani enterprises come to Kazakhstan and establish joint ventures, I am sure the joint ventures will enjoy big support from not only both governments, but also oil and gas companies,” he said. He further urged the two countries to facilitate the situation for increasing the number of such enterprises. Mirzagaliyev went on to note that the construction of a large logistics center in Kazakhstan’s Aktau city is also being discussed. “This center will import the agricultural goods to Kazakhstan and further distribute them in the domestic markets of the country. We should work on such projects both in Kazakhstan and Azerbaijan. The Kazakh delegation has held meetings with the representatives of Azerbaijan’s Ministry of Economy and Industry. During the meeting it was noted that the complex will come on stream in a year and half,” he said. A memorandum of understanding on the construction of logistics center in the Mangistau region of Kazakhstan was signed between Azersun Holding, Azerbaijan Export and Investment

Promotion Foundation (AZPROMO), and JSC Special Economic Zone ‘Seaport Aktau’ in Baku on August 14. Mirzagaliyev also said the volume of Kazakh oil delivered to Azerbaijan is estimated to reach 3 million tons in 2013. “There is potential for further increase of delivery. In particular, Tengizchevroil Company (TCO) announced that it has started discharging oil to the Baku-Tbilisi-Ceyhan pipeline,” he said. The Kazakh official also noted that there are all conditions for increasing the discharge of oil to Baku-Tbilisi-Ceyhan to four million tons in 2014. “This year TCO has already discharged 200,000 tons of oil. Next year, as we expect, this figure will significantly grow,” he said. Earlier, Head of the Investment Department of the Azerbaijani Energy Ministry Ramiz Rzayev said four million tons of Kazakh oil will be transported through Azerbaijan in 2014. Tengizchevroil Consortium, which is engaged in developing Kazakhstan’s Tengiz and Korolev oil fields, has signed an agreement to resume oil transportation through the BTC pipeline. Oil transportation through the pipeline had come to a stop in 2008. Azerbaijanis and Kazakhs are both Turkishspeaking nations and share close historical, religious and cultural ties. Both are littoral states of the Caspian Sea and possess a common maritime border. About 130,000 ethnic Azerbaijanis live in Kazakhstan. A solid legal basis has been established between the two countries. Azerbaijan and Kazakhstan have signed more than 90 documents, including 20 documents in the economic field, in particular on the investment protection, and avoiding double taxation. These documents positively affect the development of trade relations between the two countries. About 740 enterprises with Azerbaijani capital operate in Kazakhstan, while 35 companies with Kazakh assets work in Azerbaijan. azernews.az

ARMENIA December 16, 2013 #34

caucasian business week

ARMENIA INCREASED CHOCOLATE IMPORT

he volumes of the chocolate and cocoa-containing foods imported to the Republic of Armenia during the months of January-October increased by 8,78% in comparison

with the same period of the previous year and made 5 thousand 364,3 tons. The total customs value of the imported chocolate exceeded $25,5 million. Armenpress reports that according to the data provided by the State Revenue Committee of the Government of the Republic of Armenia, the major part of the chocolate and cocoa-containing foods imported to Armenia during the months of January-October was from the Russian Federation (2303,5 tons) and Ukraine (2040,9 tons). Chocolate and cocoa-containing foods were imported to Armenia also from Italy (435,1 tons), Singapore, Netherlands, Poland and other countries.

AMD 270 BILLION INVESTED IN GOVERNMENT BONDS IN ARMENIA IN OCTOBER 2013 – 2.2% MONTHON-MONTH DECLINE

ggregate investments in government bonds in Armenia reduced 2.2% in October 2013, compared with the previous month, to AMD 270 billion, according to the central bank’s monthly report. Residents’ investments in government bonds totaled AMD 269.3 billion in October 2013 – 2.2% % month-on-month decline. Armenian banks’ investments in government

binds grew 19.4% to AMD 150 billion, and the central bank’s investment shrank 75.1% to about AMD 93.3 billion. Non-banking agents and dealers invested nothing in government bonds in October 2013, while nonbanking investors accounted for 3.1% month-onmonth growth to AMD 25.4 billion. Non-residents invested AMD 650 million in government bonds in October 2013 – 0.3% monthon-month growth. ($1 – AMD 406.80).

NASDAQ OMX ARMENIA MADE SALE DANGEROUS GOODS IMPORTED TO AND PURCHASE OVER $4 MILLION ARMENIA LIQUIDATED fer jointly to the stock exchange and the Central

ASDAQ OMX Armenia OJSC on December 11 held sale and purchase of 4 million 100 thousand U.S. dollars at market average rate of AMD 404,69/USD 1. Armenpress reports that the closing price totaled AMD 404,75. The number of deals reached 24. NASDAQ OMX Armenia is the new name of the Armenian Stock Exchange OJSC (renamed on January 27, 2009); however, it is also used to re-

Depository of Armenia OJSC (CDA), as the both companies have been members of the NASDAQ OMX Group, Inc. since early 2008. NASDAQ OMX Armenia and the CDA are the major securities market infrastructure institutions in Armenia. Since their inception in 2000, both companies had operated as self-regulatory organizations established by member broker companies, up until demutualization in 2007. NASDAQ OMX Armenia is a part of the world’s largest exchange company, the NASDAQ OMX Group, Inc. The NASDAQ OMX Group, Inc. is the world’s largest exchange company. It delivers trading, exchange technology and public company services across six continents, and with nearly 4,000 companies it is number one in worldwide listings among major markets. NASDAQ OMX Group technology supports the operations of over 70 exchanges, clearing organizations and central securities depositories in more than 50 countries.

ELECTRIC NETWORKS OF ARMENIA TO MAKE INVESTMENTS

lectric Networks of Armenia submitted to the Public Services Regulatory Commission of the Republic of Armenia an investment program for 2014-2018. Armenpress reports that for the coming five years ENA presented an investment program of about 70 billion drams. ENA intends to spend about 32% of the total investment indicator or 22,1 billion drams to reduce the average annual frequency and duration of the electricity voltage deviation beyond the allowable limits. The volumes of the investments directed to the new customer acquisition and special programs implementation will make more than 20,6 billion drams or 30% of the total investment indicator.

CJSC Electric Networks of Armenia was founded in May of 2002 as merger of four state regional companies (Yerevan Electric Networks, North Electric Networks, South Electric Networks and Central Electric Networks) distributing and selling electric energy. The company is mainly engaged in regulated distribution and sales of electric energy. Overall spread of its grid is 36 thousand km. The company has an exclusive license for distribution of electric energy within the Republic of Armenia. Power distribution is implemented at tariffs confirmed by the Public Services Regulatory Commission of the Republic of Armenia. The company provides service to about 935.000 customers. ENA CJSC is a subsidiary of ОJSC RAO UES INTERNATIONAL CJSC. ОJSC INTER RAO UES is a functioning operator of electricity exports and imports on the territory of Russia. INTER RAO UES OJSC currently heads a group of more than 20 companies based in fourteen countries. By acquiring foreign assets, the company significantly consolidates its position in commercially attractive electric power markets in Europe, the South Caucasus, the Far East and Central Asia. CJSC ENA is one of the biggest tax-payers in the Republic of Armenia.

ARMENIA INCREASED TIRE IMPORT

he number of the pneumatic rubber tires imported to the Republic of Armenia during the months of January-September 2013 increased by 11,57% in comparison with the same period of the [previous year and made 366,3 thousand pieces. The total customs value of the imported tires exceeded $27 million. Armenpress reports that according to the data provided by the State Revenue Committee of the Government of the Republic of Armenia, the major part of the tire imported to Armenia during the months of January-September 2013 was from Russia (84,1 thousand pieces), Belarus (79,4 thousand pieces) and China (72,2 thousand). Tires were imported to our country as well from Ukraine, Korea, Japan, Sri Lanka and other countries.

he dangerous toys imported to the Republic of Armenia are mainly of Turkish and Chinese production. In case of being dangerous, the goods imported from Europe are defined by RAPEX Rapid Alert System and are prohibited. The Head of the State Market Control Agency of the Ministry of Economy of the Republic of Armenia Levon Khalikyan told Armenpress that Armenia is closely cooperating with the RAPEX system and gets information about the possible danger of the goods. “We have participated in the RAPEX commission

sessions twice and presented the works carried out in our market. As RAPEX is for the evaluation of goods produced in the European countries and a very small part of dangerous goods come from there to Armenia, consequently the list of the goods determined by the system is not so big”, - said Levon Khalikyan. The European RAPEX Rapid Alert System found dangerous the following goods: a toy mobile phone, Secret rider (policeman) toy, Candy make-up toy, Tip Top flomaster, MarsHero toy, Ming Sheng toy mobile phone and other goods, which have been withdrawn from the market.

DIAMOND AND JEWELRY MANUFACTURING SECTOR REGISTERS GROWTH

he volumes of the production of diamonds in Armenia registered a considerable growth by 47,8% during the months of January-October and made 73,572 carats. The volumes of the jewelry production has increased by 15,8% reaching 879,6 kilograms. Armenpress reports that according to the data provided by the Na-

tional Statistical Service of Armenia, during the months of January-October of 2012 49,478 carats of diamonds and 759,7 kilograms of jewelry products were produced in our country. In January-October 2013 the volumes of the diamonds exported from Armenia increased by 58% and made 164,800 carats, the half of which was purchased by Belgium.

ARMENIA ACTIVATES MEAT AND SAUSAGE PRODUCTION

he volumes of the production of meat in the Republic of Armenia during the months of January-October have increased by 5,1% in comparison with the same period of the previous year and made 41 thousand 907,5 tons. According to the data provided by the National Statistical Service of Armenia, during the first ten

months of 2013 3 thousand 688,3 tons of meat products (including sausages) were produced in our country, which exceeded by 2,3% the indicator of the same period of the last year. Armenpress reports that only in October 2013 11 thousand 200,8 tons of meat and 435,3 tons of meat products were produced in the Republic of Armenia.

BANK ACCOUNTS INCREASED IN ARMENIA

pproximately two bank accounts fall per a person in Armenia, using bank services. During the recent two years the bank accounts in Armenia have increased by more than one million. If in 2011 their number was 2 million 24 thousand, in 2012 – 2 million 300 thousand, in 2013 their number reached 3 million 146 thousand.

Armenpress reports that according to the data provided by the National Statistical Service of Armenia, the number of the card deals as well have increased during the last years. If in 2006 3 million 29 thousand transactions were carried out, in 2009 the number made 8 million 848 thousand and in the end of 2012 it reached 18 million 872 thousand. 21 commercial banks of Armenia mainly provide ARCA, VISA and MasterCard.

ARMENIA TO PRODUCE TABLETS AND CELL PHONES

n the coming months Armenia will launch the mass production of tablets and cell phones based on Android operational system. The National Assembly deputy of Dashnaktsutyun faction Artsvik Minasyan stated about it at the briefing at the National Assembly. “I have very good news from the field of information technologies. I was participating in the session of the Prime Minister’s Industrial Policy Council, during which it became clear that a mass production of tablets and cell phones will

be organized in Armenia”, - said the deputy, Armenpress reports. According to Artsvik Minasyan, the price for the abovementioned Armenian production will make 55-60% of the foreign analogues.

12 UKRAINE ASKS FOR €20BN FROM EU – PM

CIS caucasian business week

CRISIS IN UKRAINE WAS INSTIGATED BY THE WEST

kraine is requesting financial assistance to the tune of 20 billion euro from the EU, said Ukrainian Prime Minister Nikolay Azarov. The funds would be part of preparations for signing an association agreement and free trade deal with the EU. “We want to provide conditions to minimize losses for the Ukrainian economy,”Interfax quoted Azarov as saying. The government has invited the European Commission to consider economic conditions in Ukraine and proposed improving the situation“by offering financial aid,” the prime minister said.

RUSSIA’S GAZPROM PAYS $1 TO TAKE OVER KYRGYZSTAN GAS MONOPOLY

yrgyzstan has approved a deal to sell the country’s debt-ridden natural gas monopoly to Russia’s Gazprom for $1, RIA Novosti reported. Gazprom will gain control over pipelines, gas distribution stations and underground storage facilities owned by Kyrgyzgaz. In turn, the Russian gas giant will invest 20 billion rubles ($610 million) in modernizing the Kyrgyz company’s infrastructure over the next five years.

KAZAKHSTAN TO CANCEL VISA REGIME WITH 34 COUNTRIES

azakhstan plans to set a visa-free regime for 34 member-countries of the Organization for Economic Co-operation and Development in 2014. Spokesperson of the Central Communications Service for the President of Kazakhstan Altai Abibullayev made the remark on December 9. He said the decision is not linked with holding of EXPO-2017 in Astana. “This is linked with the industrial and innovation policy of our country, with the attraction of investments in Kazakhstan. But at the same time, it can also contribute to increase the number of visitors of EXPO-2017,” he said. However, Abibullayev added, Kazakhstan’s Foreign Ministry plans to issue new visa stickers with the logo of Expo-2017, the key topic of which will be the “Energy of future”. He went on to say Kazakhstan currently has visafree regime with many countries, adding that it is planned to expand the list of direct flight to Astana from many world capitals. Abibullayev explained that easy mode means fewer formalities for obtaining a visa and reducing its cost. Earlier it was reported that Kazakhstan will simplify visa procedures for certain categories of persons visiting the country within the International Exhibition EXPO-2017 in Astana. Currently, Kazakhstan has visa-free regime with such countries as Russia, Belarus, Kyrgyzstan, Tajikistan, Georgia, Uzbekistan, Azerbaijan, Moldova, Ukraine, Turkmenistan, Serbia, Macedonia, Turkey, Armenia, Mongolia and Malaysia.

December 16, 2013 #34

t’s not a matter of whether Ukraine joins the European Union or the Customs Union. Instead, the real issue is that the West has aimed to put a sanitary cordon around Russia for 20 years, journalist and historian Marcus Papadopolous told RT. RT: It looks like those demonstrators being held by the authorities during the protest could well be released, and the president is also making some sort of concessions. So do you think the opposition will be appeased by these latest moves? Marcus Papadopolous: Viktor Yanukovich, the democratically elected president of Ukraine, is currently exploring all the options which would be best for his country - be it in the European Union or in the Customs Union of Russia, Kazakhstan and Belarus. And that’s no different to how British Prime Minister David Cameron is currently considering all the options for reforming Britain’s relationship with the European Union. That’s how a democracy works, but unfortunately the protestors

in central Kiev who don’t represent the whole of the Ukrainian population are simply intent on two things - having president Yanukovich’s head on a silver platter and having Ukraine join the European Union. And they’re using violence and they’re using bully-boy tactics to try and achieve this. And that’s completely unacceptable. That’s not how a democracy works, and European Union officials who are supporting some of these violent protests, who are encouraging some of these violent protests - should be ashamed of themselves. RT: Well they say they are there to diffuse the situation, along with the US diplomats. But it looks as if they’ve probably done that now, haven’t they? MP: Well they’re certainly portraying themselves as knights in shining armor, there to save the day in Ukraine - and that line is being spun by the western media. It would make a great Hollywood movie, it really would. The reality of course is very different. The reality is that the crisis in

Ukraine has been instigated by the West - and I say the West, not just the European Union - because the European Union is a key component of the West and what we’re seeing. It’s not just simply a matter of ‘does Ukraine join the European Union or the Customs Union for the West.’ It’s a matter of what’s been going on for the last 20 years since the breakup of the Soviet Union. The West, for the last 20 years, has been attempting to put a sanitary cordon around Russia in the form of EU states and NATO states - and now we’re seeing a construction of a missile defense shield in Romania and Poland. RT: When it comes to Ukraine, does it look as if the EU is wining? Because after all, Yanukovich is almost making hints of doing yet another U-turn, so he’s going to revisit this in March and look at more renegotiation. How would Russia regard that? MP: It’s a big decision. It’s a major decision for Ukraine to either join the European Union or the Customs Union. But President Yanukovich is under immense pressure by Western media. Also, we’re seeing Western politicians - and we’ve also had the former President of Georgia, Mikhail Saakashvili - go to Ukraine, an independent sovereign country. And they’re encouraging protests against the Ukrainian government, which was democratically elected in 2010. So yes, President Yanukovich is under tremendous pressure at the moment. But we must remember that what we are hearing in the West from our politicians and from our journalists does not correspond to the reality of the situation in Ukraine. President Yanukovich is democratically elected and he has every right to decide, which is best for Ukraine, be it the Customs Union or the European Union. And what we’ve been seeing in the last couple of weeks in Ukraine - violent protests, western politicians flying in and encouraging what I would argue is a coup, and early elections - is absolutely unacceptable and has nothing to do with democracy.

UZBEKISTAN TO DIRECT $4 BLN FOR INVESTMENT PROJECTS’ IMPLEMENTATION

zbekistan plans to spend foreign investments worth $3.883 billion for implementation of 166 investment projects in 2014, the 2014investment program approved by President Islam Karimov reads. It is planned to direct $1.214 billion for 74 projects through foreign loans guaranteed by the government and $2.67 billion for 92 projects through foreign direct investments. The largest amount of foreign investments $2.604 billion will be spent on implementation of 35 projects in the fuel and energy sector, $2.228 billion of which will fall to foreign companies’ direct investments for 16 projects. In particular, Russia’s Lukoil will invest $1.05 billion in the implementation of two production sharing agreements (PSA) worth more than $8

billion. Lukoil implements three projects in Uzbekistan under the PSA on Kandym-KhauzakShady-Kungrad, involved in the development of deposits of South-West Gissar as well as explores the Uzbek part of the Aral Sea within an international consortium. Lukoil plans to produce at least 18 billion cubic meters of gas in Uzbekistan by 2016 and to increase the volume of investment up to $5 billion by 2017 within the first two projects under the PSA terms. The consortium of Korean companies led by Kogas will continue building the Ustyurt gas-chemical complex in the north- west of the country at a total cost of $ 4.1 billion with a planned investment volume of $711.2 million. The capacity of the gas-chemical complex will allow processing 4 billion cubic meters of natural

gas per year and produce 400,000 tons of polyethylene and 100,000 tons of polypropylene. Energy giant China National Petroleum Corporation (CNPC) will invest $316.2 million in the construction of the third line of the Uzbek section of the Central Asia-China gas pipeline which is valued at $2.1 billion. The construction of a Central Asia - China gas pipeline began in 2008. The pipeline is designed to export natural gas from Turkmenistan, Kazakhstan and Uzbekistan to China. The total length of the gas pipeline is about 7,000 km. In 2013 Uzbekistan planned to use foreign investments worth $3.017 billion. According to the official statistics, the amount of foreign investments increased by 12.4 percent up to $1.812 billion in January- September 2013 compared to the same period of 2012.

RUSSIA TO CANCEL CUBA’S $29 BILLION OF SOVIET DEBT

ussia is going to write off 90 percent of Cuba’s $32 billion Sovietera debt as part of a deal to end a 20-year dispute, according to diplomatic sources cited by Reuters. Prime Minister Dmitry Medvedev agreed to write off the island’s debt during a visit to Havana in February 2013, stressing details would be finalized by the end of the year. In October, the two sides signed a refinancing agreement that requires Cuba to settle Moscow $3.2 billion over ten years, and Russia would forgive the remaining $29 billion, which is $20 billion in debt plus service and interest, according to Reuters. Between $5-6 billion of Cuba’s remaining foreign debt is non-Soviet. The deal still needs to be agreed on by Russian lawmakers, and there has been no comment from Cuban or Russian officials. Cash-strapped Cuba has been feverishly trying to restructure its debt to jump start it’s economy and attract investment. Three years ago it restructured $6 billion of its debt with China, and in 2012 Japan forgave about $1.4 billion, Reuters reports. Mexico recently forgave $478 million of Cuban debt, and Havana agreed to pay back $146 mil-

lion over 10 years. In 2012 Cuba’s debt was estimated by government officials at $13.6 billion. This debt is categorized as “active” foreign debt, and the other debts before its default in the 1980s is considered “passive”, according to Reuters. Cuba defaulted on its debt to the Paris Club- a group of the world’s leading economies-Canada, France, Germany, Japan, Russia, the UK and the US – in 1986. Cuba doesn’t belong to any international lending organizations, like the International Monetary Fund. Cuba’s total exports of goods and services is about $18 billion, but its economy has been pinched by the 50-year trade embargo by the US, which Cuban Foreign Minister Bruno Rodriguez has dubbed as “barbaric genocide” against Cubans, who generally live in poverty. SOVIET TIES After the fall of the Soviet Union, Russia became the legal successor of Cuba’s loans, which have been rejected by Cuban officials because they held in a currency that no longer exists, to a country that no longer exists. Russia has maintained that Cuba owed the mon-

ey since Soviet times, while Cuba attests Russia should have compensated Cuba for breaking their bilateral economic relationship back in the 1990s. Cuba remains a strong ally of Russia, with trade between the two countries at about $200 million last year. Russian banks financing the debt forgiveness will be given a government guarantee. Currently, Russian oil companies have a big interest in Cuba and are pursuing offshore drilling. Rt.com

WORLD NEWS December 16, 2013 #34

caucasian business week

DUTCH DOWNGRADED: EU SHOOTS MESSENGER

he industrious Dutch have lost their coveted AAA credit rating, as the folly of the EU’s deluded ‘third way’ economic model becomes ever more dangerous to the global economy. Another clog has dropped. A paltry 10 nations retain a perfect credit rating. The prospect of all AAA sovereign heads of state meeting in a telephone box may only be months away. The Netherlands, home to whacky wooden footwear and a rather remarkably dynamic economy is hardly a Mediterranean basket case. And therein lies the terrifying reality of Europe’s continuing decline. Despite reasonable fiscal governance, Dutch debt to GDP at around 71 percent is beyond the reasonably- deemed threshold of 60 percent, but it is hardly the North Sea’s answer to Greece or even the USA. Holland’s problems stem from a decade when Germany needed low interest rates to grow a stagnant economy, but pretty much no

other euro nation had such a problem. Fuelled by cheap money, Dutch consumers inflated a property bubble. It isn’t quite Latvia, Ireland or Spain, but Dutch property prices are sinking despite the dykes keeping the nation physically above water. Household borrowing has spiraled. The total private/public debt ratio in the Netherlands stands at an eye-watering 300 percent - higher even than Italy. Credit ratings provide clear evidence that the euro crisis is merely resting, building kinetic energy for another volcanic eruption. A paltry three of the 17 eurozone nations now have AAA status. Germany (80.5 million population) amounts to almost one third of the total of AAA citizens! The other euro-nations maintaining top rating are modestly-sized Finland (5.5 million) and microstate Luxembourg, whose entire 500,000 population is less than a third of the number of daily commuters to Manhattan! There is clear evidence that the euro has impoverished its citizens, while the persistently irresponsible US government has also been downgraded. Governments are stubbornly fixated with an unsustainable centralized spending model that didn’t work for the Soviet Union and certainly won’t work in the digital age either. (No prizes for guessing why some folk love bitcoin).

Interestingly, while no fewer than seven of the world’s top rated nations are in Europe, most are either not in the euro (Denmark, Sweden) or not in the EU at all (Norway, Switzerland). That alone ought to be a salient lesson to Brussels where obsessive imperial delusion is driving the eurozone towards penury in any currency. The terrifying conclusion is just how few nations remotely manage their budgets responsibly. Emerging nations who sustain growth and budgetary prudence may be promoted, but few look like breaking into the top tier anytime soon. Meanwhile, the total population of AAA nations has declined by more than a half a billion citizens in two years to under 180 million today. This terrifying statistic is a damning indictment of the ongoing banker-influenced corporatist-socialist mindset. The West is broadly spending with the irresponsibility of a drug addict. Whatever your political persuasion, the numbers simply do not

add up. No group rich or poor can make these numbers balance. Somewhere up ahead there is either a miraculous revolution in productivity & wealth...or more likely a modest increment from nano- and bio-tech which will kick the can further down the road. Somewhere ahead, perhaps sooner than later, a hideous day of reckoning awaits the unsustainable government addiction to debt and spending. Without an outbreak of leadership, many nations, particularly in the West, are doomed to terminal decline. Citibank analysts have gone a step further, predicting sovereign ratings: they believe only Canada and Scandinavia can retain their coveted AAA status - sub 1 percent of the globe’s 7.1 billion population (and less than the total population of the UK)! Clearly many of the 99 percent in this equation have grounds to believe they are being poorly governed. Naturally the EU has struck back...by targeting the messenger. Rather than encourage government accountability, regulators contend the ratings agencies have miscalculated sovereign debt. Another tragic example of backdoor totalitarianism seeking to stifle dissent...or perhaps the lines of unemployed in Greece, Italy and Spain (let alone France et al) and those massive piles of debt created from unsustainable spending are just a mirage.

NEW ERA FOR WALL STREET? US PASSES LANDMARK RULE TO LIMIT RISKY TRADING

ollowing 3 years of negotiations, five US regulators have approved the Volcker rule, which seeks to protect American taxpayers from the losses of ‘too big to fail’ banks. The rule was approved Tuesday by five financial institutions despite dissent from the Commodity Futures Trading Commission and the Securities and Exchange Commission, the Financial Times reports. Named after former Federal Reserve Chairman Paul Volcker who pushed Obama and Congress to reform Wall Street, the rule hopes to protect America from a similar debacle to the socalled ‘London Whale’, when JPMorgan’s speculative bets resulted in a $6.2 billion loss in 2012. Banning proprietary trading and hedging at US financial institutions, the Volcker rule is considered the centerpiece of the 2010 Dodd-Frank bank reform legislation. “The Volcker rule will make it illegal for firms to use government-insured money to make speculative bets that threaten the entire financial system, and demands a new era of accountability from CEOs who must sign off on their firm’s practices,” President Obama said. Banks will now be required to report on risks such as portfolio hedging, which in theory will help avoid any repeats of the ‘London Whale’ incident. Propriety trading, as it is known, is when a department unrelated to any client orders use of its own capital to gamble on market moves, and profits from the spread and movement of prices. Goldman Sachs, JP Morgan Chase, Morgan Stanley, Citigroup, and Bank of America, the five megabanks of Wall Street, will have to change the way they do business and initiate a new, stricter reporting regime on proprietary trading. Compliance will be costly for Wall Street’s most profitable banks, which have as much as $44 billion in revenue in market-making provisions, Bloomberg News reported.

Shares in big banks rose on the news, Morgan Stanley increased 1.3 percent, and Goldman Sachs climbed 1.2 percent, a three-month high for the firm. GRAY ZONE The over 900 page edict will keep corporate lawyers gainfully employed for years to come, as they pour through it and advise banks what they now can, and cannot legally do. Banks have until 2015 to get in line with the new rule, a deadline which was extended by one year. High compliance costs and lower revenue will likely move banks to challenge Volcker, as the new rule could shave as much as $10 billion pretax profit from the eight biggest US banks, according to an estimate by Standard & Poor’s. Many critics of the new rule say it isn’t tough enough on banks, and won’t prevent a ‘London Whale’ scenario, as the rule still allows banks the following leniencies: - Banks will still be able to hedge on government bonds, including mortgage bonds which led to the housing bubble bursting in 2008. - Commodity and FOREX trading will allow banks to gamble on oil, gold, and spot currency contracts. - Foreign debt can still be owned by banks. - Bank CEOs will not be held personally accountable for compliance with the new rule. - Overstepping stable bank capital reserves will continue, as the rule ignores the need to increase bank capital. A closing chapter on the Dodd-Frank financial overhaul of 2010, Volcker himself seems pleased with the agreement. “The result should help the process of restoring trust and confidence in commercial banking institutions,”Volcker said Tuesday. “It is, after all, those institutions which benefit from explicit and implicit public support that we count on to provide a strong, safe, and effective financial system.”

CHINA REJECTS FIFTH US CORN CARGO IN A MONTH, CITING GMO STRAIN

hina has blocked a fifth cargo of US corn since mid-November after testing found a strain of genetically-modified (GMO) corn not yet approved for import. Three more cargoes may also be refused. A cargo of 59,100 tons was turned away on Tuesday in the eastern Chinese province of Zhejiang after quarantine officials found MIR 162 -- an insect-resistant GMO strain which the country’s

agriculture ministry has yet to warrant, Reuters cited an official as saying. China, the world’s second largest corn consumer, has refused 180,000 tons of grain since mid-November. Observers believe it has less to do with the corn and more to do with other trade quarrels between the two countries. “It is really causing big trouble and it seems to be related to bilateral trade conflicts,” a domestic corn trader told Reuters. In November, China fought US accusations that it was blocking a World Trade Organization technology deal that would cut tariffs on products. US Trade Representative Michael Froman said later that month that China’s demand to exempt over 100 products from the deal risked breaking negotiations. In response, China’s commerce minister, Gao Hucheng, said it was “irresponsible for the US to discard the consensus that has been agreed by most of the countries only because the deal cannot meet its own requirement for several products.” This month, China challenged further accusations from Washington that it dumped cheap exports on the US market.

Growing domestic corn surpluses may also explain some reticence to accept further US imports. Weak consumption from the animal feed industry looms large in China, as this year will likely yield a record corn harvest. Its corn output for 2013-2014 is expected to rise 5.9 percent to reach a new record for consumption. “To some extent, there is a link to the domestic supply surplus - these are the rules of the game,” an industry analyst from a Chinese governmentlinked think-tank told Reuters earlier this month. “We believe future incoming cargoes will face strict inspection.” China’s corn imports are expected to rise in the long-term, as the country urbanizes and the demand for meat and dairy rises. US government data still shows that China has a strong demand for corn, as it was the top destination for US supplies last week. For analysts, this appetite overshadows the recent handful of corn rejections. The US Agriculture Department (USDA) said Monday that it inspected 17.6 million bushels of corn headed to China last week. That figure equals 44 percent of the total amount of corn inspected by the USDA.

“If they are still importing it, it makes us wonder if this is more of a political game that China is playing,” said Terry Reilly, a senior commodity analyst at Futures International. “As long as China is taking US corn on a weekly basis...we are not going to get bearish on this topic.” Around two million tons of US corn is on its way to China, which has already committed to another three million tons of US grain. However, traders said that another three cargoes have already been shown to contain MIR 162, and are expected to be refused from ports in Guangdong and Fujian. “Rejections will be frequent, following large arrivals in coming weeks,” an industry source who asked not to be identified said. “Some cargoes simply berth offshore and buyers are not unloading the cargoes before testing results are complete.” The US corn market has not been impacted by the Chinese rejections. Prices have actually increased 4.2 percent since the first refusal in November. Much of the rejected corn has been acquired by importers in other Asian markets, at times with price cuts, according to European traders. Rt.com

WORLD NEWS 14 SOUTH STREAM: EU GAS OR A LOT OF HOT AIR? caucasian business week

ith dizzying renewable energy targets looking increasingly unattainable, the EU is simultaneously seeking to renegotiate the South Stream pipeline which could secure heat for homes across the bloc. The EU has a Soviet-style weakness for elaborate, centrally-planned projects with distinctly variable results. Sadly, the army of millions of unemployed people in the EU demonstrates the folly of the euro currency, which is currently squandering human capital to ensure, well, whatever it is the euro is supposed to achieve, bearing in mind that prosperity is clearly no longer part of the plan. Elsewhere, amidst grandiose gray offices, an army of gray civil servants create enormous schemes which hoover up public funds and frequently deliver little in return. Some, rather like

Hitler’s stillborn vision for a pan-European broad gauge railway, never go anywhere. With oil, gas and electricity, it seems the EU is on a fast track to chaos with an acute danger of actually running out of energy. Plausible solutions for the upcoming European energy crisis include nuclear and shale gas. The latter has little support, despite the benefits the US has demonstrated. Nuclear has been subject to setbacks, most notably Angela Merkel’s pious populist volte face post-Fukushima. Europe faces blackouts in the next decade if it does not find alternative sources of power, to make up for those hideously subsidized alternative sources of energy that greens love but actually don’t generate power. Gas is a natural solution for those looking east and here the EU has been in a form of tortured paranoia for some years. A kneejerk fear of using too much Russian gas seems to dominate policy.

Hence one remarkable recent EU folly: Nabucco, a wondrously complex and expensive pipeline to circumnavigate Russia, pumping gas from much less accessible parts. Meanwhile, several nations are constructing a pipeline that goes under the Black Sea, emerging neatly on the EU’s eastern borders: a simple, workable, relatively cost-effective solution. However, Brussels suddenly appears to have had a fit of nerves just as EU extra-territorial intervention has been writ large in Ukraine. Citing EU competition issues, major stumbling blocks include Gazprom owning both pipeline and gas transported through it, as EU rules nowadays require “unbundling.” However, given that “unbundled” Nabucco failed and Gazprom is funding South Stream, the EU may yet consider pipeline pragmatism better than energy poverty? The proximity to Kiev avoiding the poisoned chalice of an EU trade deal is remarkable.

December 16, 2013 #34

Ukraine has been a somewhat unreliable partner for gas transit. Its Naftogaz energy company recently owed Gazprom some $1.4 billion for delivered gas. South Stream bypasses Ukraine entirely beneath the Black Sea. The EU may also be wary that a major storage hub in the route is in Serbia. Given that the EU has already helped partition sovereign Serbian territory while proving somewhat cool to accession talks, it is not a quantum leap to presume that the EU might seek to influence Belgrade in the throes of opening negotiations with Brussels. Note, too, that Gazprom already owns a significant chunk of the European end of the Yamal pipeline through joint ventures. This doesn’t seem to trouble the EU, yet the element of control is highly similar. Meanwhile, just ahead of the South Stream announcement, EU competition authorities cleared a series of asset swaps that gave Gazprom control of more transportation and storage options in Germany. Doubtless, there is a logic in all of these deals, but it is tricky to fully appreciate how one deal is acceptable and another is not. Finally, the EU has offered a way forward whereby Gazprom can apply for an exemption to permit the binding legal agreements already signed between eight nations. Perhaps Gazprom’s impending negotiations with EU Anti-trust Commissioner Joaquin Almunia over charges it abused its monopoly position (25 percent of the EU market) may be key to a holistic EU negotiation strategy? Ultimately, EU energy policy is a mess, both at a supranational and individual state level. Saying no to South Stream, while ignoring shale, stymieing nuclear and promoting inefficient renewables is a perfect storm to generate future energy poverty. The issue is no longer whether the last western European could turn off the lights if they choose to leave the disastrous eurozone behind. Rather the question is: will there be any light to turn out if the EU maintains its misguided interventionist energy policies? Rt.com

TBILISI GUIDE December 16, 2013 #34

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

December 16, 2013 #34