Caucasian Business Week #38 by Caucasian Business Week

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BUSINESS WEEK January 20, 2014 #38

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January 20, 2014, Issue 38

GEORGIA

GEORGIA POSITIONS 22ST IN THE WORLD: ECONOMIC FREEDOM INDEX

eorgia’s economic freedom score is 72.6, making its economy the 22nd freest in the 2014 Index. Its overall score is 0.4 point higher than last year. Pg. 7

ATU DUTY FREE OPENED IN KUTAISI INTERNATIONAL AIRPORT

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BE INFORMED, DO BUSINESS

INTEREST IN GEORGIA’S AIR TRANSPORTATION MARKET GROWS Pg. 3

Temur Chkonia Wishing to Open McDonalds in Secessionist AbkhaziaPg. 4

perator company of Tbilisi and Batumi Airports TAV Georgia informs that a new free trade point takes 148 square meters area in the airport. Pg. 4

KHUDONI: THE FUTURE OF GEORGIA’S ENERGY SUPPLY

Mamuka Khazaradze: Not only the Business Sector, but the Whole Country Trusts the Current Government

GEORGIAN FUND TO INITIATE PROJECTS WORTH OVER $1BLN

MONEY TRANSFERS INCREASED BY $21 MILLION IN DECEMBER

n December 2013 money transfers of $153,5 million were made to Georgia, which is $12 million more than in previous month. Pg. 8

AZERBAIJAN WB PREDICTS 5.3 PCT GDP GROWTH IN AZERBAIJAN

he World Bank has improved its forecast for GDP growth in Azerbaijan in 2014. The WB report “Global Economic Prospects” published on January 15 says that during the year the country’s GDP will grow by 5.3 %. Pg. 9

ARMENIA ARMENIA’S ECONOMIC GROWTH TO MAKE 5% IN 2014-2016: WB

he World Bank evaluated the Armenia’s economic growth of 2014-2016 to be about 5%. Pg. 10

CIS US AGRICULTURAL GROUP BUYS INTO UKRAINIAN AGRIBUSINESS – REPORT

S agricultural trading giant Cargill has paid $200 million for a 5 percent stake in Ukraine’s largest agribusiness holding, the Financial Times reported Sunday. Pg. 11

WORLD NEWS TOP 10 RISKS FOR THE DECADE AHEAD

hat are the top 10 risks that the world will face in the decade to come, and what can be done about them? Pg. 13

Garibashvili: Khudoni HPP Considerably Determines Georgia’s Energy Independence Pg. 6

WORLD BANK FORECASTS GEORGIAN ECONOMY TO GROW BY 6.3%

ccording to World Bank prognosis, Georgian economy will grow by 6,3%-6,35 in 2014-2015, by 6,5% in 2016. According to World Bank’s prognosis, in 2013 Georgian economic growth equaled to 2,5%. World Bank placed these data in the document published on January 14 - World Economic Perspectives. The bank issues such prognosis twice a year, in June and January.

The prognosis published by international financial corporation is much more optimistic than those of Georgian government, which expects 5% economic growth of the country this year. European Bank for Reconstruction and Development (EBRD) expects 4% growth. World bank has included Georgia in the Europe and Central Asia region, economy of which will increase by 3,5% this year, by 3,7% in 2015, by 3,8% in 2016.

Armaz Tavadze: Bank System Frustrates Business Sector Development Pg. 8

Zurab Lalazashvili: Business needs more communication with government

TOYOTA COROLLA WILL BE HANDED OVER TO Pg. 4 THE WINNER OF ROMPETROL PROMOTIONAL Soso Nibladze: RAFFLE ON 15TH OF JANUARY Pg. 5

Intermetal Georgia opens a roof-producing factory in Poti FIZ Pg. 2

Businessmen Spoke with Prime Minister about Monopolies in Various FieldsPg. 4

Pg. 4

MAIN EVENTS caucasian business week

January 20, 2014 #38

ENERGY MINISTER ENCOURAGES IMPORTERS TO IMPORT FUEL FROM TURKMENISTAN AND KAZAKHSTAN

T PRIME MINISTER MET WITH MANAGEMENT OF TURKISH CALIK HOLDING

rime Minsiter Irakli Garibashvil met with management of Turkish Calik Holding on Friday. Prime Minister’s press service informs that the meeting was held in the government’s chancellery and head of Partnership Fund Irakli Kov-

zanadze and head of Co-investment Fund George Bachiashvili attended it. The sides discussed issues of future cooperation between Georgia and Turkey. Prime Minster of Georgia expressed gratitude to Ahmed Calik and expressed hope that the company will expand their activities in Georgia.

PM WILL ATTEND DAVOS ECONOMIC FORUM

rime Minsiter will guide Georgian Delegation on Davos Economic Forum. Irakli Garibashvili states that on he will participate in Davos Economic Forum on January 22-25. Prime Minister informed Georgian and foreign media about the visits scheduled for near future on Thursday.

As Garibashvili mentioned, after Davos Economic Forum he will visit Israel, where agreement on free trade will be signed with Israeli Government. He has not specified date of the visit. Garibashvili will also attend Munich Conference, after which he will visit Brussels, where he will meet with EU high officials and NATO secretary general.

PRIME MINISTER CONSIDERS 5% GROWTH REALISTIC IN 2014

conomy started to revive and 5% growth of Georgian economy is realistic, - Prime Minsiter stated. He says that after complicated I-II quarters in 2013 economy started to revive and unlike other years, private sector was a driver of the economy. “From October we have a serious revival of economy. In October economy grew by 4,1%, in November - by 7,8%. Real growth of agricultural sector equals to 9%. Financial sector grew by 7,6%, real estate operation - by 6,3%, export - by 20%, among them export to EU has increased by 65% and equals to $540 million, export to Russia has increased by 3 times and equals to $160 million”, - Prime Minsiter stated on the Thursday meeting with media. He said that slowdown of economic growth was determined by suspension of “useless projects for the population”, revision and termination of unreasonable contracts and difficult cohabitation period.

He mentioned that Georgian did not have economy and artificial stimulators provided economic growth. “We had President Saakashvil, who used to say in all over the world that destructive government has come, which destroys everything and how can you assure and enter investors and continue investments, or assure local businessmen that everything is all right and persuade in additional investments. It would be difficult, imagine yourself and nobody will assure me that you’d have behaved in the other way”, - Prime Minsiter mentioned. Irakli Garibashvili said that even with last year 2,8-3% growth Georgia remains one of the leader leaders among 21 countries with GDP growth. Irakli Garibashvili stated that international organizations also share calculations of the government. Moreover, according to the most recent prognosis of World Bank, Georgian economy will grow by 6,3% this year.

RMG: SOME GROUPS DELIBERATELY ACT TO DAMAGE COMPANY REPUTATION

ompany RMG considers that On the special briefing the company responded on the stir about Sakdrisi and a false message sent to Emergency Service yesterday. “Recent a stir about Sakdrisi object is beyond all bounds. We want to respond to the yesterday’s call to the Emergency Service, as if Sakdrisi gold deposit was mined and that RMG Gold planned to explode it. Instead to publish respective scientific argumentations on Sakdrisi object, some

stakeholders act with common scenario and are trying to mislead the society with misinformation”, - company representatives stated. They emphasized the fact that currently all works on Sakdrisi territory are suspended. Company RMG operates on the own license territory in accordance to law and the agreements made with the government. “Company RMG will do their best to protect reputation and will not leave this case without reaction”, - the company stated.

he government cannot begin importing oil from Turkmenistan and Kazakhstan - Energy Minister Kakha Kaladze states who some time ago predicted lower fuel prices in Georgia due to supplies from Central Asia. In particular, in his words, during his visit to Azerbaijan an agreement on the simplification of the rules of the movement of goods through transit corridor was signed that will dramatically increase the flow of traffic between Georgia and Azerbai-

jan. It will also give the possibility to import Central Asian energy without any extra costs. “The state cannot and should not start petroleum imports from Turkmenistan. It should be done by thecompanies that operate on the Georgian market. Therefore, intervention on our part is excluded, we intervened only in order to liberalize a corridor, “- says Kaladze. According to him, business companies themselves should be more active in fuel imports from Central Asia.

EBRD TO ISSUE GEL-DENOMINATED BONDS

resident of National Bank of Georgia George Kadagidze met with managing director of European Bank for Reconstruction and Development (EBRD) Olivier Decam. Main objective of EBRD representatives’ visit in the National Bank was to enhance awareness about existing economic situation. George Kadagidze exhaustively informed the guests about the situation in financial sector. On the meeting the sides also discussed ongoing and planned projects, implementing with financial support of EBRD in Georgia. Special attention was paid to the future investments for the development of securities market.

As it’s known in the near future EBRD is going to issue GEL denominated corporate obligation on the local market. National Bank informs that it will be first securities in Georgia issued in national currency by international financial institutions, which will support development of capital markets and respectively followed by reduction of interest rates. EBRD delegation includes managing director Olivier Decam, regional director Bruno Balvanera and political advisor Mahir Babaev. Till now EBRD has invested 1.8 billion Euro in 158 projects, among them in financial and banking sectors, energy, agro business and industry. They also mobilized 3 billion Euro from other financial sources to fund these sectors.

SOSO NIBLADZE - INTERMETAL GEORGIA OPENS A ROOFPRODUCING FACTORY IN POTI FIZ

ompany Intermetal Georgia opens metal roof-producing factory in Poti Free Industrial Zone. Deputy director in Commercial Issues of Free Trade Zones Soso Nibladze states that construction of the enterprise is going to end and will start operation in February or March. The enterprise occupies 5000 square meters area. “Intermetal has reserved additional 5000 square meters land on FIZ and during a certain time, depending how effectively the factory operates, we expect that company will expand the production”, - Soso Nibladze stated to GBC.

He said that several other projects are going on FIZ area, among them construction of alcohol procession plant. The plant will occupy 30 000 square meters. Preparation land activities have started. GeoSpirtProm is constructing the enterprise. The company belongs of the citizen of Russia Vakhtang Karichashvili. “There are importer and exporter companies in FIZ, number of which constantly increase. They register in FIZ and enjoy the benefits what we can offer them. As for industrial sector direction in the zone, the sector is gradually developing and we hope that this year 5-6 industries will add us”, - Nibladze states.

DECEMBER RECORDS ZOLOTAYA KORONA AS LEADER ON FAST MONEY TRANSFER SYSTEMS MARKET

olotaya Korona was a leader in December among the fast money transfer systems according to transfer amounts. Share of the transfers through this system increased by 1,5-2% monthly, in comparison with other systems - by 1-1,5%. In December transfers of Zolotaya Korona has increased by 9,5 million (6$ loss was mentioned in November). Transfers by Western has reduced by $3,2 million (10% decrease), Unistream 4,4 million (9% decrease), Intel 2,6 million (1,5% decrease), has increased by Contact - $1,7 million, reduced by 1,8% in previous month.

Source: National Bank of Georgia Receipt and sending of money transfers through commercial banks and microfinance organizations is available by over 20 international companies. in December 153,5 million was transferred (11/13-124,4 million).

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PUBLICITY January 20, 2014 #38

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BUSINESS caucasian business week

January 20, 2014 #38

BUSINESSMEN SPOKE WITH PRIME MINISTER ABOUT MONOPOLIES IN VARIOUS FIELDS

I IRAKLI GARIBASHVILI MET WITH REPRESENTATIVES OF APM TERMINALS

rime Minister Irakli Garibashvili met with representatives of APM Terminals, Poti Port stockholder company on Wednesday. Prime Minister’s administration informs that on the meeting the sides discussed perspectives of Poti Port and generally transit potential of the country. Executive director of APM Terminals Kim Fejfer stated that the company is interested not only in development of existing infrastructure of Poti,

but also has long-term plans. He also mentioned that according to 11 months data in 2013, container shipments increased by 16%; transit shipments have also increased. Company APM Terminals is founded in 1975 by Maersk Group. It is considered as one of the largest container terminal operators in the world. The company owns 80% of Poti Port stocks. The meeting was held in the government chancellery. Minister of Economy of Georgia and head of Georgian Railway attended it.

ZURAB LALAZASHVILI - BUSINESS NEEDS MORE COMMUNICATION WITH GOVERNMENT

orking format offered by Prime Minsiter is acceptable for the business sector. Head of customs-tax committee of Business Association

Zurab Lalazashvili stated after the Wednesday meeting with Prime Minister that Prime Minister welcomed to association’s initiative about creation of economic declaration and business sector will be involved in this process. Besides, business associations will also cooperate with the government for elaboration of shortterm working plan. Economic declaration will determine game rules, conditions of business security and priorities. Lalazashvili mentioned that on the meeting with Prime Minsiter they discussed problems in various spheres, among them immediate introduction of 4G Internet, agricultural development, export support. Business sector considers that there is communication problem between the business sector and government and Prime Minsiter expressed full readiness to improve this situation.

perator company of Tbilisi and Batumi Airports TAV Georgia informs that a new free trade point takes 148 square meters area in the airport. Construction of new shops in Kutaisi Airport started in December 2013 and took less than month to complete it. The free trade points will present over 700 kinds of various international brands, among them

ATU DUTY FREE was founded in 1999 by TAV Airports Holding and Unifree Duty Free / Gebr. Heinemann common initiative and currently it operates in the world’s leading airports. It’s represented in Tbilisi and Batumi international airports, also in the international scale and is opened in 11 cities. In 2006 ATU DUTY FREE opened first shops in Tbilisi and Batumi airports. Georgian wine shop - Wines of Georgia located in Tbilisi airport, was awarded by Golden Bran for popularization of Georgian products and cultural development. IN the same year, ATU diplomatic free trade object was opened in SOCAR petrol station in Batumi. Official opening ceremony of free trade point will be held on Friday at 12:00.Representatives of Ministry of Economy and Georgian parliament, also public person, airport administration and passengers will attend the opening ceremony.

n Business Ombudsman’s opinion, there should be a real dialogue between government and business. It became known that companies spoke about monopolies in various sectors in the first meeting in 2014 between Prime Minister and the business sector. The Business Ombudsman states. Giorgi Gakharia does not name specific companies, but notes that after the enactment of the Anti-Monopoly Law, the problematic issues will be studied by Free Trade and Competition Agency. In Gakharia ‘s words, a real mechanism should be created for dialogue between government and business in the country. According to him, the main message at the meeting was that the government is ready to cooperate with the business. Why does business so often talk about the importance of communication with the government and why have they failed to solve this problem so far? What steps did the Premier promise businesses to improve coordination with government agencies? “ Commersant” will try to get answers to these questions from members of the government and the Prime Minister.

TEMUR CHKONIA WISHING TO OPEN MCDONALDS IN SECESSIONIST ABKHAZIA

n Georgian Prime Minister’s opinion, the opening of McDonald’s in Abkhazia needs right assessment of political risk. Garibashvili said at the meeting with Georgian and foreign media at “Sheraton Metehi Palace” hotel that consultation with the Government would be held and only after this “CocaCola Bottlers Georgia” founder Temur Chkhonia would be notified. Recall that Temur Chkonia expresses his willingness to open McDonald’s in Abkhazia and bring “Coca - Cola” there. Chkonia explains that the Georgian representation, which he heads, has the exclusive right to bring these product and open the world’s fast food brand. Chkhonia has had this business idea for a long time , and now with the upcoming Olympics, this issue has become topical again and the businessman intends to meet with representatives of de - facto Republic of Abkhazia. Whether or not Georgian businessmen have the right of entrepreneurial activity on the territory of Abkhazia, according to the laws ? State Deputy Minister for Reconciliation and Civic Equality Keti Tsikhelashvili states commersant.ge that the law prohibits illegal activities in the occupied

territories, however, if there is government’s permission for economic activities and the activity is not contrary to interest of Georgia, businessmen are given the right of business activities in the occupied territory.

CHAIRMAN OF SUPERVISORY ATU DUTY FREE OPENED IN KUTAISI BOARD OF “TBC BANK”: NOT ONLY THE BUSINESS SECTOR, BUT THE INTERNATIONAL AIRPORT classic Duty Free commodity, such as Georgian WHOLE COUNTRY TRUSTS THE wines and Asian sweets, which will enable passengers to get retail goods for the advantageous CURRENT GOVERNMENT price, with exclusive quality.

t has been reported that the meeting is attended by 80 businessmen. However, “Commersant” found out that bread manufacturers, affected businessmen and representatives of Caesar Chocheli’s company are not invited to the meeting. Chairman of Supervisory Board of “TBC Bank” Mamuka Khazaradze told journalists that he welcomed such meetings and was sure that the country’s economic and strategic development in 2014 will be discussed at it. As the businessman says, the time has come to make more rapid coordination between the government and business circles. Mamuka Khazaradze notes the election results showed that not only business but also the entire population trusts the government and as the businessman adds, they came to this meeting with the same confidence .

BUSINESS January 20, 2014 #38

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MAJOR RETAIL CHAINS OF GEORGIA TALKING ABOUT INEVITABLE RISE IN PRICES

W INTEREST IN GEORGIA’S AIR TRANSPORTATION MARKET GROWS

o draw new wave of tourists and to increase the passenger turnover, the Government plans to actively cooperate with Wizz Air, the major low-cost airline in the Central and Eastern Europe. The airline management pledges to double the passenger turnover from Kutaisi Airport by summer 2014. The airline has served about 170 000 passengers for a year. “We are excited our airline is very popular among both Georgian and foreign visitors. We have served about 170 000 passengers for a period of one year. We plan to double the figure by summer 2014. Georgia has got the potential to develop the tourism and expand relations with western Europe and we are ready to back this direction and make considerable contribution to that”, Wizz Air President Joseph Varadi noted. Wizz Air’s activation and one-year successful cooperation will draw the interest of other lowcost airlines to Kutaisi International Airport. Today we have summarized the results of our oneyear cooperation and discussed issues related

to moving to the new stage. Thanks to bilateral negotiations, the airline will launch new flights to Vilnius and Lvov in March 2014. The new flights will enable passengers to travel to various destinations comfortably and at low tariffs. Our goal is to ensure formation of modern, safe and comfortable airport services and infrastructure and ensure valuable competitive environment for airlines”, Ketevan Aleksidze, a director for the Association of Georgian airports noted. Giorgi Kvirikashvili, Minister of Economy and Sustainable Development: “Wizz Air is a major carrier of tourists from Ukraine and Poland. The airline plans to add two new directions to Lvov and Vilnius in 2014”. Kvirikashvili has also talked with the airline head for adding a regular flight to Budapest. Moreover, the sides also discussed the issue for developing basis infrastructure of Wizz Air in Kutaisi. According to the last indicators, Wizz Air had got over 1000% upturn in flights from Kutaisi to European cities. Maia Arabidze

ith the sharp depreciation of the national currency, the representatives of major retail chains of Georgia are already talking about the inevitability of growth of retail prices for the products while in small shops prices have already started to grow. On January 13 Minister of Finance of Georgia Nodar Khaduri said that the rate of GEL had stabilized and further complications with the rate were not expected. “The National Bank carries out extensive activities and economic processes will not only slow down , but will be also accelerated, “ - said the Minister. However, owners of small shops interviewed by “Commersant “ say that lately prices of food

products have already started to hike- in particular, dairy products. Hypermarket chain “ Carrefour “ also states that in the event of further devaluation of the GEL , the rise in prices is inevitable. According to the network’s Director General Jean-Louis Clare , devaluation will necessarily affect the prices in “Carrefour “, despite the fact that the network management is doing everything possible in order to avoid this. Hypermarket chain “Goodwill “ doesn’t exclude hike in prices as well. “Importers already want to raise prices by 5-10% , but we do our best to keep prices at the same level , and while the depreciation of the GEL has no effect on our network , but if devaluation continues, it will become harder and harder to keep prices,” – “Goodwill” management notes.

TOYOTA COROLLA WILL BE HANDED OVER TO THE WINNER OF ROMPETROL PROMOTIONAL RAFFLE ON 15TH OF JANUARY vious year was successful for Rompetrol – Despite decreased consumption on the local market company’s sales have increased by 8%. Total amount contributed by Rompetrol to the Government budget was 83 520 463 GEL. In addition, last year the company has introduced and successfully implemented the new product EFix S euro 98, which represents super type of fuel and its sales have increased by 30% compared to year 2012. “In 2013 we were supplying the government with one of the most popular and sensitive product on the market RON 92 and we have successfully fulfilled our obligation. Number of our corporate clients has also substantially increased. Last year 7 additional stations were added to company’s network and 10 stations have been automated. Staff of the company has increased by 130 persons. Currently company’s network unites 72 gas stations” – says commercial director of the company Tengiz Chichinadze.

ucky customer and the winner of Rompetrol Georgia’s promotional raffle, resident of village Khando Tsalka district, director of the local public school Otar Vanadze will be handed over the raffle price Toyota Corolla today on 15th of January. Keys of the car will be handed over by Rompetrol Georgia’s General Director Nurken Murzagaliyev on the newly rebranded gas station located on the 9th kilometer of David Agmashenebeli valley at 11:30. Nurken Murzagaliyev will also sum up the results of the previous year and introduce strategies of the company for the year 2014. Rompetrol’s promotional raffle lasted for 44 days within company’s network country wide, customers received 1 ticket for every 20 liters of refill. More than 200 000 tickets participated in the raffle. Otar Vanadze had 14 tickets in possession out of which one turned out to be the winner. Lucky customer collected the tickets during refills made at Akhaltsikhe and Akhalkalaki stations.

“Rompetrol performs promotional actions quite often, it is the first time we have raffled a car, and we shall definitely have similar actions in the future. I would like to congratulate Otar Vanadze with his victory and wish him safe tripping. As for loyal customers together with high quality fuel we promise very interesting projects in the nearest future” – Says General Director Nurken Murzagaliyev. “I could hardly believe that it was possible to win anything until now. I mostly refill at Rompetrol stations despite the fact that the nearest station of the company is located in 100 kilometers from the village. Efix fuel is the best fuel. I was on the way home returning from Tbilisi when I received the call. I did not know what to do, I entered the house of residents of neighbouring village and asked them to switch on TV. I would like to thank this great company and show my appreciation for making me owner of such a good car” – Said Otar Vanadze. According to the company’s management, the pre-

Regarding the future plans of the company, this year we are planning stable and successful development, expansion and renovation of the network. “Within the scope of strategy for 2014 we are planning to expand our network with up to 15 stations with one of them located in the center of Tbilisi and the rest across the country regions. In addition, substantial investment will be made into rebranding of stations and what is the most important we promise customers democratic prices for fuel“ – says Nurken Murzagaliyev. Transnational Company Rompetrol represents one of the largest fuel suppliers on the Georgian Market. Headquarters of The Rompetrol Group is located in Amsterdam and unites up to 50 companies under its hood. Currently Rompetrol supplies the Georgian Market with 5 types of fuel. Three types of gasoline - Euro Regular, Efix Euro Premium, Efix S and two types of diesel - Efix Euro Diesel and Euro Diesel.

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LEVAN KALANDADZE: “SUSPENSION OF JVARI – KHORGA PROJECT IS AN IRRESPONSIBLE DECISION”

A GARIBASHVILI: KHUDONI HPP CONSIDERABLY DETERMINES GEORGIA’S ENERGY INDEPENDENCE

rime Minister Irakli Garibashvili commented about Khudon-hesi construction on the Thursday meeting with media. He said that he’d arrived to Mestia and met with local residents. “We, the state should play the role, which will not damage either sides. Neither investor, which is very important and valuable for us, but nature and citizens, are also valuable for us. We should find the mechanisms, which will not leave questions to each side. As I know, there are some questions, which

should ne removed, explanations should be made and then this issue will be solved. I’m sure that investor company and we will manage to make the process maximally transparent. The government, namely Ministry of Energy will supply detailed information to the society about the importance of the project. After the people learn about the perspectives and benefits, I’m sure they will not have questions any more”, - Garibashvili stated. He said that Khudon-hesi project considerably determines energy security of the country.

briefing regarding Reasons for Suspension of Jvari Khorga Power Transmission Line Project was held at the Agency Pirveli Press Club today. Levan Kalandadze Economic Expert, the Head of Non-governmental Organization Georgian Infrastructure Projects Initiative (GIPI), stated that artificial delay in construction project of 500 kv Jvari-Khorga High Voltage Power Transmission Line was an irresponsible decision and noted that it was the outcome of non-coordinated, inefficient activities of governmental agencies. “Today this project is artificially suspended due to irresponsible and superficial attitude of public agencies. For instance, the Ministry of Environment was unable to have prompt and effective coordination with the other governmental institutions and ministries. Now when International Financial Institutions already allocated EUR 77 million needed for construction of power transmission line, failure to reach an agreement on an Environment Impact Assessment Document becomes the ground for suspending and blocking the project”- said Levan Kalandadze. Jvari-Khorga Power Transmission Project represents one of the major components for Black Sea Power Transmission Network, being implemented by European Bank for Reconstruction and Development (EBRD), European Investment Bank (EIB), German Reconstruction Credit Bank (KFW) and European Commission Neighborhood Investment Facility (ECNIF) based on the request of the Government of Georgia. Total cost of the project constituted EUR 270 million. The second stage of this large-scale project pro-

vided for construction of approximately 60 km Jvari-Khorga 500 kv high voltage power transmission line and rehabilitation/reconstruction of Khorga (220 kv) station and construction of Jvari new (500 kv) station. The project and the Environment Impact Assessment were prepared by the European Bank for Reconstruction and Development (EBRD). At this stage EBRD and KFW already allocated investment amount of EUR 77 million. “It can be stated without exaggeration that suspension of Jvari-Khorga Power Transmission Line Construction is a completely irresponsible step and decision. This is a “brilliant” example of non-state attitudes demonstrated by governmental agencies”- added Levan Kalandadze.

KHUDONI: THE FUTURE OF GEORGIA’S ENERGY SUPPLY

hile there is fierce opposition to plans for the Khudoni Hydro Power Plant in Svaneti, the government and hydro power specialists maintain that it is a project that could revolutionize the future of Georgia’s energy sector. Georgia has an estimated 300 rivers with the potential to create energy, but is using just ten percent of them - a fraction of the 70 percent used by European countries, noted Nodar Begalishvili, the chairman of the Scientific Council at Georgian Institute of Hydrometeorology. Begalishvili, who has spent 44 years studying hydroelectric energy, believes hydroelectric energy - particularly large hydroelectric projects are Georgia’s future. Currently, Georgia’s annual electricity production is 10 billion kw/h. Begalishvili, however, believes Georgia can produce ten times that if Khudoni and other hydro power projects are built. “Of cause, we must construct Khudoni and as many more Hydro Power Plants [HPPs] as possible if we want to develop as a country,” he said. “[O]ur only natural wealth is water and hydro resources ...” Foreign investors appear to agree. Trans Electrica Ltd, an Indian company, plans to construct the Khudoni HPP in the Enguri river gorge in Mestia Municipality. The HPP’s planned capacity is in excess of 700 MW and planned annual generation is estimated at 1.5 billion kw/h. If constructed, Khudoni will become the country’s second largest HPP after Enguri, a 270-meter cascade HPP dam with a capacity of 1,320 MW and annual production potential of 3.8 billion kw/h. Enguri currently comprises approximately 35-40 percent of Georgia’s total electricity generation. By comparison, the Khudoni project includes a 200-meter high dam, currently slated to be constructed 31 kilometers from Enguri dam. Trans Electrica started constructionin 2012 and is expected to put the HPP into operation in 2018. Opposition to the dam includes locals who worry that their communities, homes and cemeteries will be flooded as a result of the dam. The controversy is not new: under the Soviet government, a similar project was planned in the late 1980s. It was halted, however, due to mass protests led by

late Prime Minister Zurab Zhvania. However, faced with pressure to diversity energy sources and increase electricity exports, in 2008 the Georgian government revisited the idea of building a new major hydro power station. When the Saakashvili government approved the Renewable Energy 2008 strategy, it included a list of hydro projects, including the Khudoni project, citing the need to create enough energy to export to bolster the country’s economy and self-sustainability. NGOs, many specializing in human rights and environment rather than in economic analysis and energy, have blasted the new project for its potential harm to the environment and property rights. A big concern of environmentalists is that going ahead with Khudoni project - spanning 1,538 hectares in total - would leave 528 hectares of land under water, displacing 2,000 people or 184 households from indigenous Svan communities. “The villages Khaishi and Chuberi, agricultural lands, pastures, parts of the forest, two churches, cemeteries, significant historical sites, includingKhaishi fortress [dating from the Middle Ages] and another still-to-be-studied archeological monument dating back to the first century ... will be either flooded or indirectly affected,” reported Green Alternative, a Tbilisi-based NGO and a major opponent of the project. Additionally, opponents argue that both the government and investors have failed to provide sufficient arguments concerning what makes Khudoni a “strategically important” project. WHY DOES GEORGIA NEED KHUDONI? For nine months out of the year, Georgia is self-sufficient in electricity. The majority of the country’s hydro energy comes from run-of-river plants, which benefit from Georgia’s rains and snow melts. Energy production is so high, even with small plants, that Georgia is an energy exporter in the summer. But in the winter, when the water flow is low, the country has to import electricity. According to official statistics, in 2012 Georgia imported 614.59 million kw/h electricity, buying most of it from Russia and a minor share from Azerbaijan and Turkey. The same year, Georgia exported 528.15 million kw/h to Russia, Turkey, Armenia and

Azerbaijan. The most successful year over the last decade was the rain-rich 2010, when Georgia was able to sell 1.5 billion kw/h electricity, an indicator of further potential for export - especially to energy-hungry Turkey - if Georgia can create the capacity necessary to stabilize its production. Export potential has swayed even former opponents to Khudoni: in 2012, the Georgian Dream Coalition campaigned against the project, as well as large dams in general. But, after coming to power, they have continued the former government’s energy policy, including plans for completing Khudoni. According to Deputy Energy Minister Ilia Eloshvili, currently Georgia pays up to $30 millionper year to Russia to buy electricity, the same as the budget funding for the Ministry of Sport and Youth Affairs in 2012. Official statistics show that Georgia’s electricity consumption increased from 8.6 billion kw/h in 2007 to 10 billion kw/hin 2012; hydro power covered 70 percent of that. “Georgia’s electricity deficit increases by 3-4% annually,” Eloshvili told Investor.ge “[I]t’s a must to use our hydro resources in order to meet the growing need and [avoid] dependence either economically or politically on any neighbor, in particular [considering] what a difficult region we live in.” The government’s expectations are high for fiscal indicators as well: the Ministry of Energy estimates that an investment of $1.2 billion will provide revenues in income tax of approximately $3 million annually during the construction period. “After it has been put into operation economic growth will be boosted by 2.7 percent per year. No other plant can bring such a huge benefit to Georgia; this is why we should do our best to construct Khudoni,” Eloshvili said. LARGE VS. SMALL But critics maintain the government’s current policy, known as Build-Own-Operate (BOO) the company that constructs the dam owns and operates it -puts more profits into investors’ pockets, than the government budget. Irakli Galdava, Research Fellow at ISET Policy Institute,believes the currenttransmission tariffis ahumble return on the massive capital outlays and environmental damage. “The build-own-operate (BOO) principle means that investors build a power plant -

own it forever - unless he/she decides to sell the HPP, and operates it. This means that the country should not expect to [acquire] a HPP in state ownership,” Galdava told Investor.ge. “Imagine that Enguri and Vardnili HPPs (both under state ownership), producing about half of [Georgia’s] total hydro generation and selling electricity at a price lower than 1.5 tetri, is under private ownership. What would be the price in this case? Definitely several times higher ...” Galdava recommends the government introduce a transfer to state ownership after a set period of time, a practice common in other countries. Green Alternative, which has been campaigning against large dam projects, believes the state will receive so little from Khudoni that it is not worth building. The government, however, maintains that smalland medium-sized HPPs alone cannot solve Georgia’s challenges. “We need big plants with dams. Electricity is not storable but we do have possibility to store water in reservoirs,” Eloshvili said. “This is how Enguri HPP operates - during the spring and summer seasons we keep water at the highest point to use it in winter. Such HPPs are called regulating ones as they help to dole out water resources seasonally. Khudoni will be such a type of HPP.” Murnam Margvelashvili, the director of Energy Studies at World Experience for Georgia (WEG), agrees. “Small HPPs are not an alternative to large ones. For instance, Khudoni’s capacity would be 700 MW, while Ortachala HPP’s (a medium-sized HPP located in Tbilisi and owned by the Czech Company Enrgo-Pro) capacity is 18 MW. This means we would need to construct as many as approximately 40 HPPs of this size to get the same capacity,” he said. Economists have also weighed in on the largeversus-big debate, noted ISET’s Galdava, and do not recommend relying only on small hydropower plants - an idea promoted by environmentalists. Currently, 27 mini HPPs are in operation with a total installed capacity of approximately 90 MW. Margvelashvili stressed that the Khudoni project is an opportunity, not a threat. “Sixty-five percent of our energy comes from outside sources. How can we miss such an opportunity?” he asked. Investor.ge

BUSINESS RATING January 20, 2014 #38

caucasian business week

GEORGIAN FUND TO INITIATE PROJECTS WORTH OVER $1BLN

he Co-investment Fund of Georgia (GCF) will initiate projects worth $1.150 million in 2014. Fund’s head Giorgi Bachiashvili told journalists that a few more projects may be added to the already planned list. “Also, I would like to stress that this amount will be used fully not only this year. Projects of such an amount will be initiated,” Bachiashvili said on January16. At this stage, the Co-investment Fund approved

one project on establishing an enterprise for processing milk. The fund will implement it jointly with the Ukrainian Tera food company and invest $50 million. GCF is a $6 billion private investment fund, with the mandate to provide investors with unique access through a private equity structure to opportunities in Georgia’s fastest growing industries and sectors. The fund was presented in Tbilisi on September 2013.

TELAVI AIRPORT TO LAUNCH TRAINING AND PRIVATE FLIGHTS IN SPRING

lights from Telavi airport will renew from April. At first training and private flights will be performed. Aviation university provided rehabilitation of the airport, for which 1,5 million GEL was spent instead of 500 000 GEL taken by investment obligations. The university reports that they will plan private flights with own, American-produced 6-seat Pit-

ter. The University also has 2-seat planes, which will be fully loaded. This year number of flight faculty members will increase. Newly rehabilitated airport is ready to serve international flights. Its improvement is over. Ministry of Economy and Sustainable Development gave Telavi airport Mimino to Aviation University with management and usage right before parliamentary elections 2012.

UKRAINIAN INVESTORS UNVEIL NEW HOTEL IN ACHARA

otel-casino Golden Palace Batumi was opened in Batumi. Adjara government informs that the hotel belongs to Ukrainian Wisher Enterpriser, which invested $15 million in the project. Hotel construction started in February of last year. Golden Palace Batumi has

51 rooms, casino and restaurant. The casino has 13 gambling tables and 75 slot machines. The company informs that they have been working with hotel and casino network Accor for many years. In the near future the company plans to build a new hotel in Georgia, which will start to operate with Novotel brand.

STATE INSTITUTION RAS AL HAIMA INVESTMENT INSTITUTION BECOMES AGAIN UNILATERAL OWNER OF POTI FREE INDUSTRIAL ZONE

ue to contracts sighed by unauthorized person, State Institution Ras Al Haima Investment Institution becomes again a unilateral owner of Poti Free Industrial Zone. On December 30,2013 Arabian state institution addressed to Public Registry Agency to annulate contracts on share sale of LTD Rakia Georgia in Free Trade Zone and change partner. Although due to failure to submit some documentation, registration process is suspended till now. Reason for contract cancellation on 15% share of Limiter partnership Manline Projects LLP was signing agreement by unauthorized person, who did not have a corporate consent on the sale of the share. Respectively, the contracts are annulated and Arabian investment institution becomes a 100% shareholder of LTD Rakia Georgia in the Free Trade Zone. Manline Projects will get back 2 GEL paid for the share.

Public registry explains that in the registration process has been determined that Anastasia Komido issues warrant on behalf of limiter partnership Manline Projects LLP; although document confirming her authority is not submitted. Therefore the agency requires submission of additional documentation. It’s noteworthy that Gela Mikadze is a representative limited partnership Manline Projects LLP. Criminal case is going against the businessman in Georgia. Mikadze is accused in sale of various amount of shares of the LTD Rakeen Development, LTD Ras AL Haima Authority Georgia and LTD Rakia Georgia in Free Industrial Zone, founded by Arabian companies subordinated to Ras Al Haima Sheikh (Ras al Haima Investment Institution (also known as Rakia) and Rakeen Development), to Bestford Development LLP and Manline Projects LLP. Till December 2012 Gela Mikadze was an executive director of Rakia Georgia Free Industrial Zone.

BANKING & INTERVIEW caucasian business week

“ARDI GROUP”: BANK SYSTEM FRUSTRATES BUSINESS SECTOR DEVELOPMENT An interview with the founder of the insurance company “Ardi” ARMAZ TAVADZE bility and if not the skillful actions of the National Bank, the banking system couldn’t have overcome the consequences of war and the global financial crisis in 2008. GEORGIAN BANKERS NEED TO UNDERSTAND THAT THE STRENGTH OF THE BANKING SYSTEM IS THE RESULT OF UNCONDITIONAL SUPPORT FROM THE STATE AND NOT THEIR GOOD MANAGEMENT. THEREFORE, THEY NEED TO UNDERSTAND THAT THIS SUPPORT CANNOT BE USED ONLY FOR THEIR OWN BENEFIT.

- What was the year 2013 like in terms ofdevelopment of business? What did a change of power in Georgia bring to business? - I will not be original in assessing the past year. It is obvious that business freed from a serious pressure, butbusiness activity in the country is still extremely low.Everyone is waiting for something. - What should government do in 2014 in terms of support of business? - First of all, I would like there was more respect for entrepreneurs and business people in the country. Everyone should understand that the welfare of every citizen ultimately depends on the amount of businessmen. Unfortunately, today in Georgia there is a serious shortage of young and progressive-minded entrepreneurs. In general, I cannot remember any new face in the Georgian business in the last 10 years. Secondly, I wish the state apparatus became more flexible. Obviously, today our state agencies are not as aggressive as before, but the bureaucratic thinking is still in the blood. I was dealing with a publicentity for almost a year but even for the most basic questions I have to spend enormous amounts oftime . - How can you explain the lack of new businessmen in the country? And what hinders the development of business in the country most of all? - Perhaps my answer will surprise a lot of people, but in my opinion, one of the major factors hindering the development of business in Georgia, is the banking system. Considering its unprofessional, overly rigid approach and the lack of necessary flexibility, it is a hindrance in the development of business in the country. I am confident that even Donald Trump would certainly go bankrupt in such a banking system. At the same time, by all accounts, the banking system is one of the most developed sectors of the Georgian economy, and one of the most advanced in the region. The banking system is the basis of financial sta-

I would like to ask the management of NBG to take more effective measures in order the country’s banking system to actually support business. In my opinion, the National Bank should be more active in the relationship between banks and customers. It is not enough to urge banks to be more active in lending business. Today, there is such a tendency that banks are always all forgiven. - What gives you a reason to make such harsh statements? I CAN GIVE A SPECIFIC EXAMPLE FROM MY OWN EXPERIENCE. IN 2008, WHEN OUR BUSINESS FACED SERIOUS PROBLEMS, I COULD NOT AGREE WITH ONE OF THE MAIN GEORGIAN BANKS ON DEBT RESTRUCTURING FOR 3 MONTHS. THE BANK CATEGORICALLY OPPOSED ANY DELAY, AND IN THE END I HAD TO GO BY PURELY GEORGIAN WAY - THROUGH OUR MUTUAL FRIENDS WHOSE OPINION WAS OF GREAT IMPORTANCE FOR THE MANAGERS OF THE BANK. Unfortunately, this is our current reality. At the same time in the Latvian branch of our company everything was exactly the opposite the banks representatives themselves came and offered us various restructuring options. I stress – they came themselves. I’ll never forget the words of the representative of the Latvian bank, when we negotiated with him about the restructuring “The sooner our economy gets out of the crisis, the more companies there will be in the country and the better it will be for us.” It would be good if someone from Georgian bankers thought so. Today our bankers offer lombard services rather than banking. It is difficult to talk about business when loans are issued only under material security. Today banks have excess liquidity, but few people take loans. Conduct an experiment - offer maximum financial security as collateral for a loan and the most absurd business idea, and come to the best Georgian bank. If financial security exceeds the amount you requested, a loan will no doubt be approved.

January 20, 2014 #38

NBG EXTENDS TEMPORARY MANAGEMENT PERIOD IN INVESTBANK FOR A MONTH

BG extended temporary administration term in Investbank. The bank reports that the supervisor will stay till the end of this month. Entrance of NBG temporary administration for 2 months in Investbank was related to failure to meet supervision capital requirements. Coefficient equaled to 11,826% and respectively was a little behind the norm. The bank meets to

all other parameters. InvestBank operates since 2003. After the changes made in the stockholder structure this year, 70% of the bank’s stocks belongs to Law Company Dimitry Alexidze and Vladimer Gabrielashvili, 30% - to TRENDFOR HOLDING LTD. Gabrielashvili and Alexidze own 35-35% of the stocks, Brenda Patricia Cocksage - 30%. Stock capital of the bank exceeds to 12 million GEL.

HALYK BANK PROFITS IN 2013 MARKED 804 487 GEL

SC Halyk Bank completed 2013 with 804 487 GEL profit (2012 loss - 0,7 million). By January 1, 2014 credit portfolio of the bank equals to 82 million GEL (01/01/13 -45 million GEL), deposits - 14 million GEL (01/01/13-8,3 million GEL). Annual growth of the loans is 82%, deposits 67%.

Overall obligations of the bank equals to 82,9 million GEL (01/01/13 -47,7 million), bank’s actives - 124 million GEL (01/01/13 - 70,6 million), market share - 0,8% (01/01/13- 0,5%). Kazakhstan People Bank (Halyk bank) is a founder of the bank. Halyk Bank Georgia got operation license at the beginning 2008. Stock capital equals to 40,7 million GEL.

VTB BANK PROFITS IN 2013 EQUALED 8.2 MILLION GEL

TB completed 2013 with 8,2 million GEL profit (3,8 million in 2012). By January 1, 2013 credit portfolio of VTB Bank Georgia equals to 505,2 million GEL (01/01/13 -371 million GEL), deposits - 518 million GEL (01/01/13 -371 million GEL). Annual growth of loan portfolio is 36%, deposits - 40%. By January 1 overall obligations are 749 million GEL. Bank’s actives equal to 826 million GEL (540,1 million GEL), market share - 5%

(01/01/13 -3,8%). Former United Georgian Bank operates since 1995. Russian VTB is owner of 96,31% of the Authorized capital of the bank, 2,08% belongs to Lakarpa Enterprises Limited affiliated to it. Russian Federation is Owner beneficiary of the 72,71% stocks. Stock capital of the bank equals to 77 million GEL (01/01/13 - 60,3 million GEL). VTB Bank Georgia is a member of international financial group and has the highest credit rating of BB among Georgian banks.

BTA BANK LOSSES IN 2013 MADE UP 4.4 MILLION GEL

SC BTA Bank (Georgia) completed 2013 with 4,4 million GEL loss (5,5 million GEL in 2012). By January 1, 2013 clients’ deposits equals to 42,3 million GEL (01/01/13-34,9 million GEL), credit portfolio - 57,3 million GEL (01/01/13-81,7 million GEL), overall obligations - 105,9 million GEL (01/01/12 - 97,5 million GEL). By January 1, 2014 bank’s actives are 128 mil-

lion GEL (01/01/13 -124 million GEL, market share - 0,8% according to this data. BTA Bank operates on Georgian market since 2001. 49% of its stocks belong to JSC BTA BANK, 51% - to Silk Road Financial Group. Large beneficiaries are Fund Samruk Kazina (39,92%) and George Ramishvili (31,16%). By January 1 Bank’s stock capital is 22,1 million GEL (2012 - 26,4 million GEL).

İŞBANK COMPLETED 2014 WITH 360 THOUSAND GEL LOSS

atumi branch of Turkish İşbank increased deposit portfolio to 3,5 million GEL, it’s 300% growth since the beginning 2013. By January 1, 2014 credit portfolio equals to 16,8 million GEL. The bank has obligations of 18,7 million GEL. The bank completed 2013 with 360 thousand GEL loss, let less in 2012 equaled to 330 thousand GEL.

Last year actives have doubled and by the end of the year equaled to 30,9 million GEL, market share is 0,2%. Batumi branch of Turkish İşbank got license on July 13, 2012. It’s represented with 1 branch and a service center (in Batumi airport) in Batumi. It will be opened in Tbilisi in spring of this year. Owner of 40,4% of the bank’s stocks is pension fund of the İşbank, 28,1% belongs to Republican People’s Party.

MONEY TRANSFERS INCREASED BY $21 MILLION IN DECEMBER

n December 2013 money transfers of $153,5 million were made to Georgia, which is $12 million more than in previous month. In November transfers were reduced by $8,1 million. According to statistic of National Bank, 1,4$ growth can be mentioned in comparison with the same period of last year. Over 94,4% of the money transfers made from abroad to Georgia comes on the 13 largest countries, transfers from where exceeded to $1 million in December. Source: National Bank

AZERBAIJAN January 20, 2014 #38

caucasian business week

AZAL RAISES PRICES FOR EXTERNAL FLIGHTS

zerbaijani Airlines (AZAL) has introduced fuel surcharge on its external flights since January 15, a move which impacted the minimal value of tickets. “Fuel surcharge for flights with the duration less than two hours is 12 euros for economy class, and 18 euros for business class, while fuel surcharge for flights with the duration longer than two hours is 18 and 27 euros respectively,” AZAL reported. The company will not apply fuel surcharge to the domestic flights. Spokesman for AZAL Maherram Safarli said fuel surcharge was introduced to save profitability of

the company following increase of excise taxes on fuel. “Many airlines use fuel surcharge and it is a worldwide practice,” he added. Being the biggest Azerbaijani airline and national flag carrier, and a regional and CIS leader in the number of new aircrafts, AZAL offers its passenger flights to European countries, the CIS, Middle East, and Asia. After purchasing new Boeing aircrafts for long-haul flights in 2014, the airline plans to open regular flights to several destinations in North America and Southeast Asia. The company cooperates with about 60 airlines to provide its passengers with an opportunity to travel freely around the world.

AZERBAIJAN PREPARING TO REACH EURO-4 ECO STANDARD

zerbaijan has bypassed Euro-3 ecological standards for vehicles preparing to reach the next standard. Director of the Azerbaijan Standardization and Certification Institute Sabig Abdullayev made the remark at a press conference on January 15. He went on saying that the application for Euro-4 will be made on April 1, 2014. Earlier, Prime Minister Artur Rasizade had signed a decree on the country’s transition to the Euro-4 standard from April. The Euro-4 ecological standard will be applied to the vehicles imported and manufactured in Azerbaijan to reduce the emission of vehicle pollutants into the atmosphere and improve the environmental situation in the country. Restrictions on the import of cars may insignificantly affect the cost of cars in the domestic market. The introduction of Euro-4 standard for vehicles bypassing Euro-3 is related to the high development rate of the country. Strengthening of ecological standards for vehicles is expected to contribute to the improvement of the environment and public health in the country. Abdullayev said, the processing capacity of the Azerbaijani State Oil Company SOCAR is able to produce gasoline and diesel fuel meeting Euro-3 ecological standard, which became possible as a result of the work carried out in the units of refineries. “Euro-3 standard applicable to fuel will be worked out jointly with the SOCAR and will be approved in the near future,” he said. The transition to higher standards applicable to fuel will be implemented in stages. Each transition to the next Euro standard requires approxi-

mately $1 billion. “Negotiations are also held with various centers on the implementation of the mechanism of gradual retirement of older cars, the use of which affect the environment and public health,” Abdullayev said. The quality of fuel produced in Azerbaijan is expected to be brought up to Euro-3 standards by late 2014. The diesel fuel produced by SOCAR already meets the Euro-3 standard. These standards are currently applied to vehicles and related spare parts in Azerbaijan and the fuel produced in the country. On January 9, at a meeting of the Cabinet of Ministers, Azerbaijani President Ilham Aliyev, said the country focuses on improving the environmental situation yearly. “Comprehensive measures are already adopted but we need to take even more serious measures. In particular, it is necessary to inspect once again the factors that pollute the air. Of course, we need to speed up the transition to the “Euro-3” standard. “Euro-3” is not the limit either. We need to do more work in connection with the “Euro-4” and “Euro-5” standards,” he said. SOCAR has been taking steps to improve the quality of its fuel since 2004 under this program, which consists of several stages. A great role in transition to the more modern standards belongs to the refineries operating in Azerbaijan. While works are under way to reconstruct old refineries, the construction of a new refinery has been planned in Baku. Further improvement of the quality of Euro-4 and Euro-5 gasoline standards will become possible after the commissioning of a new oil and gas processing petrochemical complex by SOCAR, which is planned to be operational in late 2020.

FIRST PHASE OF BAKU SHIPYARD TO COST $470M

he 1st phase of Baku’s shipyard project, being under construction in Garadagh district, will come on stream at the cost of 470 million dollars, Executive Director of Azerbaijan’s Investment Company (AIC) Rovshan Najaf said. “Once the shipyard comes on stream, it would undertake the construction of a wide range of specialized vessels and merchant ships including subsea vessels, anchor handling tug/ supply vessels, and multi-purpose offshore support vessels such as platform supply vessels, as well as tankers and cargo vessels,” Najaf said in an interview with “The Business Year’s Journal”. He went on to note that the yard will also have ship repair and conversion capabilities. “Although Keppel O&M owns just 10 percent of the project, it would have full responsibility for management and operation. The largest shareholder, at 65 percent, is SOCAR, followed by AIC, which owns 25 percent equity in the company,” Najaf said. The new shipyard which is jointly owned and developed by Azerbaijan’s state energy company SOCAR, AIC, and Keppel Offshore & Marine Ltd. (Keppel O&M) - a Singapore-based world leader in the maritime industry - was inaugurated

by Azerbaijani President Ilham Aliyev on September 20, 2013. Najaf also noted that, when completed, the shipyard is able to undertake up to 100 repairs and conversions per annum. The plans for the second phase of the construction include construction of a graving dock with added facilities for offshore projects. “With highly skilled human resources, worldclass expertise and know-how, as well as wellstructured capital investments, we will not have to wait too long to see the shipyard becoming a globally recognized center of excellence in shipbuilding, repair, and conversion. Baku Shipyard Company LLC will be meeting not only local demands in Azerbaijan, but also that of the littoral countries of the Caspian basin. It also will become an important production hub for maritime industries in the region,” Najaf noted. The shipyard is being built on an area of 880,000 square meters, with closed production area of 75,000 square meters. The length of berths is 1,300 meters. The plant’s production capacity is 25,000 tons of steel per year. The facility is designed to produce annually four tankers with deadweight of 15,000 tons or two tankers with deadweight of 70,000 tons.

WB PREDICTS 5.3 PCT GDP GROWTH IN AZERBAIJAN

he World Bank (WB) has improved its forecast for GDP growth in Azerbaijan in 2014. The WB report “Global Economic Prospects” published on January 15 says that during the year the country’s GDP will grow by 5.3 percent. The previous forecast of the Bank released in June 2013 expected growth of the Azerbaijan’s economy at the level of 4.8 percent. Economic activity strengthened in the Europe and Central Asia region in 2013 supported by strengthening external demand. The return to growth in the Euro Area in the second quarter of 2013 supported real side activity in the region, particularly in the Central and Eastern European countries, due to strong trade linkages, according to the bank.

The performance among the Commonwealth of Independent States has been mixed. “Among energy-exporting countries (Azerbaijan, Kazakhstan, and Uzbekistan), activity has remained strong, reflecting relative strength in energy-related commodity prices, expansion of production in extractive sectors, and robust growth in domestic demand,” the report said. The GDP forecast for the next 2015 year remains unchanged and sets at 4.5 percent level. While in 2016, according to the WB, the growth will be 3.9 percent. The bank forecasts the ratio of current account surplus to GDP to reach 15.9 percent in 2014, 14.3 percent in 2015, and 12.5 percent in 2016. In 2013, according to preliminary estimates of the bank, the figure was 17.7 percent.

WB, AZERBAIJAN SIGNS $42 MILLION FUNDING AGREEMENT

he World Bank (WB) and the Azerbaijani government signed a $42 million agreement on additional funding for a municipal waste management project in Azerbaijan. The news was announced by the Azerbaijan Economy and Industry Ministry on January 11. The document was signed by Azerbaijani Minister of Economy and Industry Shahin Mustafayev and WB manager on Azerbaijan Larisa Leshchenko. Some 1.8 million tons of solid waste is generated in Greater Baku per year. The bank’s experts believe that this figure will double in the next 20 years due to demographic growth and an increase in the income of the agglomeration population, the WB calculations show. The project was approved by the WB Board of Directors in June 2008, and its implementation began in 2009. The total cost of the project is $ 41.5 million, $29.5 million of which accounts for a WB loan, while the Azerbaijani government finances the remaining part. A twenty-year strategy of solid waste management in the capital and a plan for the development of the waste collection system were prepared, and primary research on municipal waste management in Azerbaijan was conducted as part of the project. The bank has financed more than 50 projects worth more than $3 billion after Azerbaijan joined it in 1992. The WB previously announced the start of drafting a new strategy of operation in Azerbaijan, while the implementation of the previous strategy for the period of 2011- 2014 will be completed in the middle of this year. The new strategy will include several new spheres of activity. New directions could include the development of alternative energy sources and reform of higher education with an emphasis on technical and vocational education, as well as a healthcare financing system. The Bank’s Regional Director for the South Caucasus Henry Kerali is expected to visit Baku in

January to discuss the bank’s strategy in Azerbaijan. WB TO ASSIST AZERBAIJAN’S JUDICIARY SYSTEM The bank has also started developing a new project to upgrade Azerbaijan’s judiciary system. “The mission plans to discuss the ‘Judicial Services and Smart Technologies Project’ (JSSTP) with the country’s government,” the WB said. The project envisages the development of infrastructure and the introduction of advanced technologies in the country’s judicial system. It will also cover issues related to the system’s institutional development, new procedures, and approaches. The project budget is estimated at $ 100 million. “Once the mission’s assessment work is summarized, a stage of negotiations will start with the Azerbaijani government,” the Baku office said. “Their start is expected at the end of the first quarter of this year.” The first loan for Azerbaijan’s judicial and legal system was approved by the WB Board of Directors on June 29, 2006. At the total value of $35.6 million for a five-year project share of bank credit, it amounted to $21.6 million. The Japan Special Fund gave a grant of $3 million, while the share of the Azerbaijani government amounted to $11 million. The WB granted a loan through the International Development Association (IDA) on standard terms, that is, 35 years with a grace period of 10 years and an interest rate of 0.75 percent per annum. At the end of a 10-year grace period, the loan payments will be at the rate of 1.25 percent, while it will be at a rate of 2.5 percent from 2026 to 2041. In 2011, the WB board approved additional funding for this project with the sum of $9.2 million through the IDA, and a $24.2 million loan from the International Bank for Reconstruction and Development (IBRD). The government share in the project amounted to $28.3 million, and the total amount of funding for the project is estimated at $61.7 million.

ARMENIA caucasian business week

OKTOGO.RU: YEREVAN AMONG RUSSIAN TRAVELERS’ TOP TEN DESTINATIONS IN CIS IN 2013

ussian Oktogo.ru online hotel reservation service has named top ten cities in the Commonwealth of Independent States that attracted Russian travelers in 2013 – Kiev, Minsk, Odessa, Kishinev, Almaty, Baku, Lviv, Astana, Yerevan and Tashkent. “In 2013, Russian citizens traveled to CIS countries for three days, on average, and paid about 3,400 rubles a day,” said Olga Favarizova, chief of the Travel.ru (Oktogo) company’s operational unit. “These figures remained almost unchanged, compared with 2012, but the number of trips to CIS countries’ cities with online booking via Internet rose more than twice.” According to Oktogo.ru, the longest trips in 2013 were made by Russians to Yerevan – for six days, on average, and the shortest to Minsk – for two days. Astana, the capital of Kazakhstan, was singled out in as the Oktogo.ru ranking as the most expensive city, and Kishinev, the capital city of Moldova, as the most consumer-grade city. Russians paid 6,300 rubles, on average, for per-day accommodation in hotels in Astana, while in Kishinev they paid 2,700 rubles. Oktogo.ru also mentioned Yerevan’s sights attracting Russians. Many parks, the Yerevan for-

tress of the 16 century and Matenadaran, the museum of ancient manuscripts, are among them. Opera and Ballet Theatre with Philharmonic Hall, Chamber Music House and other pieces created by Armenian architects are mentioned as well. In Oktogo.ru ranking, Ukraine, Belarus, Kazakhstan, Moldova, Azerbaijan, Armenia and Uzbekistan are pointed out as the most popular CIS countries for Russians. In 2013, Russian tourists travelling independently stayed in Ukraine four days, on average, paying about 3,100 rubles per day for accommodation, and in Kazakhstan three and a half days, paying more than 5,000 rubles. Oktogo.ru hotel reservation service is included in Travel.ru (Oktogo) company, which also includes Travel.ru tourist portal. More than 3 million people visit Travel.ru and Oktogo.ru every month. Oktogo.ru offers 350,000 hotels across the world and the largest number of hotels in Russia – more than 5,500. Clients can pay for accommodation in hotels by bank cards and online money as well as by cash in ATMs and retail networks. National Geographic Traveler named Oktogo.ru the best Internet service in 2012 and 2013. The general investor of Travel.ru (Oktogo) is Mangrove Capital Partners.

GAS AGREEMENT WITH RUSSIA IS THE MOST PROFITABLE: ECONOMY MINISTER

he Minister of Economy of the Republic of Armenia Vahram Avanesyan considers the gas agreement signed with Russia to be the most profitable for the country. “I do not think that we had another way to have a more profitable agreement. I am certain that the signed agreement is the most profitable for Armenia”, - said the Minister, touching upon the critics by the ex-president of Armenia Robert Kocharyan on the gas agreement. The Government of the Republic of Armenia approved the agreement of the sale and purchase of the ArmRusgasprom’s shares. According to the agreement on the sale and pur-

chase of the CJSC ArmRusgasprom’s shares and other activity conditions between the Governments of the Republic of Armenia and the Russian Federation signed on December 2 2013 in Yerevan, by January 17 2014 the Armenian Government should provide for the signing of the agreement of the sale and purchase of 20% of the ArmRusgasprom’s shares. After the signing of the agreement, the Government will compensate ArmRusgasprom at the expense of the money funds got from the Gazprom. In the forthcoming five years the Russian Federation will supply 1000 cubic meters of gas for $189 to our country.

ARMENIA’S ECONOMIC GROWTH TO MAKE 5% IN 2014-2016: WB

he World Bank evaluated the Armenia’s economic growth of 2014-2016 to be about 5%. Armenpress reports that it is mentioned in the January report of the World Bank’s “Global Economic Prospects” report. The WB experts forecast that the rates of the world economy growth will increase in the current year making it 3.4%. The initial acceleration of growth will be mainly provided by the countries having high

income level. Though the sharp decline in Russia contains great risks for many of the CIS countries, especially those countries, which mainly depend on Russia from the point of view of the import, transfer flows and foreign investments. These countries are Armenia, Kyrgyzstan, Moldova, Tajikistan and Uzbekistan. Developing countries’ GDP growth rates are expected to increase from 4.8% in 2013 to 5.3% in 2014, 5.5% in 2015 and 5.7% in 2016. According to WB’s forecasts, Armenia’s GDP was expected to grow by 3.2%. As per the World Bank projection, Armenian economy will grow by 5% in 2014-2016. The World Bank’s GDP growth projections for 2013 for CIS countries are as follows: Turkmenistan – 10.1%, Uzbekistan – 7.4%, Tajikistan – 7%, Kazakhstan – 6%, Moldova – 5.5%, Azerbaijan – 4.9%, Belarus – 1%, Ukraine – 1.1%, Georgia – 2.5%.

January 20, 2014 #38

ARMENIA OCCUPIES 57TH POSITION IN FOOD INDEX

rmenia occupied the 57th position among 125 countries of the world in the Food Index published by Oxfam charity organization. Around the world, one in eight people go to bed hungry every night despite there being enough food for everyone. Overconsumption, misuse of resources and waste are common elements of a system that leaves hundreds of millions without enough to eat. To better understand the challenges that people face getting enough of the right food, Oxfam has compiled a snapshot of 125 countries indicating the best and worst places to eat. The data

has been compiled below in an interactive graph - the countries towards the right of the graph are those where people have particular challenges in getting enough of the right food. Our country recorded positive results. The Netherlands nudged past France and Switzerland as the country with the most nutritious, plentiful and healthy food, while the United States and Japan failed to make it into the top 20, a new ranking released by Oxfam on Tuesday showed. Chad came in last on the list of 125 nations, behind Ethiopia and Angola, in the food index from the international relief and development organization.

ARMENIA POSITIONS 41ST IN THE WORLD: ECONOMIC FREEDOM INDEX

he Heritage Foundation and The Wall Street Journal released the 2014 Index of Economic Freedom, where Armenia took the 41st place among 178 countries and the 18th place among the European countries. Over the 20year history of the Index, Armenia has improved its economic freedom score by 26,7 points, the fourth largest score increase. Armenpress reports, citing the official website of The Heritage Foundation that recording score improvements in eight of the 10 economic freedoms, including monetary freedom, management of public finance, trade freedom, and financial freedom, Armenia has advanced to economically “moderately free” today. The average annual income in Armenia is $5838 and the inflation is 2,5%. Facilitated by the broad advancement of

economic freedom, diversification of the economic base has enhanced Armenia’s economic dynamism and reduced poverty. Armenia’s economic freedom score is 68,9, making its economy the 41st freest in the 2014 Index. Its overall score has declined by 0,5 point from last year, primarily due to combined deteriorations in investment freedom, business freedom and fiscal freedom. Nonetheless, substantial challenges remain, particularly in implementing deeper institutional and systemic reforms that are critical to strengthening the foundations of economic freedom. Both the protection of property rights and freedom from corruption are far below world standards and the legal framework continues to be weak. The Index covers 10 freedoms – from property rights to entrepreneurship – in 186 countries.

ARMENIA’S MINISTER OF ECONOMY AND GEORGIAN AMBASSADOR DISCUSS FURTHER COOPERATION ISSUES

he Minister of Economy of the Republic of Armenia Vahram Avanesyan along with Ambassador Extraordinary and Plenipotentiary of Georgia to the Republic of Armenia Tengiz Sharmanashvili held a discussion on issues related to Armenia’s membership with the C ustoms Union and in this context further cooperation between the Republic of Armenia and Georgia. “Armenpress” was informed from the Department for Mass Media and Public Relations of

the Ministry of Economy that at the course of the meeting the interlocutors discussed a number of issues related to the development of bilateral economic relations between the Republic of Armenia and Georgia, in particular, the sides stressed the importance of holding the consecutive session of the inter-Governmental C ommittee of the economic cooperation between the Republic of Armenia and Georgia, as well as the first meeting of the Armenian-Georgian joint working group on the upcoming tradeeconomic affairs.

ARMENIAN SHOE MANUFACTURERS READY TO ENTER INTERNATIONAL MARKET

he fame of the shoes of Armenian production has faded due to different problems, though the strategy of the sector development allows to positively predisposing towards the future of the shoe production. The Armenpress correspondent tried to touch the pulse of the local shoe manufacture, touching upon the post-Soviet decline of the volumes of the shoe production, the raw leather exported from Armenia to Turkey, the flood and pricing pressure of the Chinese-Turkish production in the local market, the introduction of the international leading design methods in Armenia and other issues. Blissful past, restraint present, unrealized potential of the shoe production and the Russian market In the Soviet times Armenia was one of the main centers of shoe production. In 1990 18 million pairs of shoes were produced in our country, 70% of which with natural leather. 80% of the shoe production is centralized in Yerevan. At present 600-700,000 pairs of shoes are produced in Armenia, about 20 times less than the indicator of the Soviet times.

Turkish “obstacle” of the shoe production development and the development strategy of the light industry The Government of the Republic of Armenia declared the light industry a priority sector. On December 6 the industrial council at the Prime Minister of Armenia approved the light industry strategy and action plan. According to the document, in 2018 it is intended to sell shoes costing about $37 million and in 2023 $75-80 million. In 2012 shoes costing about $15 million were sold in Armenia. It is also intended to make the export of shoes from the current $1,6 million to 45 million in 2023.

CIS January 20, 2014 #38

caucasian business week

TURKMENISTAN’S GDP GROWTH RATE UPS

urkmenistan’s GDP growth rate amounted to 10.2 percent in 2013, the Turkmen Ministry of Economy and Development reported. The GDP growth rates amounted to 10.2 percent in 2013, the growth rates in industry was 7.3 percent, and 17.3 percent in construction. The volume of capital investments increased by 7.1 percent compared to 2012 and amounted to over 46 billion manat, the ministry said. The volume of the foreign trade turnover exceeded $31 billion during the reporting period. The ministry says that it was possible to keep the inflation level “in the prescribed limits. Also, thanks to attraction of investments, large socio-economic projects are implemented in Turkmenistan. The ratio of this figure to GDP amounted to 46.7 percent. Turkmenistan holds one of the key positions in

the region for supplies of natural gas, which is imported by Russia, China and Iran. In 2013, the growth rates in natural gas production in the country amounted to 100.1 percent, oil and gas condensate was 102.1 percent, and associated gas 102 percent, according to the ministry. Ashgabat’s official data generally confirms the predictions of international financial institutions. International Monetary Fund expects that Turkmenistan’s economic growth will reach 10.1 percent in 2013 and 10.7 percent in 2014. The European Bank for Reconstruction and Development (EBRD), in turn, expects that economic growth of Turkmenistan will reach 10 percent in 2013 and 2014. EBRD said that the economic growth remains relatively high thanks to the implementation of a number of major projects for production of natural resources.

EBRD CUTS INVESTMENTS AS RUSSIA’S BUSINESS APPEAL DECLINES

he European Bank for Reconstruction and Development said Wednesday it had cut investment in new projects in Russia in 2013 due to the country’s declining attractiveness to private foreign and domestic investors. The bank said that its new investments in Russia fell sharply, from 2.6 billion euros ($3.54 bln) in 2012 to 1.8 billion euros ($2.46 bln) last year, reflecting “particularly difficult economic and investment conditions” in the country. “However, Russia has been and remains the largest country of operations for the EBRD and the Bank is fully committed to continuing its very deep involvement in the country,” the bank said in a statement. Russia recorded average annual growth of 7 percent between 2000 and 2008. The economy rebounded after a 2009 recession, but slowed from 4.3 percent growth in 2011 to 3.4 percent growth in 2012. Last year, Russia’s gross domestic product grew by an estimated 1.4 percent, its lowest level since the 2009 recession. Ksenia Yudayeva, first deputy chairwoman of Russia’s Central Bank, said Wednesday that the country was suffering from stagflation, a com-

bination of stagnant economic growth and high inflation. The Economy Ministry revised long-term growth forecasts in November and now expects GDP to expand 2.5 percent annually through 2030, significantly below a forecast for the global economy of more than 3.5 percent. Economic Development Minister Alexei Ulyukayev warned last year that the country’s model of economic development over the last decade, in which Russia was propelled to relative prosperity on the back of surging oil prices, was now exhausted. Investors usually avoid emerging markets like Russia in periods of turmoil, preferring to seek safe havens in developed markets.

ALMATY TO HOST EURASIAN BUSINESS FORUM RUSSIA RANKS 140TH IN ECONOMIC FREEDOM INDEX

ussia ranked 140th out of 186 countries, placing it between Tajikistan and Burundi, on the 2014 Index of Economic Freedom released Wednesday by the Heritage Foundation think tank. The country scored 51.9 economic freedom points, which is 0.8 points higher than in the previous year, but still below the global average. Heritage Foundation noted improvements in four out of 10 economic freedoms, including control of government spending, but reported declines in trade freedom, freedom from corruption and fiscal freedom.

Over the two decade history of the index, Russia’s results have generally been poor, with the score over that period only ever improving by less than one point in any given year. “Overall, notable improvements in trade freedom and monetary freedom have been largely offset by substantial declines in investment freedom, financial freedom, business freedom, and property rights, and Russia’s economy remains ‘mostly unfree,’” the Heritage Foundation said. The think tank also described “fragile” foundations for sustainable development, “endemic” corruption and the state’s overbearing role in the economy.

US AGRICULTURAL GROUP BUYS INTO UKRAINIAN AGRIBUSINESS – REPORT

S agricultural trading giant Cargill has paid $200 million for a 5 percent stake in Ukraine’s largest agribusiness holding, the Financial Times reported Sunday. The deal values Ukrainian billionaire Oleg Bakhmatyuk’s UkrLandFarming – the world’s eighth-largest cultivator of land and secondbiggest egg producer, according to the Financial Times – at $4 billion. Ukraine contains some of the world’s richest

farmland, and the former Soviet country is likely to boost its exports to emerging markets, particularly China, in coming years, the Financial Times said. Bakhmatyuk said last year that UkrLandFarming had pulled back from plans for an initial public offering, and would instead seek private investors, according to the Reuters news agency. Cargill confirmed the purchase of the stake in UkrLandFarming, but said it was not seeking to control, manage or operate the business, the Financial Times reported.

IN 2013, MOLDOVA EXPORTED MORE TO EU, LESS TO CIS

oods exports have significantly increased in November 2013. Moldovan National Bureau of Statistics reported that exports increased in November by 12.4% more than in October 2013 and by 17% more than November 2012. Exports were worth $252.7 million. Goods imports increased by 1.4% compared to a month before. However, the country imported less by 2% compared to November 2013. Imports were worth $487.2 million. Based on the data, Moldova exported more to the European Union (EU) member states than to the Commonwealth of Independent States (CIS).

Exports to the EU amounted $1038.9 million in January-November 2013, which is by 12.7% more compared to the same period a year before. Export quota to the EU was about 47.3%. A decrease in exports to the CIS was registered during January-November 2013 compared to the same period of 2012. Therefore, export quotas to this region decreased from 43.2% (in JanuaryNovember 2012) to 38.8% (in January-November 2013). Total value of exports to this region amounted $853.5 million. Among the top export destinations were Russia, Romania, Italy, Ukraine, Turkey, Germany, the UK and others.

he Eurasian business forum will be held in Almaty on April 17-18, 2014. Chairman of the organizing committee of the forum Kuanish Dautov told journalists on January 16, adding that it will continue in May, 2014 in Astana under the auspices of the Astana economic forum. The event is aimed to discuss integration, economic, trade and business processes once again. “Today, the business in Kazakhstan hasn’t yet

managed to fully assess all the advantages of joining the Eurasian Economic Union. Therefore we are preparing to clarify and discuss this and other issues in the upcoming forum,” Dautov said. He also said that presidents of Kazakhstan, Russia and Belarus have also been invited to the Eurasian business forum. “This is another opportunity to “compare notes” before the May meeting of leaders of the Customs Union, which will be held after the Eurasian Business Forum,” Dautov added.

NO KLM FLIGHTS TO MOLDOVA TO BE EXPECTED IN THE NEAR FUTURE

alks without results have been conducted on Thursday in the Netherlands. Moldovan Prime Minister Iurie Leanca met with Vice President of KLM Royal Dutch airline, Bruce P. Dönszelmann, to discuss the launching of a direct flight between Chisinau and Amsterdam in the near future. The KLM official said that the airline is currently exploring the Moldovan market, especially the services provided by the Moldovan carriers. In a comment for Moldova.ORG, KLM media relations team said that the airline has no plans to operate any flights between the Netherlands and Moldova. “At this moment no plans have been made regarding KLM possibly operating flights between Amsterdam and Moldova. KLM always talks with other airlines to explore potential cooperation between carriers,” said KLM’s Lisette Ebeling Koning in a statement for Mol-

dova.ORG. Over 45.000 passengers have been transported in 2003-2005 on Chisinau-Amsterdam route. However, no more direct flights between the two cities are available. Moldova joined the Single European Sky (SES) in 2012, which has eliminated any operation restrictions for airlines flying from Moldova to any EU destination. Passenger flow has registered an increase by 20% after the country joined the SES. The main transit spots have been Munich, Vienna, Bucharest and Riga.

RUSSIA BANS FRUITS AND VEGETABLES FROM MOLDOVA AND BELGIUM

ussian Federal Service for Veterinary and Phytosanitary Surveillance, Rosselkhoznadzor announced on Thursday that 113 tons of vegetables and fruits originating from Moldova and Belgium were banned from entering the Russian Federation. Rosselkhoznadzor claims in a press release that

in nine cases, importers did not have valid quality certificates for the products transported. The verifications have been undertaken at Smolensk and Bryansk checkpoints during January 3-8, 2014. Russia warned Moldova that vegetables and fruits are also likely to face import bans after the embargo on Moldovan wine imposed on September 10, 2013.

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January 20, 2014 #38

WORLD NEWS January 20, 2014 #38

caucasian business week

TOP 10 RISKS FOR THE DECADE AHEAD

hat are the top 10 risks that the world will face in the decade to come, and what can be done

about them? The Global Risks 2014 report calls attention to risks that could ripple through entire systems. It aims to improve collaboration among business, governments and civil society by raising awareness of these risks and the way they interact with each other. Based on a survey of the World Economic Forum’s communities, the report maps 31 global risks in five categories (economic, environmental, geopolitical, technological and societal) according to level of concern, likelihood and impact, and interconnections between them. Here is a list of the top 10 global risks of highest concern in 2014, according to the report:

jobs) remains prevalent, especially in emerging and developing markets. 3. WATER CRISES Environmental risks feature prominently on this year’s list. Water crises, for instance, rank as the third highest concern, illustrating a continued and growing awareness of the global water crisis as a result of mismanagement and increased competition for already scarce water resources. 4. SEVERE INCOME DISPARITY Closely associated in terms of societal risk, income disparity is also among the most worrying issues. Concerns have been raised about the squeezing effect the financial crisis had on the middle classes in developed economies, while globalization has brought about a polarization of incomes in emerging and developing economies.

risks on key development and security issues, such as food security and political and social instability, ranked 8th and 10th respectively. 7. GLOBAL GOVERNANCE FAILURE The risk of global governance failure, which lies at the heart of the risk map, was viewed by respondents as one of the risks that is most connected to others. Weak or inadequate global institutions, agreements or networks, combined with competing national and political interests, impede attempts to cooperate on addressing global risks. 8. FOOD CRISES One of the top societal risks in the report, food crises occur when access to appropriate quantities and quality of food and nutrition becomes inadequate or unreliable. Food crises are strongly linked to the risk of climate change and related factors.

1. FISCAL CRISES IN KEY ECONOMIES Fiscal crises feature as the top risk in this year’s Global Risks report. Advanced economies remain in danger, while many emerging markets have seen credit growth in recent years, which could fuel financial crises. A fiscal crisis in any major economy could easily have cascading global impacts.

5. FAILURE OF CLIMATE CHANGE MITIGATION AND ADAPTATION Even as governments and corporations are called upon to speed up greenhouse gas reduction, it is clear that the race is on not only to mitigate climate change but also to adapt. Failure to adapt has the biggest effect on the most vulnerable, especially those in least developed countries.

9. FAILURE OF A MAJOR FINANCIAL MECHANISM/ INSTITUTION Over five years after the collapse of Lehman Brothers, the failure of a major financial mechanism or institution also features among the risks that respondents are most concerned about, as uncertainty about the quality of many banks’ assets remains.

2. STRUCTURALLY HIGH UNEMPLOYMENT/ UNDEREMPLOYMENT Unemployment appears second overall, as many people in both advanced and emerging economies struggle to find jobs. Young people are especially vulnerable – youth unemployment is as high as 50% in some countries and underemployment (with low-quality

6. GREATER INCIDENCE OF EXTREME WEATHER EVENTS (E.G. FLOODS, STORMS, FIRES) Climate change is the key driver of uncertain and changing weather patterns, causing an increased frequency of extreme weather events such as floods and droughts. The Global Risks 2014 report draws attention to the combined implications of these environmental

10. PROFOUND POLITICAL AND SOCIAL INSTABILITY At number 10 is the risk that one or more systemically critical countries will experience significant erosion of trust and mutual obligations between states and citizens. This could lead to state collapse, internal violence, regional or global instability and, potentially, military conflict.

RICH NATIONS TO GET RICHER: WORLD BANK RAISES FORECAST TO 3.2% GROWTH

he world economy has reached a turning point five years after the global financial crisis hit. The World Bank expects growth to pick up in 2014 led by the US, Europe, and Japan, and warns of ‘turbulence’ from a slowing China as well as US tapering. Overall, the Washington-based organization sees the world economy expanding 3.2 percent in 2014, in their first report of the year, ‘Global Economic Prospects’, a bi-annual publication published Tuesday. The Bank has bumped up expectations for “highincome countries”, which they say will grow 2.2 percent in 2014, up from 1.5 percent in 2013. “This strengthening of output among high-income countries marks a significant shift from recent years when developing countries alone pulled the global economy forward,” the report said. A growth pick up will be supported by the US, which has shown strong signs of recovery and the

18-member euro currency zone, which dragged down other economies in 2013 on weak consumer demand and imports. Increased import demand should help compensate for more US tapering measures, which could deliver a big blow to emerging markets. Developing markets are vulnerable to risk both from China and US tapering, and commodities will continue to be sensitive to both factors. The US began its tapering program in December which reduced its bond-buying stimulus to $75 billion-per-month, a measure which has helped stabilize financial markets after the 2008-2009 crisis. Further scale-back under the new Fed chair could have a negative spillover effect in emerging markets, but the World Bank believes strong growth will counter and normalize such market shocks. China’s economic growth, which dropped below 8 percent for the first time in 20 years, will continue to slow. GDP is estimate to remain ‘flat’ at

7.7 percent, and then decrease to 7.5 percent in 2015 and 2016. Growth in the world’s secondlargest economy has been lackluster because it is shift into a more sustainable consumption-based, instead of an export-led economy, which led to sensational growth in the 90s. Russia’s economic growth is set to accelerate to 2.5 percent this year from 1.4 percent in 2013, according the government. The World Bank optimistically forecasts growth at 2.2 percent in 2014, 2.7 percent in 2015, and 3.0 percent in 2016. Projections for BRICS countries were cut. Brazil’s growth forecast was cut to 2.4 percent from 4 percent, for Mexico to 3.4 percent from 3.9 percent and for India to 6.2 percent from 6.5 percent. Developing countries will accelerate ‘modestly’ between 2013 and 2016, but “the slower growth is not cause for

concern” the report said. World Bank forecasts are routinely cut and modified throughout the year, and the report will serve as a foundation for further analysis throughout 2014. Rt.com

PUBLICITY caucasian business week

January 20, 2014 #38

TBILISI GUIDE January 20, 2014 #38

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

January 20, 2014 #38