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BUSINESS WEEK February 3, 2014 #40

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February 3, 2014, Issue 40

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BE INFORMED, DO BUSINESS

NBG President Predicts the Strengthening of GEL in the Medium Term Pg. 2

GEORGIA

ECHOES OF EVENTS IN UKRAINE EXPECTED TO RESONATE IN GEORGIA

ome experts estimate that developments in Ukraine will have a negative impact on the Georgian economy. Pg. 2

David Narmania: 1-billion-cost Khudon-hesi is especially important for the country, which depends on the investments Pg. 7

ARAB “ RAKIA “ INTENDS TO INVEST IN THE CONSTRUCTION OF MEDIUM-SIZED HPPS

rab company “Rakia” , which is one of the founders of the Georgian Co-investment Fund, intends to invest in the construction of medium-sized HPPs in Georgia. Pg. 7

BANKS’ ACTIVES INCREASED TO 17,3 BILLION GEL LAST YEAR

y January 1, 2014 overall actives of the banks equaled to 17,3 billion GEL (01/01/13-14,4 billion GEL). National bank informs that in December actives increased by 0,8 billion GEL (4,9%). Pg. 8

AMERICAN INVESTORS INTERESTED IN ANAKLIA PORT TO ARRIVE IN GEORGIA

eputy Minister of Economy: The aim of the meeting is to obtain the detailed information about the project. Pg. 9

AZERBAIJAN SOCAR COMMISSIONS NEW WELL ON UMID FIELD

zerbaijan’s state oil company SOCAR has commissioned a second production well on the Umid gas condensate field in the Azerbaijani sector of the Caspian Sea. Pg. 10

2013 GEORGIAN ECONOMY INCREASED BY 3,1%

n 2013 Georgian economy increased by 3,1%. This is a preliminary data. According to preliminary data of Geostat, in December 2013 real GDP growth equaled to 8,4% in comparison with the same period 2012, in the 4th quarter 2013 - 6,9%. According to latest data, in the 4th quarter economic growth accelerated in Georgia. Preliminary data also adjusted. In October GDP growth equaled to 4,3%, instead of 4,1%; in November - 8% instead of 7,8%. It’s noteworthy that Geostat makes monthly preliminary evaluations of economic growth since January 2012.

CIS S&P CUTS UKRAINE FOREIGNCURRENCY CREDIT RATING AMID POLITICAL CRISIS

INTERNET SERVICE TARIFFS ARE ABOYT TENFOLD GIER COMPARED TO JAPAN

tandard & Poor’s has cut Ukraine’s foreign-currency credit rating, Bloomberg reported. The assessment of Ukraine’s debt was lowered one step to CCC+, the seventhlowest junk rating. Pg. 11

WORLD NEWS CHINESE BECOME WORLD’S TOP TIPPLERS OF ‘LUCKY’ RED WINE

MAMIA SANADIRADZE: TBC BANK IS TRYING TO APPROPRIATE MY STAKE IN CAUCASUS ONLINE Pg. 5

DOESN’T DISCOUNT CHANGE THE QUALITY?

Pg. 9

The data is calculated on the basis of turnovers of VAT-payer enterprises, fiscal and monetary data. “These evaluations are internationally accepted practice used for calculation of short-term preliminary data. In the spheres where monthly data are absent (e.g. agriculture, unobserved economic volume), the assessment is made on the basis of previous period data. Accordingly, real quarterly calculations may be considerably different from preliminary evaluations. Besides, turnover of VAT-payer enterprises of previous months may be corrected, which respectively causes correction of monthly preliminary evaluation data”, - the institution explains.

ANZOR QOQOLADZE: TBC BANK APPROPRIATES 80 MILLION USD ELITELECTRONICS FOR 116 000 GEL Pg. 5

he internet has become an ireplaceable part of our everyday life in the contemporary world. Along with the consumption of the world electronic network connection, its supply quality also grows and prices beocme lower. The sitaution is different in Georgia, where internet service prices practically remain the same. The supply speed becomes faster stage by stage, but internet providers in Georgia continue working with serious disorders. Pg. 5

Irakli Kovzanadze: Our Economic Situation is Absolutely Stable. The Investment ment Environment will Furt

Pg. 4

Lasha Papashvili Resigned from the Post of Chairman of the Supervisory Board of Bank “Republic “ and Switched to the Real Estate Business Pg. 4

Temur Chkhonia’s Companies to Invest 8 Million Euro This Year Pg. 4

“PSP “ Founder: The National Currency should not be Lower than 1.8 GEL

Pg. 4

CEO of “ProCredit Bank” Resigns “CEO’s resignation was followed by slight stuffing changes” Pg. 4

MAIN EVENTS caucasian business week

February 3, 2014 #40

NBG PRESIDENT PREDICTS THE STRENGTHENING OF GEL IN THE MEDIUM TERM

ISRAELI, GEORGIAN PMS PLEDGE TO DEEPEN TIES

sraeli PM Benjamin Netanyahu, who met his Georgian counterpart Irakli Garibashvili in Jerusalem on January 28, said that the two countries should focus on how to “increase our friendship and coopera-

tion.” “And it’s an enduring and long friendship,” PM Netanyahu said in remarks for the press before the meeting. “We have a natural sympathy with Georgia that seeks to establish a prosperous and secure future for its people. We think we can do that together.” “We have every area to cooperate in, technology and water, agriculture, education, everything. And we are open to further this cooperation in all fields. We’ve been doing that; we’ll continue to do that. I’m sure your visit enhances that. That is part of our quest to achieve security, prosperity and peace,” the Israeli PM said. PM Garibashvili said in his remarks that Georgia strives “to build a favorable ground for full expansion of bilateral trade relations worldwide and therefore we attach special importance to the discussions toward a free trade agreement between the State of Israel and Georgia.” Meanwhile in Tbilisi, Defense Minister Irakli Alasania told journalists on January 28 that “great opportunities have opened up” for military cooperation between Georgia and Israel. “I visited Israel last month and an agreement was reached to set up a group that will start developing our military cooperation in all directions,” Alasania said. A memorandum of understanding on launching

Georgian-Israeli joint economic commission was signed by Israeli Foreign Minister Avigdor Lieberman and his Georgian counterpart Maia Panjikidze on January 28. This is a second visit of a high-level Georgian delegation to Israel in last seven months. In June, 2013 then PM Bidzina Ivanishvili visited Israel. In November, 2013 Georgia and Israel signed visa-free agreement, which has yet to go into force. After the meeting with his Israeli counterpart, PM Garibashvili told journalists: “Israel is very important country for Georgia. We pay special attention to cooperation with Israel in whole range of areas – economy, culture, security.” “I had a very important and fruitful meeting with the Israeli Prime Minister and the Israeli President [Shimon Peres]. We exchanged interesting ideas about how to further deeper our relations and first of all it concern economy as there is a huge potential,” the Georgian PM said, adding that he also had a meeting with a group of Israeli business people, who, he said, would visit Georgia in March to look into investment opportunities. “Prime Minister Netanyahu assured me of his full readiness and support to personally recommend [Israeli] investors to visit and invest in Georgia,” he said. PM Garibashvili also said that the newly launched joint economic commission should pave the way for signing of free trade agreement between two countries. Before the visit the Georgian PM’s office was reporting that the signing of this agreement was planned during the visit.

TBILISI TO HOST EBRD MEETING “Georgia is the world’s number one reformer country”

ccording to the EBRD Regional Director Bruno Balnavera, Georgia ‘s number one reformer country where the government has been changed peacefully. Balnavera told reporters in the context of why Georgia has been selected a place of the EBRD’s annual meeting in 2015. “Several countries have expressed a desire to host, but Georgia was selected for several reasons. First of all, we wanted to hold the event in the Caucasus and Georgia managed to satisfy the relevant conditions. Let’s recognize what the

country has achieved. It’s the world’s number one reformer country, and it is a country where peaceful change of government took place,” Balnavera says adding that to organize a meeting planned in 2015 is a serious commitment for which Georgia is ready. However, he also notes that London was also considered a host of the event but the UK was not ready for it. Recall that as it became known at the Davos International Forum, EBRD Business Forum is scheduled for May 14-15, 2015 and will be attended by the EBRD leaders, including 34 finance ministers. “It is very important that this meeting will be held in Tbilisi in 2015. This is the first meeting of such a scale in the region. We can boldly say that in May 2015 Georgia will be the epicenter of the event of the global importance and our country will have an unprecedented chance of attracting foreign investment, “- Finance Minister Nodar Khaduri says. Note: Up to 1 200-1 500 guests will attend the EBRD Annual Business Forum.

resident of the National Bank of Georgia GiorgiKadagidze expects the stabilization of the GEL in the medium term. “Short-term forecasting of the national currency is not possible, since in addition to economic factors, theexpectations of the citizens also affect it, but in the medium term all factors contributing to the devaluation of the GEL has come to an end. I do not expect a fundamental imbalance in the economy of Georgia, “-said the head of the National Bank. “In the short term, the rate of GEL will be floating, but the oscillation amplitude is small. With regard toprices and inflation, the session of the National Bank’s Committee on Monetary Policy will be held onFebruary 12 and if inflation expectations exceed forecast levels, the policy will be tightened, which will contribute to the stability of the GEL and prices,”- NBG President states.

PRESIDENT OF NATIONAL BANK HAS QUESTIONS FOR MOBILE OPERATORS

he President of the National Bank of Georgia [NBG] Giorgi Kadagidze has questions for the mobile operators. As Giorgi Kadagidze stated about the problem related to the automatic payment machines , he is interested in how the rules of the game were changed one day by all the players. The President of the National Bank says that the problem regarding the automatic payment machines still exists and needs fast settlement. “It is about a simple matter, as it concerns different sectors of our economy. I have questions for the mobile operators. I have spo-

ken about these questions with the national communications commission, Minister of Economy and we agree about the position on this issue as a regulator and policy maker. I hope this issue will be solved, otherwise the successful sector of our economy will be in a difficult condition and may face a threat of going broke. The change of the rules of the game one day by all the players raises questions”, - Kadagidze said. The mobile operators refused to pay the commission fee for the automatic payment machines and the commission fee is cut from the account of the subscriber.

ECHOES OF EVENTS IN UKRAINE EXPECTED TO RESONATE IN GEORGIA Wine companies face no problems so far, but do not rule out the difficulties

ome experts estimate that developments in Ukraine will have a negative impact on the Georgian economy. As the economy expert Soso Archvadze states “Commersant’’, Ukraine is Georgia’s major trading partner, and 7% of exports and 8% of imports come to Ukraine. Archvadze notes that the annual trade turnover with Ukraine ranges within one billion dollars , so the country’s economy will seriously suffer . He explains that Ukrainian products occupy a large share of the consumer market of Georgia because of a high reputation and if problems are created, replacement of the Ukrainian products will take a long time. Archvadze adds that if the current situation in Ukraine doesn’t stabilize, it

will bring serious losses in terms of tourism. Developments in Ukraine have had no impact on Georgia –Ukraine trade relations. Wine- producing companies state in a conversation with radio “Commersant ‘’. According to “Tbilvino’’ Director, , delays in the export of wine are not observed due to the current political situation in Ukraine, but Giorgi Margvelashvili says that if the events in Ukraine do not stabilize, problems are not excluded. Margvelashvili adds that 15 % of the company’s exports fall on Ukraine. ‘’Schuchmann Wines” company doesn’t face any delays in trade relations with Ukraine as well. However, Director of the company does not rule out future challenges as Ukraine is “Schuchmann Wine’s “ key strategic market.

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PUBLICITY February 3, 2014 #40

caucasian business week

INTERVIEW February 3, 2014 #40

caucasian business week

IRAKLI KOVZANADZE: OUR ECONOMIC SITUATION IS ABSOLUTELY STABLE. THE INVESTMENT ENVIRONMENT WILL FURT An interview with Director of the Partnership Found Irakli Kovzanadze

- What has the Partnership Fund managed to do during these months? - Partnership Fund generally has two directions. First, the state assets management, which is a part of our capital, including “Georgian Railway” (It is the largest public corporation), as well as Oil and Gas Corporation, Georgian State Electric System [GSE], Electricity System Commercial Operator [ESCO] and 25 percent in “Telasi” company. Management of these companies is one of the main directions, their proper management and the

functions of the Partnership Fund in respect to these companies. For a few months, our first task was to change management as well as to introduce elements of sound corporate management, independent directors and, most importantly, to staff the companies’ management and supervisory boards with qualified persons. We’ve completed this process. These companies are working successfully. We see some progress of the major state assets every day. Next direction is the implementation of investment projects in our investment portfolio. A hotel in Akhaltsikhe nearby Rabat castle is among the last two projects we completed and successfully implemented for the past two months. I think this is the best hotel in the region, which has been completed with our financial assistance The second project, which has just been completed, is a pig farm. It is located in the village of Koda in Tetritskaro region. Again, as a result of the collaboration of the public and private sectors. I think that it will be the best agricultural enterprise not only in Georgia, but also in the Caucasus region. In addition, a German company works in our management. The enterprise is equipped with the latest German and English technology. Since November pork produced in this farm will be sold in the country. I think that it will occupy 15 - 20 percent of the pork market. It will be one of the best projects in the field of agriculture that have been implemented recently. Here, there was a cooperation of the Partnership

Fund, the private sector and banking sector. In addition, we are building a hotel in Likani, it is a famous state complex.. The project is being implemented jointly with the Kazakh side. 50 percent belong to us. We are also completing the hotel’s construction in Kvareli. As you know, we are working on Gardabani thermal power plant construction. This HPP’s capacity is 230 MW and the project’s cost exceeds 200 million USD. Apart from that, we are implementing a hydro project. This is a hydroelectric power station in Upper Svaneti. It will be a 210-megawatt, very powerful plant. The International Finance Corporation [IFC] is interested in this project. We are represented in the sectors which are priorities for the state. These are two main directions in which the Fund operates and I believe that successfully. - Constantly talking about the need to create investment funds. What specific information is available, especially considering that the business has a very great and serious expectation in this regard? - The Partnership Foundation is working on the sovereign fund issue. As Mr. Bidzina Ivanishvili said, the sovereign fund would be established on the basis of the Partnership Fund. The government group was formed which will guide this process and will provide monitoring. Finance and Economy Ministry officials as well as officials from various departments, representatives of the Partnership Fund, the World Bank and the International Monetary Fund are also involved in this process.

In addition, we will hire an international law firm that has working experience with sovereign funds. Irakli Kovzanadze: Our Economic Situation is Absolutely Stable. The Investment Environment will Further Improve I think during the summer we will prepare a package which will be submitted to Parliament and the bills associated with the Partnership Fund will be amended. This fund will meet the international standards, it will be an important separation of the functions of management and the supervisory board, there will be an independent institute of directors. The so-called San Tiago principles will be introduced which are important in working with the sovereign fund. As I mentioned before, the process is in a very active phase, every day new working elements are added, we get new information, do the implementation and I think that by autumn this process will be completed. -How would you assess the economic situation in the country during these months? Does the current situation provide a good basis for interest from serious, large investors? - I believe that our economic situation is absolutely stable. Macroeconomic environment is stable, the tax environment in our country is one of the best. We have the lowest tax rates, we are in the fourth place in the world in this regard. I’m sure that the investment environment will further improve and the volume of investment will increase in the country.

“PSP “ FOUNDER: THE NATIONAL CURRENCY SHOULD NOT BE LOWER THAN 1.8 GEL An interview with the founder of the pharmaceutical company “ PSP “ Kakha Okriashvili

- Recently, there is a lot of talk about the GEL rate, different predictions are made in this regard. How dangerous is, in your opinion, the

current situation, and do you think that the government should take some actions? Or vice versa, is the policy of waiting right, that the market will regulate everything? - I think that the government should prevent a decline in the national currency rate below 1. 8 GEL per dollar. Our economy is very dependent on imports, so GEL devaluation will affect the prices of almost all kinds of goods. - What is the situation with the prices of medicines? Will the price of local drugs rise taking into account a fact that they are produced from imported raw materials ? - A sharp increase is not expected. Up to 7 000 varieties of medicines are sold on the Georgian market. In the New Year period some pharmaceutical companies have reduced prices, some on the contrary, increased, but the competition is so tough that I do not expect a sharp rise in prices.

LASHA PAPASHVILI RESIGNED FROM THE POST OF CHAIRMAN OF THE SUPERVISORY BOARD OF BANK “REPUBLIC “ AND SWITCHED TO THE REAL ESTATE BUSINESS

member of the Societe Generale Group, Bank Republicsays that the Supervisory Board of the Bank has a new Chairman - Lasha Papashvili, the bank’s former shareholder and Chairman of the Supervisory Board for the last 10 years, was replaced by Martin Zaimov. “Lasha Papashvili left the Chairman’s position to devote more time and energy to his business in the field of real estate , where he was actively involved. The businessman with a 15-year experience in the banking industry led Bank “Republic “ since 1998 and the Board of Supervisors from 2004. Martin Zaimov is a Bulgarian financier and politician, former deputy director of the Bulgarian National Bank. Since 2007, he has been board member of Société Générale-owned Expressbank,”- the bank states. According to Christian Carmagnole, Director General of Bank Republic, when Papashvili run the bank, it has achieved higher standards and sustainable success. “ Societe Generale “ came on the market in 2006 .

- Don’t you think that the rise in prices of import and the devaluation of GEL may be a chance for local production ? Whether Georgian producers will be able to use a chance and offer customers their goods at a price lower that import ? - This is possible only when the production is 100% Georgian, not dependent on foreign raw materials. Otherwise, it will be very difficult to use this factor. However, in Georgia the average salary is much lower than in Europe, and on this basis, the local goods will always be cheaper that import. Medicines market in Georgia amounts to 300 million USD, about the same is the pork market, which may be produced locally. - On this occasion, Prime Minister met with businessmen and said that import made 80 % of all products in the country. Some time ago there was talk of the need of import quotas.

TEMUR CHKHONIA’S COMPANIES TO INVEST 8 MILLION EURO THIS YEAR

businessman Temur Chkhonia’s companies will invest about 8 million Euro this year. As the businessman states ‘’Commersant”, “Castel - Georgia ‘’ has already signed a contract with a French company, world-famous equipment manufacturer which will install modern equipment. A cooperation agreement was also signed with two German companies which provide “Castel” with malt of the highest quality. Temur Chkhonia says that a working process will be completed by the end of March and 5 million 600 thousand Euro will be spent for this purpose. In his words, by the end of March “Coca - Cola ‘’ will release a new brand “Schutz Mochito” in bottles and cold tea in jars that will be exported to Azerbaijan and Armenia at the first stage. Chkhonia adds that the construction of another ‘’McDonald’s” restaurant will start in March.

What do you think, should the local production be increased at the expense of import restrictions? - I am against creating greenhouse conditions for local businesses, as competitive economy will not develop in these circumstances. However, obviously that no one will release a 2 -year-old kid into the ring against Mike Tyson. Competition is economic boxing match , so the government should think very carefully how it can help local production and find a middle ground . - How do you share the government’s optimism about a 5% growth in 2014. What will be, in your opinion, the 2014 year for Georgia? - I am by nature an optimist and we really want to have a growth of 7% , as I really like this figure. In general, I am sure that we will have economic growth in 2014.

CEO OF “PROCREDIT BANK” RESIGNS “CEO’s resignation was followed by slight stuffing changes”

ommersant “ reports that “ProCredit Bank” Director General resigns. Sascha Ternes has already announced about leaving the bank and this information was confirmed in “ProCredit Bank”. They say that a resignation of Director General is a planned process, but Sascha Ternes maintains the position until the appointment of a new CEO. According to “ProCredit “, CEO ‘s resignation was followed by slight personnel changes. Sascha Ternes has been working as CEO of “ProCredit Bank “ since the summer of 2012 replacing Maya Meredova on this position. For more information: Yesterday it was announced about another change in the banking sector. A famous businessman Lasha Papashvili resigned from the post of Chairman of the Supervisory Board of Bank “Republic.

MAIN February 3, 2014 #40

caucasian business week

MAMIA SANADIRADZE: TBC BANK IS TRYING TO APPROPRIATE MY STAKE IN CAUCASUS ONLINE

amia Sanadiradze, the former owner of Caucasus Online, continues his efforts to return the company. At this stage the case is discussed by Tbilisi City Court. At the same time, he has submitted an appeal to the Prosecutor’s Office too. The society knows the case with Caucasus Online very well. If I had not left the country jointly with my family, my affairs would be worse like many other businessmen, Mamia Sanadiradze asserts. Sanadiradze has sued the offshore company of Nelgado and he demands for abolishing the agreements under which Nelgado has appropriated Caucasus Online. Sanadiradze asserts he was made cede initially 50% stake and later 30% stake in the 100 million GEL company for the one-tenth price. Even this price was paid because blackmailers needed our consent for reassigning the company. Nelgado representatives Levan Karamanashvili (one of the owners of Rustavi 2 TV company), Khvicha Makatsaria (from the circles of the Sharangias Group) and Levan Khundadze have applied blackmails and real threats, Mamia sanadiradze told the Banks and Finances newspaper. The case includes audio records and experts have proved their authenticity. The records prove the mentioned persons demanded from Sanadiradze

in London to accept their terms and cede the company. “In the end, I accepted their terms, because I could not avoid the reality. Merabishvili was presumed behind these people and he wanted to control the internet space and the valuable business company and he could not only appropriate may business, but also leave me without any source for living and I would not be able to appeal to court in the future”, the businessman says. “I demanded that the agreement include the term for discussing available disputes at the London Arbitration Court. They objected to this idea, because they knew I could not reach the justice in the Georgian court system. Today the situation has changed and the court system is somehow oriented on taking unbiased decisions. Now they are trying to move the case to the international arbitration court, but they know they have no chances. In short, they are trying to win the time. They avoid receiving court letters, protract trials and terms and try to receive maximum profits from the company”, Sanadiradze noted. The most cynical in this history is the fact that Nelgado company has paid the one-tenth price for Sanadiradze’s stake through mortgaging Caucasus Online assets in TBC Bank. Sanadiradze recalls that they were trying to persuade him to accept their terms in London. They

openly noted in case of refusal they could appropriate the company anyway and mortgage it entirely in TBC Bank. Later the bank would demand for covering the credit ahead of schedule, but the company would not fulfill the demand and TBC Bank would sell the company by auction. Indeed, Nelgado or any other company directly or indirectly connected with Nelgado would purchase the company by auction and this would be the end. By the way, no one would explain this scheme if I had not left the country in time”, Sanadiradze noted. “I was persuading them TBC Bank and Mamuka Khazaradze would not take part in this dirty scheme and this bank was making focus on reputation, but they were answering ironically neither bank nor Mamuka Khazaradze would decide the issue, but Merabishvili… I was surprised the bank issued a loan to Nelgado on the ground of my 30% stake and they even did not ask my anything as the stake officially still belonged to me. Nothing, neither officially nor unofficially. The bank had no right to take the step without my consent. Moreover, the bank refused to give me, the owner of a 30% stake, the bargain documentation and now I am trying to obtain these documents by court. Today all details of the case, all evidences are clear and I am sure the issue will be resolved in

the near future, but Nelgado is trying to win the time and implement the mentioned scheme somehow. According to my information TBC Bank is reregistering Caucasus Online assets because of uncovered loans. If this is misinformation, I will be very glad, but, I suppose, this information is true and this means TBC Bank is taking part in appropriating Caucasus Online. In this case I will sue TBC Bank too. I have noted many times and I will repeat I have enough resources to fight for my rights for many years”, Mamia Sanadiradze noted.

ANZOR QOQOLADZE: TBC BANK APPROPRIATES 80 MILLION USD ELITELECTRONICS FOR 116 000 GEL Interview with TechnoBoom Founder Anzor Qoqoladze -What steps has TBC Bank taken to appropriate ElitElectronics? How has the bank taken over your stake? -Everyone knows the United National Movement aspired for imposing control on the business sector and restrict unacceptable businessmen, monopolize major business companies to apply them as political leverage. They considered me as undesirable and unreliable businessman. Therefore, the whole state system, including the Finance Police, the Prosecutor’s Office, the court system, taxation and customs services launched operation against me. The process was led by Zurab Adeishvili, while David Kezerashvili was implementing the plan. In 2007 to 2009 various illegal steps and pressure was carried out against us, including property arrest, yearlong arrest of 8 containers of household appliances at customs terminal, arrest of employees, making problems with drawing investors and so on. The National Movement was trying to mask all steps against the business. But in our case their steps were open. To camouflage the appropriation

of ElitElectronics, they involved TBC Bank in the process to show as if two private companies were arguing and neither prosecutor’s office nor the Authorities were involved in the case. I have talked about the scheme many times. Therefore, I will not repeat it. Briefly, initially, TBC Bank illegally assumed the management over ElitElectronics shares. Later TBC Bank dismissed the company management, appointed its own representatives and they, for the first time for the last 14 months, violated the credit coverage schedule and in this way TBC Bank appropriated the 80 million USD company for 116 000 GEL. After a certain period, the shares were handed over to the company that were managed by members of David Kezerashvili team such as Mikheil Beniamin, SUN Petroleum Georgia supervisory board head, as well as Israeli citizen Dori Grossmann, a SUN Petroleum Georgian adviser, who was appointed as a member of the supervisory board and Soso Mgeladze who was appointed as ElitElectronics director. Mgeladze was an authorized body of Shota Kezerashvili, a father of David Kezerashvili. Many documents in the public

registry prove Mgeladze was his representative and acted in the name of Shota Kezerashvili. Mgeladze has also supervised various business structures of David Kezerashvili. The former defense minister himself was actively involved in the process and he was meeting with ElitElectronics suppliers, held negotiations with them. At the same time, Kezerashvili defense lawyer Shota Mindeli is head of ElitElectronics legal department. Briefly, TBC Bank illegally appropriated ElitElectronics with active participation of the National Movement and then reregistered the company to Kezerasvhili’s offshore company. -How does the process continue at this stage? -In 2009 to 2011 TBC Bank won all trials under the pressure of Zurab Adeishvili and David Kezerashvili. Therefore, all legal steps in Georgia became useless and in September 2011 we applied to the Strasburg Court. The court accepted the appeal in 2012. After the power change, we applied to the Georgian Prosecutor’s Office too. -What steps will you take to return ElitElectronics? -I plan to fight to the end to return ElitElectronics,

both in Georgia and Strasburg. The faster they return the company, the better for them, for TBC Bank and David Kezerashvili. The longer the process is, the more they will be damaged. I think we will return the company no later than 2015.

INTERNET SERVICE TARIFFS ARE ABOYT TENFOLD GIER COMPARED TO JAPAN

ccording to the last report of the World Bank (WB), the fastest internet connection service is recorded in Japan, where the connection speed is 61 megabyte a second. South Korea is the second with 46 megabyte a second, Finland is third with 22 megabytes a seocnd, Sweden is fourth with 18 megabytes a second and so on. In the USA and European countries the connection speed ranges from 3 to 10 megabytes a second on average. Georgia occupies one of the last places in terms of the internet supply speed in the post-soviet space. The most expsnive package includes 1 megabute-second service. At the same time, we shoudl also note this is the best varinat. Because of shortocmimng in the network of providers, the consumer recives less speed compard to the agreement terms.

Taking into account the development level, no one has illusions intetnet supply speed in Georgia will be equla to the indicators of the world ;s leading countries. But we shoudl note the service tariffs in Georgia are nearlt 100 times higher compared to Europe and Japan. We have noted Japan is a leader in temrs of internet connection supply speed. Moreover, the cpountry is a leader in the tariffs too. The price for one megabyute0-secoind is 0.27 USD. The price for the same product in SOUth Korea is 0.45 USD, Finland – 2.77 USD, Sweden – 0/63 USD, the USA and European countriues – 1 USD tgo 5 USD. The appetite of Georgia-based providers is radically different. The price for one megabytesecond in Georgia is 70 GEL, that is about 40 USD. This signifies the internet connection price in Georgia is about 100 times higher compared to Japan. It should be also noted in most cases the consumers

have to pay 100 GEL for one megabyte-second connection. According to the comparative research for price and speed, Georgia occupies one of the last places in the WB rating in the Post-Soviet countries and is ahead of only Armenia. On the issue we have contacted representatives of both major internet providers in Georgia. Representatives of Caucasus Online abstained to make comments on the issue, while Teona Tsereteli of Silknet categorically refused our information and noted Silknet tariffs meet the service quality. « Silknet company offers competitive tariffs. As to the quality, we have two technologies – DSL technology that does not enable to supply over 8 megabyte-second internet connection. Another technology is fiber-optic internet that reaches about 100 megabyte-second speed », Teona Tsereteli noted.

BUSINESS caucasian business week

February 3, 2014 #40

GEORGIAN ARTISTS FOR ASSISTANCE OF ADOLESCENTS DEPRIVED OF PARENTAL CARE – GEL 11,500 WILL BE TRANSFERRED TO NATAKHTARI FUND ACCOUNT

harity Auction of contemporary Georgian Artists was held at Gamrekely Gallery on January 30. The event was attended by media and business sector representatives. All paintings were sold at the event and overall GEL 11,500 got collected. The auction proceeds will be transferred to Natakhtari Fund Account. This amount will be used for the Fund Project Take Care of Future assisting children deprived of parental care and allowing them to find their niche in the society. The event, in addition to popularization of contemporary Georgian Art, aimed to assist inmates of small family-type homes and large institutions. The following Georgian artists took part in the event: Oleg Timchenko, Gia Gugushvili, Misha Shengelia, Mamuka Tsetskhladze, Vakho Bughadze, Koka Tskhvediani, Ushangi Khumarashvili and Lia Shvelidze will take part in the campaign. Nino Surmava, Public Relations Manager of Natakhtari Company: Natakhtari fund has been operating for the third year now. Many events got implemented within the framework of this project. Funds are being attracted through sold products, however this time we decided to organize the event with artists, where they would have the opportunity to make their contribution. In addition, we decided to invite business representatives who would be able to make their endowment. The auction aims to sell paintings of contemporary artists and use the proceeds for Natakh-

tari Fund’s beneficiaries. We are talking about 15 – 18 year old, up to 200 adolescents across Georgia placed in small family-type childrenhomes... Khatuna Melikishvili, the Founder of Gamrekeli Gallery: I’m very happy with the Charity Auction held in our gallery. This event aims to assist kids deprived of parental care and the participation of our guests produced good results. I would like to thank the organizers and businessmen for their contribution, especially those people who bought the exhibited works. They did two good things bought the paintings and helped the kids deprived of care. Irakli Zubitashvili, the Event Guest: I am very much interested in a contemporary Georgian art and always try to keep up with news. I like Gia Gugushvili’s works very much and decided to buy both of his paintings exhibited here... I always wanted to have his works but so far have not had such chance. Therefore, I immediately used this opportunity. In general, I welcome and support charity. Special thanks to Company Natakhtari, such events prove high social responsibility of the Company. Oleg Timchenko, Artist: This evening and the Natakhtari Fund gave us the opportunity to help children deprived of care. I took part in similar events before but this is the first time to present myself in this form and I am very happy. For me as for an artist it is a great stimulus to know that I made my small contribution to a great undertaking...

TSKALI MARGEBELI BECAME A PLATINUM SPONSOR OF EUROPEAN YOUTH OLYMPIC FESTIVAL TBILISI 2015 AND THE 2014 EUROPEAN ATHLETICS TEAM CHAMPIONSHIPS 3RD LEAGUE

SC Tskali Margebeli and Georgian Athletics Federation signed an agreement on Platinum Sponsorship of European Youth Olympic Festival Tbilisi 2015 and the 2014 European Athletics Team Championships 3rd League. The agreement was signed by Alexi Akhvlediani, the President of Athletics Federation and Avtandil Svimonishvili, Director JSC Tskali Margebeli. Representatives of the Company and the Federation discussed details of future cooperation and answered journalists’ questions. Avtandil Svimonishvili: `It is an honor for our company to support such a large-scale event and take part in this international forum. In our opin-

ion, this will facilitate not only development of the sports in our country, but also the advancement and integration of Georgia in an international commonwealth and Tskali Margebeli, as a Georgian company, will support this initiative. Our company (since its establishing in 1997) and its brands Nabeghlavi and Bakhmaro have been popularizing healthy lifestyle and this is the second important reason for our decision. Promoting healthy lifestyle is especially important among the youth and coming generations. Therefore, I thank the participants who gave us such a great opportunity to support good initiative. In addition to financial assistance, our company during this period starting from today through holding

2015 –year Olympic festival, will promote 2014 –year athletics championship as well as Olympic games of the next year and permanently make the organizers feel that they chose reliable partners.” Alexi Akhvlediani: `Involvement of business in development of Georgian sports is very important. We have to submit such projects to business, the implementation of which may bring success both to sports and to business. I would like to thank Nabeghlavi, which became the Platinum sponsor of European Youth Olympic Festival Tbilisi 2015 and the 2014 European Athletics Team Championships 3rd League. Georgia obtained the right to hold the third league

of 2014 European Athletics Team Championship at the congress of European Association organized in Tallinn in October, 2013. Apart from Georgia, fifteen countries are participating in the championship. Each team will be represented by 50 sportsmen and 13 trainers. The competition starts every year in June and lasts for two days. The Championship this time will be held in Tbilisi on June 21 -22, 2014. The tournament in addition to popularization of athletics aims to improve the economic situation in the country and develop tourism, since the teams will be accompanied by many fans. More than thousand foreign fans are expected during championship in Georgia.

HPP February 3, 2014 #40

caucasian business week

NARMANIA: 1-BILLION-COST KHUDON-HESI IS ESPECIALLY IMPORTANT FOR THE COUNTRY, WHICH DEPENDS ON THE INVESTMENTS

IN TERMS OF ECONOMIC DEVELOPMENT, KHUDONI DAM IS EXTREMELY IMPORTANT PROJECT

onstruction of Khudon-hesi has a crucial importance for sustainable development of the country’s energy system and employment of the region’s population. Minister of Regional Development and Infrastructure David Narmania once again expressed government’s position. He mentioned that implementation of $1-billioncost project is especially important for the country, which depends on the investments. „Investment activity is proportional to economic parameters. It’s also directly linked to the providing budget incomes, employment of the people during the construction and power station management process. Besides, locally obtained construction materials will be used during the construction”, - David Narnamia stated. The minister said that institutions involved in the project should try all alternative options to start the process. Investment value of the 702 MW capacity power station, which should be built in Zemo Svaneti, in the river Enguri gorge, equals to$1 billion. The power station should produced average 1,5 billion KW/hour electricity annually. British-Indian consortium Trans Electrica Georgia implements the investment project.

SERGEENKO: DISCUSSION ON KHUDON-HESI SHOULD BE AS LARGE SCALE- AS THE PROJECT IS

inister of Labor, Healthcare and Social Security David Sergeenko considers that discussion on Khudon-hesi should be as large-scale, as

the project is. “Discussion about Khudon-hesi has started in 80s of last century. It’s a large-scale project and it has influence on many other factors, month them or not only energy, but also economy and local residents. Due to its importance, to my mind, discussion should be as large-scale, as the project is. Decision should be made with consultation of exports, sector specialists, local residents and pubic at large.” – Minsiter of Healthcare stated. Khudon-hesi is being constructed in Zemo Svaneti, in the Gorge of Enguri River. Installed capacity of the power station is 720 MW. Project implementer company Transelectrica plans to invest $1,2 billion.

ARAB “ RAKIA “ INTENDS TO INVEST IN THE CONSTRUCTION OF MEDIUMSIZED HPPS

rab company “Rakia” , which is one of the founders of the Georgian Co-investment Fund, intends to invest in the construction of medium-sized HPPs in Georgia. “Rakia Georgia “ CEO Guga Tsanava explains to “Commersant” that the company is currently considering four projects, at this stage only one

will be selected - it is about the construction of the hydropower plant with a capacity of 50 megawatts . “Rakia “ also plans to invest in other sectors of the economy , including in the framework of the Co-investment Fund, “ - says the businessman. Currently “Rakia “ owns “Tbilisi Mall “ shopping center, “Metehi hotel “ and manages Poti free economic zone.

Experts regard Khudoni HPP as the basis project for Georgian energy sector. Some of them think that the country will not be able to advance and acquire energy independence without utilization of this resource. Kakha Kaladze, the Minister of Energy and Giorgi Kvesitadze, the President of the Academy of Science signed a memorandum on cooperation. The memorandum implies sharing the experience and rendering consultations to the Ministry of Energy on various issues. In particular, the academy will take part in designing and reviewing the energy strategy and legislative acts of Georgia. We addressed these issues in a conversation with Mr. TEMUR NANEISHVILI, the Academician and Vice President of the Academy of Science of Georgia. - I am not an expert in this field, but as a common citizen and a person interested in this issue I perfectly see that Georgia does not have sufficient energy. The Minister of Energy fairly noted that country’s independence is determined by energy independence. Everyone can see what happens in the world. The whole Europe is looking into the Russia’s eyes because it possesses vast energy resources, which significantly influence the politics. Therefore, if we are energy independent and have excessive energy this will be extremely convenient. It is also incorrect when people oppose selling the energy. The energy cannot be stored or warehoused. Therefore, in summer when it is excessive it converts into currency. During the winter period the country lacks the electricity there is no doubt. We have to achieve that people heat their apartments with cheaper energy, otherwise Georgia will have no forest shortly. A right strategy needs to be developed on which the country’s government is already working on. Small as well as big HPPs need to be constructed. It is a complete lie that the Europe rejected building large HPPs long time ago. In Switzerland, Spain and the other European countries big power stations are actively being constructed. - Currently there are much debates going on not about energy efficiency or energy independence perspectives but on environmental impacts of the project, that it may entail catastrophes and affect the local population. The most acute problem really is the resettlement of local population to which the opponents refer to. - Civilization development and technical progress require certain “sacrifices” and in some cases, it is necessary to compromise something. Without this taking into account we will be forced to live like in the Europe of medieval centuries. Of course everything needs to be done to protect interests of the local population. Their requirements are to be met. Respecting ancestors’ graves is one of the important Georgian traditions, it cannot be rejected. E.g after the Second World War graves got moved from Kerch to Georgia and now the killed heroes are being mourned here. There is no sacrilege here, though the process of reburial must be carefully thought over in agreement with the local population and with consideration of their

interests. They have to receive decent compensation as well. Investor shall construct houses for them and offer better living conditions than those that they now have and electricity at a privileged price. As regards the environmental changes, the opinion is available and Khudoni HPP construction will not cause changes in this direction. Enguri HPP is close to the site, with a much bigger parameters compared to Khudoni. As industry experts say, what should have happened, everything already happened. - What do you think how correct are opinions of environmental NGO representatives, who artificially escalate the situation? - It would have been impossible to avoid those. I have a big experience and can easily state that such a large-scaled project will not be implemented without certain policy. The population should learn to listen to opinions of experts’ thoughts and conclusions instead of those dictated by political interests. Currently it is very popular in our country to create political scandal on any issue and Khudoni is a perfect topic for that. - In 80s of the last century the topic of Khudoni HPP construction became the reason for protests with thousands of participants. The Greens’ Party along with the national movement of that time was actively participating in this and Zurab Zhvani the Party Leader later admitted his mistake. - When Zurab Zhvania became a statesman he admitted that it was his biggest mistake. Significant investments are already made in construction of Khudoni HPP and the half of it is completed. We are not so rich to afford throwing away these funds! - How important is this project from the economic development perspective? - The project is the most important from the economic perspective as well. We addressed this issue at the meeting with the Prime Minister. Probably more experts will get involved in this project so that local population better realizes their importance. Some people say that project supporters do not love their country, I would say that those people who do not think about the country’s economic development are the evil-wishers.

BANKING & ECONOMY

TRADE HAS GOT HIGHEST BANKS’ ACTIVES AMOUNT OF CREDIT INCREASED TO 17,3 y January 1, 2014 in the total lending of the legal en- BILLION GEL LAST YEAR

tities share of trade sector equals to 45,2% (01/12/13 - 45,9%). National Bank informs that loans for trade sector issued in December increased by 138,2 million (6%), to 2,4 billion GEL (01/12/13 -2,3 billion GEL). In November it was reduced by 1,8% (41,7 million). Share of trade lending (47%) has reduced since the same period of last year, although its weight in the total credit portfolio remains the highest. Lending of industry has reduced by 51 million in 2013 and its share equals to 17,4% by January 1 (01/01/13 -20,9%). In December portfolio increased from 863,6 to 942,3 million GEL. Share of construction lending in the legal entities’ loan portfolio is 8,1% (01/01/13 -9,2%). Amount equals to 435.5 million GEL (01/01/13 - 435,7 million). In December portfolio increased by 38 million (01/12/13 -397,5 million; 7,9%). In sum, 70,7% of the lending of legal entities comes only on 3 sectors - industry, construction and trade (01/01/13 -77,1%). Overall, corporate loans portfolio equals to 5,4 billion GEL (01/01/13-4,9 billion GEL).

AT THE END 2013 LEGAL ENTITIES CREDIT PORTFOLIO EQUALED TO 5,4 BILLION GEL

y January 1, 2014 amount of the lending of legal entities equaled to 5,4 billion GEL (01/12/13 - 5 billion). At the end 2013 commercial banks had issued loans in national currency of `11 billion GEL, which is 92 million more (9,1%) in comparison with previous month, in the foreign currency - 4,3 billion (287,7 million or 7,2% more than in previous month). Amount of the lending for resident individuals has increased by 220,9 million GEL (4,9%) in December. By January 1 amount of the credit investments made by commercial banks (including loans on non-residents) equals to 10,5 billion GEL (01/12/13 -9,9 billion GEL).

TBC SHARE IN THE RETAIL LENDING IS 23%

y January 1, 2014 TBC Bank’s share in the retail lending equals to 23% (01/12/13 -22,4%; 01/01/13 - 25%). Individual loans portfolio of TBC has increased by 208,5 million GEL (24%), to 1,068 billion GEL since the beginning of the year (01/01/13 - 859,5 million GEL). Overall loan portfolio of the bank equals to 2,786 billion GEL (01/01/13 - 2,249 million GEL). Commercial banks’ credit investment exceeds to 10 billion GEL, among them individuals’ credit portfolio is 4,7 billion GEL. JSC TBC Bank completed 2013 with 55,4 million GEL profit (30,07 million in 2012, 121,1 million GEL in 2011). By January 1, 2012 credit portfolio of the bank equals to 2,673 billion GEL (2012 - 2,249; 2011 - 2,020 billion GEL), deposits (without banks’ deposits) - 2,786 billion GEL (2012 - 2,415; 2011 - 1,97 billion GEL), overall obligations - 3,2 billion GEL. Annual growth of loans equaled to 18,9% (11,4% in 2012), deposit portfolio has increased by 15,4% (2012 - 22,5%). Actives increased by 10,7% (2012 -15%), to 4,096 billion GEL (2012 - 3,701 billion). 1By January 1 market share of the bank is 24% (2012 - 25,8%, 2011 - 25,4%, 2010 - 21,3%). The bank operates for 21 years. Major stockholders are TVC HOLIDNG, EBRD, IFC, DEG, FMO. Stock capital of the banks equals to 592 million GEL (2012 - 543,9 million, 2011 - 505,5 million GEL).

INDIVIDUALS HAVE TRUSTED 4,82 BILLION GEL TO THE BANK

y January 1, 2014 Individuals deposit portfolio in the banking sector equals to 4,820 billion GEL (01/12/13 -4,567 billion GEL). Deposits in GEL equal to 1,257 billion GEL, in the foreign currency - 3,562 billion GEL. Market rates on the retail deposits in GEL has reduced by 2,7%, in the foreign currency- by 2,8% since the beginning of the year.

February 3, 2014 #40

caucasian business week

y January 1, 2014 overall actives of the banks equaled to 17,3 billion GEL (01/01/13-14,4 billion GEL). National bank informs that in December actives increased by 0,8 billion GEL (4,9%). Own capital of the banking sector is 2.9 billion GEL, which is 16,9^ of the total actives of the commercial banks (01/01/13 -2,4 billion GEL, 16,7%). Contribution of the foreign capital in the overall cashed authorized capital equaled to 77% (01/01/13 -75,3 %). Net profit in December equals to 7,7 billion GEL (12/12 - 18,2 billion GEL). Share of the 5 largest banks according actives in the total actives of the baking sector is 77.4% (01/01/13- 81.6%). The sector is represented by 21 banks, among them 18 - with contribution of the foreign capital in the authorized capital and 2 branches of the foreign banks.

MONTHLY TRANSACTIONS WITH BANKING CARDS EXCEEDED TO 1 BILLION GEL

n December 2013 transactions made by plastic cards emitted by resident banks equaled to 1,011 billion GEL (12/12 -790,8 million GEL). Amount of the transactions made by ATMs equals to 783,5 million GEL (12/12 -611 million GEL). Transactions made by POS-terminals in the trade centers equaled to 118 231 000 GEL (12/12 - 94,7 million GEL). Through the terminals in the banks - 47 million GEL was cashed (12/12-45 million GEL). By January 1m 2014, 4 580 156 debit and 1 368 535 credit cards are in circulation. Over 90% of the cards come on VISA, others on EC/MC and other system cards.

LAST YEAR BANKING SECTOR’S INCOME INCREASED

n 2013 banking sector received income 13,3% more than in previous year and spent 1% more. Revenues in 2013 equal to 2,430 GEL, expenditures - 1,983 GEL. According to statistic of National Bank of Georgia (NBG), 62$ of the incomes (1,5 billion) is received from the loans (01/01/13 -1,4 billion). 26% of spending - 516,3 million GEL is made on deposits. Annual cost for staff maintenance equals to 1,019 GEL (885,5 million GEL in 2012). Currently Georgian banking sector is represented by 21 banks, cumulative actives equal to 17,3 million GEL, annual growth -20,5% (01/01/13 -13,2%).

CARTU COMPLETED 2013 WITH 67,9 MILLION GEL PROFIT

SC Cartu Bank completed 2013 with 67,9 million GEL net profit (57,3 million GEL loss in 2012). By January 1, 2014 deposit portfolio equals to 179,871 million GEL (01/01/13- 67,6 million GEL), loans - 402,3 million GEL (01/01/13- 260,5 million GEL). Respectively, annual 166% and 54% growth can be noticed. Overall obligations are 344 million GEL (01/01/13-260,2 million GEL). Bank’s actives equal to 545,3 million GEL (01/01/13 -372 million GEL). Actives have increased by 47%. Bank Carty is founded by Bidzina Ivanishvili and operates since 1998. Its owner is a son of founder Uta Ivanishvili. Stock capital of the bank is 201,3 million GEL (01/01/12- 111,8 million GEL).

BUSINESS February 3, 2014 #40

caucasian business week

FIRST CONSIGNMENT OF LIVO DOESN’T DISCOUNT CHANGE THE NATURAL CITRUS JUICE PRODUCTS QUALITY? GOES TO RUSSIA

he first consignment of LIVO natural citrus juice products has been exported to the Russia Federation. The preliminary agreement with the trade company of Amarant was concluded in 2013. At the first stage the company has exported 30 000 units of 1-liter and 250-gram bottles. At the second stage, 90 000 bottles will be exported. “It is a very important agreement. The product meets all requirements. At the first stage, the product will be sold at the town of Khimki near Moscow, in the network of Amarant stores. We expect the product to become popular”, the company representatives noted. LIVO appeared on the Georgian market in April 2013. At this stage, the company produces 9 va-

rieties of juice products of lemon, orange, red orange, peach with citrus, peach, cherry, cornel, tomato and plum. Natural juices are produced at the Citro plant in the Autonomous Republic of Achara. The plant was created as part of the Millennium project. This is a sole enterprise in Georgia that processes citrus through modern technologies. “Juices are produced of Georgiagrown citrus and fruits through direct pressure. This method maintains all vitamins and useful features of fruits. The juice products have special aroma and they are recorded in the segment of FRESH”, the company says. LIVO is produced under the trademark of Choose Georgian founded by the Sales Management Company. In the retail network, one-liter product costs about 4 GEL.

AMERICAN INVESTORS INTERESTED IN ANAKLIA PORT TO ARRIVE IN GEORGIA

eputy Minister of Economy: The aim of the meeting is to obtain the detailed information about the project. ‘’Commersant” radio reports that a delegation of the American investment group interested in the project of Anaklia port arrives in Georgia . “Conti Group ‘’ representatives who held a meeting late last year, plan to arrive in Georgia in the first half of February . According to Deputy Minister of Economy Keti Bochorishvili, the aim of the meeting is to ob-

its customers Deals.ge offers quite a wide selection. The main criterion is the constant monitoring of quality and prices, as well as a wide and effective list of suggestions. Users of the Web site have the opportunity to make interesting them choice between the following categories: health, beauty, nutrition, electronics, recreation, entertainment, tourism and others. Particular attention is paid to the selection of proposals, the emphasis is made on the quality of production and its exclusive price. In addition to the various proposals of the leading companies the site operates the online-shop where it is possible the acquisition of various household appliances and accessories. Deals.ge constantly updates the database to reflect the wishes of all categories of users and their needs. To access the various products, services and different types of discount coupons, there is a simple registration procedure. Payment is possible by any of Visa / MasterCard / American Express credit cards or by balancing site through an Express-Pay clearing equipment. The award for the balance is the short-term action for those who have registered on the site.

tain the detailed information on the project of Anaklia port . The American company, which has 100 years of experience in similar projects, introduced their vision of the project development to the Minister of Economy and the government at the first meeting. Note: The former Prime Minister Bidzina Ivanishvili mentioned Anaklia port among global projects in September last year at the presentation of the Co-investment Fund and announced that its annual capacity would be 110 million tons.

POWER GENERATION REDUCED IN GEORGIA hile Georgia is striving to become the exporter of electricity , actual production of electricity in the country is reduced. A part of power engineers believe that aging power plants are the reason for this, while others explain it by a decrease in the hydrological cycle. In 2013, electricity production in the country has decreased by 556 million kWh in comparison with 2012, and by 1 billion - compared to 2011. According to the Ministry of Energy, in 2013 two new HPPs were put into operation which joint production amounted to 68 million kWh, in 2014 Energy Minister opened a new Larsi HPP generating 100 million kWh. Until the end of the year a large Paravani hydropower plant will be commissioned, which will generate 420 million kWh. However, despite the fact that the amount of HPPs increases in Georgia, power generation is reducing. And this is despite the fact that the government plans to start exporting electricity to Europe via Turkey. In 2013, the Georgian energy system developed 9.1 billion kWh, in 2012 – 9.6 billion and in 2011 – 10.104 billion. A decrease in electricity generation is evident. The expert Rezo Arveladze explains this by two reasons - technical condition and weather conditions, on which the capacity of hydroelectric

bilisi shopping and high quality service has never been an enjoyable and easy process. It is very hard to figure out what brand of product you get, there are always comments on the quality of service and one always have the impression (often justified ) that he is paying much more than the actual cost. In the online space there appeared recently many websites that offer to their customers a variety of goods and services at a discount. Unfortunately, there is a problem in this direction. In most cases, they do not focus on product quality and profitability of transaction, often one has to do with deals when it is reduced a previously artificially overstated prices. Deals.ge tries as much as possible to protect its consumers from these problems and put online deals on really favorable conditions. Deals.ge project is adapted to the Georgian online space and it has been successfully operating since the beginning of 2014.The project includes a wide range of discount offers and the online store. To

power plants strongly depends. “ In such a short period a technical condition could not deteriorate so badly , so it can be explained by the weather conditions . It depends on hydrological conditions - that is, the inflow of water. This was a decisive factor in 2013. Generally it is accepted to set the so-called long-term average hydrology – there is a minimum and maximum water flow, and the data can vary dramatically. It’s very difficult to predict how hydrology will behave, “ – says the expert. Rezo Arveladze does not agree with the assumption that Georgia will become an exporter of electricity. “In the case of economic growth, the electricity produced in Georgia will be sufficient only for local consumption, and only if new hydroelectric power plants are constructed. Georgia should be the product manufacturer and not the exporter of electricity,”- the expert notes. However, according to an expert in the field of energy Temur Arshba, in 2013 the level of hydrology was not that low, and reduction in the production of electricity is rather a problem of a technical condition of HPPs. Another expert Temur Iordanishvili categorically excludes the reduction of electricity production due to hydrology, on the contrary, in his words, 2013 was rich in rainfall, respectively, in his opinion, the reason is the state of the power system.

EGYPTIAN INVESTORS EXPLORING AGRICULTURAL LAND SOIL IN GEORGIA

ommersant” radio reports that Egyptian investors are studying potential of agricultural lands in the regions in order to invest in Georgia. Kutaisi Free Industrial Zone [FIZ] manager states “Commersant ‘’ that a special group has already arrived from Egypt to conduct the research on soil. According to Mikheil

Tigishvili, we are talking about 2 Egyptian company , whose interest in Georgia is quite high. He suggests that investors will invest in the agricultural sector already this year. As for the third Egyptian company, it has started the construction of a cold storage plant in the industrial zone. At this point six Egyptian companies are operating in the industrial zone in Kutaisi.

INDIAN BUSINESSMEN BEGIN TO STUDY GEORGIAN PHARMACEUTICAL MARKET

ndian businessmen plan to explore the potential of Georgian pharmaceutical market. A meeting with Indian business delegation is planned on February 6 at “Radisson Blu Hotel”. The visit is aimed at the familiarization with the potential of the country’s pharmaceutical market as well as establishing proper contacts with

interested Georgian companies. The delegation consists of 41 representatives of pharmaceutical production sector, herbal and traditional Indian medicine and other sectors. Note: Minister of Health, as well as former Prime Minister Bidzina Ivanishvili announced about the entry of foreign pharmaceutical companies into the Georgian market.

10 SOCAR COMMISSIONS NEW WELL ON UMID FIELD

AZERBAIJAN caucasian business week

AZERBAIJANI BUSINESSMEN OFFERED $150M WORTH OF PROJECTS IN HUNGARY

zerbaijan’s state oil company SOCAR has commissioned a second production well on the Umid gas condensate field in the Azerbaijani sector of the Caspian Sea. SOCAR said the well’s depth constituted 6,309 metres. The well was commissioned with a daily debit of 800,000 cubic meters of gas and 200 tons of condensate. SOCAR announced the opening of Umid field in 2010. According to the results of drilling of the first exploration well, the volume of the field reserves hit over 200 billion cubic meters of gas and 40 million tons of condensate, SOCAR specialists said. The Umid field is located 75 kilometers from Baku, 40 kilometers away from the coast. The first geophysical work was carried out there in 1953. The operations were also conducted in 1972 by using modern methods. Nine wells were drilled from 1977 to 1992 there, none of which gave results.

1.245 MILLION CARS REGISTERED IN AZERBAIJAN

zerbaijan’s motor fleet is growing with priority rates. Yesterday Azerbaijani Internal Affairs Minister Ramil Usubov stated that in 2013 the State Traffic Police (DYP) carried out registration of 102,000 motor vehicles. “As a result, as of 1 January 2014 the country registered 1,245,677 cars,” Usubov said. He emphasized that the number of traffic violations in 2013 increased by 40% up to 1,429,781 breaches. At that, 168,197 violations were detected automatically by cameras and camcorders. The average rate of violations per car, registered in the country, exceeded one and was 1.15 violations per vehicle. In other words, last year at least one violation of the rules was made by the driver of each vehicle.

AZERBAIJAN IMPORTED ABOUT 45,000 CARS FROM GEORGIA

n official report says Azerbaijan has imported 44,460 cars worth $401.07 million from Georgia in 2013. The report by the National Statistics Office added that the share of car imports amounted to 56.47 percent in the total volume of Georgian exports to Azerbaijan in 2013. Azerbaijan’s imports of passenger cars from Georgia increased by 16.04 percent - or by 7,910 units in quantitative terms- compared to 2012. By comparison, around 36,550 cars worth $345.62 million were exported from Georgia to Azerbaijan in 2012. Around 4,000 trucks worth $26.05 million were exported to Azerbaijan in 2013 - or by 9.2 percent less, in quantitative terms - by 0,860 units more compared to 2012. By comparison, around 3,140 trucks worth $28.69 million were exported from Georgia to Azerbaijan in 2012. Totally some $647.06 million worth of goods were imported from Georgia to Azerbaijan during the reporting period which accounts for 24.7 percent of the total volume of the country’s exports during the reporting period. Some $710.21 million worth of goods were imported from Georgia in 2013 which accounts for 24.4 percent of Georgia’s total export volume during the reporting period. The export to Azerbaijan increased by 13.3 percent compared to 2012. By comparison, around $626.85 million worth of goods were exported to Azerbaijan in 2012. These cars are delivered to Georgia from abroad.

AZERBAIJAN, FRANCE EYE ECONOMIC CO-OP

zerbaijan`s Economy and Industry Minister Shahin Mustafayev has met French Minister for Agrofood Industries Guillaume Garot to discuss current state of and prospects for economic cooperation. Mustafayev said economic relations between the two countries were rapidly developing. He noted that there was big potential for expanding the AzerbaijanFrance cooperation. The two sides hailed French companies` activities in Azerbaijan. Mustafayev also highlighted economic projects in Azerbaijan. They stressed the importance of wine festivals in France and Azerbaijan in terms of expanding cooperation between the two countries` businessmen. Guillaume Garot invited Azerbaijani businessmen to attend an agricultural exhibition in France in February, 2014.

February 3, 2014 #40

reat potential for boosting Azerbaijan-Hungary economic ties was the focus of the two-day Azerbaijani-Hungarian Intergovernmental Commission on Economic Cooperation opened in Baku on January 27. The business forum brought together about 150 companies, who mulled joint projects in the fields of industry, agriculture, construction, tourism and other fields. Addressing the event, Hungarian State Secretary, and the co-chairman of the joint intergovernmental commission, Peter Szijjarto, said Hungary has developed a list of projects worth $150 million, in which Azerbaijani businessmen can participate. “We are interested in cooperation with Azerbaijan,” he said, adding that currently the share of exports in the Caucasian countries is only 12 percent. “We set the goal to increase exports out of Western Europe up to a third by 2018, particularly in the Caucasian countries, including Azerbaijan,” he said. “ He also said the economic relations between the countries are actively developing, adding that just last year the trade volume grew by 27 per-

cent according to the Hungarian calculation, and by 40 percent according Azerbaijan’s data. Sijjarto said this is mainly the result of cooperation in agriculture, food industry, water management and other fields. “Hungarian Exim Bank is ready to allocate funds to Azerbaijan to finance large projects,” he added. Azerbaijan’s Economy and Industry Minister Shahin Mustafayev, who led Azerbaijani side, in turn, said relations between the two countries are developing dynamically in such areas as industry, energy, transport, communications and information technology, pharmaceuticals, environment, culture and tourism, adding that the result of this development was the growth of trade turnover between Azerbaijan and Hungary by 40 percent in 2013. “Solid legal basis for cooperation between the two countries is created, over 30 documents are signed,” Mustafayev said. “Works on the development of this basis are being continued. Signing of inter-branch contracts in the fields of IT, tourism and education is agreed. Moreover, some bilateral agreements in the fields of transport, health, youth and sports, science and innovation is under discussion.”

During the second day of the Azerbaijani-Hungarian Intergovernmental Commission on Economic Cooperation, Azerbaijan and Hungary signed a protocol on the results of the meeting. At the signing ceremony, Peter Szijjarto said Hungary and Azerbaijan will extend the existing air services agreement, which expires on April 7. The Hungarian side has already sent to Azerbaijan the initial draft of the updated agreement, according to Szijjarto, and it will be signed up to April 7, adding that the current agreement has shown its effectiveness. Thus, the number of visas issued to Azerbaijani citizens by Hungary increased six times in 2013. He also added that Hungary is preparing to simplify procedures for issuing visas for Azerbaijani citizens, by outsourcing the work of processing visa applications and issuing visas. Shahin Mustafayev, in turn, said, the number of the Hungarian tourists coming to Azerbaijan also must be increased, adding that he number of visas issued by Azerbaijan’s Embassy increased 2,5 times in 2013, and the number of Hungarian tourists amounted to 1500. Hungary recognized Azerbaijan’s independence in 1991, and diplomatic relations between the two countries were established in April 1992. The Azerbaijani-Hungarian relations are at a high level and are based on friendship and mutual interests. The high-level relations have paved the way for the development of cooperation in various fields. Moreover, Azerbaijan and Hungary have great opportunities for the expansion of economic cooperation, establishment of relations between the players of the securities market, as well as exchange of experience and knowledge in this sector. A trading house was established in Azerbaijan in 2012 to develop the country’s cooperation with Hungarian medium-sized businesses.

WORLD BANK TO HELP AZERBAIJAN DIVERSIFY ECONOMY

he World Bank will help Azerbaijan diversify its economy and develop its non-oil sector in 2015-2019, the WB’s Regional Director for the South Caucasus Henry Kerali said in a meeting with Azerbaijani Minister of Economy and Industry Shahin Mustafayev in Baku to discuss current state and outlook for cooperation. Mustafayev underlined the importance of implementation of projects jointly with international financial institutions in terms of applying the world`s best practices, ensuring control and transparency and introducing advanced technolo-

gies and innovations in the country. The WB has financed about $3.2 billion on implementation of 50 projects in the country 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. This year also saw the signing of the deal approving additional financing for the Integrated Solid Waste Management Project, which envisages rehabilitation of the Balakhany main waste disposal site, development of a comprehensive vi-

sion for the waste management system, closure of old waste disposal areas, development of new waste cells, and introduction of methane gas capture systems. Mustafayev said Azerbaijan was conducting talks with the WB experts over establishment of industrial parks in Azerbaijan in line with the international practice. Discussions also revolved around prospects for cooperation on establishment of pilot industrial quarters in the regions of Azerbaijan, in particular, refugees and IDPs-populated areas in order to boost social and economic development in the regions.

AZERBAIJAN EXEMPTS AI-92, AI-95 GASOLINE FROM DUTY

zerbaijan’s State Oil Company will halt a catalytic cracking installation at the Heydar Aliyev refinery for reconstruction in April, a source in SOCAR told Trend Agency on January 29. This became a reason for exempting the duty rate of gasoline brands with octane rating of 95 and 92 in Azerbaijan from 15 percent to zero. The decision was posted on the website of Azerbaijan Cabinet of Ministers on January 28. The Cabinet also made a decision to decrease the excise rate for importing these gasoline brands from $250 to $1 per ton. These decisions were implemented on January 21, and will remain valid until June 1, 2014. After reconstruction, the SOCAR’s facility will increase its production capacity, thus increasing the processing capacity of the facility from two to three million tons, and gasoline production by 450,000 tons. The need to increase the plant’s capacity is associated with an increase in gasoline consumption in domestic market. Thus, the missing volumes of gasoline during the reconstruction work is planned to be replaced by imports. The price of oil products in Azerbaijan is fixed

and determined by the Tariff Council, which increased gasolines retail price by about 30 percent in December 2013. The last change in prices for fuel in Azerbaijan was in 2007. The retail price for every liter of AI-95 gasoline is currently set at 0.8 manat ($1), and the retail price for AI-92 and AI-80 gasoline is 0.7 manat ($0.8) per liter. Head of SOCAR Rovnag Abdullayev said earlier that the company will focus on renovating and expanding the power of the catalytic cracking in 2014 to meet the country’s growing needs for gasoline in the next few years. Abdullayev said gasoline’s production and consumption is equal in Azerbaijan for the first time. Oil products are pro-

duced at two Baku SOCAR refineries with a total capacity of 16 million tons of oil per year. SOCAR annually processes about seven million tons of oil extracted onshore and offshore by its own resources.

CIS February 3, 2014 #40

caucasian business week

RUSSIA IN WORLD’S TOP 3 RECIPIENTS OF FOREIGN INVESTMENT FOR FIRST TIME - UN

oreign direct investment (FDI) in Russia reached a record $94 billion in 2013, a leap of 83 percent on the year before according to a United Nations report. Russia follows the US and China as the third most attractive country for investors. The Global FDI research published by the UNCTAD – the UN agency responsible for international trade and development – has Russia jumping 6 places from its 9th spot in 2012. The shift was primarily caused by the UK’s BP taking an 18.5 percent stake in Rosneft as part of Rosneft’s $57 billion acquisition of TNK-BP.

“FDI in the Russian Federation is expected to keep pace with its 2013 performance as the Russian Government’s Direct Investment Fund [RDIF] – a $10 billion fund to promote FDI in the country – has been very actively deployed in collaboration with foreign partners, for example funding a deal with Abu Dhabi’s state-owned Mubadala Development Company to invest up to $5 billion in Russian infrastructure,” the report says. The RDIF sealed 6 long-term investment contracts worth above $8 billion last year, which also included deals with the Japan Bank for International Cooperation, France’s Caisse Des Depots International, Italy’s Fondo Strategico Italiano and the Korea Investment Corporation, the fund said in the e-mailed press-release. Recently Russia has been showing better results in business rankings. In 2013 the country jumped 20 points in a World Bank’s Doing Business rating, having shown the best dynamics among BRICS countries. Also at the beginning of 2014 Russia broke into Bloomberg’s 50 best countries for doing business.

Globally, in 2013 FDI reached pre-crisis levels, rising 11 percent to an estimated $1.46 trillion, UNCTAD said. Developed economies attracted a historic low share of foreign investment, while FDI to the developing world reached a new high of $759 billion, or 52 percent of the global inflow.

WHEN WILL THE NEXT INSTALLMENT BE? Speaking in Brussels at the EU-Russia summit, President Putin said Ukraine will receive aid re-

ussia could sign a free trade agreement with New Zealand in 2014, Deputy Economic Development Minister Aleksey Likhachev said. “Signing the agreement to create a free trade zone with New Zealand this year is, in my opinion, very likely,” Interfax quoted him as saying. There is also a definite possibility that an agreement with the European Free Trade Association (EFTA) will be signed. It includes Iceland, Norway, Switzerland and Lichtenstein. In 2015, Russia could sign a free trade agreement with Vietnam, Likhachev said.

RUSSIA’S RUBLE ‘FREEFLOAT’ SHOULD BE DELAYED - ULYUKAEV

RUSSIA’S EMERGENCY LOAN TO UKRAINE ON HOLD UNTIL GOVT FORMS

oscow says it would postpone further payments of the promised $15 billion loan to Kiev and is waiting to see the direction of the newly formed government, according to President Putin and Prime Minister Medvedev. President Vladimir Putin assured Ukraine they can count on the promised $15 billion in loans from Russia, but the money will only be available once a new government is formed. “Let’s wait for the new Ukrainian government to be formed,” President Putin said in Brussels on Wednesday, responding to Prime Minister Dmitry Medevedev’s comment that Russia would wait on the emerging political situation in Kiev. Medvedev proposed Russia postpones the loan until “we understand what sort of government there will be, who will be working in it, and what rules they will stick to”. Medvedev’s concern was mainly fueled by the country’s inability to make regular payments for natural gas. “Even under the lower [gas] price they are telling us that they can’t pay. This really changes the situation,”Medvedev said. Meanwhile, Ukraine’s new interim prime minister said he expects Russia to deliver on the next $2 billion installment “very soon”, as Cabinet Ministers are expecting them by the end of January, and earlier this week already agreed to issuing $2 billion of its Eurobonds for Russia. Prime Minister Nikolay Azarov bowed out of his post hoping to quell the increasingly violent streetprotests in Kiev and elsewhere in Ukraine. President Viktor Yanukovich is currently in hospital being treated for fever and cold symptoms, according to the President’s press service.

RUSSIA, NEW ZEALAND COULD SIGN FREE TRADE AGREEMENT IN 2014

ussia’s Minister for Economic Development has warned that a ruble “free-float” should be put on hold. “I would discuss the possibility to introduce some limitations on the level of freedom in the process of exchange rate formation, which could possibly depend on the factors connected with the financial stability. And second, I would discuss the time frame, we may need to shift it,” he said. The Russian currency is falling against both the dollar and the euro, after authorities cut intervention before seeing the ruble become market driven and let it free float by 2015. Since January 2013 the Russian ruble has lost about 16 percent against the dollar.

S&P CUTS UKRAINE FOREIGN-CURRENCY CREDIT RATING AMID POLITICAL CRISIS

gardless of who takes power, even if it’s the opposition. Putin said the loan was made to “support the people of Ukraine, not the government”. Russia’s promise of aid to Ukraine will be fulfilled, but Economic Development Minister Aleksey Ulyukaev said on Wednesday he wasn’t able to say exactly when. First Deputy Prime Minister Igor Shuvalov, who accompanied Putin to Brussels, agrees they need to wait until their is stability within the government. “Our commitment to fulfilling these obligations has been confirmed. As for the schedule and parameters, this is an issue that requires further discussion with our Ukrainian colleagues and consideration of the restructuring of the government,” Ulyukaev said. The first $3 billion in Eurobonds were placed at the end of 2013 on the Irish Stock Exchange and facilitated by VTB, Russia’s second largest bank. A total of $15 billion was promised to help buffer Ukraine’s dire economic situation, and bonds will be in circulation through January 1,2016. December, when the protests in Kiev were much larger but far less violent, Ukrainian President

Viktor Yanukovich traveled to Moscow where he secured a $15 billion loan and a 33 percent discount for natural gas, which could save the country $7 billion in billion in 2014. The deal was hailed by then-Prime Minister Azarov as saving Ukraine from economic ruin. Protests in Kiev were set off in November when Ukraine backed out of a trade negotiation deal with the EU in favor of a debt deal with Russia, a move interpreted by Ukrainians as a decisive step away from integration with the EU. The ideological tug-of-war has involved Russia, the EU, and the US. The US is preparing financial sanctions against Ukrainian officials and protest leaders, which would be imposed if violence escalates in the country, Reuters reports citing congressional aides. The final details of the sanctions are yet to be detailed, but they could be implemented quickly, the sources told the news agency. The US House Foreign Affairs Committee on Wednesday passed a resolution calling on all parties in the Ukrainian confrontation to refrain from violence and work toward a peaceful resolution.

KAZAKHSTAN TO CONSIDER NEW REFINERY PROJECT SOON

he Kazakh Oil and Gas Ministry jointly with KazMunaiGas will develop issues relating to the construction of a new refinery in the country in the first quarter of 2014, Minister Uzakbai Karabalin said at the ministry’s expanded meeting. The issues will cover the capacity of the new refinery, its location, resource base, and investment volume and construction schedule, according to the minister. “The process of modernization of the three refineries to be completed in 2016, is to be able to address a number of issues including those related to the technical level, but the volumes of domestic demand could exceed the capacity of

our operating plants,” Karabalin said. One of the specific issues of the project is the raw material base, according to the minister. “In connection with the topicality of the task both for the operating refineries and the prospective ones, we propose to consider the following attitude such as providing new rights for subsoil use under the conditions of priority supplies of raw material to the domestic market. In addition, we propose to consider the possibility of supply to the domestic market for existing oil producers while minimising losses,” Karabalin said. Thus, Kazakhstan will be able to develop a resource base not only for oil processing, but also for petro chemistry and gas chemistry.

tandard & Poor’s has cut Ukraine’s foreign-currency credit rating, Bloomberg reported. The assessment of Ukraine’s debt was lowered one step to CCC+, the seventh-lowest junk rating. A negative outlook indicates the rating may be cut further into junk territory. The long-term local-currency grade was affirmed at B-. The rating agency said that an escalation of political turmoil undermined Ukraine’s ability to service its debt and threatened aid from Russia.

SHARES OF UKRAINE’ COMPANIES UP AS PM AZAROV RESIGNS

hares of Ukrainian companies were rising on Tuesday, following the news of the resignation of Prime Minister Nikolay Azarov. Ukrainian Exchange Index UX at noon increased by 1.36 percent to 876.66 points. During the trading session, the index rose to 881 points, Itar-Tass reported. Azarov explained his resignation early on Tuesday by the need to create additional opportunities for socio-political compromise during the current political crisis in Ukraine.

GAZPROM WARNS UKRAINE CRISIS COULD HINDER EUROPE GAS TRANSIT

azprom has warned that instability in Ukraine could hinder the transit of Russia’s natural gas to Europe. The company is concerned about the transit as statements were voiced that the Ukrainian gas transport system “could be attacked by extremists,” Gazprom’s deputy CEO Aleksandr Medvedev told Rossiya-24 TV channel. However, he added that Russia and the EU earlier agreed on the use of the OPAL pipeline to full capacity, and underground gas storages in Ukraine still contain enough natural gas.

PUBLICITY caucasian business week

February 3, 2014 #40

WORLD NEWS February 3, 2014 #40

JAPAN TRADE DEFICIT HITS RECORD HIGH AT $112BN IN 2013

apan’s trade deficit reached a record $112 billion in 2013, the finance ministry’s data showed on Monday, AFP reported. The shortfall of 11.47 trillion yen marked the biggest deficit since comparable data started in 1979. Japanese energy imports surged after the 2011 Fukushima crisis. Also, a sharp decline in the yen, which is good for exporters’ profitability, ramped up the cost of importing pricey fossil-fuels to plug the country’s energy gap.

DEUTSCHE BANK CO-CEO ANSHU JAIN CLEARED IN INTERNAL LIBOR PROBE - REPORT

eutsche Bank has cleared co-chief executive, Anshu Jain, after an internal investigation into the role of the bank into the manipulation of global interest rates, Reuters said. Bank documents were scrutinized and hundreds of employees interviewed after the Libor scandal, the German newspaper Frankfurter Allgemeine Sonntagszeitung said, citing supervisory board sources. The bank has not commented on the report.

SUICIDE SUSPECTED IN DEATH OF TATA MOTORS’ MANAGING DIRECTOR

arl Slym, managing director of India’s Tata Motors Ltd, died after falling from a hotel room in Bangkok, and police said on Monday it could be a possible suicide, Reuters reported. Slym, 51, had attended a board meeting of Tata’s Thailand unit in the Thai capital. He was staying with his wife in a room on the 22nd floor of the Shangri-La hotel. Hotel staff found his body on Sunday on the fourth floor. No sign of a struggle was found, police said.

DEFLATION IS ‘REAL RISK’ TO EUROZONE ECONOMIC RECOVERY – IMF The head of the International Monetary Fund (IMF) has said deflation remains a real risk to economic recovery in the eurozone, the BBC reported. Potential risks must not be ignored, Christine Lagarde said on the final day of the World Economic Forum in Davos, adding that “old risks” included any failure to continue banking reforms and re-balance economies. New risks are how emerging economies responded to the winding down of economic stimulus measures in the US. They are also the problems facing economies whose inflation rate remained stubbornly below target.

INDIA’S CENTRAL BANK RAISES KEY INTEREST RATE TO TAME INFLATION

ndia’s central bank has announced a quarter percentage point increase in the lending rate Tuesday to 8 percent, which sent the country’s stocks lower, AP said. The move is intended to rein in inflation. The Reserve Bank of India also cut its economic growth forecast for the fiscal year ending March to 4.6 percent from 5 percent. Last month, the bank left lending rates unchanged despite high inflation.

UK ECONOMY POSTS FASTEST GROWTH RATE IN 6 YEARS

ritain’s economy in 2013 recorded its fastest annual growth since the financial crisis, data from the UK government’s Office for National Statistics showed Tuesday. The quarterly GDP figure took the UK’s full-year growth for 2013 up to 1.9 percent, from just 0.3 percent the year before, Reuters said. This is the highest GDP growth since 2007. However, total output is still 1.3 percent below the pre-financial crisis peak reached in the first quarter of 2008. GDP rose by 0.7 percent in the fourth quarter of 2013. The rate of growth could influence the Bank of England’s decision on when to raise record-low interest rates.

caucasian business week

US FED SLASHES DEBT PURCHASES BY ANOTHER $10 BN

he US central bank will reduce bonds purchases to $65 billion per month, Ben Bernanke said Wednesday at his last meeting as Chair. No comment was directed at emerging markets, which are highly sensitive to US monetary policy. The Federal Open Market Committee (FOMC) said it would buy $65 billion in bonds per month starting February, down from $75 billion now. The statement says the $10 billion-per-month reduction is not necessarily a set course to be repeated at each monthly meeting. “Asset purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent on the Committee’s outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases,” the statement said. As the committee has said before, they will keep inflation rates low until the economy is close to full employment. There was no mention in the statement on spillover effects in emerging markets, which have experienced great turmoil since the US announced it would begin to taper its bond-buying. Steadily rising economic factors, apart from lukewarm unemployment at 6.7 percent and January’s disappointing jobs report (only 74,000 jobs added), have pushed America to ditch its stimulus. Exports, manufacturing, and sales helped the economy expand 4.3 percent in Q3 and probably over 3 percent in the last quarter. Janet Yellen, the first female to serve as Chair of the US central bank, will take over the post this Saturday. She is expected to continue Bernanke’s legacy and continue to scale back the amount of government debt the Fed buys through bonds. At last December’s meeting, Bernanke announced America’s bond buying program was being reducedto $75 billion from $85 billion. It was Bernanke’s last meeting as Chairman of the Fed, and he will be remembered as the man who saved America from a second Great Depression with quantitative easing, which drove interest rates low enough to keep stocks on Wall Street afloat. The Dow Jones Industrial Average finished up 26.5 percent in 2013, the biggest leap in the last 16 years. “I think he’s going to go down as one of the greatest Fed chairmen of all time,” said Henry Paulsen, former Treasury Secretary who worked

closely with Bernanke in the high-pressure days leading up to the government’s decision not to bailout Lehman Brothers. The Fed’s easy money program has been pumping billions of dollars into the economy by simply printing money, which propped up equities and markets after the 2008-2009 financial crisis. Under Bernanke, interest rates reached all time lows. A chief complaint about Bernanke, especially the massive stimulus money, is that his policies didn’t trickle down to Main Street, but only made the rich richer. Ex-Fed banker Andrew Huszar is one of the most outspoken critics of quantitative easing, which he admits saved financial markets but didn’t help average Americans pay off their mortgages or find jobs. Under Bernanke, monetary policy “did a wonderful job of keeping the financial system from falling off the table,” Jack Ablin, chief investment officer at BMO Private Bank in Chicago told the Los Angeles Times. “But as a side effect or consequence, it’s driven a wedge between the haves and have-nots,” said Ablin. EMERGING MARKETS Since Ben Bernanke first uttered the words “taper” in May 2013, emerging markets have gone haywire in preparing for the instability and risks that a stronger dollar spells for them. However, they have had time to prepare, as the US didn’t cut off stimulus spending until December 2013. The International Monetary Fund (IMF) released a statement Tuesday suggesting the plight of emerging markets needs to be examined internally, as tapering isn’t the only element offsetting global markets. Jose Vinals, the director of the IMF’s monetary and capital markets department, on Tuesday said the volatility in global markets is actually caused by problems in particular developing countries and not linked to the U.S. Federal Reserve’s decision to reduce its monetary stimulus, the International Monetary Fund’s top financial counselor said. America’s monetary policy has been at the center of the blame game over the huge amounts of investment that has trickled out of emerging markets, and for the severe currency losses in Brazil, Indonesia, Turkey, India, South Africa, and Russia. Tapering has had a positive effect on the dollar, which has gained against emerging economies. India’s rupee has had one of its worst years ever, and in 2013 lost 11 percent against the dollar. More recently, Russia’s ruble has hit a 5-year low against the dollar, reaching 35 rubles per dollar early Wednesday afternoon. Earlier in the weak, when the ruble hit a 5-year low against the euro, the Russian Central Bank Chairwoman explained the ruble wasn’t weakening, but the dollar and euro were becoming stronger: “As a general rule, the stronger the economy, the stronger the national currency. It’s not the ruble that weakened, but it’s the euro and the US dollar that have appreciated against all emerging market currencies,” bank chair Elvira Nabiullina said Monday during an interview with Russia’s First Chanel.

CHINESE BECOME WORLD’S TOP TIPPLERS OF ‘LUCKY’ RED WINE

hina has overtaken France and Italy to become the world’s number one consumer of red wine, although the United States remains the world’s biggest tippler of all types of wines, the wine and spirits trade association VINEXPO said on Tuesday. China drank 1.865 billion bottles of red wine last year, or in trade terms 155 million nine-liter cases, contributing to a 136 percent increase in consumption over five years. That beat France into second place for red wine and Italy into third, VINEXPO said, based on figures compiled by the London-based International Wine and Spirit Research firm. The reason for the massive surge in red wine drinking in China, apart from growing affluence, is the Chinese preference for red over white on cultural grounds based on the colour, said Guillaume Deglise, the new CEO of VINEXPO. “Red is the colour of luck and good fortune and white is the colour of death” in China, Deglise told Reuters.

“So you don’t want to drink white, why would you?” As the Chinese market matures, Deglise said he also expected an increase in consumption of white wines and champagne. Overall, the United States remains the world’s top wine consumer, VINEXPO said, with China remaining in fifth place and not expected to change that ranking in the immediate future, the organisation said. Since 2011 the United States has been the world’s largest wine consumer, with consumption expected to hit 385 million cases by 2017. The figures were released ahead of the VINEXPO Asia-Pacific exhibition to be held in Hong Kong on May 27-29. The event will feature 1,300 exhibitors and is expected to draw 18,000 visitors, a spokesman for VINEXPO said. Major producing nations from Chile to Australia and including France, Italy, Spain, New Zealand and Mexico will be represented at the event, VINEXPO said in a statement.

GLOBAL SMARTPHONE SHIPMENTS TOPPED 1BN IN 2013 – IDC

he global smartphone market topped 1 billion shipments for the first time in 2013, IDG News Service reported, citing IDC’s Worldwide Quarterly Mobile Phone Tracker. Smartphone shipments were up 38.4 percent in 2013 from 725 million units in the previous year. In 2013, some 1.82 billion mobile phones were shipped, which includes smartphones, an increase of 4.8 percent from 1.73 billion in 2012. Samsung had 31.3 percent market share in 2013 with compared to Apple’s 15.3 percent.

ECONOMISTS SAY FED TO KEEP SCALING BACK ITS MONTHLY BOND PURCHASES

he Federal Reserve is expected to keep on the stimulus tapering track Wednesday, AFP said. Most analysts are predicting another “modest” $10 billion cut in monthly asset purchases. Fed Chairman Ben Bernanke will head up the final monetary policy meeting of his eight-year tenure as Janet Yellen is due to succeed him on February 1 and become the first female Fed boss. The Federal Open Market Committee will open a two-day meeting on Tuesday, amid signs of underlying momentum in the US economy. However, a dismal December jobs report raised concerns about the outlook.

FRENCH UNEMPLOYMENT RISES TO RECORD 3.3MN IN DECEMBER

he number of registered jobless in France rose to a record 3.3 million in December, AFP reported. The number of job-seekers rose by 10,200, according to the Labor Ministry. With those holding part-time employment, the number of unemployed rose to 4.89 million, another record. President Francois Hollande claimed in November he had met his electoral pledge to halt the rise in joblessness by the end of 2013, but the new figures see that promise broken.

SHELL SELLING STAKE IN BRAZILIAN OIL PROJECT TO QATAR

oyal Dutch Shell is selling a stake in a Brazilian oil project to Qatar Petroleum International (QPI) for $1 billion, Reuters said. Shell will sell 23 percent of the Parque das Conchas, or BC-10, project off the coast of Brazil, leaving it with a 50 percent interest. It will continue to operate the 50,000 barrels of oil per day project. The move is in line with the Anglo-Dutch oil firm’s plan to divest itself of some assets. Earlier in January, Shell sold a stake in a gas project in Western Australia for $1.14 billion.

TURKISH CENTRAL BANK HIKES KEY INTEREST RATES TO STEM LIRA FALL

urkey’s Central Bank has hiked all its key interest rates as it battles to defend the country’s crumbling lira currency, Reuters said. The bank raised its overnight lending rate to 12 percent from 7.75 percent, its oneweek repo rate to 10 percent from 4.5 percent, and its overnight borrowing rate to 8 percent from 3.5 percent. The currency has gained almost 4 percent since late Tuesday and almost 10 percent from Monday’s record low of 2.39, in its biggest surge in five years. The lira fell 10 percent against the dollar over the last month amid a corruption scandal, and fears are mounting over Fed taper pressures facing emerging markets.

PUBLICITY caucasian business week

February 3, 2014 #40

TBILISI GUIDE February 3, 2014 #40

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 16 Akhmeta Str., Avlabari, 0144 Tbilisi. 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

February 3, 2014 #40